Annual Report and
Accounts 2024
Strategic Report
Becoming the customers' insurer of choice
1
The Group at a glance – our business model
2
Our investment story and strategy
3
Delivering for our customers
4
Our financial KPIs
7
Chair’s statement
8
Section 172(1) statement
9
CEO review
10
CFO review
13
CPO review
15
Market overview
19
Group financial performance
20
Operating reviews
34
Risk management
38
Sustainability
44
Non-financial and sustainability information statement
45
Task Force on Climate-related Financial Disclosures
58
Viability statement
74
Governance
Chair’s introduction
75
Board of Directors
77
Corporate Governance
82
Committee reports
101
Directors’ Remuneration report
115
Directors’ report
142
Financial Statements
Contents
147
Independent Auditor’s Report
148
Group accounting policies
156
Consolidated Financial Statements
168
Notes to the Consolidated Financial Statements
173
Parent Company accounting policies
230
Parent Company Financial Statements
231
Notes to the Parent Company Financial Statements
233
Other information
Shareholder information
236
Glossary and Appendices
238
Forward-looking statements disclaimer
254
Contact Information
255
Direct Line Group is one
of the UK’s leading
insurance companies.
Through our well-known
brands we offer a wide
range of general
insurance products
across motor, home,
commercial, travel, pet
and rescue.
Whether our customers
choose to come direct or
via a Price Comparison
Website, they can engage
with us digitally or on the
phone, whenever they
need us most.
Contents
Becoming
the customers’
insurer of choice
Becoming the customers’
insurer of choice means
prioritising their needs and
fostering trust through
exceptional service.
We strive to simplify the
insurance process, offering
easy-to-use solutions that
resonate with our customers’
unique situations.
1 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
One of the largest personal lines
insurers in the UK with two of the
most recognised brands and almost
9 million customers.
We have strong brands and our
products are sold direct to customers,
through price comparison websites
and via our partners.
Almost 9 million in-force policies (ongoing
operations)
3,831k
2,461k
1,780k
755k
l Motor
l Home
l Rescue
l Commercial Direct
£3,732m premium written (ongoing
operations)
2,700m
637m
133m
262m
l Motor
l Home
l Rescue
l Commercial Direct
We have unique assets in Motor which allows us to provide better outcomes
to customers and to understand pricing, claims and customer behavioural trends.
We have a large insurer owned UK
repair network
We operate through
23 sites
nationwide
Largest rescue brand owned by a UK
Personal Lines insurer
Green Flag now has over
60 roadside
patrol vehicles
supported by a national network of
3,000
specialists
2 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
The Group at a glance
In partnership with
Strong foundations with iconic brands and leading market positions
Unique assets in motor; large owned garage network and only UK Motor insurer with
in-house roadside rescue
Turnaround strategy with a focus on technical excellence to drive profitable growth
Capital generative business with a strong balance sheet
Target a payout ratio of ~60% of post tax operating profit with potential
for additional returns
Our strategy
In 2024 we launched our turnaround strategy and targets with a focus on technical
excellence to drive profitable growth.
Our targets
Growth
Costs
Profit
Compound annual
growth rate (“CAGR”) of
At least
7%-10%
£100m
13%
in Non-Motor gross written
premiums between 2023-26
gross cost savings by the end
of 2025 on a run-rate basis
net insurance margin
in 2026
3 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Our investment story and strategy
Target leading positions
in Home, Commercial
Direct and Rescue
Achieve top quartile
technical excellence
across the insurance
value chain
Reduce cost base
Build a high
performance
culture
Rejoin front-runners
in Motor
Customers'
insurer of choice
Doing fewer
things, better
The Group has made significant progress on its transformation plans.
Motor
Direct Line
launched
on Price
Comparison
Websites
(“PCW”)
In December we delivered one of our
key objectives and launched Direct Line
Motor on Compare the Market.
We have developed three new online
products for the channel where the
majority of customers shop and buy
insurance: Essentials Online, Standard
Online and Premium Online.
These products are tailored specifically
to meet the needs of customers who
choose to buy insurance through
PCWs and are happy to service their
policies online.
Digital
Launched
new apps
We launched apps for our Churchill and
Direct Line Motor customers enabling
them to make those often-complicated
tasks simple.
Customers can: view motor policy
details and documents, make a change
to their policy, renew a policy, get a
quote, view existing quotes, start a claim
or get support via a Virtual Assistant
or WhatsApp.
With customers having Churchill and
Direct Line in their pocket, they can be
assured that whenever they need us,
we’re there.
Home
Significant
progress with
the re-platform
Significant progress made with the
re-platforming of our Home business
which is designed to enable new
product development, improve the
speed and accuracy of pricing and
underwriting and provide enhanced
claims handling capability.
The new platform is now live for Direct
Line, Churchill and Privilege new
business customers across all channels
and the transfer of existing customer
policies is also underway.
4 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Delivering for our customers
Rescue
Collaborating
with Apple
and expanded
patrol service
Green Flag is the only UK
breakdown provider to offer rescue
services as part of Apple's Roadside
Assistance via satellite, providing
drivers with the reassurance that
help is at hand when they don't have
mobile reception or Wi-Fi access.
The expansion of our Green Flag
owned patrols continued at pace;
we have expanded into new regions
with over 60 vehicles on the road
helping customers.
Costs
Progress against
cost saving target
We are implementing a new target
operating model and simplifying our
structure to reduce complexity and
drive greater efficiency.
We are investing in digital
distribution channels to improve
customer accessibility, streamline
our operations and enhance the
overall customer experience.
We are reducing technology costs
by removing legacy technology
systems and leveraging our
existing platforms.
These initiatives underpin our
£100 million cost saving target.
Claims
Delivering
better customer
outcomes
We have a comprehensive
programme of initiatives in claims
which are beginning to take effect.
For example, we are settling large
bodily injury claims faster and
increasing the proportion of cars
repaired through our own repair
network of 23 garages. We have also
strengthened our counter fraud
capabilities, resulting in a 21% saving
year on year.
In Home, we are helping customers
impacted by weather events, visiting
flooded homes within 48 hours
where safe to do so.
5 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Our
customers
Premiums
Managing
finances
Claims
Servicing
Our people and capabilities
Costs
Investment and
other income
Reinvest in the business
Profit
Capital
Dividends
Our
shareholders
Managing risk
6 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Business model
Net insurance margin1 – ongoing
operations2 (%)
3.6%
(8.7)%
(0.9)%
2024
2023
2022
Operating return on tangible equity1
(“Operating RoTE”) (%)
10.0%
(14.9)%
(2.7)%
2024
2023
2022
Operating profit/(loss) per share1 – ongoing
operations2 (pence)
9.8
(12.8)
(2.7)
2024
2023
2022
Profit/(loss) before tax3 (£m)
218.4
277.4
(301.8)
2024
2023
2022
Solvency capital ratio (pre-dividend)1,4,5 (%)
200%
192%
147%
2024
2023
2022
Changes to our KPIs in 2024
Our metrics are reviewed annually and updated
as appropriate to ensure they remain an effective
measure of delivery against our objectives.
For 2024, metrics have been reviewed and
applied consistently to enable effective year
on year comparisons.
Our non-financial KPIs continue to be key measures
of performance. Colleague engagement is disclosed
in the Chief People Officer review, net promoter score
in the Customer section of Sustainability and emissions
are disclosed in the Planet section of Sustainability.
Customer complaints data is no longer reported.
Notes:
1.
See glossary on pages 238 to 241 for definitions and
appendix A – Alternative performance measures on pages
242 to 245 for reconciliation to financial statement
line items.
2.
Ongoing operations – the Group's ongoing operations
result excludes the results of the Brokered commercial
business, that it sold to RSA Insurance Limited in 2023, and
its Non-core businesses, announced at the Group's 2024
Capital Markets Day, and three run-off partnerships that
the Group completed its exit from in H1 2024. Relevant
prior-year data has been restated accordingly.
3.
2023 included a gain of £443.9 million from the disposal
of the Group's Brokered commercial business.
4. Estimates based on the Group’s Solvency II partial
internal model.
5.
The full year 2023 solvency capital ratio has been
re-presented as explained in the Capital analysis section
of this report (post-dividend ratio previously reported in the
Group's 2023 Annual Report and Accounts as being 197%).
7 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Our financial key performance indicators
Capital returned to shareholders since IPO
£4.0bn
Dear Shareholders,
It has been a pivotal year in the Direct Line Group’s history,
and one in which the value and potential of our business and
brands have come into sharp focus.
In a highly competitive and dynamic market one of our top
priorities has been to return to profit. I have been impressed by
the resilience and tenacity of our colleagues, who have worked
to support a new and invigorated strategy and transformative
plan, which has delivered a solid financial and operational
performance. This has been an impressive team effort, achieved
by a relentless focus on continuously improving how we attract
and compete for customers within our risk appetite.
New management, strategy and performance
Adam Winslow joined the Group as CEO on 1 March 2024
and was appointed to the Board as an Executive Director
on 21 March 2024. He undertook a comprehensive review
of the business and, after listening carefully to our investors,
customers and colleagues, established a new strategy,
designed to position Direct Line Group to become the
customers’ insurer of choice, and to set a clear path to
profitable growth.
Adam assembled a highly experienced executive team which
swiftly began to take the critical action necessary to turn the
business around with energy and determination. He and his
team adapted to the many and varied challenges leading the
turnaround with exemplary judgement, phenomenal levels
of energy and great connection with our people – all done
at remarkable pace. Adam’s vision and hard work have been
central to the considerable progress made in 2024 and I, and
my Board would like to thank him for that.
You will see in this Annual Report that we’ve made considerable
progress in delivering the new strategy and turnaround,
resulting in a Group operating profit1 from ongoing operations2
of £205 million and improved our Motor net insurance margin1.
A great deal of what was planned in 2024 is due to come to
fruition in 2025, and the Board anticipates the positive
momentum continuing.
With this positive progress, the Board was able to pay a small
dividend of two pence per share at Half Year. We are also
recommending a further five pence per share final dividend
with our full year results.
Takeover approaches
The Board takes its aim of maximising value for shareholders
very seriously. Early in the year, we received an indicative
proposal from Ageas to purchase the Company. After intensive
deliberation and consultation with investors, the Board
unanimously rejected this proposal, believing it to be uncertain,
unattractive and significantly undervaluing the future
prospects of the business.
In late November 2024, we received an approach from Aviva
plc which, again, the Board rejected on the grounds that it
undervalued the business. Aviva subsequently improved its
offer, and we announced on 23 December 2024 that we had
reached agreement on the terms of a recommended cash and
share offer. Based on the closing price of Aviva shares on 27
November 2024, that offer values each Direct Line share at 275
pence, and values the entire diluted share capital at
approximately £3.7 billion.
The Board firmly believes that the new strategy set out by
Adam would drive substantial value, and are confident in the
prospects that the Group would have as a standalone business.
However, the Board also believes that Aviva’s offer represents
an attractive proposition for our investors and recognises that
it provides an accelerated path to returns, including significant
synergies and value upside potential in the combined group
of companies. Therefore, following detailed consideration
and engagement with investors and other stakeholders, the
Board unanimously decided to recommend Aviva’s offer to
shareholders for approval. Aviva’s culture and values align
well to those of Direct Line Group and were an important
consideration in the Board recommending the offer.
People
Having spoken to many of our colleagues over the past few
months, I have felt the huge sense of pride that they have in
the work they do to support customers, and in the progress
we have made. They really care about our customers and
being brilliant for them every day.
I know that working with uncertainty isn’t easy, and I commend
and thank them all the more for their continued support and
professionalism during this period.
8 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Chair’s statement
Customers
During the year, we continued to put our customers at the
heart of our decisions and aspired to excellence through all
stages of the customer journey. One area of particular focus
has been on delivering good customer outcomes under the
Consumer Duty. The regulations are outcome based and the
Financial Conduct Authority ("FCA") has been clear that they
expect firms to keep developing and improving. In order to
enhance the Board’s continued oversight of the Consumer
Duty, the Customer & Sustainability Committee has been
given a strengthened role.
Board
In addition to Adam Winslow, we were delighted to welcome
our new CFO, Jane Poole, to the Board as an Executive Director
on 10 October 2024. Jane has made a meaningful impact
in the few months since her appointment, progressing the
transformation of our Finance function, enhancing our financial
strategies and playing a central role in the negotiations with
Aviva. We were also pleased to welcome Carol Hagh to the
Board as a Non-Executive Director on 1 April 2024. I am
grateful to all of my Board colleagues for their unstinting
support and hard work, both in supporting the management
team in resetting the Group’s strategy and in starting the
transformation of the business, and in diligently discharging
their roles during the detailed discussions leading up to our
recommendation of the Aviva offer.
It has been a privilege to serve as a member of your Board
since 2017 and as Chair since 2020. I am extremely proud
of everything our people have achieved in building our
outstanding brands, transforming our businesses and
supporting our customers. I am certain they will continue to
excel, either in an independent Direct Line Group or as part of
the Aviva Group. I would also like to thank all our stakeholders
for their continuing support and wish them every success
in the future.
Danuta Gray
Chair of the Board
Agreement for the acquisition
of Direct Line Group by Aviva
– As announced on 23 December 2024, the Boards
of Direct Line Insurance Group plc ("Direct Line")
and Aviva plc ("Aviva") reached agreement on the
terms of a recommended cash and share offer for
Direct Line.
– The transaction values each Direct Line share at 275
pence and values the entire diluted share capital
of the Group at approximately £3.7 billion1.
– The transaction is subject to certain regulatory
approvals, including from the Prudential
Regulation Authority ("PRA") and the Financial
Conduct Authority ("FCA") as well as review by
the Competition and Markets Authority ("CMA").
– Direct Line shareholder meetings are scheduled to
be held on 10 March and the transaction, subject to
regulatory clearances, is expected to become
effective mid-2025.
Note
1.
Based on the closing price of Aviva shares of 489.3 pence
on 27 November 2024 (being the last closing share price
before the commencement of the Offer Period) and taking
into account the final dividend of 5 pence per share
announced today.
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A –
Alternative performance measures on pages 242 to 245 for
reconciliation to financial statement line items.
2.
Ongoing operations – the Group's ongoing operations result excludes
the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced
at the Group's 2024 Capital Markets Day, and three run-off
partnerships that the Group completed its exit from in H1 2024.
Relevant prior-year data has been restated accordingly. See glossary
on pages 238 to 241 for definitions and Appendix B – Management
view statements of profit and loss, expenses, average premiums,
gross written premium and associated fees and in-force policies on
pages 246 to 253.
Section 172(1) statement
The Directors have acted in the way that they considered, in good faith, would be most likely to promote the success
of the Company for the benefit of its members as a whole and, in doing so, have had regard (amongst other matters)
to those matters set out in Section 172(1)(a) to (f) Companies Act 2006.
Please refer to pages 86 to 88 for our detailed statement, which describes how the interests of the Company’s key
stakeholders and the matters set out in Section 172(1)(a)-(f) Companies Act 2006 have been considered in Board
discussions and decision making.
9 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
“The turnround strategy, launched
in July has made a marked
difference to the company’s
performance, and we generated
good momentum across all our
business lines.”
Adam’s letter to shareholders
In 2024 we embarked on an ambitious mission to rapidly
transform Direct Line Group. Our focus on a new strategy,
delivering technical excellence, driving down cost and
embracing a high-performance culture has delivered a
turnaround in results. Despite difficult market conditions, 2024
ended with an operating profit significantly ahead of the
previous year.
Unlocking potential
I joined Direct Line Group in March 2024, just as the Board had
rejected a “highly opportunistic” proposal from Ageas SA/NV,
which they felt significantly undervalued the business and its
prospects. My focus was firmly on diagnosing the issues holding
back performance and demonstrating to our investors how we
could rapidly unlock the potential of the Group. I spent a lot of
time with our stakeholders to understand their frustration with
the ways the Group had lost its technical edge and
underperformed in recent years.
At our Capital Markets Day in July 2024, we laid out a new
strategy for the Group to address investors' concerns and
establish a roadmap to transform the business quickly. We laid
out targets for becoming the customers' insurer of choice and
delivering profitable growth with measurable targets across the
next three years. We have made solid progress to date and
started to deliver against many of the key initiatives rapidly.
We announced we would intensify our focus across our Motor
and Non-Motor segments. Prioritising driving value in core
disciplines has been beneficial, with all areas demonstrating
positive performance. Importantly, we’re also securing
consumer accolades, showing that we are providing products
and service that customers truly value. With two of the
strongest brands in personal lines insurance, Direct Line and
Churchill, and with Green Flag as the leading challenger in the
Rescue market, we have fantastic assets to build upon.
Financial progress
The business has delivered a net insurance margin of 3.6%1,2, a
12.3 point improvement on the previous year. We have a stated
aim to increase this to 13 per cent3 in 2026. We are well on our
way to delivering a significant reduction in our cost base, to
narrow the gap with our competitors, targeting at least £100
million of gross cost savings by end of 2025 on a run-rate
annualised basis4 and we have maintained a strong pre-final
dividend solvency capital ratio at 200%5, a good platform from
which to help the Group withstand headwinds.
10 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
CEO review
Strategic and operational highlights
– Direct Line Motor on Price Comparison Websites ("PCWs"): Successfully delivered on one of our key strategic
ambitions with the launch of three new Direct Line branded Motor products on the Compare the Market PCW.
– Motor pricing: Next generation pricing models implemented alongside four material new data enrichment sources.
– Home re-platform: All own brands now live on the new technology platform which brings significant new pricing and
underwriting capability and supports simplification.
– Rescue: Two new contracts signed, including a collaboration with Apple, becoming the only UK breakdown brand to
offer rescue services as part of Apple's Roadside Assistance via satellite. The own patrol fleet was further expanded to
over 60 vehicles across 6 regions (2023: 16 patrols across 2 regions).
– Commercial Direct: New risk models rolled out for Van and improvements made to Landlord online journeys.
– Digital: New apps launched for Direct Line and Churchill Motor, with almost 300,000 downloads to date, enabling
customers to make policy changes with ease.
– Cost saving programme: A series of initiatives aimed at simplifying the organisation is projected to deliver £50 million
gross cost savings in 2025, as part of our target to achieve run-rate gross savings of more than £100 million by the end
of 20254. Our drive to create a leaner and more efficient operating model is well advanced, with consultations now
complete as part of a reduction of 550 roles.
– Claims: A range of initiatives launched across Motor and Home, designed to deliver better outcomes for customers at
lower cost.
– Travel: We have decided to close our annual multi-trip and single trip travel insurance products to focus on our core
markets in Motor, Home, Rescue and Commercial Direct.
Operational transformation
We have made considerable progress over the year. In Motor, in
July we announced that we would be putting our strongest
brand, Direct Line, on Price Comparison Websites ("PCWs"),
where 90 per cent of motorists purchase their insurance. Less
than six months later, in December 2024, we delivered on this
promise. We launched three new Direct Line branded motor
products on the biggest PCW in the UK with an ambition to
return our overall Motor policy count to growth during 2025.
Our Motability partnership has also seen an increase in policy
count and we aim for it to continue to grow.
Beyond Motor, we outlined ambitious plans to grow our Home,
Rescue and Commercial Direct offerings. In Home we delivered
own brands premium growth of 18% and increased own brands
policies by 1.3%. Technology re-platforming is now largely
complete with Direct Line, Churchill and Privilege all trading on
a new platform.
In our Commercial Direct Insurance business, our strong
proposition in Landlord and our compelling SME offering
delivered 8.8% gross written premium growth and strong
customer retention. We stayed disciplined on the bottom line
in Van and our earned loss ratios were within our target range.
Our Rescue business made significant strategic progress in
2024. We grew our ‘owned patrol’ network to over 60 vehicles,
covering 28% of the UK market, supported nationally by a
network of independent providers. These owned patrols helped
customers, and also generated over £600,000 in additional
roadside revenue.
Technical innovation will remain a key focus across the Group
as we seek to drive home a competitive advantage. We signed
a contract with Apple for Green Flag to become the first UK
breakdown provider to offer rescue services through Apple’s
Roadside Assistance via satellite capability. This allows us to
reach people who might otherwise not get help because they
don’t have mobile phone reception or Wi-Fi access.
We launched two new apps, for Direct Line and Churchill,
meeting the needs of customers who increasingly want to
engage with us digitally. We will keep our focus on aiming to
build seamless customer journeys, letting people self-serve,
simplifying the claims process and making our products more
accessible. We aim to expand AI solutions to reduce cost and
increase the speed of service to meet the evolving needs of
policyholders.
In Claims we’re improving the service we provide customers
while unlocking savings across our operations. We’re settling
bodily injury claims much more proactively, reducing the
number of cars we write off and using our network of owned
repair centres to control costs. Effective claims management
also relies on excellent counter fraud capabilities, and we
delivered a 21% increase in cost savings after introducing data
analytics and voice analysis profiling.
Effective risk management
As a general insurer, the environmental factors impacting the
Group’s performance are major UK floods, windstorms, freeze
events and subsidence. We believe we are appropriately
reserved against those perils. During the year, we acquired
climate scenario modelling capability to support our
assessment of the impact climate change could have on our
underwriting and investment portfolio. This also helps us better
understand the opportunities that may arise from the transition
to a lower-carbon economy.
11 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
When implementing the strategy outlined at the Capital
Markets Day, we ensured that we set out to embed enhanced
risk controls within the business. For example, new pricing and
risk models enable us to be more agile, allowing for more
frequent rating and risk model updates. This renewed focus on
risk management procedures, monitoring emerging threats
and tightening control environments helps protect profitability
and reduces the likelihood of unexpected impacts on our Group.
Cultural transformation
We have recruited an entirely new Executive Committee of
high calibre, experienced leaders, with a track record of delivery.
This new leadership team have made great strides in
transforming the culture of the business, and our colleagues
have embraced the opportunity to grow and operate with a
high-performance mindset.
Transforming a business is not easy, and we’ve had to make
tough decisions about people and capital expenditure. We are
simplifying our management structure in line with our aim of
being a more efficient organisation with clearer accountability.
Over the last year we have made the necessary changes to
succeed in what is an incredibly competitive industry.
Throughout it all, our talented colleagues have consistently
demonstrated their resilience, energy and commitment. They
take immense pride in our brands and want to be brilliant for
our customers every day.
Navigating headwinds
In 2024, the insurance industry continued to grapple with
significant trading headwinds. Inflation drove up the cost of
claims, particularly in Home and Motor, where repair and
replacement costs have surged in recent years. Economic
uncertainty and the ongoing pressures from the cost-of-living
crisis have created an increasingly competitive market, with
insurers facing challenges in balancing affordable premiums
while maintaining profitability. These factors meant we needed
to adopt innovative approaches to underwriting, pricing, and
risk management.
Looking forward
2024 was a landmark year for Direct Line Group, with the Board
recommending a cash and share offer for the purchase of
Direct Line Group by Aviva plc. On 10 March 2025 Direct Line
Group’s shareholders will vote on the transaction.
The potential acquisition by Aviva, which remains subject to
shareholder and regulatory approval, reflects the attractiveness
of the Group, and we believe indicates the significant strength
of our brands and products, the trust of our customers, talent of
our people and the scale of the future opportunity. In the
meantime, we remain an independent business focused on
transforming our organisation, so we are better equipped to
serve our customers with exceptional products and services.
While we need to plan appropriately for this potential takeover,
we need to make sure we don’t take our foot off the accelerator
when it comes to delivering business change.
I am filled with immense pride in what this business has
achieved since I joined. The passion and dedication of our
colleagues, with an unwavering commitment to delivering
brilliant customer outcomes, is unparalleled. Our mission goes
beyond policies and claims: we help safeguard communities,
support the vulnerable and allow our customers to face the
future with confidence.
We are set to embrace the opportunities of tomorrow thanks to
the hard work and dedication of all those at Direct Line Group.
Adam Winslow
Chief Executive Officer
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
2.
Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that
the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary on pages 238 to 241 for
definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
3.
Net insurance margin for ongoing operations, normalised for event weather.
4. The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,
commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.
5.
Estimates based on the Group’s Solvency II partial internal model.
12 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
“I was delighted to join the Group
as CFO at such an important time
and lead our financial strategy as
we aim to grow, to deliver on our
commitments to serve millions of
customers, and to create long-term
sustainable shareholder value.”
Gross written premium and
associated fees1,2
£3,732m
2023: £2,978m
Ongoing2 operating profit1
£205m
2023: £190m loss
Ongoing2 net insurance margin1
3.6%
2023: minus 8.7%
2024 has been a year of significant transition for our Group. I
was delighted to join the Group as CFO at such an important
time and lead our financial strategy as we aim to grow, to
deliver on our commitments to serve millions of customers, and
to create long-term sustainable shareholder value.
Against a challenging external environment, we have
embarked on a bold reset strategy, to focus on improving
business performance, enhance financial strength, and embed
a robust culture of accountability and control.
Financial highlights
This report outlines the financial results for the year. 2024
performance illustrates the early stages of our turnaround
and provides a strong foundation upon which to build as
we accelerate delivery of our strategy. Our key financial
highlights were:
– 25% growth in gross written premiums and associated fees.
Strong growth of 32% in Motor including Motability and 11%
in Non-Motor, above our 7% to 10% compound annual growth
rate ("CAGR") target.
– £395 million increase in ongoing operating profit, largely due
to the turnaround in Motor profitability, alongside a strong
result in Non-Motor.
– Net insurance margin of 3.6% for ongoing operations, a 12.3pt
improvement versus prior year, demonstrating disciplined
underwriting.
– Investment income was £200 million (2023: £139 million), as
we continued to benefit from higher rates with a Group net
investment yield of 4.1%.
– Group profit before tax was £218 million, £59 million lower
than previous year which included a gain of £444 million
from the sale of the Brokered commercial business.
– Tangible net asset value growth of 10% to £1,362 million and
net asset value grew by 4% to £2,138 million.
– Strong solvency capital ratio (pre dividend) of 200% and the
Board has recommended a final dividend of 5.0 pence per
share. The Group generated 20pts of capital during the year
supporting the strong balance sheet.
Further information is set out in the Group financial
performance section on page 20.
Driving business performance
It is critical, at this stage of our turnaround, that we focus on
supporting strategic execution and driving improved business
performance. To achieve this, our Finance team are driving a
step change in performance focus by providing improved
management information to the commercial teams and
prioritising financial performance. We aim to do this while
maintaining excellent cost control, operating more efficiently
and focusing on our ambition of achieving at least £100 million
of gross cost savings by end of 2025 on a run-rate annualised
basis3.
In 2024, we focused on strengthening our performance in core
segments, leveraging our strategic advantages, and investing in
key areas of growth. Our results highlight early stages of
recovery as we delivered 25% growth in gross written premiums
and associated fees1,2, a £395 million improvement in ongoing
operating profit1,2 and 10% growth in tangible net asset value1.
These results provide a strong foundation from which to be
able to deliver on our strategic ambition of achieving 13% net
insurance margin1,4 in 2026.
13 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
CFO review
Strengthening financial resilience
Ensuring long-term financial strength is a key priority,
positioning us well for sustainable growth and enhanced
shareholder value opportunities. I have reviewed our balance
sheet, acted to assure balance sheet strength and remain
focused on prudent capital management. By leveraging
targeted financial strategies, we aim to further optimise capital
allocation, enhance efficiency, and help drive long-term
performance.
– Capital allocation framework: During 2024, we introduced a
more rigorous capital allocation framework to help us
prioritise investments in the most profitable and strategically
aligned opportunities.
– Investments: Our investment portfolio is already well
diversified, and optimised in line with our approach to asset
and liability management. During the year we reinvested
cash back into investment grade credit and introduced index
linked gilts, which are capital light, to match our PPO
liabilities and further diversify whilst generating good yields.
– Reinsurance programme: At the end of 2024 we
implemented a comprehensive reinsurance programme
designed to reduce earnings volatility, strengthen our
balance sheet, and support our long-term financial health. In
our January renewals we optimised cost and risk: in Motor we
now have unlimited cover above £5 million; in property we
increased our catastrophe cover limit in line with our
exposure to cover a 1 in 200 year loss event; while retention is
unchanged at £100 million.
– Reserve strength is a key underpin to balance sheet strength
and the setting of best estimate liabilities is a key accounting
judgment in the Group’s financial statements. Alongside the
independent re-projections performed by our auditors, the
Board annually commissions an independent review of our
claims reserves. These alongside Audit Committee challenge
to our internal actuarial analysis on reserves, provides us with
additional comfort that our best estimate liabilities are within
a reasonable range.
Embedding a culture of accountability and
control
We enhanced our financial control framework and assurance,
delivering greater oversight, control and proactive risk
management. This will help to improve long-term stability.
– Governance enhancements: A comprehensive overhaul of
our governance structures is progressing and aims to
strengthen accountability at all levels and to ensure rigorous
oversight and effective decision making.
– Financial control: We enhanced our financial control
framework and controls assurance, delivering greater
oversight, control, and proactive risk management.
– Focus on risk awareness: We proactively identify and address
emerging risks, positioning the organisation to respond
effectively to an evolving landscape.
– Cultural transformation: A strong and engaged workforce
underpins our ability to achieve sustainable growth. By
embedding a sense of accountability and ownership, we are
empowering teams to deliver results and drive the
company’s turnaround strategy.
Outlook
As we continue our turnaround journey, our financial strategy
remains focused on our clear objectives of delivering profitable
growth, enhancing operational efficiency, and reinforcing our
financial resilience. Whilst we have made significant progress,
we recognise there is more work to do to achieve our long-term
ambitions. I am confident that the disciplined execution of our
strategy can deliver lasting value for our customers, colleagues,
and shareholders.
Jane Poole
Chief Financial Officer
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
2.
Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships
that the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary on pages 238 to 241 for
definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
3.
The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,
commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.
4. Net insurance margin for ongoing operations, normalised for event weather.
14 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
“At Direct Line Group we are a team
of talented individuals, in a place
that empowers us to be the best
we can be to drive high performance.”
Colleague engagement
72
UK average: 72
Engagement survey response rate
82%
UK average: 75%
Jane's letter to the shareholders
At Direct Line Group we are a team of talented colleagues, in
a place that empowers us to be the best we can be. We believe
that by working together, we can achieve great things.
Inspiring, challenging and supporting each other to aim higher
to continually improve our performance and set new standards.
We take accountability for our work. We strive to be brilliant
for customers every day and deliver great outcomes for them.
We celebrate difference and value diverse perspectives, ideas
and opinions.
In 2024, we have been focused on continuing to support and
encourage colleagues to build on their skills and experience to
do the best work of their career and make their full contribution
to becoming a high performing business.
Driving high performance culture
We have continued the emphasis around high performance,
giving greater clarity to colleagues on what this looks like, what
they need to deliver and how to deliver it, through setting clear
objectives and building our managers' capability to have better
performance and development conversations. We have
communicated this change to provide colleagues with clarity,
fairness and transparency.
We continue to conduct multiple engagement surveys
throughout the year to seek feedback from our colleagues on
how they are feeling so that we can make actionable change.
In September 2024, we were proud to receive an Engagement
score of 72, which was a growth of 3% when compared to our
previous survey in February 2024, and is in line with the average
engagement across the UK.
Strengthening our Leadership Capability
In 2024, we appointed a new Executive team. To accelerate the
development of the team, we commenced a 12-month group
development programme partnering with an external team
performance coach. The programme involves a combination
of individual and group coaching, building strong alignment
of goals and performance standards, establishing effective
team practices, and ultimately aims to ensure groups are
performing at their best, both individually and collectively.
Alongside this, we placed a key focus on the development
of our senior leaders, including externally facilitated,
psychometric leadership assessments followed by the launch
of a bespoke programme designed to accelerate our high
performance culture supported by an external coach.
There is strong evidence to suggest our recruitment and
development approach is adding value, with our September
2024 employee engagement survey having reported a
significant 10 percentage point increase in confidence in our
senior leadership team since the survey in February 2024.
Rewarding Colleagues
In April 2024, all eligible colleagues (excluding senior
management) received at least a 5% pay rise, with our
minimum salary rising by 7% to £23,400 a year, in line with the
Living Wage Foundation’s National Real Living Wage (as set
in October 2023 for roles outside of London). This was 5% above
the Government’s statutory National Living Wage, effective
1 April 2024, for those aged 21 and over. From April 2024, all
colleagues became eligible either for incentives or our annual
incentive scheme.
15 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Chief People Officer review
A diverse and inclusive business
We know that to succeed as a high performing business
we need our workforce to be truly representative of our
customers and society. Diverse perspectives, ideas and opinions
lead to more insight, innovation and better decision making.
And we know that being diverse is not enough, we also need
to be inclusive, so everyone feels free to be themselves and
be able to succeed in their careers.
We believe that delivering change requires both policies and
targets and a change in mindsets so we undertake activity
to deliver both. Some examples include:
– Targeting ambitious new representation targets by 2027
and including them in their annual objectives.
– Using inclusive hiring principles, which include the use
of recruitment tools, such as language decoders for job
adverts and panel-based interviewing.
– Building a stronger pipeline of diverse talent, especially
in areas where the jobs of the future are, because we want
to future-proof our activity. This includes work experience,
mentoring and skills building programmes that target
less advantaged communities for our Ignite
apprenticeship programmes.
– Developing our partnerships with The Diversity Trust, Race
Equality Matters and Spear and maintaining our relationship
with Parenting Mental Health. The intention of these
partnerships is to support external communities whilst
also driving greater equity, inclusivity and active allyship
across the Group.
– We also partner with the Business Disability Forum, who
have supported us this year in auditing our guidance on
working with vulnerable customers, and with the ABI who,
through their active DEI network, provide benchmarking
opportunities and learning on industry best practice.
– Learning from our Diversity Network Alliance ("DNA") which
comprises seven employee networks which are a key driver
of diversity and inclusion across our business. They focus on
the following areas: Belief, Life (families and carers), LGBTQ+,
Neurodiversity and Disability, REACH (race, ethnicity and
cultural heritage), Social Mobility and Thrive (gender).
We feel confident that all of these things are contributing
to us becoming a more diverse and inclusive business.
Finally, I wanted to add what a pleasure it has been joining
the Group. I have been so impressed by the talent across the
organisation, the commitment to deliver against our strategy
and the strong sense of a high performance culture that we are
building. I am looking forward to spending more time with the
teams, across our different locations over the coming months.
Jane Storm
Chief People Officer
Note:
1.
Senior leadership is defined as ExCo and their Direct Reports, where
our definition of ExCo-1 is direct reports of the approved list when
they meet all the following criteria:
– must be at a certain reward level and therefore not support staff;
– not a fixed term contractor covering maternity or medical leave; and
– not on garden leave.
Senior Leadership1 female representation
Increasing the diversity of our senior leadership is an ongoing
target for the Group. In 2024 we made an intentional move
to ensure Diversity Equity & Inclusion ("DE&I") is considered
through all people and business decisions. In 2024 we have
made progress towards our 2027 target of women comprising
40% of Senior Leadership, particularly at ExCo level.
Senior leadership1 female representation
as at 31 December 2024
41.7%
40.0%
34.2%
43.5%
35.4%
Board
ExCo
ExCo-1
ExCo-2
Senior
Leadership
Senior Leadership ethnic minority
and Black representation
We recognise that we need to do more to ensure equitable
representation across our organisation, particularly for ethnic
minorities, and have set targets to achieve representation in
Senior Leadership roles of 16% ethnic minorities, including 4%
Black representation, by the end of 2027. We are accelerating
programmes to improve inclusivity across the employee
lifecycle, increasing the retention and promotion of colleagues
from ethnic minority backgrounds. We have strengthened our
succession plans, including high potential talent from under-
represented groups and will review these annually. To facilitate
colleague progression, we invested in access to WeQual, the
world’s leading development network for women leaders and
INvolve Emerging Leaders’ programmes for under-represented
communities.
Ethnic minority representation
in Senior Leadership1
8.3%
12.5%
12.1%
2024
2023
2022
Black representation in Senior
Leadership1
0.0%
0.0%
1.5%
2024
2023
2022
16 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Gender diversity1 of our Board
As of 31 December 2024
41.7%
58.3%
l Women (5)
l Men (7)
Gender diversity1 of Senior Leadership
As of 31 December 2024
35.4%
64.6%
l Women (17)
l Men (31)
Gender diversity of Senior Leadership defined as
Executive Committee and direct reports, excluding
those in support or administrative roles
Gender diversity1 of all employees
As of 31 December 2024
44.2%
55.8%
l Women (3,966)
l Men (5,009)
Ethnicity of all employees
As of 31 December 2024
l 11.7%
Asian (1,053)
l 3.1%
Black (282)
l 2.1%
Mixed (188)
l 1.4%
Other (126)
l 73.2% White (6,566)
l 6.1%
Prefer not to Say (544)
l 2.4%
Not Specified (216)
Gender pay gap1
In 2024, our mean gap widened by 1.1 percentage points
and our median gap by 1.7 percentage points. Our pay gap
is now broadly in line with peers when compared with the
broader financial and insurance services sector but we want
to see that gap close. We are comfortable that we do not pay
people differently because of their gender and believe that
the way to reduce the gap in the medium to long term is
to continue with our work to seek to address the
disproportionate representation of women at senior levels and
in certain areas of our business. The figures used for the gender
pay gap reporting are reflective of the snapshot at 5 April 2024,
which this year has been impacted by a lower proportion of
women in senior leadership roles across the Group at that time.
