’We need to do more to drive performance,’ says chief executive

Direct Line Group (DLG) has revealed that it saw an operating loss from its ongoing operations of £189.5m in the 12 months to 31 December 2023.

The figure, which was announced in the insurer’s preliminary results today (21 March 2024), was a downswing from 2022, when the firm recorded a loss of £6.4m.

DLG also highlighted that it recorded a net insurance margin of minus 8.3%, which was impacted by the continued earn through of motor policies written during 2022 and first half of 2023.

The insurer said the group’s ongoing operations result excluded the results of the brokered commercial business, which it sold to RSA in September 2023.

However, the proceeds of the sale contributed to a profit before tax of £277.4m, up from a loss before tax of £301.8m in 2022.

DLG also secured a gross written premium of £3.11bn last year, up from £2.44bn in 2022, and said that outside of motor, the group secured a net insurance margin of 12.2%.

And it said that that motor policies written since August 2023 did improve and were estimated to be in line with the group’s ambition of a net insurance margin of above 10%.

Despite this, DLG’s new chief executive Adam Winslow said that more needed to be done to drive performance.

He said: “The group has not always managed volatile market conditions successfully in recent years, particularly in motor.

“However, it is clear that the decisive actions that Jon Greenwood (former acting chief executive) and the team have taken over the last year have created a strong platform for recovery, including significant pricing and underwriting actions to improve our motor margins and the sale of our brokered commercial business.

“While the picture has improved, we need to do more to drive performance and we have identified immediate actions we can take in 2024 to create value.”

Cost cuts

The results came after insurer Ageas confirmed that it was considering making an offer of around £3.1bn to acquire DLG at the end of last month (28 February 2024) and then returned with an improved bid on 13 March 2024.

Both offers were rejected by DLG, claiming they were “uncertain, unattractive and that it significantly undervalues DLG and its future prospects, while also being highly opportunistic in nature”.

DLG also stated that it was confident in its “standalone prospects given its strong strategic position, powerful brands and robust capital position”.

The insurer has now conducted a review to identify opportunities across the value chain and said it saw a “significant opportunity to remove at least £100m of costs by the end of 2025 on a run-rate annualised basis”.

It said there remains a “substantial” cost opportunity through further improvements in digital capability, reduced technology costs and removing complexity across the group.

“We are currently running a comprehensive strategy review of the significant opportunities we see to deliver higher returns,” Winslow said.

“We will outline the details of our refreshed strategy at a capital markets day in July, as well as update on the progress we have made on the near-term initiatives.

“With the right strategy in place and determined actions, I am confident that we can deliver run-rate annualised cost savings of at least £100m by the end of 2025 and a net insurance margin, normalised for weather, of 13% in 2026.”