Briefing: All change at DLG, but can the insurer recapture stability?

By acting editor Yiannis Kotoulas 

Direct Line Group (DLG) has certainly been in the news recently. 

This year has seen considerable developments at the insurer, with the firm looking to place itself back on solid ground after a turbulent period.

At the beginning of the year, on 27 January 2023, Penny James stepped down from the chief executive position and cited “considerable headwinds” for the business. 

She had led DLG for nearly four years after being promoted from chief financial officer in May 2019, but was sunk by the group’s poor financial performance during her tenure.

A source close to James told Insurance Times that her decsion to exit had been made mutually, with her tenure being hit by “exceptional challenges”. 

As she stepped down, Bloomberg Intelligence senior insurance industry analyst Kevin Ryan told Insurance Times that tough times in the motor market meant James and DLG had confronted “an increasingly challenging operating environment”.

Speaking in January, Ryan noted that there was “no reason to believe” that conditions in 2023 would be any less hostile. 

That turned out to be an astute observation. In DLG’s H1 2023 financial results, published yesterday (7 September 2023), the insurer revealed it had continued to operate in a difficult environment. 

DLG posted a combined operating ratio (COR) of 106.4% across the group for the first six months of 2023, with the COR for its motor business reaching 125.6%. The business also posted an operating loss of £94.4m for the first half of the year. 

More stable ground

In the insurer’s statement of its H1 results, acting chief executive Jon Greenwood noted: “Over the last six months, we have taken decisive action to put the group back on a more stable footing.” 

Greenwood is certainly correct, with DLG’s actions over the recent period representing decisive moves aimed at recapturing stability and profitability. 

At the end of August, the insurer announced that it had appointed Adam Winslow as its new chief executive, prising him away from his position as chief executive of general insurance for Aviva. 

Commenting on the appointment, DLG chair Danuta Gray said: ”Winslow stood out for his strategic understanding of the [insurance] sector, outstanding track record of leading high performing businesses and his focus on driving operational excellence to consistently meed customer needs.” 

Winslow will take up his new position in Q1 2024 and will be bringing his considerable experience and ability to an insurer that has taken steps to streamline its operations. 

Just prior to the publishing of its H1 results, late on Wednesday night (6 September 2023), DLG also announced that it had agreed a deal to sell its brokered commercial lines operations, mainly consisting of the NIG and FarmSure brands, to RSA insurance for an initial consideration of £520m.

DLG explained that, having completed an “operational turnaround” of the brokered commercial lines segment of its business, it felt it was the right time to sell. Importantly, the sale facilitates the achievement of one of DLG’s goals to “restore the resilience of [its] capital position” by adding around 45 percentage points to the firm’s Solvency capital ratio. 

A move to be admired

In the search for further stability, DLG also recently (1 September 2023), in an industry first, voluntarily agreed to conduct a business review after it admitted an “error” had been made in its implementation of the FCA’s general insurance pricing reforms.

It explained that some of its “calculation of the equivalent new business price for some customers failed to comply with the regulation” and had informed the FCA of the mistake, with customers expected to receive refunds totalling nearly £30m. 

Welcoming the voluntary nature of the decision, an FCA statement added: ”DLG will carry out a review to identify all instances where a customer has been overcharged and provide appropriate redress.” 

Taking DLG’s recent moves into account it is clear to see that the insurer is craving long-term stability – and what is encouraging is that the moves it is making should improve its position. 

When Winslow arrives at the beginning of next year, it seems likely that he will find an insurer on more stable ground than it stands at this moment in time. 

What remains to be seen however, is whether that stability can be maintained in such a competitive market.