Since this time, good progress has been made in enhancing
women in senior leadership roles. A further influence in the
pay gap relates to our accident repair centres, an area that is
heavily resourced by men and where pay levels are at a market
premium compared to other positions within our lower bands
due to the external recruitment market, resulting in them
being positioned in our top two pay quartiles.
Our 2024 gender pay gap showed:
Gender pay gap
Mean
Median
2024
22.2 %
25.1 %
2023
21.1 %
23.4 %
2022
19.3 %
20.3 %
Gender bonus gap
Mean
Median
2024
56.3 %
43.6 %
2023
53.8 %
43.8 %
2022
46.7 %
45.4 %
% of employees receiving bonus
Men
Women
2024
77.2 %
71.2 %
2023
84.2 %
87.3 %
2022
83.1 %
82.6 %
Note:
1.
Gender diversity refers to Legal Sex.
17 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Ethnicity pay gap2
This is the fourth year that we are voluntarily disclosing
our ethnicity pay gap. As with the gender pay gap, we are
comfortable that we do not pay people differently because of
their ethnicity and believe that the way to reduce the gap in the
medium to long term is to continue with our work to address
the disproportionate representation of ethnic minority
colleagues at certain levels and in certain areas of our business.
We are proud that 91% of colleagues have disclosed their
ethnicity with us, as we continue to encourage more colleagues
to share, the numbers we report in the future may change
as a result. It is important to note that when pay gap data is
represented by a smaller number of colleagues, it can vary
significantly due to changes in the make up of our colleagues
during the year. Our pay gap for all ethnic minorities remains
low and has narrowed in 2024.
Ethnicity pay gap
2024
2024
2023
2023
Mean
Median
Mean
Median
Ethnic minority
(overall)
-0.8 %
11.0 %
1.0 %
12.7 %
Asian
-6.6 %
8.9 %
-2.7 %
14.1 %
Black
16.8 %
19.7 %
12.2 %
17.8 %
Mixed
3.2 %
9.0 %
3.2 %
8.2 %
Other
-0.3 %
-4.9 %
2.9 %
-0.2 %
Ethnicity bonus gap
2024
2024
2023
2023
Mean
Median
Mean
Median
Ethnic minority
(overall)
27.2 %
4.1 %
28.7 %
20.4 %
Asian
29.4 %
0.0 %
29.2 %
20.5 %
Black
42.4 %
16.3 %
40.6 %
24.5 %
Mixed
21.7 %
3.4 %
22.3 %
15.3 %
Other
-3.3 %
12.6 %
16.9 %
10.1 %
% of employees receiving bonus
2024
2023
White
77.4%
88.0%
Ethnic minority (overall)
63.5%
78.5%
Asian
64.0%
77.7%
Black
53.4%
74.1%
Mixed
69.4%
78.6%
Other
72.8%
89.6%
Notes:
1.
Gender pay gap shows the difference in average pay between women and men. This is different to equal pay, which is women and men receiving
the same pay for work of equal value. Our reporting is based on a snapshot date of 5 April 2024.
2.
Ethnicity pay gap shows the difference in average pay between ethnic minorities, Asian, Black, Mixed, Other and White colleagues. This is different
to equal pay that is ethnic minority and White colleagues receiving the same pay for work of equal value. Our reporting is based on a snapshot date
of 5 April 2024 and 91% of colleagues that have shared their ethnicity with us.
18 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Motor premium and claims inflation
The UK motor market1 continued to be affected by
challenging conditions, driven by the impact of elevated
inflation. The average cost of motor cover was £622, 15% higher
than 2023 although average premiums reduced during the
year and ended 1.3% lower year on year in the fourth quarter.
This is against a backdrop of total claims payouts that were
17% higher in 2024 compared to the previous year.
Claims inflation remained elevated in 2024, albeit lower
than the levels seen in 2023 as inflationary pressures began
to moderate. Repair cost inflation remained above long term
averages driven by higher labour costs. The market observed
a reduction in claims frequency during the year which is likely
to reflect changes to driving patterns, car safety and cost
of living pressures.
In February 2024, the Association of British Insurers (“ABI”)
published a 10-Point Roadmap to help combat the cost
of motor cover. The Roadmap outlined ten actions that the
industry, government or regulators could take, and areas where
improvements could be made to address the affordability
of motor insurance. The ABI believes the Government can help
combat high claims costs by addressing the skills and capacity
challenge in the vehicle repair sector, improving the UK's roads,
and delivering its road safety strategy.
During the year, the Government announced a cross-
government motor insurance taskforce, supported by industry
experts, to help drive down the costs of car insurance.
The Government announced changes to the discount rate used
by courts to decide how much insurer compensation personal
injury claimants should receive as a lump sum. In September
the discount rate for Scotland and Northern Ireland changed to
0.5% (previously minus 0.75%) and in January 2024, the discount
rate in England and Wales changed to 0.5% (previously
minus 0.25%).
The Group focused on maintaining margins throughout the
year and growing its share of new business through the PCW
channel. In December the Group launched its Direct Line brand
on its first PCW, the channel where over 90% of customers
buy their insurance.
Home premium and claims inflation
The UK household market2 experienced strong premium
inflation in 2024, likely driven by a combination of claims
inflation and the impact of weather events.
The average price for a combined policy rose 16% to £395 which
led to an increase in the volume of consumers shopping in the
market, particularly in the first half of the year before prices
softened in the second half of the year.
The market experienced a number of weather events in
the year, particularly in the fourth quarter where, according
to the ABI, claims for damage to homes from adverse weather
reached £146 million.
Against this backdrop, the Group focused on maintaining
margins whilst growing own brand new business sales
year on year.
Climate change
A focus on climate remains, with particular emphasis placed
on how firms are assessing and managing longer-term climate-
related risks. Increased importance is also being given to the
communication of plans that companies have in place to
support the transition to a low-carbon economy. This includes
the actions that are being taken to progress against emission
reduction targets and net zero aims. Furthermore, we continue
to expect an increase in regulatory focus on how firms are
managing climate-related financial risks, as well as how this is
reported, supported by developments in reporting frameworks
and disclosure requirements.
The Group continues to respond to climate change, and
we take our responsibilities seriously in our assessment of
climate-related risks to our business. Our disclosure against
the recommendations of the Task Force on Climate-related
Financial Disclosures (“TCFD”) (see pages 58 to 71) sets out our
strategic response to climate change and reflects continued
action to further develop our understanding and management
of the associated risks and opportunities. The disclosure reports
on the progress we have made in the year against our carbon
emissions reduction targets, which were approved by the
Science Based Targets initiative (“SBTi”) in 2022.
Notes:
1.
Based on ABI Q4 motor premiums and claims tracker.
2.
Based on ABI Q4 household premiums and claims tracker.
19 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Market Overview
2024
2023
Change
Ongoing operations1,2
In-force policies1 (thousands)
8,827
9,339
(5.5%)
FY 2024
FY 2023
Change
Notes
£m
£m
£m
Ongoing operations1,2
Gross written premium and associated fees1
3,731.9
2,977.6
25.3%
Net insurance revenue1
2,857.1
2,422.6
17.9%
Insurance service result
104.6
(212.0)
316.6
Net insurance margin1
3.6%
(8.7%)
12.3pts
Combined operating ratio1
96.4%
108.7%
12.3pts
Net insurance claims ratio1
69.9%
82.1%
12.2pts
Net acquisition costs ratio1
6.3%
6.8%
0.5pts
Net expense ratio1
20.2%
19.8%
(0.4pts)
Normalised net insurance margin1
3.0%
(10.0%)
13.0pts
Investment income
200.3
139.1
44.0%
Unwind of discounting of claims1,3
(98.9)
(116.5)
17.6
Other operating income and expenses before restructuring and one-off costs
(1.0)
(0.5)
(100.0%)
Ongoing operating profit/(loss)1,2
205.0
(189.9)
394.9
Current-year operating profit/(loss)1
208.2
(45.4)
253.6
Prior-year reserves development
(3.2)
(144.5)
141.3
Other investment movements4
111.9
98.9
13.1%
Restructuring and one-off costs
(118.1)
(59.5)
(98.5%)
Brokered commercial business, Non-core and Run-off
39.7
(1.5)
41.2
Other finance costs
(15.4)
(14.5)
(6.2%)
(Loss)/gain on disposal of business
(4.7)
443.9
(101.1%)
Profit before tax
218.4
277.4
(59.0)
Tax charge
(55.8)
(54.5)
(1.3)
Profit for the year attributable to the owners of the Company
162.6
222.9
(60.3)
Performance metrics
Basic earnings per share (pence)
12
11.2
15.9
(4.7)
Diluted earnings per share (pence)
12
11.1
15.7
(4.6)
Operating earnings/(loss) per share (pence)1,3
9.8
(12.8)
22.6
Return on equity1
14
7.0%
10.6%
(3.6pts)
Operating return on tangible equity1,3
10.0%
(14.9%)
24.9pts
Investments metrics
Investment income yield1,3
4.1%
3.5%
0.6pts
2024
2023
Change
Capital and returns metrics
Dividend per share – final (pence)
5.0
4.0
25.0%
Dividend per share – total ordinary (pence)
7.0
4.0
75.0%
Net asset value per share (pence)
13
164.3
158.0
4.0%
Tangible net asset value per share (pence)1
104.7
95.6
9.5%
Solvency capital ratio – post dividends1,5,6
195%
188%
7pts
Notes:
1.
See glossary on pages 238 to 241 for definitions.
2.
Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that
the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly.
3.
See appendix A – Alternative performance measures on pages 242 to 245 for reconciliation to financial statement line items.
4. Other investment movements relate to net fair value gains/(losses), the effect of the change in the yield curve and interest expense on funds
withheld liabilities.
5.
Estimates based on the Group’s Solvency II partial internal model.
6.
The full year 2023 solvency capital ratio has been re-presented as explained in the Capital analysis sub-section of the Group financial performance
section in this report (previously reported in the Group's full year 2023 preliminary results and Annual Report and Accounts as being 197%).
20 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Group financial performance
2024 performance
Profit from ongoing operations increased by £395 million to
£205 million driven by a turnaround in Motor earnings which
increased by £427 million. Non-Motor delivered a profit
of £98 million.
The Group has excluded the results of the Brokered commercial
business, three run-off partnerships and its Other personal lines
products from its ongoing results. Results relating to ongoing
operations are referenced in Appendix B to the report and
in the financial statements, note 2 (Segmental information)
has also been amended to reflect the change. The insurance
service result from ongoing operations was a profit of £105
million (FY 2023: £212 million loss) and for the Group, as a whole,
it was a profit of £126 million (FY 2023: £227 million loss).
The Group profit before tax was £218 million, £59 million lower
than prior year, which included £444 million from the sale
of the Brokered commercial business in 2023.
In-force policies1 and gross written premium and
associated fees1
In-force policies from ongoing operations were 8.8 million, 5.5%
lower than at the end of 2023. The largest reduction was in
Motor where own brand policies were 13.2% lower as we
focused on disciplined underwriting which more than offset
growth in the Motability partnership. Non-Motor in-force
policies were 3.1% lower than the end of 2023, mainly due
to Rescue. Commercial Direct grew 0.8% and Home own
brands grew 1.3%.
Gross written premiums and associated fees for ongoing
operations grew by 25.3% to £3,732 million driven by strong
growth in Motor and Non-Motor. The 31.8% growth in Motor
was supported by the Motability partnership, where we had
a full year of premium in 2024 compared to only seven months
during 2023, and higher own brand average premiums.
Non-Motor achieved growth of 11.0%, ahead of the CAGR target
of 7% to 10%, due to double-digit premium growth in Home
and 8.8% growth in Commercial Direct.
Insurance service result
The net insurance margin for ongoing operations was 3.6%,
12.3pts better than 2023, primarily due to a significant
improvement in Motor, particularly in the second half of 2024
following repricing action. The Non-Motor net insurance
margin remained strong at 8.9%.
The net insurance claims ratio for ongoing operations was
69.9%, an improvement of 12.2pts compared with 2023 due to
significant improvement in both the current year attritional
claims ratio and the prior year reserves development ratio.
The changes to the Ogden discount rate for large bodily injury
claims resulted in a £41 million reserve release for the Group,
of which £36 million related to ongoing operations.
The current year attritional claims ratio improved by 6.7pts as
the pricing actions taken in Motor began to earn through while
the prior year reserves development ratio improved by 5.9pts.
Weather event related claims in Non-Motor were £43 million
(FY 2023: £27 million). Our assumption for the full year 2024 was
£62 million. In addition, the Group experienced approximately
£10 million of non-event weather above expectation in the first
half of 2024.
The prior-year reserves development ratio was an immaterial
strengthening of 0.1% (FY 2023: 6.0% strengthening). Motor saw
positive development in prior year claims, following the
changes to the Ogden discount rate for large bodily injury
claims, which was more than offset by prior year strengthening
in Non-Motor.
The net acquisition costs ratio for ongoing operations improved
by 0.5pts to 6.3% as higher acquisition costs were more than
offset by higher premiums. The net expense ratio for ongoing
operations was broadly stable at 20.2% (FY 2023: 19.8%) as the
full year of Motability costs alongside higher depreciation and
amortisation charges and general inflation were largely offset
by premium growth.
Expenses in insurance service result
Operating expenses for ongoing operations were £577 million,
an increase of £97 million compared with FY 2023. Controllable
costs increased by £51m in line with growth from Motability and
expected inflation, resulting in a broadly stable net expense
ratio of 20.2% (2023: 19.8%).
FY 2024
FY 2023
£m
£m
Commission expenses
(121.2)
(104.8)
Marketing
(58.1)
(61.1)
Acquisition expenses
(179.3)
(165.9)
Staff costs7
(225.2)
(185.1)
IT and other operating expenses7,8
(104.4)
(93.2)
Insurance levies
(104.1)
(79.1)
Depreciation, amortisation and
impairment of intangible and fixed
assets9
(143.6)
(122.9)
Operating expenses
(577.3)
(480.3)
Total expenses – ongoing
operations1,2
(756.6)
(646.2)
Total expenses – Non-core and
Run-off1
(45.2)
(54.2)
Total expenses – Brokered
commercial business1
(105.3)
(207.5)
Total expenses
(907.1)
(907.9)
Net acquisition costs ratio1
– ongoing operations
6.3%
6.8%
Net acquisition costs ratio1
– total Group
7.5%
9.3%
Net expense ratio1 – ongoing
operations
20.2%
19.8%
Net expense ratio1 – total Group
21.6%
19.7%
21 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Brokered commercial business1,2
The Group has excluded the results of the Brokered
commercial business from its ongoing results and has restated
all relevant comparatives across this review. The Group agreed
the transfer of the Group’s Brokered commercial lines
insurance business and associated partnerships to Royal & Sun
Alliance Insurance Limited with effect from 1 October 2023
through a combination of quota share reinsurance and a form
of renewal rights transfer. As a result, the economic effect of the
Brokered commercial insurance business moved to Royal &
Sun Alliance Insurance Limited and the back book of policies
has remained with the Group.
For 2024, gross written premium and associated fees were £437
million (2023: £666 million). The operating profit relating to the
Brokered commercial business in 2024 was £36 million (2023:
£28 million). The formal separation and operational transfers
started in the second quarter of 2024, with subsequent
transfers of outstanding elements of the overall Brokered
commercial insurance business following.
Non-core and Run-off1,2
The Group has excluded the results of Other personal lines
products, including three partnerships that were previously
disclosed as being exited, from its ongoing operations and has
restated all relevant comparatives across this review. Other
personal lines is made up of Pet, Travel, Creditor and Select, our
insurance targeted at mid- to high-net worth customers. Pet is
the largest product within Other personal lines. As announced
at the Group’s Capital Markets Day in July 2024, the decision
was taken to pause investment in these products. Other
personal lines represented around £130 million of gross written
premium and associated fees in 2023.
Three partnerships in Travel and Rescue have now been exited
and will reduce the Group’s exposure to low margin insurance
products packaged with bank accounts so it can redeploy
capital to segments with higher return opportunities. The two
Travel partnerships were with NatWest Group and Nationwide
Building Society and expired during the first half of 2024,
although upgrades on existing Nationwide Building Society
policies will continue to be underwritten by the Group until
April 2025. The Rescue partnership was with NatWest Group
and expired during the second half of 2022.
Gross written premium and associated fees were £178 million
(2023: £279 million). The operating profit relating to Non-core
and Run-off was £4 million (2023: £29 million loss).
Investment result and unwind of discount rate1
Net investment income from ongoing operations increased to
£200 million (FY 2023: £139 million) primarily driven by interest
rates remaining high following an environment of global
interest rates rising during 2023, and a phased reinvestment
back into investment grade credit more aligned with the
Group’s benchmark weighting, resulting in an investment
income yield of 4.1%.
FY 2024
FY 2023
£m
£m
Investment income
207.5
146.3
Investment fees
(7.2)
(7.2)
Net investment income
200.3
139.1
Unwind of discounting of claims1,3
(98.9)
(116.5)
Finance income and expenses
in operating profit
101.4
22.6
FY 2024
FY 2023
Investment income yield
(total Group)1
4.1%
3.5%
Finance income and expenses in operating profit also benefited
from a decrease in expenses related to the unwind of the
discounting of claims.
Reconciliation of operating profit/(loss) to basic
earnings per share
FY 2024
FY 2023
£m
£m
Motor
107.0
(319.6)
Non-Motor
98.0
129.7
Operating profit/(loss)¹ – ongoing
operations¹
205.0
(189.9)
Operating profit¹ - Brokered
commercial business1
36.2
27.6
Operating loss1 – Non-core and
Run-off1
3.5
(29.1)
Operating profit/(loss)¹ – total
Group
244.7
(191.4)
Restructuring and one-off costs1
(118.1)
(59.5)
Net fair value gains
37.1
124.4
Net insurance finance income
– effect of change in yield curve1
89.2
(25.5)
Interest expense on funds withheld
liabilities
(14.4)
–
(Loss)/gain on disposal of business
(4.7)
443.9
Other finance costs
(15.4)
(14.5)
Tax charge
(55.8)
(54.5)
Profit for the year attributable to
the owners of the Company
162.6
222.9
Basic earnings per share (pence)
11.2
15.9
Operating return on tangible
equity1,3
10.0%
(14.9%)
22 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Restructuring and one-off costs
The Group incurred £118 million of restructuring and one-off
costs during 2024 (2023: £60 million), which were a result of
several items including cost out and control initiatives, non-
cash impairments, as well as work carried out in relation to the
takeover approach from Ageas NV and the offer from Aviva plc.
Net fair value gains1,2
Net fair value gains in the period were £37 million (2023: £124
million), reflecting a further tightening of credit spreads and
interest rate movements year-on-year and the pull to par on
the Group's credit holdings.
Net insurance finance income – effect of change
in yield curve
Net insurance finance income of £89 million (2023: £26 million
expense) reflects the gross and reinsurance effect of changes
in the yield curve and the ASHE index on the discounting
of previously recognised PPO claims.
Other finance costs
Other finance costs were £15 million (2023: £15 million) and
relate to interest payable on the Group's £260 million (nominal)
subordinated debt due in 2032.
Profit before tax
Profit before tax reduced by £59 million to £218 million
(2023: £277 million) primarily due to the effect of the sale of
the Brokered commercial business in 2023 which generated
£444 million.
Effective corporation tax rate
The Effective Tax Rate ("ETR") for 2024 was 25.5% (2023: 19.6%),
which was slightly higher than the standard UK corporation tax
rate of 25.0% (2023: 23.5%). This was driven primarily by
disallowable expenses, partly offset by tax relief for coupon
payments on the Group's Tier 1 notes, which are accounted for
as a distribution, together with a prior-year credit. This is higher
than the effective tax rate for 2023 which reflected the offset
of capital losses brought forward which had not previously
been recognised in deferred tax.
Operating return on tangible equity1,3
The operating return on tangible equity increased by 24.9pts to
10.0% (2023: minus 14.9%) due primarily to the increase in the
Group's operating profit from ongoing operations.
Earnings per share
The basic earnings per share in 2024 was 11.2 pence (2023: 15.9
pence). Diluted earnings per share in 2024 was 11.1 pence (2023:
15.7 pence), mainly reflecting a reduction in the Group's post-
tax profit for the calculation of earnings per share in 2024 as
improvements to operating profit were offset by the non-
repeat of the gain on the sale of the Group's Brokered
commercial business experienced in 2023. Operating earnings
per share was 9.8 pence (2023: 12.8 pence loss).
The financial performance of the Group is discussed in detail
in this and the Operating review sections. The calculation of
earnings per share is presented in note 12. The calculation of
operating earnings per share is presented in Appendix B.
Notes:
1.
See glossary on pages 238 to 241 for definitions
2.
Ongoing operations – the Group's ongoing operations result excludes
the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced
at the Group's 2024 Capital Markets Day, and three run-off
partnerships that the Group completed its exit from in H1 2024.
Relevant prior-year data has been restated accordingly. See glossary
on pages 238 to 241 for definitions and Appendix B – Management
view statements of profit and loss, expenses, average premiums,
gross written premium and associated fees and in-force policies on
pages Appendix B – Management view statements of profit and loss,
expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
3.
See appendix A – Alternative performance measures on pages 242 to
245 of insurance finance costs, operating return on tangible equity,
operating earnings/(loss) per share and investment income yield.
4. Other investment movements relate to net fair value gains/(losses),
the effect of the change in the yield curve and interest expense on
funds withheld liabilities.
5.
Estimates based on the Group’s Solvency II partial internal model.
6.
The full year 2023 solvency capital ratio has been re-presented as
explained in the Chief Financial Officer review of this report
(previously reported in the Group's full year 2023 preliminary results
and Annual Report and Accounts as being 197%).
7.
Staff costs and other operating expenses attributable to claims
handling activities are allocated to the cost of insurance claims.
8. IT and other operating expenses include professional fees and
property costs.
9.
Includes right-of-use ("ROU") assets and property, plant and
equipment. For the year ended 31 December 2024, there were no
impairment charges which relate solely to own occupied freehold
property (2023: no impairments).
23 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Cash flow
2024
2023
Note
£m
£m
Net cash (used in)/generated
from operating activities
(364.5)
404.9
Of which:
Operating cash flows
before movements in
working capital
137.2
(337.0)
Movements in working
capital
(168.2)
469.0
Tax received/(paid)
13.9
(30.9)
Cash flow hedges
(0.3)
(0.6)
Cash (used in)/generated
from investment of
insurance assets
(347.1)
304.4
Net cash (used in)/generated
from investing activities
(106.5)
398.3
Net cash used in financing
activities
(129.6)
(51.8)
Net (decrease)/increase in
cash and cash equivalents
25
(600.6)
751.4
Cash and cash equivalents at
the beginning of the year
1,689.8
938.4
Cash and cash equivalents
at the end of the year
25
1,089.2
1,689.8
The cash that the Group used in operating activities (£365
million), investing activities (£107 million) and financing
activities (£130 million) resulted in a net decrease in cash and
cash equivalents of £601 million to £1,089 million (2023: £751
million increase to £1,690 million).
Net cash used in operating activities of £365 million is largely
as a result of cash used in investment of insurance assets of
£347 million (2023: £304 million cash generated). The Group has
considerable assets under management and during the period
purchases of debt securities held at fair value through profit or
loss ("FVTPL") exceeded disposals and maturities. The Group
had an operating cash inflow before movements in working
capital of £137 million (2023: outflow £337 million), due to the
improvement in the insurance service result. After taking into
account movements in working capital, taxes and cash flow
hedges, the Group's cash outflow before investment of
insurance assets was £31 million (2023: inflow £132 million).
Net cash used in investing activities of £107 million primarily
reflected the Group's continuing investment in its major IT
programmes (2024: £93 million, 2023: £124 million) while the
net cash generated from investing activities in the period
ended 31 December 2023 primarily reflected net proceeds from
the sale of the Brokered commercial business of £470 million.
Net cash used in financing activities of £130 million included
£95 million in dividends and Tier 1 capital coupon payments
(2023: £17 million in Tier 1 capital coupon payments) and £13
million (2023: £11 million) in lease principal payments.
The levels of cash and other highly liquid sources of funding
that the Group holds to cover its claims and other cash flow
obligations are continually monitored with the objective of
ensuring that the levels remain within the Group’s risk appetite.
Balance sheet management
Capital management and dividend policy
The Group aims to manage its capital efficiently and generate
long-term sustainable value for shareholders, while balancing
operational, regulatory, rating agency and policyholder
requirements.
The Group aims to pay a regular dividend of around 60% of
operating profit after tax for ongoing operations1.
Where the Board believes that the Group has capital which is
expected to be surplus to the Group’s requirements for a
prolonged period, it intends to return any surplus to
shareholders.
The Group has a solvency risk appetite of 140% of the Group’s
solvency capital requirement ("SCR"). In normal circumstances,
the Board expects that a solvency coverage ratio of around
180% is appropriate and will take this into account when
considering the potential for additional returns, alongside
expectations for future capital requirements and other relevant
factors. In the short-term, the Group expects to maintain a
solvency coverage ratio above this level.
In the normal course of events the Board will consider whether
or not it is appropriate to distribute any surplus capital to
shareholders once a year, alongside the full year results.
The Group expects that one third of the annual dividend will
generally be paid in the third quarter as an interim dividend,
with the remaining regular dividend paid as a final dividend in
the second quarter of the following year. The Company may
consider a special dividend and/or a repurchase of its own
shares to distribute surplus capital to shareholders.
The Board may revise the dividend policy from time to time.
The Board has reviewed the progress the Group has made in
turning around the business and, based on the Group's strong
solvency coverage ratio and underlying capital generation over
the last 12 months, has concluded it is appropriate to
recommend to shareholders at the annual general meeting
a final dividend of 5.0 pence per share (£65 million).
Subject to shareholders approving the dividend at the annual
general meeting on 14 May 2025, the dividend is scheduled
to be paid on 19 May 2025 to shareholders on the register
on 4 April 2025. The ex-dividend date will be 3 April 2025.
Note:
1.
Operating profit from ongoing operations after finance costs, coupon
payments in respect of Tier 1 notes and tax at the standard rate.
24 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Capital analysis
The Group is regulated under Solvency II requirements, as
modified by the PRA's 2024 reforms, by the PRA on both a
Group basis and for the Group’s principal underwriter, U K
Insurance Limited. In its results, the Group has estimated its
Solvency II own funds, SCR and solvency capital ratio as at
31 December 2024.
Capital position1
At 31 December 2024, the Group held a Solvency II capital
surplus of £1.11 billion above its regulatory capital requirements,
which was equivalent to an estimated solvency capital ratio
post dividends of 195%.
At 31 December
2024
2023
Solvency capital requirement (£
billion)
1.16
1.13
Capital surplus above solvency
capital requirement (£ billion)
1.11
1.00
Solvency capital ratio pre-final
dividend1
200 %
192 %
Solvency capital ratio
post-dividends1
195%
188%
Note:
1.
The full year 2023 solvency capital ratio has been re-presented as
explained below (the post-dividend ratio previously reported in the
Group's full year 2023 preliminary results and Annual Report and
Accounts as being 197%).
During the Group’s half year results preparation, a
miscalculation was identified within the Group’s audited
Solvency II own funds for the year ended 2023. 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.
This miscalculation had no impact on the IFRS figures.
Correcting for the miscalculation, the solvency capital ratio
(post-dividend) at year end 2023 was 188%, which was above
the Group’s risk appetite range of 140% to 180% (the previously
reported solvency capital ratio was 197%).
Capital Returns (£million)
595.2
401.3
149.1
52.0
91.1
299.7
301.3
99.0
52.0
91.1
195.5
100.0
100.0
50.1
2020
2021
2022
2023
2024
n Ordinary dividends
n Special dividends
n Buyback programmes
Movement in capital surplus1 (£bn)
1.00
0.24
0.10
(0.03)
(0.11)
(0.03)
(0.06)
1.11
Capital
surplus at 1
January
Capital
generation
excluding
market
movements
Market
movements
Change in
solvency
capital
requirement
Capital
expenditure
Interim
dividend
Final dividend
Capital
surplus at 31
December
25 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Movement in capital surplus1
2024
2023
£bn
£bn
Capital surplus at 1 January
1.00
0.57
Capital generation excluding
market movements
0.24
0.46
Market movements
0.10
0.06
Capital generation
0.34
0.52
Change in solvency capital
requirement
(0.03)
0.08
Surplus generation
0.31
0.60
Capital expenditure
(0.11)
(0.15)
Interim dividend
(0.03)
–
Final dividend
(0.06)
(0.05)
Decrease in ineligible Tier 3 capital2
–
0.03
Net surplus movement
0.11
0.43
Capital surplus at 31 December
1.11
1.00
Notes:
1.
The full year 2023 movement in capital surplus has been re-presented
as explained in the Capital position section of this report.
2.
At 31 December 2024 and 31 December 2023 no ineligible Tier 3
capital arose as the Group's available Tier 3 capital was under the
amount of Tier 3 capital permitted under the Solvency II regulations
(15% of the Group’s SCR). In FY 2023 there was a £0.03 billion
reduction in ineligible Tier 3 capital as ineligible Tier 3 capital reported
at FY 2023 reduced to £nil.
During 2024, the Group generated £0.34 billion of Solvency II
capital from a combination of operating earnings, one-off
benefits from partnerships and market movements. After
a change to the solvency capital requirement of £0.03 billion,
capital expenditure of £0.11 billion and dividends of £0.09 billion,
the net surplus for the year increased by £0.11 billion to £1.11 billion.
Change in solvency capital requirement
2024
£bn
Solvency capital requirement at 1 January
1.13
Parameter changes
–
Exposure and model changes
0.03
Solvency capital requirement at 31 December
1.16
During 2024, the Group’s SCR increased by £0.03 billion to £1.16
billion primarily due to updated exposure positions.
Scenario and sensitivity analysis1
The following table shows the impact on the Group’s estimated
solvency capital ratio in the event of the following scenarios
as at 31 December 2024. The impacts on the Group’s solvency
capital ratio arise from movements in both the Group’s SCR
and own funds.
Impact on solvency capital ratio1
At 31 December
2024
2023
Deterioration of small bodily injury
motor claims equivalent to that
experienced in 2008/09
(5pts)
(5pts)
One-off catastrophe loss
equivalent to the 1990 storm
"Daria"
(8pts)
(9pts)
One-off catastrophe loss based on
extensive flooding of the River
Thames
(7pts)
(7pts)
100 bps increase in PPO real
discount rate2
(11pts)
(15pts)
100 bps increase in credit spreads3,4
(6pts)
(6pts)
100 bps decrease in interest rates
with no change in the PPO
discount rate3
(4pts)
(6pts)
Notes:
1.
Sensitivities are calculated on the assumption that full tax benefits
can be realised.
2.
The periodic payment order ("PPO") real discount rate is an actuarial
judgement which is based on a range of factors including the
economic outlook for wage inflation relative to the PRA discount rate
curve. The sensitivity was previously labelled, “Increase in Solvency II
inflation assumption for PPOs by 100 basis points”. The underlying
sensitivity and historic results remain the same.
3.
The sensitivity has been updated to include assets that are accounted
for at amortised cost. Previously only assets that were treated as
FVTPL were included. The comparative period has been restated
on a consistent basis.
4. Assumes no change to the SCR.
26 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Limitations of sensitivity analysis
– Sensitivities are calculated by applying an instantaneous
change to specific assumptions whilst leaving others
unchanged.
– In reality, changes in the environment occur over time and
are often interrelated; the sensitivities provided do not
capture these interactions.
– The impact of a change in assumptions is often non-linear
and users of this information should not assume that
applying a linear calculation methodology will provide
accurate results.
– The sensitivities are based on a balance sheet at a specific
point in time. The result of a sensitivity analysis will also
change due to business performance and any active
management of assets and liabilities.
– Movements in economic variables are unlikely to follow the
nature of a parallel shift as described in many of the
sensitivities.
– In addition, the sensitivities assume economic variables move
in a similar manner across different currencies and countries,
which is unlikely to be true in reality.
– Our specific portfolio of assets and liabilities will not match
the composition of market indices exactly and using such
indices to estimate an impact on the balance sheet should be
used with caution.
Own funds
The following table splits the Group’s eligible own funds by tier
on a Solvency II basis.
2024
2023
At 31 December
£bn
£bn
Tier 1 capital before foreseeable
distributions
1.71
1.51
Foreseeable dividend
(0.06)
(0.05)
Tier 1 capital – unrestricted
1.65
1.46
Tier 1 capital – restricted
0.32
0.32
Eligible Tier 1 capital
1.97
1.78
Tier 2 capital – subordinated debt
0.21
0.22
Tier 3 capital – deferred tax
0.09
0.13
Total eligible own funds
2.27
2.13
Note:
1.
Full year 2023 eligible own funds have been re-presented
as explained in the Capital position section of this report.
During 2024, the Group’s eligible own funds increased from
£2.13 billion to £2.27 billion. Eligible Tier 1 capital after
foreseeable distributions represents 87% of own funds and 170%
of the estimated SCR. Tier 2 capital relates to the Group’s £0.21
billion subordinated debt with no ineligible Tier 1 capital.
The maximum amount of Restricted Tier 1 capital permitted
as a proportion of total Tier 1 capital under the Solvency II
regulations is 20%. Restricted Tier 1 capital relates solely to the
Tier 1 notes issued in 2017.
The amount of Tier 2 and Tier 3 capital permitted under the
Solvency II regulations is 50% of the Group’s SCR and the
amount of Tier 3 alone is 15% of the Group's SCR. The Group has
no ineligible Tier 3 own funds.
Reconciliation of IFRS shareholders’ equity to Solvency
II eligible own funds
At 31 December
2024
2023
£bn
£bn
Total shareholders’ equity
2.14
2.06
Goodwill and intangible assets
(0.78)
(0.82)
Change in valuation of technical
provisions
0.39
0.34
Other asset and liability
adjustments
(0.04)
(0.07)
Foreseeable dividend
(0.06)
(0.05)
Tier 1 capital – unrestricted
1.65
1.46
Tier 1 capital – restricted
0.32
0.32
Eligible Tier 1 capital
1.97
1.78
Tier 2 capital – Tier 2 subordinated
debt
0.21
0.22
Tier 3 capital – deferred tax
0.09
0.13
Total eligible own funds
2.27
2.13
Notes:
1.
Full year 2023 eligible own funds have been re-presented as
explained in the Capital position section of this report.
2.
At 31 December 2024 and 31 December 2023 no ineligible Tier 3
capital arose as the Group's available Tier 3 capital was under the
amount of Tier 3 capital permitted under the Solvency II regulations
(15% of the Group’s SCR).
27 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Reconciliation of IFRS shareholders’ equity to Solvency II eligible own funds (£bn)
2.14
1.65
0.78
0.39
0.04
0.06
0.32
0.21
0.09
Total shareholders’
equity
Goodwill and
intangible assets
Change in
valuation of
technical
provisions
Other asset and
liability
adjustments
Foreseeable
dividend
Total own funds
n Tier 1 capital unrestricted
n Tier 1 capital restricted
n Tier 2 capital – sub debt
n Tier 3 capital – deferred tax
Investment portfolio
Our investment strategy aims to deliver several objectives, which are summarised below:
– to ensure there is sufficient liquidity available within the investment portfolio to meet stressed liquidity scenarios;
– to match PPOs and non-PPOs liabilities in an optimal manner; and
– to deliver a suitable risk-adjusted investment return commensurate with our risk appetite.
The strategic asset allocation has continued to be regularly reviewed during 2024. Whilst the core outcome of the review reinforced
investment grade credit as the largest asset class within the portfolio, it suggested some modest changes to other areas of the
portfolio. Following the review, a phased approach during the year was adopted in reinvesting back into investment grade credit
securities and reducing the Group's overweight position in cash. To assist with the matching exercise of the Group’s PPO liabilities,
effective from Q4, the Group diversified further by acquiring some index-linked sovereign.
Asset and liability management
The following table summarises the Group's high-level approach to asset and liability management.
