DLG makes change to solvency capital ratio after miscalculation

Direct Line Group (DLG) has issued an update to its 2023 results after identifying a miscalculation within its audited Solvency II funds.

The error has led to the insurer changing its solvency capital ratio to 188% for the end of 2023, down from the previously reported figure of 197%.

According to the ABI, this metric is used as an indication of an insurance company’s financial strength and its “ability to withstand the risks they are exposed to such as falling asset prices or increased liabilities”.

DLG said it identified the error during preparation for its half year results, which is set to be released in September.

“This miscalculation arose in the Solvency II treatment of the whole account quota share reinsurance arrangement (incepted 1 January 2023) and in particular the translation of the reinsurance debtors between IFRS and Solvency II own funds,” the group said.

“This miscalculation has no impact on the IFRS figures.”

Capital generation

DLG also said that the updated figure was still above the group’s risk appetite range of 140% to 180%.

And it estimates its solvency capital ratio at 30 June 2024 to be around 200%^.

“This follows good capital generation in the first half from a combination of operating earnings, one-off benefits from partnerships and market movements,” DLG said.

“The group has taken action to strengthen the control environment in relation to the specific area where the miscalculation occurred.”