Geddes: Talanx IPO exit will not hurt DLG float

Direct Line Group (DLG) chief executive Paul Geddes (pictured) says German insurance group Talanx’s decision to abandon its flotation plans do not bode ill for his own company’s initial public offering (IPO).

DLG revealed this morning that current parent RBS had begun the process of floating the insurance group on the stock exchange. The initial float will be a minimum of 25% of the company’s shares, although the exact percentage and pricing has not yet been determined.

Geddes told Insurance Times: “We think the Talanx deal is significantly different from us for lots of reasons. One is that they are 80% life and reinsurance and only 20% property/casualty.

“We believe from the advice that we have received that it is not a direct read-across for us.”

Talanx pulled its IPO on Wednesday, saying investors expectations of valuation clashed with what the bankers handling the IPO had told the company it should expect.

In addition to the IPO announcement, DLG also revealed two new targets in addition to the 15% return on tangible equity and £100m cost savings it had previously announced.

The company intends to reduce its group combined operating ratio (COR) to 98% from its current level of 101% next year, and is aiming for a 100% combined ratio in its commercial business by 2014. Broker-only insurer NIG accounts for the bulk of DLG’s commercial business.

“We don’t think the transformation is complete and we think there is still more progress we can make,” Geddes said.

DLG has added a new non-executive director, former Prudential human resources director Priscilla Vacassin, to its board. This closely follows the appointment of Miller’s Clare Thompson to DLG’s board.

Geddes said, however, that that the board is not yet complete. “We are not completely finished, but we are largely there,” he said. He declined to comment on how many more directors would be hired or who they would be.