Liabilities
Assets
Characteristics
More than 10 years, for example PPOs
Property and infrastructure debt and index-
linked sovereign
Inflation linked or floating
Short and medium term - all other claims
Investment-grade credit
Fixed - key rate duration matched
Tier 1 equity
Investment-grade credit
Fixed
Tier 2 sub-debt
Commercial real estate loans and cash
Floating
Tier 2 sub-debt fixed
Investment-grade credit and cash
Fixed or floating
Surplus - tangible equity
Investment-grade credit, short-term high
yield, cash and government debt securities
Fixed or floating
28 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
2.27
Asset allocation and benchmarks – U K Insurance Limited
The current strategic benchmarks for U K Insurance Limited are detailed in the following table:
Benchmark
Holding
Actual
Holding
Benchmark
Holding
Actual
Holding
2024
2024
2023
2023
Investment-grade credit
61.0 %
55.7 %
60.0 %
43.8 %
High yield
6.0 %
5.9 %
6.0 %
5.4 %
Investment-grade private placements
0.0 %
1.1 %
0.0 %
1.4 %
Credit
67.0 %
62.7 %
66.0 %
50.6 %
Sovereign
13.0 %
14.4 %
10.0 %
13.0 %
Total debt securities
80.0 %
77.1 %
76.0 %
63.6 %
Infrastructure debt
4.0 %
3.7 %
4.0 %
4.1 %
Commercial real estate loans
4.0 %
2.6 %
6.5 %
2.8 %
Other loans
0.0 %
0.1 %
0.0 %
0.1 %
Cash and cash equivalents
7.0 %
10.9 %
8.0 %
24.1 %
Investment property
5.0 %
5.6 %
5.5 %
5.3 %
Total investment holdings
100.0 %
100.0 %
100.0 %
100.0 %
With the Group ending 2023 in a stronger capital position, a phased approach has been adopted throughout 2024 in reducing
the overweight holding in cash and reinvesting back into investment grade credit.
Investment holdings and yields1
2024
2023
Holding
Income
Gross yield
Holding
Income
Gross yield
(£m)
(£m)
(%)
(£m)
(£m)
(%)
Investment-grade credit2
2,869.6
79.5
3.1 %
2,288.1
51.1
2.2 %
High yield
302.7
20.0
6.8 %
281.2
16.5
5.9 %
Investment-grade private placements
55.7
1.8
2.9 %
70.6
2.8
3.3 %
Credit
3,228.0
101.3
3.5 %
2,639.9
70.4
2.6 %
Sovereign2
746.0
28.5
4.0 %
681.2
8.5
1.4 %
Total debt securities
3,974.0
129.8
3.6 %
3,321.1
78.9
2.4 %
Infrastructure debt
188.7
14.7
7.3 %
214.2
14.8
6.6 %
Commercial real estate loans
135.5
10.0
7.1 %
145.9
12.9
7.5 %
Other loans
5.4
0.1
2.1 %
3.1
0.0
0.4 %
Cash and cash equivalents3
791.1
58.2
5.2 %
1,448.0
65.2
5.5 %
Investment property
287.6
17.4
6.1 %
277.1
16.1
5.8 %
Equity investments4
20.1
0.0
0.0 %
19.7
0.0
0.0 %
Investment fees
–
(8.8)
–
–
(9.3)
–
Total assets under management
5,402.4
221.4
4.1 %
5,429.1
178.6
3.5 %
Notes:
1.
Excludes £298.1 million (2023: £241.8 million) which is invested within money market funds under the 100% quota share reinsurance treaty for the
Brokered commercial business, which is operated on a funds withheld basis and is retained as security against the reinsurer's obligations.
2.
Asset allocation at 31 December 2024 includes investment portfolio derivatives, which have a mark-to-market liability value of £19.6 million which
is split as assets of £19.6 million included in investment grade credit and of £nil included in sovereign debt (31 December 2023: mark-to-market
asset value of £12.0 million and £0.4 million liability respectively). This excludes non-investment derivatives that have been used to hedge
operational cash flows.
3.
Net of bank overdrafts: includes cash at bank and in hand and money market funds.
4. Equity investments consist of quoted shares and insurtech-focused equity funds. The insurtech-focused equity funds are valued based on external
valuation reports received from a third-party fund manager.
29 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
At 31 December 2024, total assets under management of
£5,402 million were 0.5% higher than at the start of the year.
Total debt securities were £3,974 million (31 December 2023:
£3,321 million), of which 2.2% were rated as ‘AAA’ and a further
63.1% were rated as ‘AA’ or ‘A’. The average duration at
31 December 2024 of total debt securities was 2.5 years
(31 December 2023: 2.1 years).
At 31 December 2024, total unrealised losses on investments
held at FVTPL were £90 million (31 December 2023: £137 million
unrealised losses).
FY 2024
FY 2023
Note
£m
£m
Investment income
207.5
146.3
Investment fees
(7.2)
(7.2)
Net investment income in
operating profit – ongoing
operations
200.3
139.1
Net investment income –
Brokered commercial
business
33.6
35.2
Net investment income –
Non-core and Run-off
1.3
4.3
Net investment income –
total group
4
235.2
178.6
Net FV gains
6
37.1
124.4
Total investment income
recognised through the
statement of profit or loss
6
272.3
303.0
Net investment income in operating profit for ongoing
operations increased to £200 million (2023: £139 million)
primarily driven by interest rates remaining high following an
environment of global interest rates rising during the first half
of 2023, and a phased reinvestment back into investment grade
credit more aligned with the Group’s benchmark weighting.
Fair value gains were £37 million (2023: £124 million), with a
tightening of credit spreads and interest rates accounting for
the majority of the movement.
Net asset value
2024
2023
Note
£m
£m
Net assets
13
2,137.9
2,058.2
Goodwill and other
intangible assets
13
(776.3)
(818.6)
Tangible net assets
13
1,361.6
1,239.6
Closing number of Ordinary
Shares (millions)
13
1,301.0
1,297.7
Net asset value per share
(pence)
13
164.3
158.6
Tangible net asset value per
share (pence)1
13
104.7
95.5
Note:
1. See glossary on pages 238 to 241 for definitions and Appendix A -
Alternative performance measures on pages 242 to 245.
Net assets at 31 December 2024 increased by £80 million
to £2,138 million (31 December 2023: £2,058 million) and a
reduction in own shares held by the Group, increasing the
closing number of shares, resulting in tangible net assets per
share increasing to 104.7 pence (31 December 2023: 95.5 pence).
Leverage
The Group’s financial leverage reduced slightly to 22.1%
(2023: 22.7%).
2024
2023
£m
£m
Shareholders’ equity
2,137.9
2,058.2
Tier 1 notes
346.5
346.5
Financial debt – subordinated debt
259.1
258.8
Total capital employed
2,743.5
2,663.5
Financial leverage ratio1
22.1%
22.7%
Note:
1.
Total IFRS financial debt and Tier 1 notes as a percentage of total IFRS
capital employed.
Credit ratings
Moody’s Investors Service provides insurance financial-strength
ratings for U K Insurance Limited, our principal underwriter.
Moody’s rate U K Insurance Limited as ‘A2’ for insurance
financial strength (strong) and has been put on review for
potential upgrade.
Reserving
We make provision for the full cost of outstanding claims from
the general insurance business at the statement of financial
position date, including claims estimated to have been
incurred but not yet reported at that date and associated
claims handling costs. We consider the class of business, the
length of time to notify a claim, the validity of the claim against
a policy, and the claim value. Claims reserves could settle across
a range of outcomes, and settlement certainty increases over
time. However, for bodily injury claims the uncertainty is greater
due to the length of time taken to settle these claims. The
possibility of annuity payments for injured parties also increases
this uncertainty.
The liability for incurred claims ("LIC") reserves are the
combination of best estimate of liabilities ("BEL") and a risk
adjustment, which is set around the 75th percentile on an
ultimate basis and provides a margin on top of the BEL
reflecting the uncertainty on a best estimate basis. The BEL is
set on a discounted basis and includes an allowance for direct
and indirect claims handling expenses, as well as events not in
data ("ENIDs"), set by reference to various actuarial scenario
assessments. ENIDs also consider other short- and long-term
risks not reflected in the actuarial inputs, as well as the
Corporate Actuarial Function’s view on the uncertainties in
relation to the BEL.
The most common method of settling bodily injury claims is by
a lump sum. When this includes an element of indemnity for
recurring costs, such as loss of earnings or ongoing medical
care, the settlement calculations apply the statutory discount
rate (known as the Ogden discount rate) to reflect the fact that
payment is made on a one-off basis rather than periodically
over time. The current Ogden discount rate is 0.5% for England
and Wales and its equivalent is also 0.5% in Scotland and
Northern Ireland.
30 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
The Ogden discount rate for England and Wales increased
from minus 0.25% on 11 January 2025. The bodily injury discount
rate increased in Scotland and Northern Ireland on 24
September 2024 from minus 0.75% and minus 1.5%,
respectively. The impact of potential future changes in the
discount rate is shown in the sensitivity table below. Since 2021,
we have reduced the level of Motor reinsurance purchased,
resulting in higher net reserves for accident years 2021 to 2024.
If the claimant prefers, large bodily injury claims can be settled
using a PPO. This is an alternative way to provide an indemnity
for recurring costs, making regular payments, usually for the
rest of the claimant’s life. As it is likely to take time to establish
whether a claimant will prefer a PPO or a lump sum, until a
settlement method is agreed we make assumptions about the
likelihood that claimants will opt for a PPO. This is known as the
PPO propensity.
At 31 December 2024, the real discount rate for PPOs is 1.5%
(2023: 0.7%), the combination of cash flow weighted inflation
and discounting of 3.7% (2023: 3.9%), which allows for increased
short-term ASHE 6115 inflation of 6.5% over the next 12 months,
followed by a number of years of heightened inflation before
reverting to a long term assumption of 3.5%, and a yield curve
based discount rate of 5.2% (2023: 4.6%).
The assessment of claims inflation, and the underlying drivers of
claims inflation, remains a key consideration in deriving the
reserves. Claims inflation is correlated with price inflation but
there are several individual factors that are considered in
addition, for example the salary of care workers, the price of
used cars, judicial costs and repair costs. A range of general and
specific scenarios for excess inflation has been considered in
the reserving process.
The Group's prior-year reserves development (excluding
restructuring and one-off costs) in 2024 was a reserve release of
£5 million (2023: £124 million), driven by reserve releases in
Motor and Non-core and Run-off, partially offset by reserve
strengthening in Non-Motor and Brokered commercial.
Net liability for incurred claims
31 Dec 2024
31 Dec 2024
31 Dec 2024
31 Dec 2023
31 Dec 2023
31 Dec 2023
Estimate of
present value
cash flows
Risk
adjustment
Total
Estimate of
present value
cash flows
Risk
adjustment
Total
£m
£m
£m
£m
£m
£m
Motor
(1,661.8)
(77.8)
(1,739.6)
(1,634.9)
(79.9)
(1,714.8)
Home
(488.3)
(20.9)
(509.2)
(483.2)
(22.4)
(505.6)
Total ongoing operations1
(2,150.1)
(98.7)
(2,248.8)
(2,118.1)
(102.3)
(2,220.4)
Brokered commercial business1,2
26.8
(10.8)
16.0
(354.7)
(18.5)
(373.2)
Run-off partnerships
(72.1)
(2.7)
(74.8)
(136.8)
(4.5)
(141.3)
Total
(2,195.4)
(112.2)
(2,307.6)
(2,609.6)
(125.3)
(2,734.9)
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245.
2.
2024 balances reflects 12 months of the Royal & Sun Alliance Insurance Limited quota-share reinsurance compared with three months in 2023.
31 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Sensitivity analysis – changes in: the discount rate used in relation to PPOs and other claims, the assumed
Ogden discount rate and claims inflation
The table below provides a sensitivity analysis of the potential net impact of a change in a single factor (for example the illiquidity
premium ("ILP")) with all other assumptions left unchanged. Other potential risks beyond the ones described could have additional
financial impacts on the Group.
Increase/(decrease) in profit
before tax and equity gross of
reinsurance
Increase/(decrease) in profit
before tax and equity net of
reinsurance
2024
2023
2024
2023
At 31 December
£m
£m
£m
£m
Discount curve - PPOs
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points
87.0
95.0
38.5
39.0
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points
(115.1)
(127.8)
(51.4)
(52.1)
Discount curve - other claims
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points
65.1
55.9
41.3
37.2
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points
(68.3)
(58.6)
(43.2)
(38.9)
Ogden discount rate
Impact of the Group reserving at a discount rate of 1.5% compared to 0.5%
(2023: 0.75% compared to minus 0.25%)
143.6
105.1
57.7
48.1
Impact of the Group reserving at a discount rate of minus 0.5% compared
to 0.5% (2023: minus 1.25% compared to minus 0.25%)
(204.9)
(220.6)
(73.8)
(97.0)
Claims inflation
Impact of a decrease in claims inflation by 200 basis points for two
consecutive years
129.7
112.8
73.9
71.7
Impact of an increase in claims inflation by 200 basis points for two
consecutive years
(131.7)
(114.6)
(75.0)
(72.8)
Risk adjustment (restated)
Impact of a risk adjustment at the 70th percentile compared to the booked
risk adjustment at the 75th percentile
52.3
52.3
26.9
28.9
Impact of a risk adjustment at the 80th percentile compared to the booked
risk adjustment at the 75th percentile
(61.4)
(60.5)
(30.2)
(33.9)
The PPO sensitivity above is calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves
as at 31 December 2024. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance
bad debt assumptions.
Notes:
1.
These sensitivities exclude the impact of taxation.
2.
These sensitivities reflect one-off impacts at the statement of financial position date and should not be interpreted as predictions.
3.
The sensitivities relating to an increase or decrease in the discount rate used for PPOs illustrate a movement in the time value of money. The PPO
sensitivity has been calculated on the direct impact of the change in the discount rate with all other factors remaining unchanged. The sensitivity is
calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves as at 31 December 2024. It does not take into
account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.
4. The sensitivities relating to an increase or decrease in the yield curve used to discount all reserves excluding PPOs illustrate a movement in the
time value of money from the assumed level at the statement of financial position dates. The sensitivity has been calculated on the direct impact of
the change in the discount curve with all other factors remaining unchanged.
5.
Ogden discount rate sensitivity has been calculated on the direct impact of a permanent change in the discount rate in England and Wales with
all other factors remaining unchanged.
6.
The risk adjustment sensitivities are with respect to the discounted risk adjustment at the statement of financial position dates, with the year-end
2023 sensitivities having been restated from an undiscounted basis as reported in the Group's 2023 Annual Report and Accounts.
32 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Reinsurance
The objectives of the Group’s reinsurance strategy are to reduce
the volatility of earnings, facilitate effective capital
management, and transfer risk outside the Group’s risk
appetite. This is achieved by transferring risk exposure through
various reinsurance programmes with the material ones being:
– Catastrophe reinsurance to protect against an accumulation
of claims arising from a natural perils event. The retained
deductible is £100 million and cover is placed annually on 1
January up to a modelled 1-in-200 year loss event.
– Motor reinsurance to protect against a single claim or an
accumulation of large claims, which renews on 1 January. The
retained deductible is set at an indexed level of £5 million per
claim up to an unlimited amount.
– Motor excess of loss reinsurance for Motability Operations has
been renewed with effect from 1 October 2024. The retained
deductible is set at an indexed level of £5 million per claim up
to an unlimited amount. Motability policies are 80% quota
share reinsured.
– Following the Group's sale of its Brokered commercial
business to RSA Insurance Limited, quota share reinsurance
between the two parties incepted on 1 October 2023, on an
earned basis, covering 100% of all premiums earned and
claims incurred after this date.
– Whole account (excluding Motability) structured quota share
reinsurance with a 10% cessation, ceded on a funds-withheld
basis with inception on 1 January 2023 for a three-year term.
Tax management
The Board recognises that the Group has an important
responsibility to manage its tax position effectively. The Board
has delegated day-to-day management of taxes to the Chief
Financial Officer and oversight is provided by the Audit
Committee.
These arrangements are intended to ensure that the Group
complies with applicable laws and regulations; meets its
obligations as a contributor and a collector of taxes on behalf of
the tax authorities; and manages its tax affairs efficiently,
claiming reliefs and other incentives where appropriate.
Tax authorities
The Group has open and co-operative relationships with the tax
authorities with which it deals in the countries where the Group
operates, namely the UK, the Republic of Ireland, South Africa
and India.
Tax policy and governance
The Group’s tax policy has been reviewed and approved by the
Audit Committee. The Group Tax function supports the Chief
Financial Officer in ensuring the policy is adhered to at an
operational level.
For more information please see our published Group Tax
policy on the Group’s website at:
www.directlinegroup.co.uk/en/sustainability/reports-policies-
and-statements.html
Total tax contribution
The Group’s direct and indirect tax contribution to the UK
Exchequer is significantly higher than the UK corporation tax
that the Group would ordinarily pay on its profits. The Group
collects taxes relating to employees and customers on behalf of
the UK Exchequer and other national governments. It also
incurs a significant amount of irrecoverable value added tax
relating to overheads and claims. Taxes borne and collected in
other tax jurisdictions have not been included in this note as
the amounts are minimal in the context of the wider UK Group.
During 2024, the sum of taxes either paid or collected across
the Group was £1,032.1 million
The Group's 2024 tax contribution is detailed further on page 50
in Society in the Sustainability section.
Jane Poole
Chief Financial Officer
33 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Operating profit/
(loss)
£107m
2023: £(320)m
Gross written
premium
£2,700m
2023: £2,048m
In-force policies
(thousands)
3,831
2023: 4,181
Gross written premium by channel
24.3%
33.3%
42.4%
l Direct
l Price comparison websites
l Partnerships
Performance summary
Operating profit of £107 million, an
increase of £427 million as the result
started to benefit from pricing and
underwriting actions taken during 2023.
Gross written premium grew by 31.8%.
In-force policies reduced by 8.4% as
we continued to focus on disciplined
underwriting. Direct own brand policy
count reduced by 13.2%.
During 2024, Motor's return to profitability was delivered by two
key factors. Firstly, the pricing and underwriting actions taken
during 2023 continued to earn through and secondly, a return
to favourable prior year reserve development. Alongside a
higher investment result, this delivered a £427 million increase
in operating profit to £107 million.
2024 was a transitional year for Motor earnings given the net
insurance margin was a positive 4.9% in the second half of the
year, compared with negative 3.0% in the first half which was
impacted by the below target margin business written during
the first half of 2023.
34 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Motor
Financial summary
2024
2023
£m
£m
In-force policies1 (thousands)
3,831
4,181
Of which:
Direct own brands2
2,927
3,373
Partnerships
904
808
Gross written premium1
2,700.0
2,047.8
Of which:
Direct own brands2
1,554.9
1,601.3
Partnerships
1,145.1
446.5
Operating profit/(loss)1
107.0
(319.6)
Profit/(loss) before other finance costs
207.0
(274.4)
Net insurance margin1
1.0%
(21.1%)
Net insurance claims ratio1
74.9%
95.5%
Current-year attritional net insurance claims ratio1
76.0%
86.7%
Prior-year reserves development ratio1
(1.1%)
8.8%
Net acquisition costs ratio1
4.6%
5.7%
Net expense ratio1
19.5%
19.9%
In-force policies and gross written premium
and associated fees
Motor premiums grew by 31.8% compared to 2023 driven by the
Group's partnership with Motability, where we had a full year of
premium in 2024 compared to only seven months during 2023.
Our partnership with Motability accounts for around 41% of
Motor gross written premiums, is developing well and delivered
14% growth in policy count during 2024.
Motor average premiums2,3
£
FY 2024
FY 2023
New business
583
551
Renewal
508
441
Own brands
530
470
Overall the motor market remained challenging in the second
half of 2024 and we continued to trade with discipline. This
resulted in a further reduction in our own brand policy count,
which for 2024 was down 13.2%. The reduction in policy count
was partly offset by an increase in average premiums, which
were in line with market, leading to a 2.9% reduction in our own
brand1 gross written premiums and associated fees. Retention
across own brands improved during the year while we also
delivered 3% policy count growth in the PCW channel.
Underwriting
The current-year attritional net insurance claims ratio improved
by 10.7pts to 76.0% reflecting the benefit from the pricing
actions taken during 2023 and 2024 and claims inflation
tracking in line with expectations of high single digits. Prior-year
reserves saw a release of £21 million compared with a reserve
strengthening of £138 million in 2023.
Net insurance margin and operating profit/(loss)
The combination of an improved current-year attritional net
insurance claims ratio, and prior year development ratio,
delivered a 22.1pt improvement in the net insurance margin
to 1.0%, (2023: minus 21.1%). The insurance service result was a
profit of £19 million and operating profit was £107 million due
to higher investment income.
Profit before other finance costs
Profit before other finance costs improved to a profit of £207
million from a loss of £274 million in 2023 due to the factors
described above together with positive movements from
changes in the yield curve.
Notes:
1.
See glossary on pages 238 to 241 for definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums,
gross written premium and associated fees and in-force policies on pages 246 to 253.
2.
Direct own brands include in-force policies under the Direct Line, Churchill, Darwin, Privilege and By Miles brands.
3.
Average premium figures quoted relate to Motor own brands excluding the By Miles brand.
35 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Operating profit
£98m
2023: £130m
Gross written
premium and
associated fees
£1,032m
2023: £930m
In-force policies
(own brands)
(thousands)
3,469
2023: 3,503
Gross written premium by product (£m)
637
133
262
In-force policies by product (thousands)
2,461
1,780
755
l Home
l Rescue
l Commercial Direct
Performance summary
Operating profit reduced to £98 million,
primarily due to higher weather-related
claims and prior-year strengthening.
Total gross written premium grew 11.0%
to £1,032 million. Direct own brand gross
written premium grew 13.1% to £831 million.
Total in-force policies 3.1% lower at 5.0
million. Direct own brand policies were
1.0% lower at 3.5 million.
Non-Motor delivered a solid result, with double-digit gross
written premium growth, a net insurance margin of 8.9%
(7.0% when normalised for event weather) and operating profit
of £98 million.
In-force policies and gross written premium
and associated fees
Non-Motor delivered gross written premium growth of 11.0%
during 2024, which is ahead of our target of 7% to 10% CAGR
announced at the Capital Markets Day in July 2024. Growth was
supported by a double digit increase of 15.5% in Home and 8.8%
in Commercial Direct while Rescue premiums were 3.3% lower.
Home own brands returned to policy count growth in 2024 as
competitiveness improved due to significant premium inflation
in the market, particularly in the first half. Strong retention
and a 13% increase in average premiums delivered own brand
gross premium growth of 17.5% year-on-year. Home
partnerships premium increased by 9.7% during the year.
36 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Non-Motor
Financial summary
2024
2023
In-force policies1 (thousands)
4,996
5,158
Home
2,461
2,444
Rescue
1,780
1,965
Commercial Direct
755
749
Of which: Own brands2
3,469.0
3,503.0
Gross written premium and associated fees1
1,031.9
929.8
Home
636.8
551.5
Rescue
132.8
137.3
Commercial Direct
262.3
241.0
Of which: Own brands2
831.3
734.9
Operating profit1
98.0
129.7
Profit before other finance costs
110.4
156.9
Net insurance margin1
8.9%
14.0%
Net insurance claims ratio1
59.8%
57.5%
Current-year attritional net insurance claims ratio1
52.8%
53.7%
Prior-year reserves development ratio1
2.5%
0.7%
Event weather ratio1
4.5%
3.1%
Net acquisition costs ratio1
9.7%
8.9%
Net expense ratio1
21.6%
19.6%
Normalised net insurance margin1
7.0%
10.2%
Home average premiums
£
FY 2024
FY 2023
New business
259
206
Renewal
278
249
Own brands
274
242
In Commercial Direct, gross written premium grew 8.8%
compared to the prior year driven by growth in Landlord and
small-to-medium enterprises ("SME") while Van was broadly
stable. Policy count was 0.8% higher as we continued to target
growth in the attractive Landlord and SME markets, more than
offsetting a reduction in Van policies, where we increased
average premiums to take into account elevated levels of
inflation. Overall, retention was stable across the Commercial
Direct book.
In Rescue, policy count was 9.4% lower largely due to
partnerships while gross written premium and associated
fees was 3.3% lower than prior year, largely due to lower
linked premiums, where we sell a Rescue policy alongside
a Motor policy.
Underwriting
The insurance service result was £85 million (2023: £120 million).
The net insurance claims ratio was 59.8%, 2.3pts higher
than prior year, with the increase largely driven by higher
weather-related claims and prior year strengthening.
Weather event-related claims in Home and Commercial were
£43 million, £16 million higher than prior year. The 2025 event
weather claims assumption is £70 million (2024: £62 million.)
The current-year net insurance attritional claims ratio was
52.8%, 0.9pts lower than prior year. The prior-year claims
development ratio was 2.5%, mainly reflecting strengthening
in assumptions for subsidence and escape of water claims from
older years.
Net insurance margin and operating profit
The net insurance margin was 8.9% or 7.0% when normalised
for event weather, 3.2pts lower than prior year. However,
underlying margins were strong adjusting for the attritional
weather and prior year movements.
Operating profit was £98 million or £79 million normalised for
event weather.
Profit before other finance costs
Profit before other finance costs reduced to £110 million from a
profit of £157 million at 2023 due to the factors described above
alongside a small reduction in benefits received from changes
in the yield curve.
Notes:
1.
Appendix B – Management view statements of profit and loss,
expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
2.
Direct own brands include in-force policies under the Direct Line,
Churchill and Privilege brands.
37 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Our Risk Management Framework
The Risk Management Framework sets out, at a high level,
the Group's approach to setting risk strategy, and managing
risks to the strategic objectives and day-to-day operations
of the business. The Risk Management Framework is designed
to manage the Group’s risk proactively and to enable dynamic
risk-based decision making.
This includes clear accountabilities and risk ownership
designed to ensure that we identify, manage, mitigate and
report on all key risks and controls, and is governed through
the Group's three lines of defence model:
First line: Management is responsible for embedding risk
management into business as usual and change processes
whilst creating transparent reporting of risks and management
actions. The Chief Controls Office ("CCO") supports
Management and Senior Management Function ("SMF")
holders in discharging their responsibilities with respect to
risk and control.
Second line: Is responsible for the design of the Risk
Management Framework and oversight of its implementation
with the provision of proportionate oversight of key business
decisions and challenge of risks, events and management
actions throughout the Group.
Third line: Group Audit is responsible and accountable for
providing an independent and objective view of the adequacy
and effectiveness of the Group’s risk management, governance
and internal control framework.
Aligned to the three lines of defence model, the Risk
Management Framework articulates the high-level principles
and practices needed to achieve appropriate risk management
standards and the inter-relationships between components
of the Risk Management Framework.
The Risk Policies and Minimum Control Standards ("MCS")
are key elements of the Risk Management Framework that
interpret risk management control objectives into a set of risk
and control requirements to be implemented across the Group.
The Group’s key controls are aligned to these control objectives
and are subject to regular assessment.
The Group uses a systematic approach for the assessment
of risks and the controls in place to mitigate risks, through
the Risk and Control Self-Assessment ("RCSA") process.
The objective of RCSA is to ensure that the Group understands
the risks to the achievement of its strategic objectives,
and to provide reasonable assurance over the effectiveness
of mitigating controls, and to ensure an up to date and
consistent view of risks and controls.
Risk appetite
Our risk appetite statements define the opportunities and
associated level of risk the Group is prepared to accept to
achieve its business objectives. These statements, supported by
a suite of Key Risk Indicators ("KRIs"), support management in
making decisions aligned to the risk appetite of the Group. Risk
appetite statements are both qualitative and quantitative risk
statements and forward- and backward-looking. We review our
risk appetite statements and KRIs annually.
The Risk Appetite Framework is comprised of Overarching Risk
Appetite Statements, set out below, that are approved by the
Board annually, with risk appetite statements documented
in our Risk Policies.
Overarching risk objective
The Group recognises that its long-term sustainability
is dependent on having sufficient economic capital
to meet its liabilities, therefore protecting customers,
its reputation and the integrity of its relationship with
policyholders and other stakeholders. As part of this,
its appetite is for general insurance risk, focusing on
personal lines retail and small and medium-sized
enterprise insurance in the United Kingdom. DLG has
appetite for non-insurance risks, as appropriate, to
enable and assist it to undertake its primary activity
of insurance.
Three strategic risk objectives
1. Maintain capital adequacy
The Group seeks to hold capital resources in the range
of 140% to 180% of the partial Internal Model Solvency
Capital Requirement ("SCR"). This is the buffer the
Group wishes to hold on top of its 1 in 200 regulatory
requirements, with a green threshold set at 155% of
SCR to provide an early warning indicator, but a target
of 180% of SCR consistent with its Dividend Policy.
2. Stable/efficient access to funding
and liquidity
The Group aims to meet both planned and
unexpected cash outflow requirements, including
those requirements that arise following a 1-in-200 year
insurance, market or credit risk event.
3. Maintain stakeholder confidence
The Group has no appetite for material risks resulting
in reputational damage, regulatory or legal censure,
poor customer outcomes, fines or prosecutions and
other types of non-budgeted operational risk losses
associated with the Group’s conduct and activities.
The Group’s objective is to maintain a robust and
proportionate internal control environment.
38 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Risk management
Managing risk in line with our strategy
Our management team, with oversight from the Board, is
responsible for developing our strategy. Our strategic planning
process aims to ensure we have developed clear objectives and
targets, and identified the actions needed to deliver them,
including the management of risks arising from the
strategic plan.
The Risk Strategy supports optimal business decision-making
through the proactive identification, assessment and
management of risks to the Group and its pursuit to be the
customers’ insurer of choice.
The Group recognises the need to ensure that:
– the Risk Strategy is aligned to the Group’s vision, purpose and
strategic objectives;
– risk and capital requirements are managed within the
Board’s risk appetite;
– the reputation of the Group is maintained;
– strong risk management capability is in place across the
business; and
– it drives for sustainable value for shareholders.
This is delivered by ensuring that:
– a robust, proportionate, proactive and forward-looking Risk
Management Framework is maintained to support the
business in achieving its strategic objectives;
– Risk Strategy aligns to the Group Strategy;
– risk management within the Group is a forward-looking
activity;
– strong risk behaviours and attitudes are exhibited across the
Group; and
– effective relationships are maintained with the Group’s
regulators.
Strategic
Objectives
Vision &
Business
model
Inherent
Risk
Insurance
Market
Credit
Liquidity
Operational
Conduct
Regulatory
Strategic
Group
“What the Group
is trying to achieve
as a Company”
“The risks (and
opportunities)
the Group’s
Objectives
expose it to”
The Group Enterprise Risk Management Framework
("ERMF")
1st Line of Defence
2nd Line of Defence
3rd Line of Defence
– Risk Policies &
Minimum Control
Standards
– Risk Appetites
– Risk & Control Self-
Assessment
– Monitoring &
Reporting
– Governance
– Business Processes
– Risk & Compliance
Function
– Set the
overarching ERMF
– Risk Management
Committee (RMC)
– Group Audit
Function
Internal Control Framework (ICF)
Control Environment
(Tone, Integrity, Values, Risk Culture,
Risk Maturity)
Internal Control Standards
(Structures, Policies, Standards,
Role & Responsibilities)
Control Activities
(Internal controls, Key Controls, Testing)
“How the Group manages those risks (and opportunities)”
Residual
Risk
Insurance
Market
Credit
Liquidity
Operational
Conduct
Regulatory
Strategic
Group
“The Backstop to protect
customers if the Group
gets it wrong”
39 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Capital
Our principal risks and uncertainties have been identified as those most likely to materially impact the Group's solvency capital.
These risks and uncertainties have been assessed as events or circumstances that might threaten the Group’s business model,
future performance, solvency or liquidity and reputation. The principal risks presented here are not intended to be exhaustive but
are consistent with those reported to the Risk Management Committee and Board Risk Committee for review and discussion.
Principal risk
Description
Risk commentary
Insurance Risk
Trend – stable
Insurance risk is the
risk arising from
insurance obligations,
in relation to the
perils covered and
the processes used in
the conduct of
business. It takes
account of the
uncertainty related to
the Group’s existing
insurance and
reinsurance
obligations as well as
to new business
expected to be
written. It includes
the risk of loss, or of
adverse change in
the value of insurance
liabilities, resulting
from:
– fluctuations in the
timing, frequency
and severity of
insured events, and
in the timing and
amount of claim
settlements; and
– significant
uncertainty of
pricing and
provisioning
assumptions
related to extreme
or exceptional
events (for
example
catastrophe risk).
Key drivers of the outlook for Insurance risk
include reserve, underwriting, distribution,
pricing and reinsurance risks. Issues relating to
claims inflation, ongoing Motor insurance
affordability concerns resulting in the creation of
the Motor Insurance Task Force, motor market
premium softening and the uncertainty in
economic environment, with elevated
geopolitical tensions, have been key areas of
focus for the Group in 2024.
Claims trends have been significantly impacted
by persistent claims inflation and large claims,
particularly in the motor market, contributing to
uncertainty in claims reserving and pricing in
2024 and beyond. This notwithstanding, our
reserving processes reflect improved insight in
claims experience and inflation trends resulting
from extensive work undertaken across the
business. In addition, the Group is continuing its
pricing and underwriting transformation
journey, targeting technical excellence in
support of best market practice in line with our
strategic objectives. This includes ongoing
monitoring of our underwriting risk profile
following the launch of the Direct Line for Motor
brand on price comparison websites in
December 2024.
Key risk themes relating to this category include
the macroeconomic environment, regulatory
and legislative environment, climate,
organisational resilience and agility, and a
softening motor market. We use scenario
testing to understand the potential financial
impacts of the key risks and we continue to
monitor them closely.
With respect to climate change, this
potentially poses significant risks to our
business in the longer term, particularly in
terms of weather-related perils. It could
impact the frequency and severity of events
such as floods, windstorms, freezes,
droughts, and subsidence, leading to more
extreme occurrences in the future. To
mitigate our exposure to these extreme
weather events, the Group employs
reinsurance arrangements and participates
in the Flood Re scheme. Additionally, we use
stress and scenario testing to quantify the
potential short and long term impacts of
climate change on our customers, business
model, and financial performance. These
stress tests particularly focus on the impact
on liabilities in the property (Home and
Commercial) lines of business.
Market Risk
Trend – stable
Market risk is the risk
of loss resulting from
fluctuations in the
level and in the
volatility of market
prices of assets,
liabilities and financial
instruments.
Key drivers of market risk are the sensitivity of
the values of our assets and investments to
changes in credit spreads, our exposure to losses
as a result of changes in interest rates, term
structure or volatility, and wider market volatility,
including the key risk themes of the impact
from the macroeconomic environment and
geopolitical landscape. In particular, the
worldwide and UK economic environment
remains uncertain with elevated geopolitical
tensions that could affect equity, credit and
property markets and lead to credit spread
increases, foreign exchange rate volatility and
the impact of interest rate changes.
Our Board has approved a strategic asset
allocation and investment strategy that
limits our exposure to individual asset classes
and illiquid investments. Technical provisions
are affected by changes in interest rates and
inflation, and in particular Periodic Payment
Orders as these are of longer duration. We
apply asset liability matching techniques to
partially mitigate these sources of risk. We
also use risk reduction techniques such as
hedging foreign currency exposures with
forward contracts.
40 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Principal risks and uncertainties
Principal risk
Description
Risk commentary
Credit Risk
Trend – stable
The risk of loss
resulting from default
in obligations due
from, and/or changes
in the credit standing
of, issuers of securities,
counterparties or any
debtors to which the
Group is exposed.
The Group monitors its key counterparties,
specifically the security of the issuers within its
investment portfolio and that of its reinsurance
counterparties.
To manage credit risk, we set credit limits for
each material counterparty and actively monitor
credit exposures, whilst also considering new
future exposures. With respect to reinsurance
counterparty credit risk, our exposures are
mainly held with reinsurers with high credit
ratings. Reinsurance is only purchased from
reinsurers that hold a credit rating of at least A–
for short tail reinsurance and the majority of
long tail reinsurance is to be purchased from
reinsurers rated A+ or above.
Exceptions to the above or strategic
reinsurance arrangements are assessed on a
case-by-case basis and follow clearly defined
internal credit risk processes.
Finally, we also have well defined criteria to
determine which customers and brokers are
offered and granted credit.
Operational Risk
Trend – stable
Operational risk is the
risk of loss due to
inadequate or failed
internal processes or
systems, including
from human error or
from external events.
Risks relating to this
category include,
technology and
infrastructure, change,
cyber, operational
disruption, financial
reporting, and
procurement and
outsourcing.
Our approach is to manage our operational
risks proactively, to mitigate potential customer
harm, regulatory or legal censure, financial,
reputational, or environmental, social,
governance ("ESG") impacts. This is principally
achieved through robust control, and the
Group is continuing to strengthen its control
environment through various improvement
initiatives across the business. This includes
implementation of a new Risk & Control Self-
Assessment process, facilitated by a new Chief
Controls Office function in the first line, ensuring
greater consistency in control assessment and
testing. Material progress has been made
in 2024, with further embedding to continue
into 2025.
Technology and infrastructure risk is defined
as the risk of loss resulting from inadequate
or failed information technology processes
through strategy, design, build or run
components internally or externally provisioned.
This includes IT resilience and cyber security.
Changes to our technology environment follow
an industry standard service management
framework that provides risk assessment,
planning, testing and validation prior to
production with ongoing control and
performance monitoring.
Change risk is defined as the risk of failing to
manage the change portfolio and associated
change initiatives, within desired scope, time,
cost, quality and Group risk appetite, leading
to a failure to deliver strategic benefits, good
customer outcomes and possibly causing
business disruption. The Group’s Transformation
Management Office (“TMO”) is responsible for
implementing and embedding changes to
further mature our organisational change
portfolio management, delivery capability, and
associated control environment.
Cyber risk arises from inadequate internal and
external cyber security, where failures impact
the confidentiality, integrity and availability
of our data. The Group’s Chief Information
Security Officer is responsible for ensuring the
appropriate cyber security policies and controls
are in place and operating effectively.
Operational disruption risk is the risk of
failing to deliver products and services at an
acceptable predefined level following
disruptive events. The Group’s Operational
Resilience Framework sets out requirements
for maintaining resilience which includes,
identifying Important Business Services
("IBS"), setting tolerances, and regularly
assessing the Group’s ability to remain
within these tolerances during disruptions.
The Group has planned mitigations in the
event of a disruptive event and monitors a
suite of IBSs. All IBSs undergo scenario
testing, as per regulatory guidelines, to
identify vulnerabilities and develop suitable
mitigations.
Financial reporting risk is defined as the risk
of material misstatement, misrepresentation
or untimely delivery of external or internal
financial information, including regulatory
financial information, resulting in
inappropriate movements in share price,
reputational damage, poor decision making/
planning in relation to finance,
tax, investment, strategy and capital, or
regulatory fines. During the Group's half year
results preparation, a miscalculation was
identified within the Group's audited
Solvency II Own Funds for the year ended
2023 as announced on 23 August 2024.
The Group has taken action to strengthen
the control environment in relation to
the specific area where the miscalculation
occurred.
Procurement and outsourcing is the risk of
an outsourcing arrangement that is deemed
critical or material failing to deliver the
service provision in question to the expected
levels. The Group adheres to a defined
framework for the appointment and
management of suppliers, outsourcing
arrangements and Intra-Group relationships.
The Group manages its suppliers through
ongoing oversight and assurance.
41 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Principal risk
Description
Risk commentary
Conduct and
regulatory
compliance risk
Trend – stable
The risk of failing to
deliver good customer
outcomes and/or
failing to deliver on
our regulatory
commitments.
The Group sees its obligations to deliver good
customer outcomes as a priority area of focus.
Our approach is to act promptly to identify and
address the risk of failing to deliver good
customer outcomes.
The introduction of the Consumer Duty in July
2023 represented a significant shift in the FCA’s
expectations of firms and applies to all of the
Group’s regulated products. The FCA has been
clear that the Duty is not a “once and done”
exercise and firms must ensure they are
learning and improving continuously. The Board
approved the Annual Consumer Duty Report in
July 2024, which includes areas of focus to
deliver improvements on over the next 12
months, with work underway.
The outlook for regulatory compliance risk is
stable as financial institutions continue to
embed multiple regulatory changes, alongside
the challenging external environment referred
to in Strategic Risk and Insurance Risk. Further,
regulators are increasingly expecting financial
institutions to balance commercial and societal
outcomes in decision-making, as they seek to
meet the needs of different stakeholders (for
example, relating to climate change).
The FCA published two regulatory
requirements for Direct Line Group in 2023:
The FCA required the Group to undertake
past business reviews to
– review motor total loss claims settled
between 1 September 2017 and 17 August
2022 to identify policyholders who may
have received unfair settlements and
provide them with redress; and
– review renewal prices charged since
1 January 2022, identify any that didn’t
comply with the rules relating to use
of tenure and provide redress.
Both reviews were materially complete by
the end of 2024. In January 2025, the FCA
confirmed that the voluntary requirements
("VREQs") in relation to both of these matters
had been satisfied and removed from the
Financial Services Register.
We have continued to engage with industry
bodies, regulators and HM Treasury
regarding the future regulatory framework
within the UK.
Strategic Risk
Trend – stable
The risk of direct or
indirect adverse
effects resulting from
strategies not being
optimally chosen,
implemented or
adapted to changing
conditions.
Strategic risk is influenced by internal and
external developments, including the potential
impacts of the cost of living, regulatory change,
changing trends for insurance products, the
potential for new and ongoing geopolitical
conflicts, and climate-related risks. These factors
continue to have an impact on the delivery
of the Group’s Strategy due to a high level
of uncertainty in the market and changes
in consumer behaviour and engagement
models. Delivery of our strategy is being
closely monitored and managed with the
support of the Group’s Transformation
Management Office.
The potential acquisition of DLG by Aviva
and subsequent integration activity
increases risks in the short to medium term,
including potential for impact to
management stretch, staff retention,
unplanned costs and process disruption.
These additional risks will be closely
monitored and managed by the Executive
team and Board through our regular and
project risk reporting processes.
42 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Emerging risks
Emerging risks are defined by the Group as newly developing
or changing threats or opportunities, that are subject to a high
degree of uncertainty but have the potential to materially
impact the Group either in the short term, due to rapid risk
emergence, or over the long term, through changing the
risk landscape.
The Group has in place an emerging risks process to:
– identify, assess, and prioritise a wide range of potential
emerging risks using both internal expertise and external
intelligence sources; and
– mitigate the impact of emerging risks which could impact
the delivery of the Plan.
Our process leverages subject matter expertise across the
Group, external horizon scanning and external industry data.
Emerging risks are regularly reviewed and reported to the Risk
Management committees.
Environmental
The Group recognises that emerging environmental issues,
such as climate change, pose material long-term financial risks
to the Group. Environmental risks can manifest themselves
through a range of existing financial and non-financial risks.
We continue to monitor these risks closely and to develop our
climate change modelling capability. Further details on our risk
management approach to climate change are included in the
Task Force on Climate-related Financial Disclosures ("TCFD")
section of the report starting on page 58.
Social & Economic
Increasing economic pressures and generational shifts in
consumer behaviour are expected to influence demand
patterns. Persistent cost-of-living concerns, along with younger
generations prioritising flexible, digital first solutions, may
require the Group to innovate and adapt its product offerings
in order to appropriately meet changing demands and needs.
Political
Due to heightened geopolitical tensions, there is a risk that
measures are implemented by governments that decrease
political stability, erode countries’ relationships, and contribute
to increasing protectionism. This could lead to multiple impacts
including on investment performance and supply chains.
The Group conducts ongoing analysis to monitor exposure
to the developing geopolitical environment.
Technological
Technological advancements, including relating to
autonomous vehicles and Artificial Intelligence applications are
expected to transform the insurance landscape. The Group is
closely monitoring these changes to assess their implications
for underwriting, claims and regulatory compliance. The Group
will continue to engage with industry bodies to help shape
policies and understand potential impacts on the Group.
43 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Direct Line Group believes that responsible business behaviour is the key not
only to being a sustainable business but also a successful one. It supports our
vision of insurance as a force for good in society and builds trust among the
Group's stakeholders.
Ensuring a sustainable future for the Group means taking positive action
on environmental, social and governance issues. This includes fair treatment
of customers and colleagues, transparency on climate-related risks, high
standards of conduct in business relationships and making a positive
contribution to UK society.
This section aims to provide the non-financial and sustainability information sought by investors and other stakeholders.
It sets out the practical ways in which legal requirements under the Companies Act and other measures, including
climate-related reporting, are carried out.
For more information on corporate governance, see the report on Pages 75 to 100.
To reflect the Group’s priorities as a responsible business, this section organises the
information under five pillars: Customers, People, Society, Planet and Governance.
Our vision
To create a world where insurance
is personal, inclusive and a force for good
Ambitions
Customers
Earn our customers’
trust by demonstrating
how we are acting
in their interests
People
Encourage a culture that
celebrates difference
and empowers people
so they can thrive
Society
Use our expertise
to improve outcomes
for society and the
communities we serve
Planet
Protect our business
from the impact
of climate change and
give back more to the
planet than we take out
Governance
Look to the long term
for our stakeholders,
build a reputation for high
standards of business
conduct and develop
a sustainable business
Priority areas
– Good customer
outcomes
– High service levels
– Inclusive and accessible
digital journeys
– Develop products that
offer better choice and
value for money
– High workplace
standards
– Fair outcomes for all
colleagues
– Invest in skills and
career development
– Increase representation
in our Senior
Leadership
– Improve employability
skills and access to
employment for under
represented young
people
– Colleague engagement
– Reduce operational
emissions
– Decarbonise
investment portfolio
– Manage climate-
related risks and
opportunities
– Engage and align
suppliers with
environmental aims
– Robust corporate
governance and effective
leadership
– Ethical and professional
conduct
– Responsible
procurement
– Responsible use of data
and technology
2024 actions
– Launched Churchill
and Direct Line apps
– Developed proposition
for Direct Line launch
on Price Comparison
Websites
– Rolled out new home
platform
– New target operating
model
– Improved skills
– Made some progress
against diversity targets
– Young people positively
impacted through
Community Fund
outreach programmes
– Colleagues engaged
in Community Fund
programmes
– Announced new
Community Fund
charity partners
– Further reduced
operational emissions
(Scope 1 + 2) by 3%
compared to 2023.
– Further reduced
commercial real estates
investment emissions
by 20% year on year.
– Increased supplier
sustainability weighting
to 10% in the
procurement process
– 99.5% of colleagues
trained on Business
Code of Conduct and
associated standards
– Introduced new AI
responsibility framework
and risk assessments
– Over 95% of suppliers
paid on time (under
30 days)
44 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Sustainability
This non-financial and sustainability information statement highlights information necessary for an understanding of the
Company’s development, performance, position and impact of its activity, information relating to environmental, employee, social,
respect for human rights, anti-corruption and anti-bribery matters.
Where possible, the following table states where additional information can be found that supports the requirements of sections
414CA and 414CB of the Companies Act 2006.
Reporting
Requirement
Annual Report
Page
Relevant policies, statements and codes available
at directlinegroup.co.uk
Environment
Sustainability
44 to 57
Environment Statement
Task Force on Climate-related Financial
Disclosures
58 to 71
Streamlined Energy and Carbon Reporting
72 to 73
Anti-bribery and
anti-corruption
Financial crime and anti-bribery and corruption
108
Prevention of Financial Crime Policy
Code of Business Conduct
Ethical Code for Suppliers
55
Ethical Code for Suppliers
Whistleblowing Policy
Employees
People
15 to 18
48
Flexible Working Policy
Health & Safety Policy
Business model
Group at a glance – our business model
2
Prompt Payment Code
Our investment story and strategy
3
Responsible Investment Policy
Delivering for our customers
4 to 5
Underwriting Standards
Tax Policy
Social and
community matters
Society
49 to 50
Board Diversity Policy
Nomination and Governance Committee report
– Diversity and inclusion
110
Data Privacy Policy
Corporate Website Privacy Notice
Human rights
Human rights and modern slavery
55 and 112
Human Rights, Diversity and Inclusion Policy
Modern Slavery Statement
KPIs
Our financial key performance indicators
7
Colleague engagement
15
Net Promoter Score
47
Operational emissions
53
Risk
management
Risk management
38 to 43
Principal risks and uncertainties
40 to 42
Emerging risks
43
The table below has been produced to comply with the requirements of section 414CB of the Companies Act 2006, as amended
by the Companies (Strategic Report) (Climate-related Financial Disclosures) Regulations 2022. The information listed is
incorporated by cross-reference.
Reporting requirement
Page
Further information
(a) a description of the company's governance arrangements in relation to assessing and
managing climate-related risks and opportunities
58 to 59
Refer to Governance
(b) a description of how the company identifies, assesses, and manages climate-related risks
and opportunities
72 to 73
59
58 to 71
Refer to Risk Management
Refer to Management's role
Additional information available
throughout TCFD report
(c) a description of how processes for identifying, assessing, and managing climate-related
risks are integrated into the company’s overall risk management process
72 to 73
Refer to Risk Management
(d) a description of:
– (i) the principal climate-related risks and opportunities arising in connection with the
company’s operations; and
– (ii) the time periods by reference to which those risks and opportunities are assessed
69
Refer to table within Our
strategic response
(e) a description of the actual and potential impacts of the principal climate-related risks
and opportunities on the company’s business model and strategy
69 to 71
Refer to Our strategic response
(f) an analysis of the resilience of the company’s business model and strategy, taking into
account consideration of different climate-related scenarios
61 to 68
Refer to Scenario analysis
(g) a description of the targets used by the company to manage climate-related risks
and to realise climate-related opportunities and of performance against those targets
70, 71 and 71
to 73
Refer to Science-Based Targets
(h) the key performance indicators used to assess progress against targets used to manage
climate-related risks and realise climate-related opportunities and a description of the
calculations on which those key performance indicators are based
71 to 73
Refer to Metrics and Targets
45 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Non-financial and sustainability
information statement
“In 2024 we took the momentous
decision to put our best known
brand, Direct Line, on Price
Comparison Websites so we are
offering even more choice to
motor insurance consumers.”
The Group has two of the UK’s iconic
motor insurance brands in Direct Line
and Churchill. It is in the top three for
Motor and Home1, number one for single
property Landlord2 insurance and has
the UK’s third largest Rescue provider
in Green Flag3.
In 2024, we focused on strengthening our performance in our
core businesses of Motor, Home, Commercial Direct and
Rescue alongside reducing costs and improving our claims
capabilities.
We are aiming for excellence through all stages of the
customers’ journey in order to become their insurer of choice.
We have invested over the past two years in digitalising that
journey and the transformation has further to run in 2025.
Our approach to earning customers’ trust can be broken down
into three themes: choice, value for money and service.
Choice
– More choice: Churchill, Darwin, Privilege and By Miles have
been available on price comparison websites for many years
and this year we took the momentous decision for Direct
Line to join them. This went live on Compare the Market in
December 2024.
– Essentials policies meet the needs of drivers who want core
insurance cover and are willing to trade additional elements
for a lower premium. First launched by Churchill in 2022 via a
leading price comparison website, a large proportion of new
sales are being driven by this product. Direct Line Essentials
was launched in September 2023 and we have identified a
similar opportunity for a Home Essentials product and are
designing one for launch in 2025.
– By Miles, where customers pay according to car usage,
launched Connect for Volvo drivers in August enabling these
customers to purchase a By Miles policy without requiring a
separate Miles Tracker. This takes the number of vehicle
manufacturers on our Connect platform to six.
– Enhanced renewal options: We launched a new retention
toolkit that offers contact centre colleagues better support
when having conversations with renewal customers. Also, for
renewing customers who pay in full, we now show a monthly
payment option to make it clear the cost can be spread.
– Expansion of Green Flag’s own patrols: Green Flag
launched its own patrol service in 2023 in Scotland and the
West Midlands. In 2024, Yorkshire, the Northwest and East
Midlands were added and coverage is being extended across
the Midlands and southern England in 2025. The new service,
which last year fixed 95% of the problems it responded to at
the roadside, complements the independent network of
third-party roadside rescue operators who carry out more
complex recoveries. In 2024 our patrols attended 19,491
customers, reaching them, on average, in 54 minutes.
– Commercial Direct put tool theft on the agenda with a
campaign to draw attention to the impact these losses have
on tradespeople. We provided practical advice on how to
protect tools and other property. Our data was widely
reported by the media, helping to drive awareness.
Value for Money
– To help with the cost of living challenge we offered an
Essentials range to customers and through our By Miles
brand, which ties premiums to car usage, offer customers
better choice and ways to control their insurance costs.
Customers can also use the new Churchill and Direct Line
Apps to tailor policies to their needs.
– Independent benchmarking by Consumer Intelligence
confirmed Green Flag offered more competitive pricing than
AA and RAC, across all cover levels, for both vehicle and
personal cover.
– Commercial Direct's Landlord product won the What
Mortgage best landlord insurance provider for the 12th year
in a row and scored 4.7/5 on Trustpilot.
– Darwin smart pricing:
– Improved pricing: We significantly improved our pricing
capability allowing us to offer competitive prices to
more UK drivers.
– Renewals research: In 2024, we incorporated additional
feedback from customers into pricing and customer
experience improvements in our renewal journey resulting
in a step change in retention rates.
Notes:
1.
Source: Ipsos Mori – FRS, January to December 2024.
2.
Source: Consumer Intelligence Market Benchmarking – September & December 2024, 500 risks per month.
3.
Mintel Vehicle Assistance and Recovery UK Oct 2024.
46 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Customers
– Premium Finance: With rising costs, more customers are
looking to spread the cost of insurance across their policy
term. Darwin has reviewed this scheme aiming to minimise
barriers and to offer an appropriate rate of interest. In 2024
we piloted and rolled out a new scheme which reduced the
initial deposit and extended the remaining payments over
a longer period. Learnings from the Darwin pilot also allowed
us to extend this scheme across our other brands.
– The Green Flag partnerships team collaborated with Virgin
Money to upgrade the level of Rescue cover for their Club M
packaged bank account customers. Before this upgrade
customers only had access to local cover. Following the
upgrade, National and European Cover became available
on 1 February 2024, along with other new benefits including
Onward Travel and Personal Cover in the UK.
– Working with Apple and utilising its robust satellite services,
Green Flag is the first UK breakdown brand to offer rescue
services as part of Apple's Roadside Assistance via satellite
on iPhone.
Service
– Better customer experience: enhanced digital capabilities
have enabled customers to manage their policies better.
Two Apps were launched in 2024, Churchill in July and Direct
Line in September. Customers can use them to change
cover, view policy documents, start a claim and get support
on the go. By the end of the year, 205,531 customers were
using the Apps, growing at an average rate of 1,181 sign-ups
a day. The Churchill app reached #4 in the Finance charts
towards the end of October and is rated 4.5/5 on iOS App
Store, on which Direct Line is rated 3.95.
– “MyAccount”: one time passcode was introduced to make
it easier for customers to access their online insurance
information without the need to remember a password.
Since its rollout from early 2024, this service has increased
successful sign ins by 20% and reduced customer password
resets by almost 90%.
– Our dedicated personal insurance advisors visit customers
when they’ve been impacted by flooding, to assess the
damage to the home and provide much needed advice and
reassurance. Advising on appropriate alternative
accommodation, if required, is the first and main action
taken to ensure the safety of impacted customers. They also
provide guidance on what is safe to do and not do during the
time water is inside the property. The Group engage with
policymakers and others to highlight the importance of flood
defences and infrastructure to protect properties from the
risk of flood, as part of an effective and sustainable flood
resilience strategy.
– Claims tracking and repairs efficiency: The Group has
improved the digital experience in motor claims so that
customers can track progress online, reducing the need
to call for updates. This has fed into improved Net
Promoter Scores.
– In DLG Autocentres, the average repair time1 of 24.2 days
is ahead of the national average time at 34.4 days. Our own
garages also compare well with 3rd party network providers
for both customer experience and cost to repair.
– To keep pace with the most up to date repair techniques
and the highest customer safety standards, we’ve launched
our innovative Vehicle Damage Assessor accreditation
programme. What’s more, we are one of the few
organisations in the UK that is equipped to offer this
certification in our training centre based in our flagship
Stechford Technology Centre. Our training is recognised
by the Institute of the Motor Industry.
– The Direct Line Motability team has improved their
interaction with customers. All frontline teams are
experienced in supporting customers with dementia and
many have also had autism awareness training. By the end
of 2025 all frontline teams will have completed their autism
awareness training. They also launched a "Hyper Care" team
to ensure that when the most vulnerable customers make
a claim there is dedicated support on hand so customers
understand the next steps and feel supported and informed.
This customer centric approach has helped us attain an
overall average end of amendment customer score of +91
NPS and end of claim customer NPS score of +80. (TLF data).
– Overall the Group's Net Promoter Score2 increased across
2024 ending the year at 52.2 improving from 50.1 in 2023.
Green Flag Apple Satellite case study
When a customer’s car began billowing smoke on a
remote road in North Wales, she found herself alone,
isolated and without any mobile phone signal. Using
Apple’s Roadside Assistance via satellite on iPhone she
contacted Green Flag who responded within a minute.
In a panic, she accidentally provided her own phone
number instead of her mother’s for her family to be
informed she was safe. Our team quickly identified the
error, located the correct number, and reassured her
family. After quickly dispatching a rescue vehicle, we
sent regular updates to support our customer,
ultimately leading to a safe resolution.
Notes:
1.
Cycle Time taken from Activeweb.
2.
The Group's NPS is calculated using Churchill, Direct Line and Green
Flag responses from customer surveys after purchase, amend, claim,
cancel and renew (Green Flag is rescue claim only).
47 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
“Colleagues have raised their skill
levels to help meet the goal of
technical excellence and used
their experience to adapt to new
ways of working.”
The Group has focused on
encouraging and enabling colleagues
to play a clear role in improving
the Group’s performance.
This has involved embedding a high-performance culture
based on the brand’s core values of customer service and
teamwork. Colleagues have raised their skill levels to help meet
the goal of technical excellence and used their experience to
adapt to new ways of working. A simpler operating structure
has improved accountability for delivering better performance.
Building skills and capabilities
Our training and development programmes are focused on
building essential skills to meet our customers’ needs, making
the most of new digital platforms. Technical skills are being
upgraded across the Group, from data analysis to our in-house
automotive service centres. Our apprenticeship and graduate
programmes make a key contribution to this.
Graduates
A fifth cohort of graduates with a STEM degree joined our
Technical Engineering Programme within Automotive Services.
Graduate schemes are rare in the automotive industry and
we offer a number of Institute of the Motor Industry accredited
qualifications. Our programme is flexible, allowing graduates
to experience different aspects of the business and pursue
different paths, including data analytics.
A diverse and inclusive business
In the past year we've moved our Diversity & Inclusion ("D&I")
partner into our Leadership, Talent and Early careers centre
of excellence, as part of the People Partner and Organisational
Effectiveness team. This ensures we take a holistic and
pragmatic approach, using data to identify opportunities
to improve equity and inclusion across all people processes.
We’ve also aligned our D&l priorities with the new Group
strategy, contributing to a high performing business.
Our shift in approach is driven by clear D&l objectives set
by senior leadership and implemented throughout the
organisation. Our commitment has been recognised by a jump
from 17th to 12th in the 2024/25 Inclusive Top 50 UK Employers
rankings. Highlights cited by the judges included improved
representation of under-represented groups at senior level; bias
mitigation in performance management training; and a social
mobility network.
The work done in 2024 focused on building talent pipelines,
enhancing leadership capability, meeting regulatory
requirements and achieving equitable outcomes in
performance management. Here are some examples:
– new targets to increase representation at senior leadership
level of females to 40% and ethnic minority colleagues to
16% (including Black colleagues to 4%) by the end of 2027
– we’ve made significant progress towards our female target
increasing by 4.1% year on year but have more work to do
to seek to ensure ethnic minority representation continues
to increase. Current initiatives include targeting diversity
in recruitment shortlists, setting leadership objectives for
representation in succession and developing our internal
talent development methods to support those from
underrepresented groups
– senior leadership championing D&I, supported by employee-
led “DNA” strands (Belief, Families & Carers, Gender, LGBTQ+,
Neurodiversity and Disability, Race and Ethnicity, and
Social Mobility)
– comprehensive policies to encourage dignity and respect,
zero tolerance of bullying and harassment, clear processes
to report incidents
– a communication strategy that ensures we keep D&I top
of mind, driving accountability and allyship beyond our
employee networks with regular contributions from the ExCo
– using data to identify focal areas to address change such
as representation of females in our Motor Network.
Ignite Apprenticeship Programme
The Ignite apprenticeship programme, launched in 2022,
celebrated 159 completions in 2024 with standout results: 56%
achieved distinction and 17% earned merit.
At the end of the year, 257 colleagues were actively engaged
in apprenticeships across the Group. Of these, 32% were
focused on data and technology and 45% on vehicle repair, with
the remainder developing vital business skills. Among the 127
new apprentices in 2024, 68 were new hires with 62% of those
joining auto services and a further 25% dedicated to Motability.
We utilised 81% of our apprenticeship levy, with 10% of our
spending supporting local communities and smaller enterprises.
We are working with The Schools Outreach Company to
increase the number of female applications for our vehicle
repair apprenticeship and have signed up to the Automotive
30% Club (aiming to fill 30% of key leadership positions across
the Automotive industry with females by 2030). Targets have
been set to increase the number of females in leadership
positions within the Auto Repair Network.
48 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
People
“The number of students likely
to consider a career in insurance
rose from 13% pre-programme
to 95% afterwards. The Group
has started to hire participants
into paid roles.”
A key part of our responsible business
strategy is to use our expertise and
resources to improve outcomes for
society and the communities we serve.
When our communities prosper, so
does our business and so does the sense
of well-being among our colleagues.
Community Fund
The Community Fund helps to build a more inclusive and
equitable society by supporting disadvantaged young people
in their quest for a brighter future. This complements our
commitment to being an inclusive and diverse employer,
which helps us to attract and retain a wide range of talent.
Our Bright Futures programme connects our colleagues
with young people from lower socio-economic backgrounds
via volunteering opportunities to help them acquire the
knowledge and networks they need to improve their
employment chances.
In 2024, our colleagues gave 2,027 volunteering hours to
support more than 11,000 disadvantaged young people
through activities ranging from paid work experience to
mentoring. This more than doubled the total number reached
since the launch of the programme in September 2022.
Around half of these young people completed our virtual work
experience programme, with 43% based in coastal or rural
“cold spots” (regions with low social mobility). Of these, 38%
were eligible for free school meals and 28% came from ethnic
minority backgrounds. The number likely to consider a career
in insurance rose from 13% pre programme to 95% afterwards.
The Group has started to hire participants into paid roles such
as apprenticeships.
Our commitment to social mobility was recognised by the
Social Mobility Foundation Employers Index as we rose eight
places to 60. The Index measures eight areas of employer-led
social mobility including recruitment approach, internal
progression opportunities and engagement with young people.
In 2024, the Community Fund donated £50,000 to four new
charity partners – Parenting Mental Health, Race Equality
Matters, employment support programme charity SPEAR and
The Diversity Trust. Each organisation focuses on at least one
of the fund’s strategic areas, such as increasing minority group
inclusion and improving outcomes for social mobility.
Charitable giving
Participating in charity initiatives enhances employees’
engagement with the company by fostering a sense of
belonging and connection, enabling them to align their
professional roles with personal values.
We launched a new volunteering platform, “Neighbourly”, in
May which provides market-leading data insights and reporting
capabilities. It found that 90% of volunteers reported a positive
change in their feeling of connection to the Group and 60%
upgraded their coaching skills. Our Community & Social
Committees continued to help colleagues get involved in
community activities and support fundraising ventures.
Colleagues can support good causes in three main ways: ‘give
as you earn’, for which the Group earned a Platinum Payroll
Giving Quality Mark Award; community cashback – each
individual can apply for £250 to support their volunteering
or fundraising activity; and ‘Change for Charity’ – in 2024
donations deducted from monthly pay went to MIND.
WhizzKidz: through our partnership with the charity devoted
to young wheelchair users, we donated £10,000 to children
living near our offices. With this partner, we also ran a Disability
Awareness Training session for more than 100 colleagues.
Insure Your Future – The Group spearheaded an
industry-wide collaboration with five insurers to
expand career opportunities in the sector for 500+
students from diverse backgrounds.
49 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Society
Direct Line Group financially contributed to SPEAR
programme in London and Leeds to support young
people, who may be care-experienced, receiving state
welfare, or have a disability or neurodifference, to find
ways into employment. We also collaborated with
them on their "Hire Me" events to help other students
from lower socioeconomic backgrounds to find jobs.
The Group's colleagues volunteered to participate in
career events, CV support sessions, and mock
interviews. We are proud that our investment in
SPEAR promotes social mobility in communities local
to our offices and aligns to our objective of being an
equitable and inclusive employer.
Values in action
As a leading insurer, we conduct research and mount
campaigns that tackle societal challenges.
In 2024, Churchill uncovered the shocking statistic that 1,200
children are injured every month in traffic collisions within 500
metres of a school. Film evidence from key locations revealed
that 10% of children were using their phones while crossing the
road and one in five secondary school pupils were hit or
narrowly missed by vehicles whilst using their phones. We
launched a campaign – ‘Eyes up, screens down’ – to highlight
the dangers.
On ‘Drink Driving’, we delivered a campaign to raise awareness
of the danger of being over the legal alcohol limit following a
wedding. Research revealed that 29% of people have 16 or more
drinks at a wedding and one in six admit they could still be over
the limit the morning after. The campaign highlighted the time
it takes for alcohol to leave the system and urged people to
think before getting behind the wheel.
The Group’s in-person career insight sessions, held at our offices
or delivered by a Group employee, catered for 6,300 young
people, of whom 84% were eligible for free school meals and
89% were from ethnic minority backgrounds.
Insure Your Future event: As part of National Careers Week,
we brought together several insurance companies to introduce
young people (aged 16-20) from diverse backgrounds to a
career in insurance. 510 students took part in the business
simulation exercise and by the end of the day there was a 27%
increase in attendees agreeing that they could see themselves
working in insurance.
Bright Futures: Students enhance their teamwork,
communication, and commercial awareness during
a Insurance Business simulation in London.
Our 2024 tax
contribution
In accordance with
applicable tax laws and
regulations and our
responsibilities both as a
contributor of corporate
taxes and as a collector
of taxes on behalf of
HMRC, in 2024 the
Group’s net tax
contribution was £1,032.1
million, which includes
the Group’s direct and
indirect taxation.
Our
customers
IPT
£392.1m
Our suppliers
VAT
£32.7m
Our people
PAYE NIC
£119.6m
Our
operations
Other taxes
including business
rates
£10.7m
Irrecoverable VAT
£369.9m
Employers NIC
£52.1m
Our
performance
Corporation Tax
£55.0m
HM Treasury
£1,032.1m¹
Net tax contribution
Society
– Public services
– Healthcare
– Infrastructure
– Welfare
– Education
– Defence
Note:
1.
The Group’s total tax contribution in 2024, including direct and indirect tax contributions.
50 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
“In 2024, 21% of managed suppliers
had signed up to SBTi-aligned
decarbonisation targets
or an equivalent.”
For more information, please see page 54.
Planet
Our strategic focus on climate change aims to reduce our
impact on the environment and manage the impact of climate
change on our business, playing a part in accelerating the
transition to a low-carbon future.
Our climate ambition is to be a Net Zero business across scopes
1, 2 & 3 by 2050. Management’s priorities are to decarbonise our
most carbon-intensive activities, protect our business from the
impact of climate change (see Task Force on Climate-related
Financial Disclosures report on pages 58 to 71) and support our
customers in the transition to a low-carbon economy.
Science Based Targets
In 2024, we continued to deliver against our five Science-Based
Targets (“SBTs”), which are aligned to a 1.5°C pathway and were
approved by the Science Based Targets initiative (“SBTi”) in
2022. We plan to continue to drive initiatives to decarbonise
our operational and investment emissions.
From 2025, we expect that updated sector guidance from SBTi
will enable us to create a new baseline for emissions, expand
the scope of our SBTs and further develop the transition plans
consistent with our Net Zero ambition.
Our climate ambition
To become a Net Zero business across scope 1, 2 & 3 by 2050
Management priorities
Decarbonising our
accident repair
centres and
office estate
Decarbonising
our investment
portfolio
Engaging our
supply chain
Supporting
customers in
the low carbon
transition
Enhancing
management
of climate-related
financial risks
and opportunities
Science-Based Targets to support our ambition
Operational
emissions
(Scope 1 & 2)
1. Reduce emissions
by 46% across our
office estate and
accident repair
centres by 20301
Investment portfolio (Scope 3):
Corporate bonds
Investment
portfolio (Scope 3):
Commercial
property
4.Reduce emissions
from our
commercial
property portfolio
by 58% per square
metre by 20301
Investment
portfolio (Scope 3):
Real estate loans
5. Reduce emissions
from our real
estate loans
portfolio by 58%
per square metre
by 20301
2. Align our scope 1
& 2 portfolio
temperature
rating to 2.08ºC
by 2027
3. Align our scope 1,
2 & 3 portfolio
temperature
rating to 2.31ºC by
2027
In 2024, we reduced
our operational
Scope 1 & 2
emissions by 46%
compared to 2019
In 2024, the
temperature rating
of the Scope 1 & 2
portfolio was 2.01ºC
In 2024, the
temperature rating
of the Scope 1, 2 & 3
portfolio was 2.31ºC
In 2023, we reduced
emissions from our
commercial
property by 39% per
square metre2
In 2023, we reduced
emissions from our
real estate loans
by 26% per
square metre2
Notes:
1.
Against a 2019 baseline.
2.
Due to the practicalities of obtaining data from our external asset managers ahead of the release of the Group’s annual reporting, progress against
our commercial property and real estate loan targets is reported with a one-year time lag.
51 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Planet
Science-Based Targets
The Group made good progress in 2024 and is on track to deliver against its Science-Based Targets. Last year we reduced our
operational Scope 1 & 2 emissions by 5%1 compared to 2023. This amounts to an overall reduction of 46%1 against our 2019 baseline,
meaning we have delivered against our 2030 target early.
2024 performance
Progress against targets
Operational emissions (Scope 1 & 2)
Covering
Operational footprint
Our buildings and garage
network Including our
23 auto services sites and
13 offices.
Targets
T 1. Reduce emissions by
46% across our offices and
accident repair centres
by 2030 against the
2019 baseline.
Operational emissions
(Scope 1 & 2)
In 2024 we further reduced these emissions by 5%1 compared
to 2023 as we continue to make progress in downsizing and
investing in our office estate, electrifying our auto services
sites and using alternative fuels in our recovery trucks.
Overall, we have now reduced our Scope 1 and 2 emissions
by 46%1 against our 2019 baseline meaning we have delivered
against our 2030 target early. Our work will continue this
year and beyond as we look to renegotiate our renewable
energy contracts and continue the electrification of our auto
services sites.
n Result
— Target
Investments (Scope 3)
Corporate bonds
The largest asset class in
our investment portfolio
and typically short-
duration holdings.
T 2. Align our Scope 1 and 2
corporate bonds portfolio
temperature rating to
2.08°C by 2027 from
2.44°C in 2019.
T 3. Align our Scope 1, 2
and 3 portfolio
temperature rating to
2.31°C by 2027 from 2.80°C
in 2019.
Corporate bonds
Scope 1 and 2 temperature rating
Our performance in 2024 shows we were successful in
reducing the temperature rating of this portfolio to 2.01°C
for Scope 1 & 2 against our 2019 baseline of 2.44°C (Target 2)
and to 2.31°C for Scope 1, 2 & 3 (Target 3) against our 2019
baseline of 2.8°C. This means we have hit our 2027 targets
early, something we have achieved through working with
our investment managers and providing them with
clear mandates.
Reductions have been largely driven by an increasing
number of investee companies achieving lower temperature
ratings by setting ambitious greenhouse gas reduction
targets including SBTs. This has helped to lower the
aggregate portfolio temperature score.
Corporate bonds Scope 1, 2 and 3
temperature rating
2023 Performance
Commercial property
T 4. Reduce commercial
property emissions by 58%
per square metre by 2030
compared to the 2019
baseline of 5,197 tCO2e.
Commercial Property
investments
We are reporting on our 2023 performance for these two
assets in this year's report, as there is a lag in the availability
of energy performance data from our investment managers
ahead of our annual reporting.
Our performance in 2023 shows we were successful in
reducing the Commercial Property investment intensity by
39% against our 2019 baseline of 67 kCO2e/m2 and on the real
estate loans we reduced our energy intensity by 26% against
our 2029 baseline of 81 kCO2/m2.
Reductions in emissions were mainly delivered through the
implementation of an investment strategy requiring all assets
in our property portfolio to have an Energy Performance
Certificate of ‘D’ or better, or a funded plan to achieve that
level and engaging with investee companies, tenants and
property owners to encourage them to commit to emissions
reduction measures.
Real estate loans
T 5. Reduce real estate
loans emissions by 58%
per square metre by 2030
compared to the 2019
baseline of 13,769 tCO2e.
Real Estates Loans
Note:
1.
We are required to use Scope 1 and Scope 2 market-based emissions for SBTi operational target-setting and reporting. When including Scope 2
location-based emissions this reduction is equivalent to a 3% reduction when compared to 2023 and a 53% reduction against the 2019 baseline.
52 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
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22 23 24 25 26 27 28 29 30
0
4000
8000
12000
16000
Operational emissions
4,257
4,500
6,529
7,032
7,811
2,535
2,499
2,453
3,155
3,886
2024
2023
2022
2021
2020
n Scope 1
n Scope 2
Overall, when compared to 2023, our Scope 1 and 2 emissions
decreased by 3%.
Our Auto Services, comprising 23 accident repair centres
and our recovery fleet, makes up over 70% of our operational
emissions. In 2024, Scope 1 and 2 emissions associated with our
repair centres reduced by 6%, compared with 2023.
We have achieved this through:
– the use of hydrogenated vegetable oil in our accident repair
centres as an alternative fuel for our recovery trucks. This
initiative has now been implemented at 95% of our repair
centres, resulting in an estimated 2,312 tCO2e saved in 2024;
– installing electrical infrastructure to remove gas from paint
spray booths at one of our site, providing an estimated saving
of 399 tCO2e in the year; and
– generated 140,000 kWh of energy from roof mounted solar
at one of our DLG Auto Services sites, providing 13% of the
total electricity used on-site.
Group energy consumption (kWh)1,2
2024
2023
Electricity
12,133,434 11,906,788
Gas
16,862,562 19,779,732
Total
28,995,996 31,686,520
The Group adheres to the SBTi concept of the "mitigation
hierarchy", namely that the Group addresses its value chain
emissions and implements strategies to achieve these targets
as a priority, ahead of actions or investments to mitigate
emissions by using carbon offsets. Working with Climate
Impact Partners, we have supported a carbon removal project
to Verra Verified Carbon Standard in Uruguay since 2023 to
offset our remaining Scope 1 and 2 emissions over a three-year
period. The project involves reforestation and a sustainable
approach to wood production. The Project is certified by the
Forest Stewardship Council(FSC), balancing timber production
and sales with habitat creation for wildlife. It provides
employment for the local community and enhances
biodiversity and carbon sequestration opportunities.
Investments
Emissions from investments make up approximately 70%
of our Scope 3 total. Aligned to our climate ambition, our long-
term goal is to reach Net Zero across our investment portfolio.
To deliver against our four current SBTs for investments,
we have incorporated key climate considerations into our
investment strategy. In 2024 we:
– continued to make progress towards meeting our SBTs
for GHG emissions reduction for in-scope asset classes;
– reported performance against our SBTs for commercial
property and real estate loan portfolios for the first time;
– continued to reduce the carbon intensity of our corporate
bond portfolio in line with our goal of a 50% reduction
by 2030 from a 2020 baseline; and
– encouraged high emitters to set science-based emissions
reduction targets as a signatory to the CDP’s science-based
targets campaign.
Our investments are underpinned by a wider Environmental,
Social and Governance ("ESG") framework. We expect all
external investment managers to be signatories to the United
Nations Principles for Responsible Investment (“UN PRI”),
ensuring that UN PRI criteria are integrated into the
investment process.
Our investment policy:
– excludes any company with a low MSCI low-carbon transition
score (indicating assets could be economically stranded);
– excludes companies involved in thermal coal activity, either
mining or power generation, at greater than 5% of revenues
unless the company is taking positive climate action3;
– has a preference for investments in green bonds where the
risk return characteristics are similar to conventional bonds;
and
– requires all assets in our property portfolio to have an Energy
Performance Certificate of ‘D’ or better, or a funded plan to
achieve that level.
Looking ahead, our priorities include:
– ensuring Investment Managers are engaging with investee
companies, tenants and property owners to encourage them
to implement half-hourly metering of their utilities and to set
emissions reduction targets;
– setting targets for asset classes not yet covered once
standards and methodologies are established;
– monitoring targets for all asset classes based on the latest
methodologies and best practice; and
– increasing the coverage across our private asset investments.
For more detail on how we manage climate-related risks and
opportunities in our investment portfolio please see page 71.
Notes:
1.
100% of the reported energy consumption relates to operations, all of which are based in the UK.
2.
Data is reported in compliance with the Streamlined Energy and Carbon Reporting ("SECR") requirements (see page 72).
3.
Companies taking positive climate action are defined as those that are committed to setting Science-Based Targets or have a 2°C or better carbon
performance alignment from the transition pathway initiative.
53 | Direct Line Group Annual Report and Accounts 2024
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Supply chain
Emissions from our supply chain make up approximately
30% of our Scope 3 emissions, highlighting the importance of
engaging with our suppliers to achieve our climate ambition.
Our Supply Chain Sustainability Programme is embedded in
our approach to responsible procurement. The focus of this
programme is twofold:
– engagement with our Tier 1 suppliers to keep them updated
on the Group’s climate commitments and practices, and
to obtain information on their appetite for and approach
to emissions reduction and target-setting; and
– embedding sustainability considerations into supply chain
decisions, processes and management.
During 2024 we increased the sustainability weighting for
contracts over a million pounds, which means that 10% of the
criteria relate to sustainability-related criteria. In addition to
measuring supply chain emissions, we monitor the
effectiveness of our engagement strategy. In 2024, 86% of
the managed supply base that we reached out to responded
positively to our direction of travel on emissions reduction.
By the end of the year, 21% of managed suppliers had signed
up to SBTi-aligned targets or an equivalent.
Looking ahead, our priorities include creating a new baseline
for our supply chain emissions, updating the emissions
reduction target and moving to more accurate emissions
measurement methodologies.
Biodiversity
We continue to monitor our nature-related dependencies,
impacts, risks and opportunities as part of the wider integration
of ESG factors into our Group risk framework. While our
immediate strategic priority is to manage climate-related risks,
we recognise that conserving and restoring nature is essential
to limit emissions and adapt to climate change. This includes
nature's role in storing carbon and providing natural defences
against extreme weather events.
We are involved in various UK initiatives, including supporting
the Get Nature Positive movement formed by the Council for
Sustainable Business and supported by Defra. Incorporating
biodiversity into specific business activities, in 2024 we
continued to fund a tree-planting project in a flood prevention
scheme in Yorkshire, replacing trees we removed when home
insurance policyholders make subsidence claims.
Working with nature recovery charity Heal Rewilding, we
provided a loan in 2023 to acquire a 460-acre site in Bruton,
Somerset, where rewilding is in progress and wildlife is
flourishing. Over the last year, Heal Rewilding made major
progress in its work to rebuild wildlife populations, tackle
climate change and support people’s well-being. Surveys of
birds found 67 species, including 11 red-listed and 16 amber-
listed, with the breeding populations of some red-listed birds
faring unexpectedly well, including linnet, tree pipit and
yellowhammer. The baseline survey for invertebrates found
unexpectedly high abundance of common species, a key
finding because they are a vital food source for birds, mammals,
reptiles and amphibians. The year also saw a significant
expansion of community engagement work at the site, with
nearly 300 free visits by people with additional needs, dementia
and mental health challenges, young adults with life
challenges, and disadvantaged families, and free visits by
schoolchildren and young apprentices.
While our immediate strategic priority is to manage
climate-related risks, we recognise that conserving
and restoring nature is essential to limit emissions and
adapt to climate change.
54 | Direct Line Group Annual Report and Accounts 2024
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“Our shared values shape the
Group's culture and conduct in
pursuit of the Group’s purpose.
These guiding principles help
colleagues to work together
effectively, make good decisions
and deliver for our customers.”
Governance and responsible business
Pursuing excellence in corporate governance and maintaining
the highest standards of business conduct are fundamental
to building a long-term, sustainable business. Our Corporate
Governance report, including the work of our Customer and
Sustainability Committee, can be found on pages 75 to 141.
This section drills down into the governance framework
and approach that drive alignment of responsibility and
sustainability aims with business goals, in line with the
Group’s risk framework.
Ethical business and professional conduct
Our shared values shape the Group's culture and conduct in
pursuit of the Group’s purpose. These guiding principles help
colleagues to work together effectively, make good decisions
and deliver for our customers. Our Group Code of Conduct sets
out the high standards of behaviour that we expect. Key areas
covered include combatting discrimination, harassment and
bullying, treating customers and suppliers fairly, diversity and
inclusion, fair competition and contributing to society.
Aligned to the Group risk framework, the Code is
supplemented by detailed policies and guidance that raise
awareness of financial crime and set out action to combat it.
Anti-bribery and corruption, anti-money laundering, terrorist
financing, fraud prevention and sanctions are covered. This
seeks to ensure that we can protect our business and
customers from financial harm as well as fulfilling regulatory
and legal responsibilities.
As part of our annual e-learning programme, colleagues
completed training on ethics and regulatory policy, including
compulsory assessment elements. In 2024, we enhanced this
programme by including new scenario-based examples and
additional content in relation to timeliness of logging gifts &
hospitality requests and 97% of colleagues completed modules
on anti-bribery and corruption. The Group’s whistleblowing
policy supports these standards and helps promote a culture
of openness. Anyone can raise concerns with managers or
utilise the services of an independent third party including
a confidential telephone helpline.
Group policies and statements are available publicly at
www.directlinegroup.co.uk/en/sustainability/reports-policies-
and-statements
Responsible procurement
As an extension of our business it is important that our
Suppliers embody our values and standards just as we have
a responsibility to treat them fairly and respectfully. This helps
to build long-term positive relationships that best serve our
customers and society. This approach is encapsulated in our
Ethical Code for Suppliers. The Code sets out our expectations
in areas such as human rights, labour standards, environment
and governance. It requires adherence to International Labour
Organisation (“ILO”) standards, which include a ban on the use
of child labour and forced or bonded labour.
Having rolled out a refreshed Code in 2023, all managed
suppliers were required to confirm their acceptance of it and
encouraged to ensure their supply chains also adhered to the
principles. Our Supplier Management and Outsourcing Policy
has processes in place to ensure we maintain high standards,
which include:
– supplier segmentation based on factors such as value,
expenditure and risk exposures;
– supplier assurance and oversight
– rigorous due diligence when onboarding new suppliers; and
– open and transparent sourcing including assessment
of potential new suppliers against criteria that cover
environmental, social and governance factors.
These processes are reviewed on an annual basis to ensure they
remain aligned with potential exposures faced by the business.
For more information on how we are embedding
environmental sustainability through our supply chain, please
see page 54. We expect managed suppliers to provide
assurances of compliance with the Modern Slavery Act through
a published statement (where applicable). The procurement
process includes an annual review of our modern slavery risk,
annual training, due diligence on new suppliers and active
assurance and management of existing suppliers. Further
detail on our approach and adherence to the Act can be found
in our latest Modern Slavery Statement.
55 | Direct Line Group Annual Report and Accounts 2024
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Governance
Data ethics and privacy
At Direct Line Group, enriching our data and making effective
use of technologies such as artificial intelligence (“AI”) and
machine learning are crucial to our strategy to become
the customers’ insurer of choice. They enable us to better
meet customer needs and upgrade their digital experience,
for example, by increasing pricing accuracy and providing best-
in-class claims management.
The need for customers to trust the way we use their data
is paramount. This means using their data ethically while
we perform our day-to-day jobs. Our Data Ethics Principles
sit at the heart of a holistic framework, establishing the values
to which colleagues must adhere and driving fairness,
transparency and accountability.
Data Ethics Principles
1. Respect the person behind the data.
2. Ethics will be designed into data processes and
solutions from the outset.
3. Understand and document the purpose for any data
collected, used and/or shared.
4. Comply with applicable laws and regulations
in connection with data, its collection and use.
5. Understand the limitations and quality of the
data we use and how this may impact the decisions
we make.
6. Actively pursue a fair, explainable and
transparent approach to algorithmic and statistical
decision-making.
7. Ensure accountability and appropriate governance
for any automated decision process.
8. Provide appropriate guidance and training to
support and encourage responsible data use.
We have implemented an extensive control framework to
manage privacy and security risks and meet our responsibilities
under data protection legislation, following regulatory and
industry standards and guidance. Governance forums ensure
privacy and security considerations receive high levels of
visibility. All businesses within the Group are required to meet
the standards set out in the framework and provide evidence
of compliance with UK GDPR obligations. All colleagues and
contractors receive annual training on data protection and
security responsibilities.
During 2024, we enhanced our approach to data privacy and
security by implementing several key initiatives. These included
the introduction of privacy enhancing technologies ("PETs")
to protect personal data, improving our data anonymisation
and pseudonymisation processes, and strengthening our
accountability and governance frameworks. We also focused
on ensuring compliance with data protection laws through
comprehensive training and awareness programs, and by
updating our internal controls and risk assessments to address
new technological developments and regulatory requirements.
Please see our online Group Data Privacy Policy for more
information on our privacy framework, privacy and security
programmes, and governance.
56 | Direct Line Group Annual Report and Accounts 2024
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We actively support a variety of membership organisations, and disclose information to ratings and benchmarking authorities,
as well as receive ESG performance ratings.
ESG ratings
MSCI
In 2024, we received a rating of AAA (on a scale of AAA-CCC)
in the MSCI ESG Ratings assessment
MSCI ESG Rating
AAA
Sustainalytics1
In 2024, we received an ESG Risk Rating of 22.2 and were
assessed by Sustainalytics to be at a medium level of risk.2,3
ESG Risk Rating
22.2
Ecovadis
We were awarded a silver medal in 2024
Ecovadis
Silver medal
Carbon Disclosure Project
We were awarded a B score for the 2024 assessment.
CDP score
B
Planet
Science Based Targets initiative
In 2024, we continue to make good progress towards our Science-Based Targets,
(Targets were approved in November 2022)
Race to Zero
As part of our Race to Zero pledge, we have signed the Business Ambition for 1.5°C
Get Nature Positive
We are a supporter of the Get Nature Positive campaign, focused on restoring nature
and biodiversity
People
Inclusive top 50 employers
We ranked 12th on the Inclusive Top 50 UK Employers List 2023/24
Social Mobility Pledge
We support the Social Mobility Pledge and have focused on helping students with their
careers through our Community Fund
Women in Finance
We are a signatory to HM Treasury’s Women in Finance Charter
Race at Work Charter
We support the Race at Work Charter to take positive action towards supporting ethnic
minority representation and inclusion
The Faith & Belief Forum
We are a signatory of the Charter for Faith & Belief Inclusion which aims to help create
understanding between people of different faiths and beliefs and a society which is fair
to people of all backgrounds – religious and non-religious
Notes:
1.
(www.sustainalytics.com). Such information and data are proprietary of Sustainalytics and/or its third-party suppliers (Third Party Data)
and are provided for informational purposes only. They do not constitute an endorsement of any product or project, nor an investment
advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions
available at https://www.sustainalytics.com/legal-disclaimers.
2.
Assessed to be at a medium level of risk of experiencing material financial impacts from ESG factors.
3.
Copyright © 2024 Morningstar Sustainalytics. All rights reserved. This section contains information developed by Sustainalytics.
57 | Direct Line Group Annual Report and Accounts 2024
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External ratings, memberships
and benchmarks
Introduction
The Group’s 2024 disclosure against the Recommendations and
Recommended Disclosures of the Task Force on Climate-related
Financial Disclosures (“TCFD”) reflects our ongoing work to
further integrate climate risk management across the business,
while also outlining the progress we are making against our
climate ambitions, including our Science-Based Targets.
We continue to assess and develop our disclosures against
the Recommendations and Recommended Disclosures
of the TCFD and recognise its importance in evolving our
understanding and management of the risks and opportunities
associated with climate change.
The Group, as at the time of publication, has complied with the
requirements of UK Listing Rule 6.6.6R(8) by including climate-
related financial disclosures consistent with 9 of the 11 TCFD
Recommendations and Recommended Disclosures for all sectors
(‘Section C Guidance for All Sectors’), including the supplemental
guidance for insurance companies (‘Section D Supplemental
Guidance for the Financial Sector’) within the 2021 TCFD Annex.
The Group has reported against all 11 Recommended Disclosures
and believes its disclosure against 9 of the 11 Recommendations
meets the objectives of the TCFD framework, with further detail
regarding the two remaining Recommendations
explained below.
For Metrics and Targets disclosure Recommendations (a) and (b),
which includes sector-specific guidance for insurance companies,
we continue to work towards developing our disclosure against
the relevant components of these two Recommendations, as
outlined below.
Metrics and Targets disclosure Recommendation (a):
– to provide additional metrics, including cross-industry
metrics, within our disclosure to support measurement
and management of climate-related transition risks and
opportunities; and
– to describe the extent to which our insurance underwriting
activities, where relevant, are aligned with a well below
2°C scenario.
Metrics and Targets disclosure Recommendation (b):
– to disclose, where data and methodologies allow, the weighted
average carbon intensity or GHG emissions associated with
commercial property and specialty lines of business.
The Group expects its disclosure against these to evolve over
time, with improving alignment to these forming part of the
actions embedded within our climate-related risk management
roadmap. For Recommendation (b), above, whilst we continue
to review emerging best practice, at present, we do not believe
available methodologies allow meaningful measurement of these
metrics for small commercial property portfolios. See page 70.
Companies (Strategic Report) (Climate-related
Financial Disclosures) Regulations 2022
The climate-related financial disclosures made by the Group,
within the following pages, comply with the requirements of the
Companies Act 2006 as amended by the Companies (Strategic
Report) (Climate-related Financial Disclosures) Regulations 2022.
The Non-Financial and Sustainability Information Statement,
on page 45, outlines where disclosure against each of these
requirements can be found.
International Sustainability Standard Board's
("ISSB") IFRS S1 and IFRS S2
The Group notes the ISSB's Sustainability Disclosure Standards,
IFRS S1 and S2, issued in 2023, and welcomes the value the
Standards will have in evolving the global baseline for climate-
related reporting. The Standards are currently subject to
UK endorsement.
Governance
Our approach
The Group’s approach to the governance of its sustainability
strategy is underpinned by a clear commitment from the
Board and senior management to align sustainability goals
with the Group’s strategy, and to encourage accountability
across the business.
Our five-pillar sustainability strategy (see page 44), endorsed
by the Board, aims to foster the highest standard of
Environmental, Social and Governance practice and deliver
long-term sustainability for all our stakeholders. The Planet
pillar takes the lead on climate-related issues.
Boards and Committees
The potential and actual impact of climate change on the
business (“inbound”), as well as the Group’s impact on the
environment (“outbound”), are issues requiring robust
governance to empower business areas in the management
of climate-related risks and opportunities.
It starts with the Group’s Board, which seeks to underpin all
of the Group’s activities with the highest standards of corporate
governance. The Board has oversight on two key aspects of
the Group’s approach:
– Each year, the Board assesses the strategic plan (the “Plan”)
in conjunction with the Group’s Own Risk and Solvency
Assessment (“ORSA”), which considers material risks to
the Plan, including climate change-related risks. More
information on climate change and our financial planning
can be found on page 60.
– The Board oversees the Group’s sustainability activity
through its Committees, which scrutinise and provide
appropriate challenge on the Group’s five pillar sustainability
strategy, including the establishment and monitoring of
Science-Based Targets and the Group’s development of
a climate-related risk management roadmap (see page 59).
The Chair of each Committee reports to the Board after
each Committee meeting.
Committees
– The Audit Committee meets a minimum of four times a
year and is responsible for overseeing the Group’s financial
statements and non-financial disclosures, including
climate-related financial disclosures.
– The Board Risk Committee oversees financial, regulatory
compliance, conduct and operational risk, including the
risk to the Group from climate change. It meets a minimum
of four times a year and receives reports on stress testing
of long-term climate change scenarios, discusses strategies
for managing the associated risks and receives updates
on emerging risks throughout the year, with deep dives
as appropriate. During the year, the Committee played
a key role in monitoring the Group’s climate-related risk
management roadmap and identifying areas of opportunity
for improvement.
– The Investment Committee meets a minimum of three
times a year and considers the strategy for incorporating
ESG factors into the Group’s investment management, which
has seen our credit portfolios tilted towards issuers with a low
carbon transition category.
58 | Direct Line Group Annual Report and Accounts 2024
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Task Force on Climate-related
Financial Disclosures
– The Nomination and Governance Committee meets a
minimum of two times a year, monitoring the Board’s
overall structure, size, composition and balance of skills.
This Committee is also responsible for monitoring the
Group’s observance of corporate governance best practice.
– The Customer and Sustainability Committee receives
updates on progress made under our Customer, People,
Society, Planet and Governance pillars. The Committee meets
a minimum of four times a year. During 2024, it has reviewed
progress against the Group’s Science-Based Targets,
approved by the Science Based Targets initiative (“SBTi”)
in 2022; and reviewed performance and approach on key
stakeholder matters, along with the Group's participation
in various sustainability-related initiatives. The Committee
continues to monitor the Group’s progress towards its
Net Zero aims.
– The Remuneration Committee meets a minimum of four
times a year and considers how executive remuneration
can be used to drive progress on climate-related matters.
An emissions metric has been applied to long-term incentive
plan (“LTIP”) awards made since 2022 and makes up a 10%
weighting of the total award made under the LTIP.
The emissions performance condition includes a targeted
reduction in emissions and temperature score and is based
on the Science-Based Targets that were approved by the
SBTi in 2022.
More information on the structure of the Board and Board
Committees can be found within the Corporate Governance report
on page 94.
Management’s role
There are three primary management roles designed
to oversee the delivery of the Group’s assessment and
management of climate-related matters:
– the Chief Executive Officer (“CEO”) has oversight of overall
climate-related matters;
– the Chief Financial Officer (“CFO”) oversees the
implementation of the Group’s investment strategy and
is advised by the Investment Committee on the application
of ESG weightings, including those related to climate change,
to the relevant portfolios. The CFO is a member of the
Investment Committee and the Director of Investment and
Capital Management is a regular attendee. The CFO also
oversees the identification and management of climate-
related financial risk; and
– the Chief Risk Officer (“CRO”) provides subject matter advice,
challenge and objective opinions on all risk matters, including
climate-related risk, through their oversight of the Risk
Function. The CRO is also tasked with establishing
appropriate risk management processes and frameworks for
climate-related risks.
Further information relating to our climate risk identification process
can found on page 67.
In the year, the Group’s Climate Executive Steering Group
(“CESG” or the “Steering Group”) acted as a management
forum to assess the potential impacts of climate change on the
business, along with the business’s impact on the environment.
The CESG consisted of members representing various teams
across the organisation, which included senior management
representation, and supported the Customer and Sustainability
Committee's oversight of the Group's progress against its
climate ambitions.
The Steering Group’s responsibilities also included monitoring
the Group’s performance against its climate ambitions,
including its Science-Based Targets, and overseeing input into
the Group’s business development and strategic processes to
make sure climate is given appropriate consideration in long
term strategy and planning. This included the identification
and oversight of climate-related opportunities.
In 2024, tracking and management of the financial aspects of
climate risk management activities, as identified in the Group’s
climate-related risk management roadmap, transferred from
the CESG to the Risk Management Committee and Board Risk
Committee. Regular updates are provided to support their
oversight of climate-related risk.
The roadmap sets out a range of actions to further integrate
climate risk management across the business and to build
additional capabilities in areas such as climate risk modelling
and scenario analysis.
A Climate Risk Workshop meets monthly with representation
across the business including Risk, Finance and Sustainability.
During 2024, it received updates relating to enhancements
to the risk management framework and climate scenario
testing capabilities.
Further information relating to the processes by which management
are informed about climate-related issues can be found on page 67.
More information on the key performance indicators used to assess,
monitor and manage climate-related risks and opportunities can be
found on pages 68 to 71.
Strategy
The effects associated with climate change are far reaching and
have the potential to cause significant economic and societal
impact. We know that through the actions we take as a business
we can contribute to a more sustainable future and as an
insurer with over 8.8 million in-force policies1, we recognise
our role in supporting – and accelerating – the transition to
a low-carbon economy.
Our strategy focuses on mitigating against, and adapting to,
climate change. This involves driving change across our
underwriting activities, our operations and our investments,
and includes the actions we are taking to progress against our
Science-Based Targets and Net Zero ambitions.
The following pages examine this strategy alongside the
actual and potential impacts of climate change on the Group,
in line with the TCFD Recommendations and Recommended
Disclosures, and outline how we continue to develop our
approach to climate-related risks and opportunities across
the business.
Note:
1.
Based on the Group's ongoing operations. See glossary on pages 238 to 241 for definitions.
59 | Direct Line Group Annual Report and Accounts 2024
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Climate change risks and opportunities
The potential impacts of climate change on organisations are
classified into the following three categories by the TCFD:
– physical risks – resulting from the physical effects of climate
change;
– transition risks – resulting from the transition to a lower-
carbon economy; and
– opportunities – arising from efforts to mitigate and adapt to
climate change.
We also recognise that litigation risk, which includes risks
arising when parties who have suffered losses from climate
change seek to recover them from those they believe may have
been responsible, could also cause adverse impact. This could
include direct climate-related litigation against the Group or
insurance risk arising from the underwriting of liability
products. The Group considers the risks associated with this to
be low due to low exposure in high-risk industry sectors.
Following the sale of the Brokered commercial business in 2023
we expect our exposure to liability insurance risk to reduce
further as the retained back book for this business continues to
run off over time.
Materiality
A greater level of estimation and assumption is required when
assessing materiality in the context of climate change and this,
combined with the longer term and forward-looking nature of
climate-related risks and opportunities, makes the assessment
inherently uncertain. As a result, we have chosen not to quantify
a materiality threshold for the purposes of our climate-related
financial disclosures.
Our approach to determine where information is material is
supported by quantitative assessment, such as the findings of
our scenario analysis activities where we consider the potential
financial impact of climate change over the longer term. Our
approach means we disclose relevant information that focuses
on the areas of our business that could be most affected by
climate change, which we identify as our underwriting
activities, our operations and our approach to investments.
The key physical and transition risks and opportunities that
could impact these areas are outlined on page 64.
We will continue to review emerging best practice associated
with assessing climate-related materiality and we expect this
to evolve over time. More information on our current approach
to measuring the impact of climate-related risk, and the
integration of climate change into the Group’s overall risk
management processes, can be found below and on page 67.
Defining the short, medium and long-term
time horizons
Short 1 - 10 years
Medium 10 - 30 years
As in previous years, our approach to defining the time
horizons associated with climate-related risks and opportunities
is to align closely with the scenarios considered in the Group’s
quantitative analysis of climate-related risk, which typically
considers scenarios that span over a significantly longer time
period (see page 61).
When defining the time horizons, the useful life of assets
was considered. However, the Group’s assets are primarily
depreciated or amortised over a period of up to 15 years.
As such, from a climate-related risk perspective, this falls into
our short-term, and lower end of our medium-term, time
horizon and therefore climate-related risk is not a significant
input into determining asset useful economic lives.
The time horizons over which specific climate-related issues
will manifest themselves vary significantly. However, in general,
transition risks are likely to materialise more rapidly than
physical risks, which are likely to be gradual and materialise
over the longer term. The timing of climate-related litigation
risk is less certain due to the nature of the exposure.
The key physical and transition risks and opportunities that
could significantly impact the Group, as well as the time
horizons over which they could manifest, is available further
into our disclosure on pages 64 to 66.
Financial planning, performance and position
Without appropriate management, the risks posed by
climate change could adversely impact the Group’s financial
performance and financial position.
To help quantify the potential impact of climate change we:
– perform scenario analysis, which enhances our
understanding of the financial risks associated with the
longer-term impacts of climate change and provides an
indication of strategic resilience (see pages 61 to 63);
– undertake climate risk modelling to assess the most
predominant physical drivers of risk in our property insurance
products, enabling us to evaluate the potential impact to the
Group’s capital position (see pages 67 to 68); and
– integrate climate risk into the Group’s overall approach
to risk management. This includes measuring the relative
significance of climate-related risks to other risks in the Group
Risk Taxonomy (see page 67).
Financial planning
We acknowledge that limitations exist in aligning
climate change and financial planning. A key issue relates to
the modelling of the impact of climate change, which typically
extends out to a significantly longer time period than our
current financial plan.
Although limitations and uncertainties associated with the
longer-term impacts of climate change exist, we continue
to embed climate-related considerations into our planning.
This includes within the Group’s Plan, which reflects the
strategic planning that is ongoing across the business and
covers any climate-related initiatives that are embedded within.
These include the costs associated with the actions we are
taking to reduce the carbon footprint of our accident repair
centres, and the use of reinsurance in our property insurance
business, acknowledging that the cost to obtain catastrophe
reinsurance could be impacted by an increase in the frequency
and severity of major weather events.
We also monitor losses from major weather events, which
include inland and coastal flooding, storm surge, freeze events
and subsidence. We use sophisticated modelling techniques
to estimate the expected losses from event weather in
our property book to set an annual expectation for event
weather-related claims. The impact of major weather relative
to this annual expectation for 2024 can be found within Metrics
and Targets on page 69.
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Long 30+ years
Financial performance and position
In preparing the financial statements, the Group has assessed
the impact of climate change. While the risks associated
with climate change remain uncertain looking forwards, the
impact of event weather is reflected in the Group’s historical
performance and position as at 31 December 2024. The
potential impact of climate change on insurance risk is also
discussed in further detail within note 1 to the consolidated
financial statements (see page 176).
Areas of physical and transition risks the Group could be
exposed to are outlined in the table on page 64. The financial
impact of these risks can, if realised, be grouped broadly into
the following:
– Adverse impacts to revenue and market share due to a failure
to understand, and adapt to, the scale of change in market
demand for products and services due to climate-related
policy, technology and consumer preference.
– Increased climate-related operating costs and capital
expenditure due to the investments we make to progress
against our emission reduction targets, or higher operating
costs due to carbon cost increases or regulatory
requirements designed to limit carbon emissions.
– Changes in the value of our financial investments due to
the influence of physical and transition risk impacting the
wider economy.
– An increase in the frequency and severity of natural
catastrophes and other weather-related events adversely
impacting insurance liabilities.
We also recognise that our access to capital can be materially
affected by factors including, but not limited to, financial
performance and investment decisions, which have their own
associated climate-related risks. In addition, our performance is
assessed externally by ESG rating agencies, to which investors
and other stakeholders are giving increasing prominence.
Adverse impacts to our debt rating could negatively affect cost
and access to sources of debt finance and subsequent
interest rates.
In our approach to acquisitions and divestments, any climate-
related risks and opportunities are expected to form part of our
usual due diligence process.
Scenario analysis
The Group uses scenario analysis to better understand the
potential impacts climate change could have on our business
model and strategy.
Since 2021, we have updated our scenario stress testing
annually, evolving our approach to take account of changes in
our exposure, updates to our underlying risk models, leverage
new software, and to further enhance how we communicate
the outputs of our modelling in an effective way. Our analysis
focuses on the impact that transition and physical risks could
have on investment asset values and on liabilities associated
with weather-related perils.
Our stress tests have been designed around Intergovernmental
Panel on Climate Change (“IPCC”) pathways that project both
socio-economic changes and greenhouse gas concentrations
into the future. This allows us to assess the combined potential
impacts of transition and physical risks on our business. The
IPCC's scenarios are globally recognised and standardised,
facilitating consistent and comparable stress testing aligned
with a wide variety of impact assessment studies.
Specifically, we considered SSP2 (“Middle of the Road”), in
combination with RCP4.5 ("SSP2-4.5"), and SSP5 (“Fossil-fuelled
Development”), in combination with RCP8.5 ("SSP5-8.5"),
focusing on two future points in time for our stress testing:
– 2030, to support our understanding of the potential impacts
on our business strategy; and
– 2050, to support our understanding of the potential impacts
on our long-term business model.
The choice of the SSP2-4.5 pathway represents a useful baseline
for understanding climate change impacts in terms of physical
risk, while incorporating the transition risk associated with
some reduction in emissions. The choice of the SSP5-8.5
pathway allows us to understand the effects of a severe but
realistic outcome in terms of physical risk. A scenario such
as this would see over 2oC of global warming, which is seen
as a critical threshold with irreversible and far-reaching
consequences for the physical environment. The choice of
scenarios and timelines are sufficient to explore a wide range
of potential outcomes due to climate change, which can
be expanded upon in future by the consideration of
additional pathways.
Across both considered scenarios, increased temperatures
mean that the mid-Atlantic atmosphere can hold more
moisture, leading to more extreme rainfall events and flooding
in the UK. Sea levels will rise, although not uniformly, which
would increase the severity of coastal flooding events. The
scenarios also consider that there will be more frequent and
intense droughts. Drought conditions can lead to the drying
and shrinking of clay soils, which are prevalent in many parts
of the UK, leading to increased subsidence.
Our modelling approach
Different methods are used to quantify the impact of the
scenarios on our investment assets and weather-related
liabilities.
We use a specialised third-party software tool as the basis for
stress tests on our investment portfolio. The tool enables a
transition risk adjusted valuation and a physical climate
adjusted valuation to understand the financial impact of
the scenarios on individual securities and the overall portfolio.
It uses a bottom-up approach that considers individual
companies and geolocation in assessing the potential impact
for a portfolio.
For estimating the impact of climate change on liabilities due
to flood and windstorm, we use third-party catastrophe
modelling software. This aligns with the approach for
quantifying catastrophe risk on our current portfolio. Custom
adjustments are applied to these models for each chosen
scenario and time horizon, reflecting changes in severe flood
frequency and the impact of sea level rise on coastal flooding.
This approach allows us to quantify changes in average annual
losses by peril, as well as changes in the size of extreme losses,
such as a 1 in 100-year loss, for example. All scenarios are applied
to our current exposures to ensure focus of the stress test
remains on climate change specific impacts. The windstorm
and flood impact assessments are updated quarterly for
portfolio exposure changes, and form part of our regular
catastrophe risk reporting.
For estimating the impact on subsidence, we extrapolate
published analyses from the British Geological Survey to
estimate the impact on average annual losses.
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Summary of results
2050 time horizon
Under the Middle of the Road pathway, climate policies are
implemented at a moderate pace and whilst there is progress
towards sustainable development goals, it is uneven and slow.
Technological development proceeds without fundamental
breakthroughs and there is a gradual shift towards cleaner
technologies while fossil fuel dependency decreases slowly.
The necessity for policy changes under this scenario leads to
transition risks that affect carbon-intensive industries and
property portfolios.
The impact observed on our asset portfolio under this scenario
was a small decrease in the value of assets under management,
estimated at less than a 1% impact. In this scenario, transition
risks dominate, particularly for the commercial property
asset class which makes up only a small portion of our overall
portfolio. The impact is further limited due to the mix of our
portfolio, which is heavy in liquid assets such as cash, gilts,
and publicly traded debt, and has negligible exposure to
carbon-intensive industries.
From a physical risk perspective the scenario aligns to an
approximate 1.8oC temperature rise above pre-industrial levels
by 2050. For the UK, this is expected to lead to increases in
precipitation and flooding, though to a lesser degree when
compared to the Fossil-fuelled Development scenario.
Sea levels under the Middle of the Road scenario rise by
over 20cm, on average.
Under the Fossil-fuelled Development pathway, economic
growth is driven by intensive use of fossil fuels with minimal
effort to mitigate climate change. As such, there are fewer
transition risks due to fewer changes in policy or the economy.
The consequence is that greenhouse gas concentrations and
global average temperatures would continue to rise, reaching
an estimated 2.5oC above pre-industrial levels by 2050. This
would lead to far greater physical risks with much more
extremes in temperature and precipitation for the UK.
The impact on the valuation of our investment portfolio is
much smaller under this scenario compared with SSP2-4.5
because of the lower transition risk. However, we still observe
reductions in asset values due to the increased physical risk,
particularly in the publicly traded credit asset class where more
extreme weather events could potentially lead to operational
disruptions and asset devaluation for these companies.
Catastrophe modelling results for both scenarios at the 2050
time horizon showed increases in average annual losses from
both inland flooding and the coastal flooding element of
windstorm. This includes a significant increase in predicted
inland flood losses of 30% under the SSP2-4.5 scenario and over
65% for the SSP5-8.5 scenario, with the increases observed in
coastal flooding of 51% and 70%, respectively.
Under both scenarios, the higher weather-related losses are
further increased when including subsidence, where average
annual losses would grow by over 30% in the SSP2-4.5 scenario.
Under the SSP5-8.5 scenario, subsidence risk would be
more pronounced.
The following graph shows the impact of the scenarios on
the average annual losses for three weather-related perils.
The results illustrate the magnitude of impact from the
scenarios compared with the base case, and the relative
importance of each peril on the overall loss. Within the results,
the windstorm peril includes the associated losses from both
wind damage and coastal flooding.
The graph highlights that, whilst inland flood and subsidence
showed the strongest sensitivity to climate change, windstorm
continues to dominate the combined loss.
Although we observed an increase in average annual losses
across all perils, when the results are viewed in the context
of the combined modelled weather losses, the impact from
climate change is less pronounced as most of the combined
losses are from windstorm, and in particular the wind damage
element of this peril. Under our modelling for the scenarios,
windstorms see only a small increase in losses, which is due
to the impact of sea level rise on coastal flooding.
Average annual losses by peril
2030
2050
SSP2-4.5
2050
SSP5-8.5
n Windstorm
n Subsidence
n Inland Flood
Figure 1: Average annual losses by peril under both scenarios and time
horizons. Numbers within the bars represents the change in peril-
specific losses compared to the base. The 2030 result reflects the similar
impact under both the SSP2-4.5 and SSP5-8.5 scenarios.
There is significant uncertainty associated with how climate
change may affect UK windstorms and in previous iterations,
we incorporated the results of studies showing that climate
change may suppress the occurrence of large storms. However,
other studies argue that windstorms may become more
extreme and, as such, we have chosen to exclude the former,
more optimistic view, from our most recent modelling. Going
forward, we seek to enhance our understanding of the science
and how we can better incorporate this uncertainty into our
stress testing.
2030 time horizon
At the 2030 time horizon, under both scenarios, the effects of
climate change are expected to be more benign compared to
2050, both in terms of physical and transition risk.
The focus on the 2030 time horizon continues to be valuable
due to its direct relevance with the Group's five-year Strategic
Plan. Given that we observed limited impact on the investment
asset values at 2050, the associated impact at the 2030 time
horizon was not examined in detail.
In terms of physical risk, by 2030 there are no material
differences between the two scenarios and both see an
approximate increase in temperatures of around 1.4oC against a
pre-industrial average. Based on climate models, this could lead
to an increase in flood and subsidence risk, which in turn would
result in an increase to the amount of capital the Group needed
to hold to meet these additional liabilities.
We continue to keep track of scientific literature and maintain
in-house expertise to further support our understanding of new
scientific developments relating to peak flood risk.
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+1%
+9%
+13%
+30%
+34%
+2%
+2%
+40%
+65%
Business impact
The increase in losses from weather-related perils could result
in a material increase in budgeted loss for weather, as well as to
the cost of reinsurance and capital.
Under both scenarios, the combined increase in weather-
related losses would need to be addressed through a
combination of measures including pricing and underwriting
action, increased reinsurance coverage, and investment in other
mitigation measures. This is deemed a manageable change for
the business given that weather-related losses are only a small
component of the Group’s overall expected losses. This is
further supported by the ability to reprice policies annually.
Losses under the scenarios at the 2050 time horizon, with our
current reinsurance in place, would be higher than our current
appetite for catastrophe risk. However, changes to capital
requirements at a Group level are mitigated by diversification
from parts of the business less sensitive to climate change risk,
and the estimated potential impact on capital requirements
could be mitigated further by additional reinsurance cover.
This assumes that reinsurance markets would still continue to
offer the coverage and terms that are offered today, although
we acknowledge that heightened global catastrophe activity
could increase the cost of obtaining reinsurance. In future stress
and scenario work, we intend to address the cost of reinsurance
more explicitly in our modelling.
Overall, the short-term nature of the business and the ability to
reprice annually help limit the impact on general insurance
liabilities, while reinsurance arrangements also provide further
risk mitigation. Nevertheless, the scenarios highlight that the
increased physical effects of climate change could make some
policies and perils either uninsurable or unaffordable.
Reverse stress test – electric vehicle adoption
In 2023, we conducted a reverse stress test to establish
whether the long-term future for motor insurance, specifically,
the adoption of electric vehicles, poses a threat to the viability
of our current business model. While not commonly covered by
transition risk scenarios, changes in consumer behaviour form a
significant part of the transition to a net zero emissions economy.
Whilst this exercise has not been updated in 2024, the overall
conclusions outlined below remain relevant as in the short
term, re-running the reverse stress test is unlikely to produce
materially different results.
For the short term time period, that covered to the end of 2025,
the findings showed that there are only minor differences
between the scenario impacts, with more significant
movements unfolding over a longer timeframe. Over the longer
term, the results varied considerably across the different
scenarios and included possible adverse impacts to the Group’s
business model or market share. Conversely, at the favourable
end of the range, the findings represented a possible growth
opportunity. The analysis also identified that the outcomes are
sensitive to assumptions which are largely outside of the
Group’s control, such as the rate of adoption of electric vehicles
in the UK, which is supported by changes in technology and
policy designed to limit carbon emissions.
The analysis supports our assessment of transition risk and
highlighted the importance of enhancing capabilities,
particularly around the Group’s ability to identify and respond
to the emerging electric vehicle and mobility landscape. More
information on how we are evolving our strategic response to
the adoption of electric vehicles can be found on page 65.
Key assumptions
In formulating scenarios to stress test key sensitivities of our
current business model we acknowledge there are limitations
in the assumptions used, particularly relating to the longer-term
2050 time horizon.
For example, the scenarios used do not take into account:
– the Group’s long-term commitments within its investment
strategy, including the ambition of holding a net zero
emissions investment portfolio by 2050, which could result
in lower transition risk (see pages 66 and 71); and
– the expiry of the Flood Re scheme in 2039. The ceding of
peak flood risk is a part of our current business strategy and
we have therefore assumed ceding would be available in the
2050 scenarios. This implies that either Flood Re would be
extended, or that an alternative private market reinsurance
solution would exist.
Additionally, whilst we have used credible scientific data to
build our scenarios, we recognise considerable uncertainty and
diverse opinions exist in relation to how climate change will
affect extreme weather in the UK. This provides incentive for
critically assessing the scenario design on a regular basis and
for considering alternate scenarios in future modelling, such as
more extreme windstorms, for example.
We plan for the scenarios to expand and evolve over time
which includes continuing to challenge our assumptions.
The scenario design is iterative, as we learn how climate change
may affect our specific risk profile, while also allowing us to
focus on the aspects of the business most likely to be materially
impacted by the effects of climate change.
Management actions
The findings from our analyses continue to highlight the
importance of the Group’s existing Management Action
Framework, which includes a range of actions that could mitigate
against the risks identified through our climate-related modelling.
Considering the level of impacts that we have observed as part
of our modelling, we have identified a number of management
actions that would be effective to mitigate these risks and
respond to new opportunities.
Our Management Action Framework consists of three broad
categories based on the purpose and nature of the action:
– Contingent Management Actions – These follow the Group’s
existing Contingent Management Actions framework and
would be deployed to mitigate the scenario impacts,
assuming these arise as instantaneous shocks on the balance
sheet; potential action could include restricting capital
distributions, for example.
– Pre-emptive Management Actions – These have been
developed assuming that the business can observe the
scenarios unfolding in real time and begin to adapt the
business model in response to these emerging impacts;
they cover areas such as repricing, de-risking of investments
and reinsurance.
– Strategic Management Actions – These actions are aligned
to the Group’s ongoing strategic activity as part of our
contribution to the transition to a lower-carbon economy.
They include: taking action to progress against our Net Zero
ambitions and Science-Based Targets; understanding how
we can support in improving the flood resilience of UK
properties in flood-prone areas; and evaluating the impact
of climate change on our underwriting footprint, which
includes through scenario modelling.
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Our strategic response
Developing our understanding and management of climate-related risks, while seeking out opportunities that may arise from
efforts to mitigate and adapt to climate change, are important aspects for maintaining the longer-term resilience of our strategy.
Our approach continues to focus on driving change across key areas of our business: our underwriting activities; our operations; and
our approach to investments. The actions we are taking across these areas are considered in turn on pages 65 and 66.
In the following table, we outline the key physical and transition risks and opportunities that could significantly impact these areas
and include the time horizons over which we believe these could become manifest. Additional focus on the operating segments
that could be most affected by climate change can be found on page 65. More information on how we define the time horizons
used can be found on page 60.
Category
Description
Examples of potential impact on the Group
Time
horizon
Key area
of impact
Physical
risks
Acute – event
driven risks such as
flooding and storm
surge.
Chronic – longer-
term shifts in
climate patterns,
such as a continued
rise in average
temperatures,
changes in, and
extreme variability
of, precipitation and
weather patterns
and rising sea levels.
An increase in the frequency and severity of natural catastrophes
and other weather-related events could adversely impact
insurance liabilities, particularly those from our property
insurance products.
Disruption to our direct operations, which could include damage
to our estate, impacting our ability to serve customers.
Chronic risks could lead to significant changes in our
underwriting criteria to maintain risk appetite, and/or higher
costs to obtain catastrophe reinsurance to protect us against an
accumulation of claims arising from a natural perils event.
Reduced returns from investments in companies whose
operations are impacted by physical climate risks, and real asset
investments directly impacted by physical climate risks.
Transition
risks
Risks arising from
the transition to a
lower-carbon
economy.
These are
categorised by
the TCFD as:
– policy and
legal risks;
– technology risks;
– market risks; and
– reputational risks.
A failure to understand the scale of change in market demand
for products and services due to climate-related policy,
technology and consumer preference could impact revenue and
market share. This could include risks from the transition to
electric-powered vehicles, for example.
Costs associated with the transition to a lower-carbon economy
may increase over time and the adoption of new lower emission
technologies may be unsuccessful.
Insufficient progress against our net zero ambitions could cause
stakeholder concern and reputational damage.
Reduced returns from investments in high carbon intensity
companies that are not taking action to transition to a low
carbon economy, and real asset investments that are not
compatible with the transition to a low carbon economy.
Opportunities Efforts to mitigate
and adapt to
climate change
can also produce
commercial
opportunities.
These could
allow us to help
accelerate the
transition and
continue
contributing to
a sustainable
economy.
Accelerating the speed of transition to a lower-carbon economy
by, for example, supporting the move to greener transport
solutions, particularly electric-powered cars, allows us to develop
new insights and capabilities to help us build insurance solutions
that best meet our customers’ evolving needs.
Investment in energy-efficient features and equipment across
our office estate and accident repair centres could save on
energy consumption and operating costs, reduce our footprint
and improve operational and resource efficiencies.
Potentially enhance risk-adjusted returns from our investments
by aligning the investment portfolio with the transition to a low
carbon economy whilst also enhancing our reputation as a
responsible investor. Ensuring the investment portfolio is
resilient against the physical effects of climate change.
Short-term (1 – 10 years)
Medium-term (10 – 30 years)
Long-term (30 years +)
Underwriting
Investments
Operations
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Underwriting
Property
The physical risks from climate change are most likely to
manifest themselves as an insurance risk on our property
insurance products, where we protect millions of our
customers’ properties against weather events, such as
flooding and windstorms.
These natural catastrophes, and other weather-related events
in the UK, are key drivers in the Group’s solvency capital
requirements and we recognise that climate change could
cause the frequency and severity of these events to increase.
The short-term nature of the business we underwrite, the
ability to re-price annually, and the risk mitigation provided
by reinsurance arrangements are all important factors in how
we manage our exposure. In addition, we further limit our
exposure by making use of Flood Re to cede high flood risk
residential properties.
In the second half of 2024, we deployed a new pricing and
underwriting engine across our Home business. This is
expected to provide further agility enabling us to increase the
frequency with which we refresh our view of underwriting risk.
Despite this, we acknowledge that, in general, the physical risks
from climate change are likely to intensify over the longer-term.
To assess the effects of this, we perform scenario analysis
to measure the potential impact of climate change on our
insurance liabilities over a time horizon spanning over 25 years.
This analysis helps us to quantify the financial implications
of physical risk under different possible future climate
scenarios, with the outputs providing an indication of the
Group’s resilience.
The analysis provides a framework to understand and assess
the potential future risks associated with climate change in
greater detail and the findings aid our strategic planning. This
has included the development of our Strategic Management
Actions (see page 63), which span across business areas and
include actions such as engaging with policymakers on the
importance of flood defences in the UK to protect properties
located in flood-prone areas.
The potential impacts observed on the business under
these scenarios, as well as the contingent and pre-emptive
management actions which could be deployed to mitigate
against the risks identified, can be found on page 63.
These actions cover areas such as pricing, de-risking
of investments and reinsurance.
Motor
Being a large personal motor insurer, the move to electric-
powered vehicles is particularly pertinent to the Group and,
supported by changes in technology and policy, the speed of
transition to electric continues to increase. Whilst this presents
new challenges, we also recognise this as an opportunity to
support the move to a lower-carbon economy, through the
insurance products we offer.
In recent years, our products have expanded to support our
Motor customers who are making the switch to electric, for
example our car insurance includes battery, home charging
and charging cables cover.
We have also entered into new strategic partnerships which
can help grow our data on electric vehicles, such as with
Motability Operations from September 2023. We expect the
number of electric vehicles we insure to increase over the
course of the partnership, driving both scale and insight
through our accident repair centres.
We are also building further capabilities in our repair centres,
where an increasing number of our technicians are now
accredited in repairing electric vehicles, supporting the
development of insight into the future of vehicle technology
and repair.
During 2023, we performed a reverse stress test to assess how
the adoption of electric vehicles could impact the Group’s
business model, which considered a range of variables across
three time periods and scenarios.
Operations
We continue to take action to ensure we are operating in a
sustainable way, recognising this not only supports the planet,
but is also a part of how we can mitigate against the potential
climate risks that could cause disruption to our operations.
To date, this has included investing in our estate to integrate
new energy-efficient features and equipment, launching a
carbon reduction strategy in our network of accident repair
centres and since 2014, purchasing the electricity for all our
offices and accident repair centres from renewable sources.
Science-Based Targets
We aim to become a Net Zero business by 2050 and
this includes our direct operations. Our Science-Based
Targets were approved by the SBTi in 2022 and are
aligned to a 1.5°C pathway, meaning we have
ambitious carbon reduction plans which support our
journey towards Net Zero.
For our direct operations, we are aiming for a 46%
reduction in absolute Scope 1 and 2 emissions from our
office estate and accident repair centres by 2030, from
a 2019 baseline. Reporting against this target can be
found within Metrics and Targets on page 70 and
on page 52.
Operational emissions
The steps we have taken in recent years mean we understand
where the most carbon-intensive areas of our operations are,
allowing us to prioritise carbon reduction activity across these
areas in support of our targets. Our 23 accident repair centres
remain a key area of focus and we continue to embed a range
of solutions as part our carbon reduction strategy, with this
work being led by colleagues in the Auto Services Sustainability
Programme. More information on what we have achieved in
2024 as part of the Programme can be found on page 53.
Emissions reporting
We calculate and report our GHG emissions annually and
our most recent carbon emissions reporting can be found on
page 73. In recognition of our hybrid operating model (where
people work from home at least part of the time), since 2021
our reporting has also included emissions from homeworking.
Further disclosure on the progress we have made in reducing
our operational footprint to date can be found within Metrics
and Targets on page 70.
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Carbon offsetting
Our aim is to become less reliant on carbon offsetting and,
although our journey to net zero emissions continues to gain
momentum, we acknowledge that it will take time to facilitate
the transition. For this reason, we offset our remaining Scope 1
and 2 emissions, with this achieved in 2024 through carbon
removal credits. More information can be found on page 53.
Supply chain
The Group has an established Supply Chain Sustainability
Programme, recognising the importance of engaging with our
suppliers to achieve our climate ambition. During the year,
work has included increasing the weighting of sustainability
factors in our sourcing processes.
Further information on the activities undertaken in the year
as part of our Supply Chain Sustainability Programme can be
found on page 54 and the Scope 3 GHG emissions from our
supply chain are reported on page 73.
Investments
We have been integrating more ESG considerations into our
investment strategy over a number of years, recognising this
is a long-term process which will require assessment and
challenge to inform future decision making.
We know that the impacts of potential physical and transition
climate-related risks arising in the wider economy will have an
impact on our investment portfolio, through their influence on
the value of assets. For example, our portfolio is exposed to
physical risks through our investment in companies that are
exposed to disruption from adverse weather events across their
supply chain. It is also exposed to transition risks, where
companies that we are invested in are not adapting their
strategy to a low-carbon future. However, the transition
to a low-carbon economy also creates significant
investment opportunities.
We have the long-term goal of our entire investment portfolio
being net zero emissions by 2050 and in support of our aims
we continue to implement key climate initiatives into our
investment strategy. During 2024, we:
– continued to work towards meeting our approved
Science-Based Targets for GHG emissions reduction for
in scope asset classes; and
– continued to reduce the carbon intensity of our corporate
bond portfolio in line with our aim of a 50% reduction by
2030 from a 2020 base year.
The actions detailed above form part of the ongoing
development of the wider ESG framework underpinning
investments. In terms of holding investments in other
companies, those with higher reported ESG credentials have
more sustainable practices which better align to our
investment, environmental and social goals. As such, for our
investment-grade corporate bond portfolios, we require the
MSCI ESG rating of the portfolio to be at least as high as the
corresponding ESG weighted reference index or benchmark.
Science-Based Targets
In support of our long-term goal of ensuring our entire
investment portfolio is net zero emissions by 2050, in
line with the aims of the Race to Zero campaign, we
set four science-based GHG emission reduction
targets in our investment portfolio.
Approved by the SBTi in 2022, the targets cover
corporate bonds, commercial property and real estate
loans which, as at the end of 2024, covered 70% of
assets under management.
More information on the targets, and our 2024 reporting
against them, can be found within Metrics and Targets
on page 71 and on page 52.
Looking through the climate lens, we also have in place the
following current initiatives:
– Thermal coal screen whereby we restrict investment in firms
generating more than 5% of revenues from either thermal
coal mining or thermal coal power production unless the
company is taking positive climate action1.
– We actively encourage our investment managers to invest in
green bonds. Green bonds are designated bonds intended to
encourage sustainability and to support climate-related or
other environmental projects. All our relevant corporate bond
mandate guidelines now direct the portfolio manager to
purchase a green bond where the risk return characteristics
are similar to those of a comparable non-green bond.
– Within our investment property portfolio all assets must have
an Energy Performance Certificate of ‘D’ or better, or a plan
and funds in place to achieve that level. The property portfolio
also has a tailored set of ESG targets covering areas such as
carbon, energy, water and waste.
We also use climate scenario modelling to support our
assessment of the impact climate change could have on the
investment portfolio. This analysis enables us to measure and
quantify the potential financial impact of climate-related
physical and transition risk on our investments, while also
providing a better understanding of the opportunities that may
arise from a transition to a lower-carbon economy to inform our
strategic planning.
The potential impacts observed on the investment portfolio
under these scenarios can be found on pages 61 to 63.
Using our influence
We aim to use our influence to drive wider change. For
example, our investment managers are signed up to the UN
Principles for Responsible Investment. We also talk regularly
to our external asset managers to understand (and where
necessary, challenge) how they are using their global presence,
size and leverage to engage and encourage corporations to
tackle climate change.
Note:
1.
Companies taking positive climate action are defined as those that are committed to setting Science-Based Targets or have a 2°C or better carbon
performance alignment from the transition pathway initiative.
66 | Direct Line Group Annual Report and Accounts 2024
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Risk Management
Our Risk Management Framework
The Risk Management Framework sets out, at a high level, the
Group's approach to setting risk strategy, and managing risks
to the strategic objectives and day-to-day operations of the
business. The Risk Management Framework is designed to
manage the Group’s risk proactively and to enable dynamic
risk-based decision making. This includes clear accountabilities
and risk ownership designed to ensure that we identify,
manage, mitigate and report on all key risks and controls, and is
governed through the three lines of defence model.
Further information can be found in the Risk management
section of the Strategic report on pages 38 and 39.
Risk taxonomy
The Group recognises that the effects of climate change are
wide-ranging, with uncertain and extended time-horizons, and
that a strategic approach to managing the risks from climate
change is required. The Group reflects the effects of climate
change in the drivers of those risks which are defined in the
Group Risk Taxonomy. This embeds the management of
climate-related risks in the normal risk management processes
for managing risks across the Group’s risk profile.
During 2024, the Group enhanced the coverage of climate-
related risk within its policies and minimum controls standards
for the financial risks considered to be most materially
impacted by climate change. Materiality was assessed through
SME judgement.
Risk impact
The impacts of all risks, events and action plans are rated using
the Impact Classification Matrix which facilitates a consistent
approach to the sizing and categorisation of risk across the
Group by using Financial, Regulatory, Customer, Reputation,
Operational disruptions and Economic, Social and Governance
factors (including Climate Change) inputs. This includes those
risks relating to climate change, including climate-related
litigation risks, and allows the Group to determine the relative
significance of climate-related risks in relation to other risks.
Climate-related risk identification process
Annual risk identification process
Each year, the business is required to review all current and
developing risks which could impact on the achievement of
strategic objectives. This process includes assessing the Group
risk drivers, such as those due to climate change, and their
potential impact and likelihood of risk crystallisation on both
an inherent and residual basis, in addition to identifying the
position which aligns with risk appetite. The risk drivers are
assessed at the sub-level most appropriate for the risk, for
example at a product level for insurance risk or business unit
level for certain operational risks.
We also use a variety of indicators across our product segments
to assess, monitor and manage climate-related risks. A number
of these key metrics can be found on pages 68 to 71.
Additionally, scenario analysis is used to quantify the potential
impact climate change could have on the business across
the short and longer term, see pages 61 to 63.
Regulatory monitoring
The Group monitors and reviews relevant outputs from the
FCA, the PRA, and His Majesty’s Treasury, to consider existing
and emerging regulatory requirements.
During 2024, this included reviewing:
– the Bank of England’s bulletin on measuring climate-related
financial risks using scenario analysis;
– the Climate Financial Risk Forum’s guides on three areas
of climate risk: nature-related risk; use cases of short-term
scenarios; and mobilising adaptation finance to build resilience;
– the FCA’s finalised guidance on the anti-greenwashing rule;
and
– the FCA’s temporary measures for firms on ‘naming and
marketing’ sustainability rules.
We continue to monitor future developments. Reviews are
summarised and distributed to relevant stakeholders, and,
where necessary, responses are coordinated and overseen
by Second Line of Defence subject matter experts.
Emerging risk process
In addition to the annual risk review process, the Group has
in place an emerging risks process which facilitates the
identification, management and monitoring of new or
developing risks which are difficult to quantify or are highly
uncertain. The Group records emerging risks within an
Emerging Risk Register. Updates on emerging risk and the
actions being taken to address them are presented to the Risk
Management Committee and the Board Risk Committee
regularly, supplemented by deep dives on selected
emerging risks.
Climate change, including climate-related physical and
transition risk, is one of the Group’s most prominent emerging
risks. In the year, oversight was provided by the Climate
Executive Steering Group and the Climate Risk Workshop,
consisting of First Line of Defence subject matter experts from
around the business where the impact of climate change is the
highest, in addition to Second Line of Defence subject matter
experts who provide oversight and challenge of risk
management activity relating to this.
Both physical and transition risks could manifest themselves
through a range of existing financial and non-financial risks,
including insurance, market, operational and strategic risks.
For more information on emerging risk and climate change
see page 43.
Climate risk modelling
The risk to the Group’s capital from extreme weather event
losses is modelled, monitored, and reported internally on
a quarterly basis. The largest loss potential comes from UK
windstorms or floods, which are explicitly modelled within the
Internal Economic Capital Model, along with less significant
perils such as freeze and subsidence.
The Group uses vendor catastrophe models to quantify wind
and flood risk for its in-force portfolio. These models are regularly
reviewed to ensure they reflect the latest scientific understanding.
Part of this review explicitly considers whether climate change
has materially altered the underlying risk assessment within
these models compared to historical observations. This task
is managed by the Capital Management Function.
A warming climate is likely to lead to increased flooding from
more frequent extreme rainfall events, and sea level rise will
increase the risk of coastal flooding. This informs an evolving
underwriting strategy for ceding peak flood risk to Flood Re,
which incorporates the modelled view of risk.
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Nearly all policies are of twelve months' duration and when
renewed are priced using advanced rating engines that
incorporate location-specific parameters for weather-related
risk. These rating engines include catastrophe risk to ensure
that pricing is adequate for potential extreme events not in the
historic record. Underlying algorithms are constantly reviewed
against claims data to seek to ensure adequate pricing. As
climate change affects loss patterns and catastrophic risk
evolves, our prices will adjust accordingly.
The Group mitigates its exposure to large catastrophic weather
events through catastrophe excess of loss reinsurance.
This reinsurance covers property (Personal Lines and
Commercial Direct) and motor physical damage losses. It
provides significant capital benefits by transferring volatility
from low-frequency, high-severity natural peril events away
from the Group. The reinsurance coverage purchased is based
on catastrophe modelling, capital analysis, the Group’s risk
appetite, cost of cover, and the overall impact on the income
statement. Typically, cover is purchased with an upper limit
equivalent to a 200-year modelled loss.
Metrics and Targets
We use a variety of key performance indicators across the different lines of our business to assess, monitor and manage
climate-related risks and opportunities. In the table below, we summarise the key metrics used across the three areas of activity,
as identified earlier in our disclosure: our underwriting activities; our operations; and our approach to investments. Further detail
on these, and our targets, can be found within the pages that follow. Where the Group believes that the values associated with
certain metrics are commercially sensitive these values have not been disclosed.
Area
Metric
Description
Category
Page
Underwriting
Total weather-
related loss impact
Track actual performance against our an annual expectations for event
weather-related claims and monitor the impact of claims associated
with severe weather on the Group’s net insurance margin.
Physical risk
69
Flooding
Monitor our market share for risks to be deemed in the high- or very
high-risk segments and track the volume and proportion of policies we
are ceding to Flood Re.
Physical risk
69
Electric vehicles
Monitor the number and proportion of electric vehicle policies
we underwrite and track the number of new electric vehicles registered
in the UK.
Transition risk and
opportunities
70
Operations
Operational
emissions
Calculate and report our operational emissions (Scope 1 and 2),
to monitor progress towards our science-based operational emissions
target.
Physical risk and
transition risk
52, 70
and 73
Measuring progress
within our repair
centres
Quarterly oversight of:
– GHG emissions and gas consumption metrics associated with
vehicle repair;
– the delivery of carbon reduction plans; and
– opportunities for innovating and using new solutions within repair
centres, in support of plans and targets.
Physical risk,
transition risk and
opportunities
70 and
71
Investments
Investment
portfolio emissions
Measure and report the temperature score of our corporate
bond portfolio, and GHG emissions from commercial property and real
estate loans, to track progress against our science-based investment
targets to ensure we are delivering against our aims.
Physical risk and
transition risk
52, 71
and 73
The Group has also disclosed a number of materially relevant metrics consistent with the cross-industry categories recommended
by the TCFD. These include:
– GHG emissions: our Scope 1, 2 and 3 emissions and emissions
intensity metric reporting can be found on page 73.
– Remuneration: our LTIP awards have an emissions
performance condition which covers the targeted reductions
in emissions and temperature scores that form part of our
Science-Based Targets. More information can be found in the
Directors’ Remuneration Report from pages 115 to 141.
– Physical risks: the results of our scenario analysis activities,
which assesses the potential impact of climate-related
physical risk on the value of insurance liabilities, can be found
on pages 61 to 63. Analysis of the actual impact of severe
weather claims can be found on the following page.
– Transition risks: the results of our scenario analysis activities,
which assesses the potential impact of climate-related
transition risk on the value of investment assets, can be found
on pages 61 to 63. These pages also include the results of a
reverse stress test, undertaken in 2023, to assess how the the
transition to electric vehicles could impact the Group’s
business model, including both risks and opportunities.
We continue to assess how we incorporate additional metrics
into our disclosures, including those used to enhance the
measurement and management of transition risks and
opportunities, and expect this to evolve over time. In 2025,
actions to explore disclosure of additional metrics, which could
also support further development of the Group's transition plan,
have been embedded within our climate-related risk
management roadmap.
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Underwriting
Weather-related loss impact
The predominant direct physical drivers of catastrophe
weather risk from a capital perspective are major UK floods
and windstorms. The last peak of windstorm activity was in the
late 1980s and early 1990s; the last decade being particularly
benign in comparison. By contrast, flood has seen more
elevated activity.
Catastrophe reinsurance is purchased annually to protect
against event losses greater than £100 million (see page 33).
Use of the Flood Re scheme also helps mitigate against the
highest individual residential flood risks.
The cost of claims relating to event weather can found
within the management view statement of profit or loss
(see page 247).
Severe weather claims1 (actual % of expected loss)
The Group uses sophisticated modelling techniques to
estimate the expected losses from severe weather events and
uses these to set an annual expectation for major weather-
related claims.
2014
2015
2016
2017
2018
2019 2020
2021
2022
2023 2024
0
100
200
300
n Actual weather
. . . Assumed
The graph above shows the impact of event weather claims
relative to this annual expectation. In 2024, claims associated
with severe weather were below our 2024 event weather
assumption, which is set at 100% in the graph.
As shown in the graph, the trends are reflective of relatively
benign activity, although there is significant variability.
In 2022, claims from weather-related events were more than
double our annual assumption following three significant
storms in Q1, a rise in subsidence claims from extremely
high temperatures in the summer and the December freeze
event. The 2018 peak was driven by the ‘Beast from the East’
freeze event and the 2015 peak was a result of a number of
weather events in December, which caused severe flooding
across the UK.
Impact of severe weather on net insurance
margin1, 2 (pt)
2022
2023
2024
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
n Severe weather impacts
. . . Assumed
Both these graphs reflect the number of major weather events
in the year that the Group responded to. The frequency and
severity of extreme weather events could be affected by climate
change, which in turn will affect our view of risk, how we price
severe weather risk, and the type and level of reinsurance we
purchase to protect our balance sheet.
Home
Key risk indicators are produced by the Underwriting Function
and reviewed monthly through relevant business forums.
The key climate change-related activities are flood, subsidence
and other weather incidents. For flood and subsidence perils,
we monitor the Group’s market share for risks deemed to be
in the high- or very high-risk segments. We also monitor and
review the proportion of policies ceded to Flood Re. Each peril
is monitored against set tolerances, with movements in amber
or red ratings generating investigation and action as required.
We maintain a view of trends and look to take action where
a trend is likely to result in a breach of tolerance.
Flooding
Governments have been working with insurers since 2000
to help make flood risk insurance more affordable and in 2016
Flood Re was introduced. Every insurer that offers home
insurance in the UK, the Group included, must pay into the
Flood Re scheme and this levy is used to cover the flood risks
in home insurance policies.
To ensure the Group and its customers benefit from the levy
and guard against the highest of flood risks, we monitor the
volume and proportion of policies we are ceding to Flood Re.
Properties are eligible to be ceded to Flood Re when they
meet certain criteria.
Notes:
1.
Data used within this analysis is based on the Group's ongoing operations. See glossary on pages 238 to 241 for definitions.
2.
Following adoption of IFRS 17, analysis for periods prior to 2022 is not available. For historic reporting, see previous publications, including page 83
of the 2022 Annual Report and Accounts.
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Motor
The Group’s motor market is diversified throughout the UK,
and although weather-related factors will influence claims
frequency it is a relatively small influence compared with other
factors, such as used car prices.
In the year, in order to track the transition towards electric
vehicles we monitored both the number and proportion of
policies we underwrite for these types of vehicles as well as the
number of electric vehicles and alternatively fuelled vehicles
registered in the UK. This supports us in estimating our market
share and helps inform our electric vehicle strategy.
Progress against the supplemental guidance for
insurance companies
The Group believes that its disclosure against certain
components of the sector-specific guidance, within Metrics
and Targets Recommendations (a) and (b), does not meet the
objectives of the TCFD.
Below, we outline the activities we have undertaken during
the year to improve our disclosure against these areas in future
reporting, as well as the activities planned in future years.
The extent to which insurance underwriting activities,
where relevant, are aligned with a well below 2.0°C scenario
The Group recognises that measuring underwriting emissions
remains a developing area, with the frameworks and
methodologies to support insurers in calculating these
emissions continuing to evolve. An area of limitation that is
particularly pertinent to personal lines and small commercial
business insurers is the practicalities of obtaining data with
sufficient accuracy and reliability to determine the emissions
associated with these portfolios.
The Group has embedded plans to further assess its
disclosures relating to underwriting emissions through its
climate-related risk management roadmap. Actions that
are currently embedded include continuing to review issued
guidance related to measuring and reporting underwriting
emissions as this guidance evolves, in order to further inform
the Group’s approach.
The weighted average carbon intensity or GHG emissions
associated with commercial property and specialty lines
of business, where data and methodologies allow
Following the sale of our Brokered commercial business in
2023, we expect our underwriting exposure to commercial
property lines to significantly reduce as the retained back book
for this business continues to run off over time.
We continue to remain active in the direct small business
commercial insurance market, which includes providing
insurance for small commercial properties, however, we view
our exposure to carbon intensive sectors through these
underwriting activities to be low, due to the type and size
of the businesses we insure.
Whilst we will continue to review emerging best practice,
at present, we do not believe available methodologies have
sufficient maturity to meaningfully measure the weighted
average carbon intensity or GHG emissions associated with
small business commercial property lines. For example, current
frameworks recommend collecting emissions data from
companies’ own disclosures or official filings, or use of physical
or economic activity data, to determine emissions associated
with commercial lines portfolios. Such recommendations are
not currently pragmatic for insurers with small commercial
business customers, such as the Group.
The Group does not underwrite any specialty lines of business.
Operational
We calculate and report our operational GHG emissions
annually. Our most recent reporting can be found on page
73 where we continue to break out our Scope 1 and Scope 2
emissions into separate performance figures across our office
sites and accident repair centres. We also disclose our Scope 3
footprint, which includes emissions from our supply chain.
Science-Based Targets
In support of our net zero ambitions, we have set five
Science-Based Targets, in line with a 1.5°C pathway, focused on
the most carbon intensive areas of our business, one of which
covers our operational emissions. These targets were approved
by the SBTi in 2022.
Scope
Target
2024 update
Operational
We target
reducing absolute
Scope 1 and 2 GHG
emissions by 46%
by 2030 from
a 2019 base year.
As at the end
of 2024, absolute
Scope 1 and 2 GHG
emissions reduced
by 46%1, from
a 2019 base year.
Our 2024 reporting shows a 46%1 reduction in Scope 1 and 2
emissions, when compared to the 2019 baseline, meaning we
have achieved our 2030 target early. This reflects the actions we
have taken in recent years, which has included reducing our
office footprint, investing in our estate to integrate more
energy-efficient features and equipment and the carbon
reduction initiatives we are implementing across our network
of accident repair centres.
More information on our Science-Based Targets, including the
actions we have taken against them and our future priorities,
can be found on page 52.
Operational emissions performance
Overall, when compared to 2023, our Scope 1 and 2 GHG
emissions decreased by 3%. A summary of the movements in
the year can be found on page 73.
Auto Services Sustainability Programme
Our Auto Services Sustainability Governance Forum oversees
the activity that forms part of the Auto Services Sustainability
Programme. The Forum oversees progress against the activities
to deliver towards the carbon reduction strategy within our
accident repair centres and tracks key Programme milestones.
Note:
1.
We are required to use Scope 1 and Scope 2 market-based emissions for SBTi operational target setting and reporting. When including Scope 2
location-based emissions this reduction is equivalent to a 53% reduction.
70 | Direct Line Group Annual Report and Accounts 2024
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This includes monitoring the delivery and performance against
GHG emissions reduction targets, where metrics, such as gas
consumption and emissions associated with vehicle repair, are
tracked. Scope 1 and 2 emissions from our accident repair
centres are reported on page 73.
The Forum also assesses the risks that could impact the delivery
or prioritisation of planned activity, coordinating the actions
required to mitigate against these. It also considers metrics
relating to opportunities from innovating and using new
solutions in support of plans and targets, such as assessing
the feasibility and benefits of adopting new lower emission
technologies or equipment in repair centre sites.
Supply chain
While we wait for the publication of the Science-Based Net
Zero Targets for Financial Institutions from the SBTi, which
is now expected in 2025, we have chosen to set an internal
emissions reduction target for our supply chain. This target
forms part of our Supply Chain Sustainability Programme (see
page 54.
Investments
In 2018, the SBTi launched a project to help financial institutions
align their lending and investment portfolios with the
ambitions of the Race to Zero campaign. The project audience
includes universal banks, pension funds, insurance companies
and public financial institutions.
Science-Based Targets
Our long-term goal is for our entire investment portfolio to be
net zero emissions by 2050, in line with the aims of the Race to
Zero campaign. To support this, we have set Science-Based
Targets for our investment portfolio covering corporate bonds,
commercial property and real estate loans, these were
approved by the SBTi in 2022. As at the end of 2024 our
investment portfolio targets covered 70% of AUM.
Asset Class
Target
2024 update
Corporate bonds
Align the Scope 1
and 2 portfolio
temperature score
by invested value
from 2.44°C in 2019
to 2.08°C by 2027.
As at the end of
2024, the Scope 1
and 2 portfolio
temperature score
by invested value
was 2.01°C.
Align the Scope 1, 2
and 3 portfolio
temperature score
by invested value
from 2.80°C in 2019
to 2.31°C by 2027.
As at the end of
2024, the Scope 1, 2
and 3 portfolio
temperature score
by invested value
was 2.31°C.
Commercial
property
Reduce GHG
emissions by 58%
per square metre
by 2030 from a
2019 base year.
As at the end of
2023, GHG
emissions reduced
by 39% from a 2019
base year1.
Real estate loans
Reduce GHG
emissions by 58%
per square metre
by 2030 from a
2019 base year.
As at the end of
2023, GHG
emissions reduced
by 26% from a 2019
base year1.
Further details on the emissions from our investments are
reported on page 73.
The temperature score for corporate bonds is the implied level
of warming above pre-industrial levels to which our portfolio
is aligned based on the CDP’s temperature rating data set.
For an individual company the temperature rating is the level
of warming to which a company’s publicly stated emission
reduction targets align. The targets are set on a linear pathway
for the portfolio to reach 1.5°C by 2040 as is required by the SBTi.
We aim to achieve our corporate bond target by directing
investment to companies with lower temperature scores
as these are the ones taking most serious action to reduce
emissions. We will also expect our external investment
managers to engage with portfolio companies to encourage
them to act by setting robust emissions reduction targets.
We also continue to target an interim 50% reduction in
weighted average carbon intensity by 2030 from a 2020 base
year for corporate bonds in order to seek to ensure emissions
are reducing over time.
Carbon intensity is the GHG emissions intensity per $1 million
of sales. Normalising by sales allows the investor to compare
carbon efficiency of different-sized firms within the same
industry and has become a standard metric used in the
investment industry.
For commercial property and real estate loans, targets were set
using the SBTi sectoral decarbonisation approach for real estate
which uses the IEA ETP 2017 Beyond 2°C scenario. Emissions for
real estate relate to the energy use of buildings which is largely
emissions from electricity and heating use. Work towards our
real estate targets will require improving the energy efficiency
of buildings, engaging with tenants to share energy use
data and encouraging them to set their own emissions
reduction targets.
More information on our Science-Based Targets, including the
actions we have taken in the year against them and our future
priorities, can be found on page 52.
Note:
1.
Due to the practicalities of obtaining data from our external asset
managers ahead of the release of the Group’s annual reporting,
progress against our commercial property and real estate loan
targets is reported with a one-year time lag.
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Streamlined Energy and Carbon Reporting
("SECR") regulations
The following table highlights where information can be found
that supports the requirement to disclose how the Group
manages its energy consumption and carbon emissions.
Requirement
Page
Annual global GHG emissions (CO2e):
– from activities for which the Company
is responsible
73
– from buying electricity, heat, steam or cooling by
the Group for its own use
73
Annual global energy consumption in kWh, being
the aggregate of:
– energy consumed from activities for which the
Company is responsible
53
– energy consumed resulting from buying
electricity, heat, steam or cooling by the Group
for its own use
53
The proportion of GHG emissions and energy
consumed relating to the UK and offshore area1,2
72, 73
Methodology used to calculate emissions and
energy consumption
72
At least one intensity metric in relation to emissions
73
Description of energy efficiency actions taken
53
Notes:
1.
The offshore area is broadly defined as the sea adjacent
to the UK, including the territorial sea, plus the sea in any
designated area under section 1(7) of the Continental Shelf
Act 1964 and section 41(3) of the Marine and Coastal Access
Act 2009.
2.
100% of the Group’s GHG emissions and energy
consumption reported relates to operations, all of which
are based in the UK.
Greenhouse gas emissions
The Group's annual GHG emissions reporting is provided on
the following page which includes a summary outlining our
performance in the year. More information relating to the
progress we are making against our Science-Based Targets
can be found on page 52.
Definitions
Scope 1: This covers direct emissions from owned or controlled
sources. For example, our office sites throughout the UK using
gas boilers, the paint booths in our auto services sites currently
relying on gas powered processes, and our fleet vehicles.
Scope 2: These are indirect emissions. They are emissions
associated with the production and transmission of energy we
eventually use as a company across our office and auto services
sites. For example, the production of the electricity we buy to
heat and cool our buildings generates emissions.
Scope 3: These are indirect emissions that occur in our
investments and the value chain to support our company
operations. For example, employee commuting, activities
related to the disposal of waste, and the goods and services we
purchase to fulfil customer claims as part of our supply chain.
Reporting methodology
We apply the relevant greenhouse gas reporting requirements
contained within Schedule 7, Part 7 of the Large and Medium-
sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended) and apply the GHG Protocol
Corporate Accounting and Reporting Standard (revised edition)
to calculate our emissions, which includes emissions associated
with electricity consumption. We use the operational control
method to define the boundary for consolidating GHG emissions.
Our carbon emissions are calculated by an external third
party and reviewed internally. The calculation method used
for our 2024 emissions reporting remains consistent with
prior periods and with the reporting standards stated above.
For our 2024 reporting, the emission factors that were used in
the calculation of purchased goods and services emissions
were updated to EORA 26 emission factors to remain in line
with best practice. Our 2023 reporting has been represented
accordingly.
Emissions data is reported in compliance with the SECR
requirements to disclose annual global GHG emissions. 100%
of the emissions reported relate to our operations, all of which
are based in the UK.
Scope 3 emissions
The GHG Protocol defines Scope 3 emissions as all other
indirect emissions that occur in a company’s value chain. These
include Scope 3, Category 1: Purchased Goods and Services
(or ‘supply chain’) and Scope 3, Category 15: Investments
(or ‘financed emissions’). Estimates necessarily have to be made
regarding Scope 3 emissions as the information is not available
across all Scope 3 emissions sources, such as underlying
suppliers, for example.
In estimating the emissions from our supply chain, we use the
GHG Protocol’s spend-based approach. This involves using
supplier spend data and multiplying these values by a relevant
emissions factor to estimate the amount of emissions
associated with purchased goods or services.
We have applied the Partnership for Carbon Accounting
Financials (“PCAF”) methodology to calculate emissions
associated with our investment activities, in line with industry
best practice. We have included our corporate bonds,
commercial property and real estate loans within our financed
emissions calculations.
Due to the practicalities of obtaining data from our external
asset managers ahead of the release of the Group’s annual
reporting, investment emissions from commercial property and
real estate loans are reported with a one-year time lag.
Our Net Zero ambition
We aim to become a Net Zero business across all scopes by
2050, with external near-term targets and plans that cover our
operational emissions (Scope 1 and 2) and our investments.
At present, we have not set an external target for our supply
chain emissions while we await the publication of the Financial
Institutions Net-Zero Standard from the SBTi, which is now
expected in 2025. For more information on our Supply Chain
Sustainability Programme, please see page 54.
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Group greenhouse gas emissions (tCO2e)
Scope 1
2024
2023
2022
2019 (Baseline)
Office sites
858
671
1,023
1,418
DLG Auto Services
3,399
3,829
5,506
6,506
Total (tCO2e)
4,257
4,500
6,529
7,924
Scope 2
Location-
Market-
Location-
Market-
Location-
Market-
Location-
Market-
based
based1
based
based1
based
based1
based
based1
Office sites2
622
23
659
16
1,089
0
4,516
0
DLG Auto Services
1,890
0
1,824
0
1,364
0
2,093
0
Total (tCO2e)
2,535
2,499
2,453
6,609
Total Scope 1 and 2 (tCO2e)
6,792
6,999
8,982
14,533
Of which: Office sites (tCO2e)
1,503
1,346
2,112
5,934
Of which: DLG Auto Services (tCO2e)
5,289
5,653
6,870
8,599
Scope 3
Purchased goods and services3
333,876
253,844
244,316
294,080
Fuel and energy-related activities (not included in Scope 1 & 2)4
1,570
1,300
1,518
2,459
Upstream transportation and distribution
477
1,641
1,890
4,173
Waste generated in operations
1,529
1,762
2,523
3,358
Business travel
746
1,287
475
1,807
Employee commuting
6,073
7,100
7,227
3,176
Of which: homeworking emissions
4,327
5,256
5,583
–
Upstream leased assets
247
131
189
514
Downstream leased assets
3,080
2,878
1,552
1,658
Total Scope 1, 2 and 3 excluding investments (tCO2e)
354,390
276,942
268,672
325,758
Investments5
Corporate bonds and private placements Scope (1 & 2)
2.01ºC
2.02ºC
2.44°C
Corporate bonds and private placements Scope (1, 2 & 3)
2.31ºC
2.31ºC
2.80°C
Commercial property (tCO2e)5,6
3,679
4,747
5,197
Commercial property – intensity (kCO2e/m2)5,6
41
55
67
Real estate loans (tCO2e)5
6,093
10,011
13,769
Real estate loans – intensity (kCO2e/m2)5
60
72
81
Intensity metrics
Scope 1 and 2 emissions (tCO2e) per £ million of net insurance revenue
2.2
2.2
2.9
Scope 1 and 2 emissions (tCO2e) per average number of employees
for the year
0.7
0.7
0.9
1.3
Overall, when compared to 2023, our Scope 1 and 2 emissions
decreased by 3%.
Within our repair centres, we continued to see a reduction
in Scope 1 emissions through the use of an alternative fuel for
our recovery trucks. These reductions were partly offset by an
increase in Scope 2 emissions where we continue to switch
to electric from gas to power repair equipment, where possible.
See page 53 for more information.
Scope 3 emissions (excluding investments), increased by 29%,
primarily driven by higher emissions from purchased goods
and services. This was largely attributable to increased
expenditure associated with the partnership with Motability
Operations, which began in September 2023.
Investment emissions from our commercial property and
real estate loans portfolio further reduced in 20235, primarily
reflecting a continued focus on energy efficiency by tenants
and property managers.
Further information relating to our performance against our
Science-Based Targets can be found on page 52.
Notes:
1.
Figures for Scope 2 use standard location-based methodology.
We follow the GHG Protocol to disclose both location and market-
based figures; and as we have secured our energy from 100%
renewable sources since 2014, our Scope 2 market-based results
are nil prior to 2023. From 2023, emissions from electric and plug-in
hybrid vehicles in the company car fleet have been reported within
the Scope 2 market-based result.
2.
The 2023 figures differ from our previously reported result following
a reclass of 17 tCO2e between location-based and market-based.
3.
As outlined on page 72, the emission factors used in the calculation
of purchased goods and services emissions were updated to EORA 26
emission factors in 2024 to remain in line with best practice. The 2023
result has been represented accordingly.
4. The 2023 figure of 1,300 tCO2e differs from our previously reported
figure of 1,354 tCO2e following recalculation.
5.
Due to the practicalities of obtaining data from our external asset
managers ahead of the release of the Group’s annual reporting,
progress against our commercial property and real estate loan
targets is reported with a one-year time lag.
6.
The 2022 figures differ from our previously reported figures of 4,630
tCO2e and 54 kCO2e /m2 following recalculation.
73 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
In accordance with Provision 31 of the 2018 UK Corporate
Governance Code, the Directors assessed the viability over a
three-year period to December 2027, beyond the minimum
12 months required. This assessment considered the Group’s
financial performance (page 20), principal risks (page 40),
capital management strategies (page 24), and regulatory
compliance as detailed in the Strategic Report and
Financial Statements.
Every year, the Board considers the strategic plan (“the Plan”)
for the Group, which is based on the Group operating as a
standalone business. As the approved Plan is used for planning
over a timeframe of three years, to 31 December 2027, this has
been selected as the most suitable period for the Board to
review the Group’s viability.
The Group’s Risk Function assesses the Plan and provides a
report to the Board which supports the Board in concluding on
the Group’s viability.
In undertaking this review, the Group Risk Function has defined
a set of key risk themes, known as top risks, grouped around
the themes of financial resilience, operational resilience and
future strategic fit in the context of the Plan. The Plan did not
introduce any new material risks other than those already
contained within the Group’s Material Risk Register. Whilst
outcomes for the later years in the Plan are less certain, the Plan
remains a robust tool for strategic decision-making despite the
unpredictability of long-term outcomes.
The Group's Risk Function has also carried out an assessment
of the risks to the Plan and the dependencies for the success
of the Plan. This included running adverse scenarios on the
Plan to consider the downside risks and subsequent impact
on forecast profit. The key scenarios applied to the Plan were
in relation to the impact of adverse claims inflation, failure to
achieve motor pricing initiative benefits, delay to delivery of
expense reductions and a fall in asset values. In applying these
scenarios, key judgements and assumptions are made, the
most relevant are as follows: adverse claims inflation; failure to
achieve motor pricing initiative benefits; delay to delivering
expense reductions and fall in asset values.
None of the scenarios individually were concluded to present
a threat to the Group’s expected viability across the duration
of the Plan. It is unlikely that all risks would materialise
at the same time.
Finally, the Finance Function has also carried out an
assessment of the risks to the Group's capital position over 2025
and 2026, incorporating moderate and severe macroeconomic
stress tests individually and in combination. The stresses have
been run to assess the possible impact on own funds in the
period to 31 December 2025 and 31 December 2026, and both
scenarios confirmed the Group's solvency capital requirement
would not be breached, including when all stresses were
applied in combination. The most significant stresses
considered were widening credit spreads; increases in claims
inflation and reduction in business volumes.
The overall conclusion of these tests was that there could be
breaches in the Group’s risk appetite in the long term, however
a combination of contingent, pre-emptive, and strategic
management actions could be deployed to address the risks
and allow the business to recover to above risk appetite.
Further information in relation to the sensitivity of key factors
on the Group’s financial position are included in the Group
financial performance section on page 20 and in the market
risk note in the consolidated financial statements on page 177.
Takeover approach from Aviva plc
The Board has also assessed the impact of Aviva plc's offer to
purchase the entire share capital of the Company, subject to
regulatory and shareholder approval. In making its
recommendation to the shareholders to accept the bid, the
Board considered many factors. Further information in relation
to the considerations made is included in the Section 172 (1)
statement on page 86. In the event that the deal does not
complete, the Directors consider that the Group would
remain resilient.
Based on the results of these reviews, the Board has a
reasonable expectation that the Company and the Group
as standalone businesses can continue in operation, meet
liabilities as they fall due and provide the appropriate degree
of protection to those who are, or may become, policyholders
or claimants in the period to 31 December 2027. Although
the Directors cannot be certain about the actions of the new
owners should a deal complete, they consider that the viability
of the Groups operations should not be adversely affected.
Statement of the Directors
in respect of the Strategic report
The Board reviewed and approved the Strategic report
on pages 1 to 75 on 03.03.2025.
By order of the Board
Adam Winslow
Chief Executive Officer
04.03.2025
74 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Viability statement
Dear Shareholders,
On behalf of the Board, I am pleased to present the Corporate
Governance report for the year ended 31 December 2024. This
report sets out how we have applied the principles of the UK
Corporate Governance Code (the "Code") 2018 throughout the
year. It provides information on the activity of the Board and
progress we have made in strengthening our corporate
governance practices.
Board changes
In March 2024 we were delighted to welcome our new CEO,
Adam Winslow. As we disclosed in last year’s Annual Report,
Adam was appointed following a highly competitive selection
process on account of his outstanding track record and
significant leadership experience, alongside his commitment to
delivering for customers. During the year, Adam has spent time
visiting many areas of the business, listening to our colleagues
and investors and sharing information on our new strategy.
More information on this engagement can be found on pages
89 and 90.
In April 2024 we announced that following a comprehensive
and extensive search, the Board had identified Jane Poole to
take on the role of Chief Financial Officer and Jane joined the
Board in October 2024. Jane is a highly experienced CFO with
extensive general insurance knowledge following a long and
successful career building high performance teams in the
financial services industry. More information on the process
leading to Jane's appointment can be found on page 109.
In April 2024 we were delighted to be joined by Carol Hagh as
an Independent Non-Executive Director. Carol brings with her
experience in actuarial services and technology consultancy;
brand, marketing and customer strategy development; as well
as board and executive search. Carol’s experience in executive
search has made her an extremely valuable addition to our
Remuneration and Nomination and Governance Committees.
Jon Greenwood, our former Acting CEO, and Neil Manser, our
former CFO, stepped down as Executive Directors in March and
October 2024 respectively. I thank them for their hard work and
commitment to the Company.
As a result of these changes to its composition, the Board
consisted of 42% women and 58% men as at 31 December 2024
and at the date of this annual report.
Having served for nine years, Richard Ward would have been
due to step down from the Board and from his roles as Senior
Independent Director and Remuneration Committee Chair at
the AGM in May 2025. However, in the light of Aviva’s potential
acquisition of the Company, Richard has kindly consented to
continue to serve for a period, to be reviewed in mid-2025. The
Board is confident in Richard’s continuing independence of
character and judgement.
Stakeholders
During the year the Board has spent time engaging with
and considering the interests of many of our investors and
key stakeholders on many important topics, including the
proposed acquisition of the Group by Aviva plc. Many of
our Board members attended meetings of our Employee
Representative Body to understand the views of our workforce
and our new directors undertook induction activities which saw
them meeting many of our colleagues around the business.
More information in respect of this activity can be found on
pages 89 and 91. Our customers are key stakeholders and an
important focus for the Board. We expanded the remit of the
Customer & Sustainability Committee chaired by Tracy
Corrigan to reflect this.
Risk, Audit and Internal Control
2024 was KPMG’s first year as auditor having been appointed
by shareholders at our 2024 AGM. During the year the Audit
Committee has overseen a programme of work to ensure a
smooth transition from Deloitte to KPMG. More information
on this can be found on pages 101 to 105.
During the year, our Board Risk Committee has continued
to oversee a Group-wide controls improvement programme
which has helped the Group to improve the resilience of
its control environment and with the aim of bringing our
oversight, monitoring and assurance processes into line with
industry best practice. In addition, the Audit Committee has
overseen a Control and Oversight Remediation Programme
within Finance, the aim of which is to enhance the financial
reporting control environment across the Group. More
information on this work can be found on pages 101 to 105.
75 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Chair’s Introduction
Remuneration
This Annual Report details the progress we have made in
executing our new strategy and the Group's improved financial
result. A majority of the targets established by the Remuneration
Committee under the 2024 Annual Incentive Plan ("AIP") have
been achieved, including targets for operating profit and cost
savings, resulting in the payment of bonuses to our people.
The Long-Term Incentive Plan awards made to our senior
managers in 2021, which were due to vest in 2024, did not meet
the RoTE and TSR threshold performance levels and, therefore,
lapsed with no payout. The Remuneration Committee
considered this outcome appropriate in the light of the Group’s
performance over the three-year performance period.
The Remuneration Committee continued to monitor the
remuneration of the wider workforce to ensure that outcomes
were fair and appropriate in comparison to executive pay
decisions. More information on executive remuneration and
the work of the Remuneration Committee can be found
on page 115.
Shareholder Meetings
Notice of a Court meeting and a General Meeting of
shareholders in connection with the proposed acquisition
of the Company by Aviva plc was given on 10 February 2025.
These meetings will be held on 10 March 2025. The relevant
notices of meetings can be found on our corporate website.
Our 2025 AGM is scheduled to be held on 14 May 2025 at
10.30 a.m. Full details, including the resolutions to be proposed,
can be found in the Notice of AGM, which will also be made
available on our corporate website.
The outcome of the resolutions to be voted and the meetings,
including poll results detailing votes for, against and withheld,
will be published on the London Stock Exchange’s Regulatory
Information Service and the Company’s websites once the
respective meetings have concluded.
Yours sincerely,
Danuta Gray
Chair of the Board
76 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
RC
IC
Danuta Gray
Chair of the Board
Adam Winslow
Chief Executive Officer
Jane Poole
Chief Financial Officer
Committees
– Nomination and Governance Committee
(Chair)
– Remuneration Committee
Appointed
– Independent Non-Executive Director in
February 2017
– Chair of the Board since August 2020
Key Skills and Experience
– Extensive experience leading and
transforming large, consumer focused
businesses.
– Deep understanding of governance and
remuneration requirements affecting
listed companies gained from previous
Chair roles.
– Expertise in sales, marketing, and
technology.
Danuta was Chair of Telefónica in
Ireland until 2012. She was Chief Executive
between 2001 and 2010, during which time
Telefónica’s customer base increased to 1.7
million from just under 1 million.
Between 1984 and 2001, Danuta held a
variety of senior positions within the BT
Group. Elsewhere, Danuta has acted as
Senior Independent Director of the
Aldermore Group; Non-Executive Chair of St.
Modwen Properties; Non-Executive member
of the Ministry of Defence Board, NED and
Chair of the Remuneration Committee at
both Page Group plc and Old Mutual plc; and
was Non-Executive Chair of the Board of
Perth Topco Limited and North Tech.
External Appointments
– Non-Executive Director, Chair of the
Remuneration Committee and member
of the Nomination Committee of Burberry
Group plc.
– Chair and Non-Executive Director of Croda
International plc.
– Trustee Director of The Resolution
Foundation
Committees
– None
Appointed
– March 2024
Key Skills and Experience
– Extensive experience in the insurance
industry and financial services, gained
from over 20 years in the sector.
– Proven track record of leading high-
performance businesses.
– Expertise in driving operational excellence
with a focus on delivering for customers.
Adam became Chief Executive Officer of
Direct Line Group in March 2024. He joined
Direct Line Group from Aviva, where he was
CEO, UK & Ireland General Insurance and
previously held the post of CEO for Aviva’s
international businesses. Before working at
Aviva, Adam held various senior roles at AIG.
External Appointments
– Member of the Association of British
Insurers Board.
– Member of the FCA Practitioner Panel.
Committees
– Investment Committee
Appointed
– October 2024
Key Skills and Experience
– Chartered Accountant with deep
knowledge and extensive experience of
General Insurance in the UK marketplace.
– Expertise in leading large finance teams
operating in a regulated financial services
environment.
– Successful track record of delivering
cultural change and technological
transformation.
Jane became Chief Financial Officer of Direct
Line Group in October 2024. Prior to joining
the Group, Jane was CFO for Aviva's UK and
Ireland General Insurance business, where
she played a key role in driving business
performance and improving profitability.
Before her time with Aviva, Jane held senior
finance roles at RSA Insurance Group,
including serving as CFO of its UK &
International businesses.
External Appointments
– None.
77 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Board of Directors
NGC
RC
AC
IC
NGC
RC
NGC
RC
Tracy Corrigan
Independent Non-Executive Director
Mark Gregory
Independent Non-Executive Director
Carol Hagh
Independent Non-Executive Director
Committees
– Customer and Sustainability Committee
(Chair)
– Nomination and Governance Committee
– Remuneration Committee
Appointed
– November 2021
Key Skills and Experience
– Track record of driving digital growth.
– Experience in digital transformation with a
focus on data, culture and customer.
– Expertise in ESG issues and
communications with multiple
stakeholders.
Tracy’s professional background spans
financial journalism, digital media and
corporate strategy in the media industry.
Most recently Tracy was Dow Jones’
Chief Strategy Officer where she was
responsible for global strategy, customer
insight and commercial policy, and had
oversight of the digital transformation of the
business. Earlier in her career, Tracy was
Editor-in-Chief of The Wall Street Journal
Europe and Digital Editor of The Wall Street
Journal. She also held various positions,
including Editor of FT.com and Editor of the
Lex Column, at the Financial Times.
External Appointments
– Non-Executive Director and member of
the Remuneration Committee of Barclays
Bank UK plc.
– Non-Executive Director, Chair of the
Sustainability Committee and member of
the Audit and Nomination Committees of
Domino’s Pizza Group plc.
– Chair of The Scott Trust Endowment
Limited and Non-Executive Director and
member of the Nominations Committee
of The Scott Trust.
Committees
– Board Risk Committee (Chair)
– Audit Committee
– Investment Committee
– Nomination and Governance Committee
– Remuneration Committee
Appointed
– March 2018
Key Skills and Experience
– Extensive experience in both General and
Life insurance.
– Deep understanding of capital markets.
– Strategically orientated with a detailed
understanding of the retail sector.
Mark was CEO of Merian Global Investors
from January 2019 to August 2020. He
previously held the role of Group CFO and
Executive Director at Legal & General until
2017. Mark acted in a variety of senior roles in
his 19-year career at Legal & General,
including CEO of the Savings business,
Managing Director of the With-Profits
business, and Resources and International
Director. Earlier in his career, Mark held
senior financial and business development
roles at ASDA and Kingfisher. Mark is an
Associate of the Institute of Chartered
Accountants in England & Wales.
External Appointments
– Non-Executive Director, Chair of the Risk
Committee and member of the Audit
Committee of Phoenix Group Holdings plc.
Committees
– Nomination and Governance Committee
– Remuneration Committee
Appointed
– April 2024
Key Skills and Experience
– Extensive experience of digitalisation,
brand strategy and the drivers of customer
satisfaction.
– Deep understanding of insurance brand
and customer strategy and of refining
products and propositions.
– Expertise in leadership and company
culture.
Carol’s career has spanned actuarial services
and technology consultancy; brand,
marketing and customer strategic
development; board and executive search, in
which she led Spencer Stuart’s UK insurance
practice; and senior executive coaching. In
senior leadership roles in General Insurance,
she was responsible for digital
transformation, direct channel development,
and proposition design. She has led
customer-centric culture transformation and
data driven approaches to improving
customer satisfaction.
External Appointments
– Non-Executive Director, Chair of the
Nomination and Governance Committee
and member of the Remuneration
Committee of Chesnara PLC.
78 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Key for Committee membership
AC
Audit Committee
IC
Investment Committee
RC
Remuneration Committee
Committee chair
BRC
Board Risk Committee
NGC
Nomination and Governance
Committee
CSC
Customer and Sustainability
Committee
CSC
NGC
CSC
NGC
RC
AC
BRC
NGC
Adrian Joseph OBE
Independent Non-Executive Director
Mark Lewis
Independent Non-Executive Director
Fiona McBain
Independent Non-Executive Director
Committees
– Customer and Sustainability Committee
– Nomination and Governance Committee
Appointed
– January 2021
Key Skills and Experience
– Leading expertise in digital, data science
and analytics.
– Track record of using data and AI to drive
business transformation.
– Recognised Diversity and Inclusion leader
and a passionate advocate on this topic.
Adrian is the former Managing Director,
Group Data and Artificial Intelligence at BT
Group and a former member of HM
Government’s AI Council. He has significant
industry and consultancy experience and has
held senior roles at EY and Google. Between
2016 and 2020, Adrian was a Non-Executive
Director at the Home Office where he sat on
the Data Board advising on data science,
digital transformation, and diversity and
inclusion. A former Chair of the Race Equality
Board, Adrian was appointed to the main
Board of Business in the Community in 2014
and continues to act as an adviser to them. In
2018, he was announced as the most
influential Black, Asian and minority ethnic
technology leader in the UK by the Financial
Times and Inclusive Boards. Adrian has been
awarded an OBE for services to equality and
diversity in business.
External Appointments
– Non-Executive Director of Allwyn
Entertainment Limited.
– Non-Executive Director of Great Ormond
Street Hospital for Children NHS Trust.
– Member of the Technology Advisory Board
of NatWest Group plc.
Committees
– Customer and Sustainability Committee
– Nomination and Governance Committee
– Remuneration Committee
Appointed
– March 2023
Key Skills and Experience
– Strong track record of delivering digital
transformation and growth.
– Highly experienced in customer-focused
and regulated business environments with
a focus on strategy and innovation.
– Expertise in price comparison websites.
Mark’s career has spanned financial services,
retail, e-commerce, management
consultancy and advertising. Most recently,
he was Chief Executive of the
MoneySupermarket Group, overseeing a
period of revenue and profit growth for the
UK listed price comparison business. Mark’s
previous roles include the Retail and Online
Director for John Lewis and the Managing
Director of eBay UK.
External Appointments
– Non-Executive Director and member of
the Audit, Remuneration, Risk and
Responsible Banking Committees of
Santander UK plc.
– Non-Executive Director of Hammer PW
Topco Limited.
Committees
– Investment Committee (Chair)
– Audit Committee
– Board Risk Committee
– Nomination and Governance Committee
Appointed
– September 2018
Key Skills and Experience
– Deep understanding of the development
of corporate and digital strategy.
– International experience with broad
perspective of business and capital
markets.
– Expertise in digital transformation,
customer analytics and stakeholder
communications.
Fiona’s experience in retail financial services,
both in the industry and as an auditor, was
gained in the UK and the USA. Fiona qualified
as an accountant early in her career at Arthur
Young (now EY). Until January 2019, she was
Vice-Chair of Save the Children UK and a
Trustee Director of the Humanitarian
Leadership Academy. Previously, Fiona served
as CEO of Scottish Friendly Group for 11 years,
before which she was Scottish Friendly
Group’s Finance Director. Between February
2009 and June 2023, she served as Chair and
Non-Executive Director of the Scottish
Mortgage Investment Trust plc. Fiona is a
Fellow of the Institute of Chartered
Accountants in England & Wales.
External Appointments
– Senior Independent Director, Non-
Executive Director, and Chair of the Audit
Committee of Monzo Bank Limited.
79 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Key for Committee membership
AC
Audit Committee
IC
Investment Committee
RC
Remuneration Committee
Committee chair
BRC
Board Risk Committee
NGC
Nomination and Governance
Committee
CSC
Customer and Sustainability
Committee
AC
BRC
NGC
BRC
NGC
BRC
NGC
David Neave
Independent Non-Executive Director
Gregor Stewart
Independent Non-Executive Director
Dr. Richard Ward
Senior Independent Director
Committees
– Audit Committee
– Board Risk Committee
– Nomination and Governance Committee
Appointed
– October 2023
Key Skills and Experience
– Deep understanding of General and Life
insurance markets.
– Extensive experience in senior
management and Non-Executive roles.
– Proven record of delivering General
Insurance business modernisation.
David is a Chartered Insurer and former Chief
Executive of General Insurance for Co-
operative Insurance. Following his executive
career, spanning over thirty years in senior
management roles in General Insurance,
David has held chairmanships, Non-
Executive Directorships and advisory roles in
a number of insurance, InsurTech,
consultancy and legal businesses, including
Slater and Gordon UK Limited, The Solicitors
Indemnity Fund, Liverpool Victoria Friendly
Society, LV General Insurance Limited and
Accenture UK Limited.
External Appointments
– Chair of the Advisory Board of the
Common Automotive Platform Standard.
Committees
– Audit Committee (Chair)
– Board Risk Committee
– Nomination and Governance Committee
Appointed
– March 2018
Key Skills and Experience
– Strong audit background having worked
as a partner in Ernst & Young’s Financial
Services practice.
– Extensive experience in the insurance and
investment management industry.
– Deep knowledge and understanding of
financial services regulation and practice.
Gregor worked at Ernst & Young for 23 years,
10 of which were as partner in the financial
services practice. Between 2009 and 2012, he
was Finance Director for the insurance
division of Lloyd’s Banking Group plc which
included Scottish Widows. Gregor previously
served as Chair and Non-Executive Director
of Alliance Trust plc and FNZ (UK) Limited;
Chair of Quilter Financial Planning; and was
Honorary Treasurer of International Alert for
six years. Gregor is a Member of the Institute
of Chartered Accountants of Scotland.
External Appointments
– Non-Executive Chair of FNZ Group.
– Chair of the Royal Scottish National
Orchestra.
Committees
– Remuneration Committee (Chair)
– Board Risk Committee
– Nomination and Governance Committee
Appointed
– January 2016
Key Skills and Experience
– Highly experienced financial services
professional with expertise in dealing with
complex stakeholder groups.
– Extensive knowledge of the insurance
industry with deep insight into prudential
regulation.
– Background of delivering business
transformation and change in
challenging circumstances.
Richard was previously Executive Chair of
Ardonagh Specialty, Chief Executive of Lloyd’s
of London, and CEO of the International
Petroleum Exchange. He also held the roles of
Non-Executive Chair at Brit Syndicates
Limited and Executive Chair of Cunningham
Lindsey. Richard also held Non-Executive
Director roles at the Partnership Assurance
Group plc and the London Clearing House.
Earlier in his career he held a range of senior
positions at British Petroleum and was a
research scientist for the Science and
Engineering Council. Richard has also been a
member of the PwC Advisory Board, the PRA
Practitioner Panel and the Geneva
Association.
External Appointments
– Non-Executive Chair of CFC Group Limited.
– Non-Executive Chair of Mrald Limited.
80 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Key for Committee membership
AC
Audit Committee
IC
Investment Committee
RC
Remuneration Committee
Committee chair
BRC
Board Risk Committee
NGC
Nomination and Governance
Committee
CSC
Customer and Sustainability
Committee
Board independence1
8%
17%
75%
l Chair (1)
l Executive Directors (2)
l Independent Non-Executive Directors (9)
Board gender1
Chair and NED tenure
58%
42%
l Women (5)
l Men (7)
58%
17%
25%
l 0-3 Years (7)
l 4-6 Years (2)
l 7-9 Years (3)
Gender diversity of our Executive
Committee1
Gender diversity of Senior Management
and Direct Reports2
40%
60%
l Women (4)
l Men (6)
36%
64%
l Women (16)
l Men (28)
Notes:
1.
As at 31 December 2024.
2.
Senior Management in this context is defined as the Executive Committee, Company Secretary and direct reports (where direct reports
are members of the Group’s Enterprise Leadership Network) as at 31 December 2024.
81 | Direct Line Group Annual Report and Accounts 2024
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This report explains the Board’s role and
activities, and how corporate governance
operates throughout the Group.
Corporate Governance statement
This Corporate Governance Statement explains key features of
Direct Line Insurance Group plc’s (the “Company”) governance
structure and how it measures itself against the standards set
out in the UK Corporate Governance Code 2018 (the “Code”)
which applied to the financial year ended 31 December 2024.
For more information about the Code, visit the Financial
Reporting Council's ("FRC") website at www.frc.org.uk.
This Corporate Governance statement fulfils the requirements
of the FCA’s Disclosure Guidance and Transparency Rule 7.2
(“DTR 7.2”). For full details refer to the Directors’ report on
pages 142 to 146
The Company complied with the principles and
provisions of the Code throughout the financial year
and up to the date of this Annual Report and Accounts.
Board leadership and
company purpose
Pages
– The role of the Board
– The role of the Board in the
Company’s culture
– Board activity and meeting attendance
– Consideration of Section 172(1) factors
– How the Board engages
with stakeholders
82 to 92
Division of responsibilities
– Governance framework and structure
– Structure of the Board, Board
Committees and executive management
– Roles and responsibilities of the Board
93 to 94
Composition, succession
and evaluation
– Board composition
– Induction, training and support
– Board’s approach to diversity, inclusion
and succession planning
– Board and Committee
effectiveness review
95 to 97
Audit, risk and internal control
– Preparation of the Annual Report
and Accounts
– Assessing emerging and principal risks
– Risk management and internal
control systems
– Audit Committee report
– Board Risk Committee report
98 to 108
Remuneration
– Directors’ Remuneration report
115 to 141
Board leadership and company purpose
The role of the Board
The Board seeks to promote the long-term sustainable
success of the Company for the benefit of its shareholders
and stakeholders, and establishes the Company’s purpose,
values, culture, and strategy, while contributing to wider society.
The Board aims to create shared vision for the organisation
and role-models the values and standards that are expected
from all of our people. The Board and its Committees are
comprised of individuals with an appropriate mix of skills,
industry experience and knowledge.
The Board's role is supported by a formal Schedule of Matters
Reserved for the Board, which contains items that are reserved
for the Board’s consideration and approval. These matters
relate to strategy and management, material contracts,
financial reporting and controls, internal controls and risk
management, Board membership and succession planning,
corporate governance, structure and capital, and delegation
of authority.
The Matters Reserved for the Board are kept under review to
ensure they remain appropriate. Throughout 2024, the Board
acted in accordance with the Schedule of Matters Reserved
for the Board.
The Board discharges some of its responsibilities through
its Committees, each of which expands the work of the
Board and enables deeper focus on particular areas. Each
Board Committee has written Terms of Reference defining its
role and responsibilities. The Terms of Reference for each of the
Board Committees can be found on our corporate website.
Further details regarding the role, responsibilities and activities
of the Board and its Committees can be found below and in
the Directors’ Remuneration report which begins on page 115.
Whilst some of the key areas of the Board’s responsibility are
summarised in the following paragraphs, these are not
intended to be an exhaustive list.
Leadership
The Board provides leadership within a framework of
prudent and effective controls. The Board has clear divisions
of responsibility and seeks the long-term sustainable success
of the Group. Information on how opportunities and risks
to the future success of the business have been considered
and addressed, and about the sustainability of the Company’s
business model, is set out in the Strategic report which
begins on page 1.
Operations
The Board oversees the implementation of a robust control
framework to allow effective management of risk. The Board
supervises the Group’s operations, with a view to ensuring they
are effectively managed, that effective controls are in place,
and that risks are assessed and managed appropriately.
Financial performance
The Board sets the financial plans, annual budgets and key
performance indicators and monitors the Group’s results
against them.
82 | Direct Line Group Annual Report and Accounts 2024
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Corporate Governance
Strategy
The Board oversees the development of the Group’s strategy,
the sustainability of the business model and considers how
the Group’s governance supports the delivery of strategy. The
Board approved a refreshed strategy in 2024. More information
on the Group’s refreshed strategy can be found on page 3.
The Board monitors management’s performance and progress
against the Group’s strategic aims and objectives.
Further details of how the Company applied the Code’s
principles and complied with its provisions can be found
in the remainder of this Governance report.
The role of the Board in the Company’s
culture
Our Mission:
To be brilliant for customers every day.
Our Vision:
To create a world where insurance is personal, inclusive
and a force for good.
Our Purpose:
To help people carry on with their lives, giving them
peace now and in the future.
Our culture informs the way we work, the way we interact
with stakeholders and how we provide value for our customers
and underpins our mission, vision and purpose.
The Board recognises that evolving and enhancing the Group’s
culture is critical to its future success in a rapidly changing
world. In 2024, the Board had continued oversight of work
on the Group’s culture and sought to bring together various
activities in the Group aimed at instilling a customer focused,
high performance and risk-positive culture. The Company
partnered with PwC to develop a business-driven culture
framework, supported by a culture narrative and a plan to
embed the culture framework in order to support the Group’s
refreshed strategy.
The ‘Tone from the Top’
The Group had a Culture Steering Committee, which met on a
quarterly basis to co-ordinate and lead activity on culture.
The Steering Committee was made up of key individuals from
across the business who influence culture, including the Chief
People Officer and representatives from Business Change,
Human Resources, the Conduct Centre of Excellence, Trading,
Customer Sales and Service, Corporate Communications,
Risk and Compliance.
Communications as an enabler of change
The Group has reviewed and enhanced the way it engages
on culture internally with a view to ensuring the tone from
the top is cascaded clearly and effectively by using consistent,
open and transparent communication. Conscious effort
is made to ensure that internal communications use key
language related to our cultural ambition with regard to
the high-performance culture.
Monitoring culture
In 2024 the Group continued to make use of a dashboard to
assist the Board in monitoring the Group’s culture. The
dashboard includes key metrics across Customer (for example;
NPS and complaints); People (for example; performance
management; grievances; diversity; hiring trends; and
engagement); and Risk (for example; colleague compliance
training completion levels; completion of internal audit actions;
and speaking up and whistleblowing reports), and is regularly
reviewed by the Board.
– People
In 2024 the Group introduced a new performance
management framework with the aim of promoting a high
performance culture, focused on objective setting, embedding
the performance framework, managing underperformance,
upskilling people managers and colleagues, and tackling bias
in performance management. A revised set of standardised
objectives was rolled out across the business, supported by a
comprehensive audit in Q1 2024, to assess both quality and
completion of objectives.
– Customer and Consumer Duty
The Group continued to embed Consumer Duty Requirements
throughout the organisation. In addition, we launched the
Enterprise Leadership Network ("ELN") Customer Framework to
support business areas in the identification of best practice and
areas for improvement.
– Governance and Risk
Throughout 2024 the Group worked through the revised Risk
and Compliance Self-Assessment (‘RCSA’) process as part of the
Controls Remediation Programme (‘CRP’), with RCSAs being
carried out in each business area to identify areas in which
our controls could be improved. Members of the Executive
Committee and the ELN were also given specific objectives
around controls for 2024. More information on the RCSA can
be found on pages 106 and 107.
83 | Direct Line Group Annual Report and Accounts 2024
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Board meetings and activity in 2024
Scheduled Board meetings focused on four main themes, as detailed below:
Themes
Description
Strategy and execution
– Approving and overseeing the Group’s key strategic targets and monitoring the Group’s
performance against those targets;
– reviewing customer experience and trends and monitoring the Group’s performance against
external brand metrics;
– reviewing and approving key projects aimed at developing the business or rationalising costs;
– considering growth opportunities; and
– reviewing the individual strategy of key business lines.
Strategic alignment
Financial performance
and investor relations
– Setting financial plans, annual budgets and key performance indicators, and monitoring the
Group’s results against them;
– considering the Group’s reserving position, approving Solvency II narrative reports and approving
financial results for publication;
– approving reinsurance programmes and renewals;
– reviewing broker reports on the Group, alongside feedback from investor meetings; and
– considering the appropriateness or otherwise of possible surplus capital distributions.
Strategic alignment
Risk management,
regulatory and other
related governance
– Reviewing and agreeing the Group’s policies;
– setting risk appetite;
– approving the Own Risk and Solvency Assessment (“ORSA”);
– seeking to ensure that the Group complies with its regulatory obligations;
– reviewing the Group’s solvency position and forecast, including overisight of work in connection
with the miscalculation of the Company's solvency capital ratio;
– overseeing the Control and Oversight Remediation Programme;
– reviewing the Group’s ESG initiatives;
– reviewing and approving the Group’s Task Force on Climate-related Financial Disclosures
(“TCFD”); and
– reviewing and approving the Group’s Consumer Duty implementation programme.
Strategic alignment
Board and Board
Committee governance
– Receiving reports from the Board’s Committees;
– updating the Schedule of Matters Reserved for the Board;
– updating Terms of Reference for the Board’s Committees;
– receiving corporate governance updates;
– overseeing Board and executive succession planning;
– conducting the annual review of the Board and Board Committees’ performance; and
– conducting an annual review of the Group’s governance framework.
Strategic alignment
In addition to its scheduled Board meetings, the Board
held a number of ad hoc meetings to deal with urgent
or arising matters.
In June 2024, the Board held a strategy day to monitor progress
against the Group’s refreshed strategy and to discuss the
Group’s future opportunities.
Link to core strengths and capabilities driving our strategy
Rejoin front runners in Motor
Target leading positions in Home, Commercial Direct
and Rescue
Achieve top quartile insurance technical excellence
Build a performance culture
Reduce cost base
Board and Committee meeting attendance
The Board and its Committees held a number of scheduled meetings in 2024, which senior executives, external advisers and
independent advisers were invited to attend and to present on business developments and governance matters. The Company
Secretary attended all Board meetings and he, or his nominated deputy, attended all Board Committee meetings.
The table overleaf sets out attendance at the scheduled meetings in 2024. Attendance is expressed as the number of scheduled
meetings attended out of the number of such meetings possible or applicable for the Director to attend. In circumstances where
a Director is unable to attend a meeting, the Director receives papers in advance and has the opportunity to raise issues and give
comments to the Chair in advance of the meeting.
Additional Board and Committee meetings were convened during the year to discuss current issues (including the offers received
for the Company), ad hoc business development, governance and regulatory matters.
84 | Direct Line Group Annual Report and Accounts 2024
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Board
Audit
Committee
Board Risk
Committee
Customer and
Sustainability
Committee
Investment
Committee
Nomination
and Governance
Committee
Remuneration
Committee
Chair
Danuta Gray
10 of 10
–
–
–
–
3 of 3
3 of 3
Senior Independent Director
Richard Ward1
9 of 10
–
5 of 5
–
–
3 of 3
3 of 3
Non-Executive Directors
Tracy Corrigan
10 of 10
–
–
4 of 4
–
3 of 3
3 of 3
Mark Gregory
10 of 10
5 of 5
5 of 5
–
4 of 4
3 of 3
3 of 3
Carol Hagh2
7 of 7
–
–
–
–
–
1 of 1
Adrian Joseph OBE1
10 of 10
–
–
3 of 4
–
3 of 3
–
Mark Lewis1
9 of 10
–
–
3 of 4
–
2 of 3
3 of 3
Fiona McBain1
8 of 10
5 of 5
5 of 5
–
4 of 4
3 of 3
–
David Neave
10 of 10
5 of 5
5 of 5
–
–
3 of 3
–
Gregor Stewart
10 of 10
5 of 5
5 of 5
–
–
3 of 3
–
Executive Directors
Adam Winslow4
8 of 8
–
–
–
–
–
–
Jane Poole5
2 of 2
–
–
–
1 of 1
–
–
Former Executive Directors
Neil Manser6
8 of 8
–
–
–
3 of 3
–
–
Jon Greenwood7
2 of 2
Notes:
1.
Directors were unable to attend some meetings due to conflicting commitments.
2.
Carol Hagh was appointed to the Board and the Nomination and Governance Committee on 1 April 2024 and was appointed to the Remuneration
Committee on 1 November 2024.
3.
Adam Winslow joined the Group as CEO on 1 March 2024 and was appointed to the Board on 21 March 2024.
4. Jane Poole joined the Group as CFO and was appointed to the Board and the Investment Committee on 10 October 2024.
5.
Neil Manser resigned as CFO on 10 October 2024.
6.
Jon Greenwood resigned as an Executive Director on 21 March 2024.
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Section 172(1) Statement
The Board of Direct Line Insurance Group plc (“Direct Line”) confirms that during the year under review, it has acted in the way
it considers, in good faith, would be most likely to promote the long-term success of the Company for the benefit of its members
as a whole, whilst having regard to the matters set out in Section 172(1)(a)-(f) of the Companies Act 2006 (“Section 172(1)”).
Purpose and Vision
The matters set out in Section 172(1) underpin Direct Line’s purpose and vision and form the foundation for the Board’s considerations
and decision making. Our purpose – to help people carry on with their lives, giving them peace of mind now and in the future
– is centred on customers and their long-term interests. Our vision – to create a world where insurance is personal, inclusive and
a force for good – reflects our desire to do business in a way that benefits all stakeholders, the environment and wider society.
Stakeholders
Information on Direct Line’s key stakeholders is set out in the Sustainability section of the Strategic report on the following pages:
Customers, pages 46 to 47; People, page 48; Society, pages 49 to 50; and the Planet, pages 51 to 54.
Engagement
The Board recognises that our stakeholders have diverse and sometimes competing interests that need to be finely balanced, and
that these interests need to be heard and understood in order for them to be effectively reflected in decision making. Information
about how the Board has engaged with stakeholders during the year and outcomes of that engagement can be found on
pages 89 to 90 in the table titled “How the Board engages with stakeholders”.
Board decisions and oversight
Examples of how stakeholder engagement and Section 172(1) matters have influenced Board discussion and decision making
during the year can be found in the table titled “Consideration of Section 172(1) factors by the Board” on page 88. The table covers a
number of key topics including: the takeover approaches from Ageas SA/NV ("Ageas") and Aviva; the return of capital to
shareholders; the launch of a new strategy; and continuing compliance with the Consumer Duty rules. The metrics and processes
which the Board looks at to ensure that business practices and behaviours reflect the Company’s culture, purpose and values,
including the impact of decisions on key stakeholders, are set out on page 88. Information about Board oversight of environmental
matters can be found on pages 58 to 71 in the TCFD Report.
The table below sets out where key disclosures in respect of each of the Section 172(1) matters can be found.
Section 172(1) factor
Relevant disclosures
the likely consequences of any
decision in the long-term
Mission, vision, purpose and strategic objectives (page 82)
Consideration of Section 172(1) factors by the Board (pages 87 to 88)
the interests of the Company’s
employees
Key performance indicators – Colleague engagement scores (page 15)
Outcome of employee engagement (pages 91 to 92)
Diversity and Inclusion (pages 95 to 96)
How the Board engages with stakeholders (pages 89 to 90)
Employee Representative Body (page 91)
the need to foster the Company’s
business relationships with suppliers,
customers and others
Key performance indicators – NPS and customer complaints metrics (pages 7 and 47)
Customer support (pages 46 to 47)
Supply Chain (page 54)
How the Board engages with stakeholders (pages 89 to 90)
the impact of the Company’s
operations on the community
and the environment
Community Fund 2024 (page 49)
Science-Based Targets (page 52)
External ratings, memberships and benchmarks (page 57)
TCFD disclosures (pages 58 to 71)
How the Board engages with stakeholders (pages 89 to 90)
Customer and Sustainability Committee report (pages 111 to 112)
the desirability of the Company
maintaining a reputation for high
standards of business conduct
Our values (page 3)
The role of the Board in the Company’s culture (page 83)
Internal controls (pages 98 and 99)
the need to act fairly between
members of the Company
Capital management (page 24)
How the Board engages with stakeholders (pages 89 to 90)
Shareholder voting rights (page 143)
Annual General Meeting (page 236)
86 | Direct Line Group Annual Report and Accounts 2024
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Consideration of Section 172(1) factors by the Board
The table below sets out how factors under Section 172(1) of the Companies Act 2006 and engagement with stakeholders have
fed into Board discussion and decision making on key topics. More information about Board engagement with stakeholders can
be found in the table on pages 89 to 90.
Section 172(1)
The Directors must act in a way they consider, in good faith, would be most likely to promote the success of the Company
for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
The likely consequences of any decision in the long term;
the interests of the company’s employees;
the need to foster the company’s business relationships with suppliers, customers and others;
the impact of the company’s operations on the community and the environment;
the desirability of the company maintaining a reputation for high standards of business conduct; and
the need to act fairly between members of the company.
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Takeover
Approach
from Aviva
plc
Considered shareholders views on the
value of the offer.
On 23 December 2024, the Board announced it had agreed to
recommend a cash and share offer for the Group. More
information on the offer can be found on page 9. The Board
made the unanimous decision to recommend Aviva’s offer as it
delivered significant value and represented a substantial
premium for Direct Line shareholders that allowed them to
realise the value of their investment in the near term.
Subject to regulator and shareholder approval, our customers
and employees will join an established, successful business that
is well-placed to deliver for its stakeholders.
Considered the long-term implications of
combining the Group’s business with
Aviva’s.
Considered the impact on customers and
Aviva’s culture in respect of customer
service.
Considered the effect on the Group’s
workforce and Aviva’s people culture.
Takeover
approach
from Ageas
SA/NV
Considered shareholders views on the
value of the offer.
Early in 2024, Ageas made an indicative proposal to purchase
the Company. Following extensive consultation with the
Group’s investors, the Board unanimously rejected the proposal,
believing it to be uncertain, unattractive and significantly
undervaluing the future prospects of the business.
Return of
Capital to
Shareholders
Considered shareholder expectations in
respect of return of capital.
Based on the progress made on the turnaround of the business,
the strong solvency capital ratio, and underlying capital
generation over 12 months, the Board approved a dividend of
2.0 pence per share in respect of the first half of 2024.
On 10 July 2024, the Board approved a revised dividend policy
which targets a payout ratio of around 60% of post-tax
operating profit for any regular dividend. More information on
the Policy can be found on page 24.
Based on the strength of the Group’s capital position, taking
into consideration regulatory and policyholder requirements
and the long-term investment needs of the business, the Board
recommended a final dividend for 2024 of 5.0 pence per share.
Considered the Group’s capital position as
well as regulatory and policy holder
requirements and the long-term
investment needs of the business.
Considered the macro-economic
environment.
New
Strategy
Launch
Considered the needs of customers and
what they want from their insurer both
now and in the future.
The strategy is supported by a new Target Operating Model
("TOM") which aims to reduce our cost base to support the
target of at least £100 million gross run-rate cost savings by
20251. The Board approved the TOM programme and have
overseen and monitored its implementation throughout the
year. By making improvements in procurement, technology
rationalisation and simplifying our operating model we expect
to deliver £50 million against our cost savings target in 2025,
with further work ongoing in respect of the rest of the targeted
savings by the end of 2025.
The delivery of the strategy is also underpinned by the
introduction of strengthened performance management and
a high-performance culture which the Board has supported.
See pages 15, 16 and 83 for more information.
More information on progress on the ongoing implementation
of the strategy can be found on pages 4 to 5.
Considered shareholder expectations in
respect of return on investment.
Considered feedback from employees
about what we do well and where we have
the potential to do better.
Considered impact on communities and
the environment and the Company’s
purpose of creating a world where
insurance is a force for good.
Consumer
Duty
Continuing
Compliance
Considered the extent to which work to
implement Consumer Duty was translating
into good outcomes for customers.
Following the implementation of the Consumer Duty in July
2023, during 2024 the Board reviewed how successfully the
Duty had been implemented and embedded in the business
and considered ways compliance could be enhanced. This
resulted in the Board approving the Group’s Customer
Outcomes Improvement Plan ("COIP") which represents a
programme of work that aims to deliver enhanced compliance
with customer outcomes by the time the 2025 Consumer Duty
Annual Board report is delivered. For more information, please
see page 111.
Considered the level of compliance
achieved under the Consumer Duty
implementation programme and the
importance of maintaining a reputation for
high standards of business conduct.
Considered the need to ensure
compliance with Consumer Duty becomes
embedded in in the business’s operation in
the long-term.
Topic
Section 172(1) considerations
Outcomes
Note:
1.
The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,
commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.
88 | Direct Line Group Annual Report and Accounts 2024
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How the Board engages with stakeholders
The Board has identified the Company’s key stakeholders and considers their opinions and needs to ensure that they are effectively
reflected in decision making, while recognising that their diverse and sometimes competing interests need to be finely balanced.
This approach aims to ensure that the decisions the Company makes are made having had regard to the matters set out in Section
172(1). The table below sets out how the Board has engaged with various stakeholders or received information about engagement
with stakeholders throughout the year.
Our Customers
The Board closely monitors customer conduct and satisfaction. It considers a Customer Outcomes report at each of its scheduled
meetings, which includes data in respect of a number of customer experience metrics including Net Promoter Scores and
customer complaints data relating to sales, service and claims. It also reviews data in respect of digital service interactions.
During the year, the Board received detailed updates on the impact of various key strategic matters on customers, including the
implementation of the new Consumer Duty Regulation.
Tracy Corrigan, Non-Executive Director, is the Consumer Duty Champion and acts as the voice of the customer in the boardroom.
In addition, the CEO has spent time with people across the business to see first hand how we support our customers. This
included visits to repair centres in Barnsley, Edinburgh and Perth, and shadowing a Green Flag patrol technician in Glasgow to
get an understanding of how the skill and commitment of our patrol technicians supports customers who are in vulnerable and
often stressful situations.
Members of the Board also attended a Household Customer Outcomes Forum to participate in a deep-dive on complaints.
Several Non-Executive Board Directors took part in a customer journey ‘walkaround’ to understand how customers' digital
journeys were being improved.
Our People
Executive Directors host interactive sessions with colleagues throughout the year to receive feedback and answer questions.
These sessions are held in various formats, for example, town halls and live Q&A sessions, in order to encourage maximum
participation from colleagues, allowing them to have a more informal discussion with senior managers.
During the year, Non-Executive Directors visited the Group’s operations around the country. Between them the Non-Executive
Directors visited sites in Birmingham, Bristol, Bromley, Glasgow, Doncaster, Leeds, Liverpool, Manchester and Stechford. All of the
visits included informal Q&A sessions with colleagues. The CEO visited fifteen of our sites around the country, (including 5
Accident Repair Centres ("ARCs").
In addition, Adrian Joseph, Non-Executive Director, hosted a conversation with the CEO and the co-lead of the REACH strand to
discuss the achievements and challenges experienced by ethnic minority colleagues in their careers and the importance of
allyship and leadership in building an inclusive culture as part of our celebration of Black History Month. This was aligned to a two-
day Bright Futures student business simulation event.
Employee Representative Body (“ERB”)
The ERB meets on a quarterly basis and comprises colleagues from across the business areas and locations. Meetings are
generally attended by Board members, including the CEO and one or two Non-Executive Directors per meeting, to discuss issues
and proposals which may have an impact on our people. Attendance and information on the work of the ERB during the year can
be found on page 91.
Motability
In September 2023, the Group welcomed 585 Motability colleagues to the business. People in this area are represented by the
union Unite. The business leads meet fortnightly with representatives of Unite to discuss matters affecting colleagues.
The Group is intent on building and maintaining a positive relationship with Unite based on transparency and trust throughout
the duration of the Motability partnership.
DiaLoGue
The Board receives regular updates on people matters from the Chief People Officer and reviews the results and key outcomes of
the Group’s colleague engagement survey, ‘DiaLoGue’, through which all colleagues are surveyed three times a year.
Findings provide both a snapshot and identify trends not only of all-colleague opinion but also findings for specific teams,
allowing solutions to be tailored to specific needs. Response to these surveys has consistently been high (over 80%).
Diversity Network Alliance (“DNA”)
There are seven employee networks, each of which are key drivers of diversity and inclusion across the business. They focus on the
following areas: Belief, Life (families and carers), LGBTQ+, Neurodiversity & Disability, REACH (Race, Ethnicity and Cultural
Heritage), Social Mobility and Thrive (gender).
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Our Planet and Our Society
The Customer and Sustainability Committee is a key vehicle through which the Board receives updates on engagement with key
community and environmental stakeholders. More information on the work of the Customer and Sustainability Committee can
be found on pages 111 to 112. During the year, the CEO visited our Technology Centre in Stechford where the Group tests how the
cars of the future, including Electric Vehicles ("EVs"), can be fixed in a greener way.
Our Shareholders
The Investor Relations team runs a comprehensive programme of engagement covering a broad range of the Company’s
shareholders and debt investors, which includes meetings with the Chair and Executive Directors, presentations and
conference calls to discuss performance and strategy. During the year, the CEO met with investors from Europe and the
United States of America.
The Remuneration Committee Chair engages with shareholders on remuneration-related matters (see page 116 of the Directors’
Remuneration report for more information).
The AGM provides both institutional and retail shareholders with the opportunity to ask the Board questions either live
or by submitting questions in advance.
Our Suppliers
The Board reviewed and approved the Group’s annual Modern Slavery Statement. The Group's Ethical Code for Suppliers, which
was last reviewed by the Board in 2023, states that the Company encourages and welcomes feedback from suppliers on the
Group as a customer and on how policies and procedures can be improved. This feedback can be given as part of regular review
meetings with management.
The Group is a long-standing signatory of the Prompt Payment Code. Key performance indicators in respect of prompt payment
are reported internally, and there are mechanisms in place for any significant issues regarding prompt payment to be escalated
to the Board.
During the year, the CEO visited key suppliers in South Africa and India.
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Colleague Engagement
The Group has an established Employee Representative Body, meetings of which are attended by elected representatives from
the different areas of the business and by the CEO, the Chief People Officer and members of the senior leadership team, to discuss
issues and proposals which have, or may have, an impact on colleagues. Non-Executive Directors also attended meetings on a
rotational basis (during the year, seven different Non-Executive Directors attended ERB meetings). Output from the meetings
attended by Directors is reported to the full Board so they can consider relevant colleague views in their decision making.
The Board considers that this arrangement fulfils the recommendation under Provision 5 of the Code to provide a mechanism for
engaging with the workforce, being an enhanced version of the “formal workforce advisory panel” method referred to in Provision 5.
The Board considers this arrangement to be highly effective as it provides a formal framework through which a wide variety
of views can be represented and provides colleagues the opportunity to express these views directly to both Executive and Non-
Executive Directors. It also means Director attendance can be tailored so that colleagues can engage with the most appropriate
Board member on a particular topic. For example, during the year, the Chair of the Remuneration Committee attended the
meeting at which workforce pay was discussed, and the Chair of the Board attended the meeting at which effect of the Consumer
Duty regulations were discussed.
Information about Board representation at ERB meetings can be found in the table below.
Meeting
March
June
September
December
Board Representation
Adam Winslow
(CEO)
Danuta Gray
(Chair of the Board)
David Neave
(Non-Executive Director)
Adam Winslow
(CEO)
Tracy Corrigan
(Non-Executive Director)
Carol Hagh
(Non-Executive Director)
Adam Winslow
(CEO)
Mark Lewis
(Non-Executive Director)
Adam Winslow
(CEO)
Adrian Joseph
(Non-Executive Director)
Dr. Richard Ward
(Senior Independant
Director)
Examples of engagement with the ERB having resulted in business action include:
Issue Discussed
Outcomes
Establishing
a new Target
Operating
Model
We discussed the
development and
establishment of
the new Target
Operating Model
with the ERB,
focusing on
communications
and employee
consultations.
ERB representatives have been engaged on the principles, design and implementation of
the proposed Target Operating Model ("TOM"), and specifically on providing feedback on
how this could be effectively communicated to our colleagues. This feedback was integral to
the communications strategy and informed email, intranet and video content made
available to all colleagues with the aim of providing clear and understandable information to
our people via multiple channels. The ERB’s recommendations led to the production of a
video which was hosted on our intranet and presented by the Chief People Officer and Chief
Operating Officer. The video outlined what was meant by the TOM, how it would be
implemented and what it would mean for the business and our people in the longer term.
The ERB was also subsequently engaged, or consulted as appropriate, on redundancy
proposals in various functions within the business that had applicable people impact under
the TOM proposals. Representatives were upskilled to ensure that people affected by
consultations could be appropriately supported. Feedback from the ERB was used by our
HR team as part of the consultation and communication process.
Takeover
Approach
from Aviva
plc
We discussed the
takeover approach
from Aviva with the
ERB, considering
process and
potential outcomes.
Following the offer from Aviva for the Company announced in December 2024, the CEO and
members of the Board engaged the ERB in line with the Takeover Code, and additionally
provided them with an overview of the timeline of a potential takeover, answering any
questions they had at the time. The feedback and questions from ERB representatives, as
the voice of the employee, was used as part of the communication strategy for the wider
workforce. This included consideration of key employee outcomes that would follow if and
when the acquisition was completed. The ERB will play an important role in the takeover
process and will be regularly engaged with to enable them to provide support to our people
in the coming weeks and months.
Hybrid
Working
We discussed the
Group’s approach to
Hybrid working with
the ERB.
During the year, the Group set out plans to return to a two day per week cadence in each of
our offices. The ERB was engaged and gave feedback in a number of areas including on the
approach to anchor days, the review of possible exceptions individuals may need, the layout
of redesigned office spaces, and ensuring that there was sufficient office space to support
the cadence. This included feedback from the Diversity Network Alliance (“DNA”) strands,
most specifically the Neurodiversity and Disability Strand. The ERB feedback helped shape
dedicated upskilling for people managers in respect of managing and communicating
change and to ensure that there was a consistent and fair approach to colleagues’
adherence to the Hybrid working policy and/or review of an exception being required.
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DiaLoGue
DiaLoGue is our employee engagement tool that we use to survey our colleagues three times a year. Examples of outcomes
resulting from DiaLoGue feedback include:
Issue Raised
Outcome
The Future
Colleagues reported that they
were excited about the Group’s
future but felt unclear or anxious
about change.
We committed to keeping our colleagues regularly updated on
decisions that affected them – from changes to the TOM to the
takeover approach from Aviva plc. During the year we held a series
of townhalls during which people had the opportunity to put their
questions to management.
Transparency and
Direction from Senior
Leadership
While confidence in senior
leadership had grown, Colleagues
sought even more transparency
and direction from senior leaders.
To improve transparency and direction and to build on confidence
in leadership, we shared progress on strategy through regular
townhalls; held monthly senior manager calls with the ExCo team;
regularly engaged with the ERB to understand what was on
people’s minds; and held monthly ‘spotlight’ sessions, hosted by
ExCo, to improve understanding of different business areas.
Building a high-
performance culture
Colleagues fed back that they
wanted greater clarity and
consistency on priorities and
objectives to support the delivery
of a high-performance culture.
We took action to bring clarity, consistency and focus to how
we set and track objectives by setting group objectives to ensure
that all colleagues had clear priorities that align with the Group
strategy. In addition, we made personal growth a mandatory
objective as this is critical to building a high-performance culture.
A series of practical tools were put in place to contribute to
individual and Group success through the ‘Evolve’ all-colleague
masterclass. People managers have also been set specific
objectives around making time to support and develop people
in their teams.
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Division of responsibilities
Governance framework and structure
The Board oversees the system of governance in operation
throughout the Group. This includes an effective Enterprise
Risk Management Framework and system of internal control.
The Board has established a risk management model that
separates the Group’s risk management responsibilities into
three lines of defence. An explanation of these responsibilities
can be found on page 38.
The Group’s governance framework is detailed in the Group’s
Systems of Governance document. This document also details
how the Group meets Solvency II requirements, as modified by
the Prudential Regulation Authority's (“PRA”) 2024 reforms, and
the PRA requirements to identify key functions, and to have
and maintain a Responsibilities Map in respect of the PRA and
FCA’s Senior Managers and Certification Regime requirements.
The Board reviews this document annually.
The core elements of the governance framework are the:
– Matters Reserved for the Board and the Board Committees’
Terms of Reference;
– Systems of Governance document;
– Risk appetite statements, which are described on page 38;
– Enterprise Risk Management Strategy & Framework and
Internal Control Framework, which are described on page 38;
– Group policies, which address specific risk areas, are aligned
to the Group’s risk appetite, and inform the business on how
it needs to conduct its activities to remain within risk
appetite; and
– Minimum Control Standards, which interpret the Group’s
policies into a set of requirements that can be implemented
throughout the Group.
The diagram below summarises the split of responsibilities
for the different parts of the Group’s governance framework.
The Board approves
The Systems of Governance
Framework, overarching risk appetite
statements and Group policies,
following review by the Board Risk
Committee.
Matters Reserved for the Board
and Board Committees’ Terms
of Reference.
Matters Reserved
for the Board and
Board Committees’
Terms of Reference
The Systems of Governance Framework document
Overarching
risk appetite
statements
The Board Risk Committee
approves
The Risk Management Framework and
the policy risk appetite statements,
following review by the Risk
Management Committee (a committee
comprised of executives).
Enterprise Risk
Management
Strategy and
Framework
Internal
Control
Framework
ERMF policies
Policy risk
appetite
statements
Minimum Control Standard
Policy owner approves
Minimum Control Standards, subject to
non-objection from the Risk
Management Committee.
Minimum Control Standards
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Structure of the Board, Board Committees and executive management
The following chart sets out the structure of the Board and its Committees and highlights the responsibilities of the Chair, the
Senior Independent Director, the Non-Executive Directors, the Executive Directors, the Company Secretary and the Executive
Committee. The role descriptions for the Chair and CEO are set out in writing; the profiles clearly define their respective roles
and responsibilities, and ensure that no one person has unlimited powers of decision making.
The Board and Board Committees have unrestricted access to management and external advisers to help discharge their
responsibilities. Each Committee plays a vital role in helping the Board to operate efficiently and consider matters appropriately.
The Board and Board Committees are satisfied that, in 2024, sufficient, reliable and timely information was received in order
for them to perform their responsibilities effectively.
The reports by each Board Committee are given in this Annual Report and Accounts. The Terms of Reference for each Committee
can be found on the corporate website at: www.directlinegroup.co.uk/en/who-we-are/leadership/board-committees
Roles and responsibilities of the Board
Board of Directors
Each Director brings different skills, experience and
knowledge to the Company, and the NEDs contribute
additional independent thought and judgement.
Depending on the business needs, the NEDs and the
Chair commit at least two days a month and two days
a week respectively to discharging their duties effectively
in accordance with their letters of appointment.
As at 31 December 2024, the Board comprised the Chair,
nine independent NEDs, and two executive Directors
(the CFO and the CEO). Biographies of the full Board can
be found on pages 77 to 80.
Board Committees
Full details of membership, responsibilities and activity
of each Committee throughout the year can be found
on pages 101 to 118.
– Audit Committee.
– Board Risk Committee.
– Nomination and Governance Committee.
– Customer and Sustainability Committee.
– Investment Committee.
– Remuneration Committee.
The Executive Committee
The Executive Committee is the principal management
committee that helps the CEO manage the Group’s
operations and supports the CEO in:
– Setting performance targets.
– Implementing Group strategy.
– Monitoring key objectives and commercial plans to help
achieve the Group’s targets.
– Evaluating new business initiatives and opportunities.
Chair
– Guides, develops and leads the Board.
– Plans and manages the Board’s business.
– Oversees the Group’s governance framework.
Senior Independent Director
– Acts as a sounding board for the Chair and an
intermediary for the other Directors when necessary.
– Is available to shareholders if they have concerns that
cannot be resolved through other channels.
– Leads the Chair’s performance evaluation.
Non-Executive Directors
– Challenge management in an objective and
constructive manner.
– Use their wider business experience to help develop
the Group’s strategy.
Executive Directors
– The CEO and CFO are members of the Board,
with delegated responsibility for the day-to-day
operation of the Group and delivering its strategy.
– The CEO delegates certain elements of their authority to
the Executive Committee members to help ensure that
senior executives are accountable and responsible for
managing their business areas and functions.
Company Secretary
– Ensures the Directors receive accurate, timely and clear
information.
– Assists the Chair in overseeing the Group’s corporate
governance arrangements.
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Board composition
As at the date of this report, the Board comprised the Chair,
who had previously served as an independent Non-Executive
Director and was independent when appointed as Chair; two
Executive Directors; and nine independent Non-Executive
Directors, including the Senior Independent Director.
Adam Winslow joined the Group as CEO on 1 March 2024 and
was appointed to the Board on 21 March 2024. Jane Poole
joined the Group as CFO on 10 October 2024 and was
appointed to the Board on the same day. Carol Hagh, an
Independent Non-Executive Director, also joined the Board
during the year on 1 April 2024.
Biographical details of the Directors of the Company as at the
date of this report are set out on pages 77 to 80. Details of
Directors who have served throughout the year can be found
in the Directors’ report on page 142.
Board succession
The Nomination and Governance Committee continues to
review succession plans both for the Board and at executive
level each year. Further information on our approach to
succession planning and Board appointments can be found
in the Nomination and Governance Committee’s report
on pages 109 and 110.
Board induction and training
All new Directors appointed to the Board undertake an
induction programme aimed at ensuring they develop an
understanding and awareness of our businesses, people and
processes, and of their roles and responsibilities as Directors
of the Company. The programmes are tailored to suit each
Director and include provision of relevant current and historical
information about the Company and the Group; visits to
operations around the Group; induction briefings from Group
functions; one-to-one meetings with Board members, Senior
Management and the Company’s advisers; and engagement
with the Group’s ERB.
The Board is committed to the training and development
of Directors to improve their knowledge of the business and
the regulatory environment in which it operates. The Company
Secretary is responsible for helping the Chair identify and
organise training for the Directors which is tailored to
individual needs.
As part of Adam Winslow's CEO induction activity, he
completed a busy schedule of site visits to fifteen of the Group's
sites around the UK (including 5 ARCs). He also visited key
suppliers in South Africa and India, and met with investors in
Europe and the United States of America.
Carol Hagh was appointed to the Board in April 2024. Her
induction programme has included site visits across the UK,
introductory meetings with members of the Executive
Committee and sessions with leadership across several
business areas (including Legal, Compliance, Risk and Finance).
In addition, she has attended Audit, Risk, Investment and
Customer and Sustainability Committee meetings and has met
with external advisers in respect of the Remuneration
Committee.
The Company Secretary maintained the training agenda for
the Board and its Committees during the year. During the year,
the Board received technical briefings on Major Model Changes.
Non-Executive Director (“NED”) independence
On behalf of the Board, the Nomination and Governance
Committee assesses the NEDs’ independence, skills, knowledge
and experience annually. The Nomination and Governance
Committee concluded that every current NED was
independent, continued to contribute effectively, and
demonstrated they were committed to the role. Each current
Director will submit themselves for election or re-election at the
2025 AGM. You can find out more about the activities of the
Nomination and Governance Committee’s work during the
year on pages 109 and 110.
External directorships
The Board keeps Directors’ external commitments under
ongoing review to ensure they continue to have sufficient time
to dedicate to the Group. During the year, the Board reviewed,
and approved in advance, Adrian Joseph’s appointment as an
Independent Non-Executive Director of Allwyn Entertainment
Limited and Great Ormond Street Hospital. The Board also
reviewed and approved Gregor Stewart’s appointment as Chair
of the Board of the Royal National Scottish Orchestra. The
Board was satisfied that, in taking on these roles, both Adrian
and Gregor would continue to have sufficient time to dedicate
to their roles on the Board.
Information and support
The Board accesses assistance and advice from the Company
Secretary. The Board, and each member of the Board, may seek
external independent professional advice at the Company’s
expense, if required, to discharge its duties.
Board’s approach to inclusion and diversity
Last year, the Company reported that the Board had met two
out of three diversity targets set out in the UK Listing Rules,
having at least one senior Board position being held by a
woman and with at least one Board member being from a
minority ethnic background (this was also consistent with
Parker Review recommendations).
This year, as at 31 December 2024 and the date of this report,
and following the appointments of Carol Hagh (from 1 April
2024) and Jane Poole (from 10 October 2024), the Board is
pleased to report that it now meets all three diversity targets set
out in the UK Listing Rules, including the target that at least
40% of Board members should be women.
Diversity, including gender diversity, is a key consideration
in succession planning, though as the skills and experience
of the Board are refreshed over time, the gender balance will
be dependent on the availability of the best candidates for
Board vacancies, with all appointments based on merit and
objective criteria.
In 2023 the Group set ambitious new targets to continue to
improve diversity in senior leadership. Our targets are aligned
with the definitions of senior leadership used by the FTSE
Women Leaders Review, Women in Finance review and Parker
Review. We are aiming to increase representation of women
to 40%, ethnic minority talent to 16%, and Black talent to 4%
at senior leadership levels (defined as Executive Committee
and direct reports, excluding direct reports in support
or administrative roles).
Current representation
(end Dec 2024)
Targeted representation
(end 2027)
Women
36 %
40 %
Ethnic minority
9 %
16 %
Black
– %
4 %
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The tables below set out data about the sex and ethnicity of the Board and senior management as at 31 December 2024,
in the format prescribed by the UK Listing Rules.
Number of
Board members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management1
Percentage of
executive
management1
Men
7
58 %
2
7
58 %
Women
5
42 %
2
5
42 %
Not specified/prefer not to say
–
–
–
–
–
Note:
1.
Executive management is the Executive Committee and Company Secretary.
Number of
Board members
Percentage
of the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management1
Percentage of
executive
management1
White British or other White
(including minority-white groups)
8
67 %
2
5
42 %
Mixed/Multiple Ethnic Groups
1
8 %
–
–
–
Asian/Asian British
–
–
–
–
–
Black/African/Caribbean/Black British
–
–
–
–
–
Other ethnic group
–
–
–
–
–
Not specified/prefer not to say
3
25 %
2
7
58 %
Note:
1.
Executive management is the Executive Committee and Company Secretary.
The Group recognises the importance of understanding diverse representation and the monitoring of differential outcomes.
It collects diversity representation information on the basis of self-reporting across the categories of sex, gender identity, ethnicity,
religion, sexual orientation, disability and socio-economic background, collected using our HR Information Systems as part of the
onboarding process.
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Senior management succession planning
The Board recognises that in order to maintain and improve
on diversity levels, it must ensure that senior management
succession planning is focused on promoting diverse
leadership, and that workforce diversity is sought at all levels
in order to seek to secure a diverse pipeline of talent.
The 2024 Annual Incentive Plan includes targets for Executive
Directors, the Executive Committee and senior management
in respect of improving the gender and ethnic diversity of the
workforce in the context of leadership succession planning
(more information on this can be found on pages 16, 48, 117
and 123).
Board appointments and Diversity Policy
The Board has in place a Diversity Policy which sets out
the key principles to be followed in respect of the Board
appointment process. More information on this can be found
in the Nomination and Governance Committee report on
pages 109 and 110.
Workforce diversity and inclusion
The Board encourages and supports equity, diversity and
inclusion in the workplace and is committed to building an
inclusive culture. It continues to support Group-wide diversity
and inclusion activities and initiatives, many of which are
outlined on page 48. This includes the work of the Company’s
Diversity Network Alliance (“DNA”) which champions diversity
and inclusion in the Group through its ‘DNA strands’: Race,
Ethnicity and Cultural Heritage ("REACH"); Belief; LGBTQ+; Life
(working families and carers); Neurodiversity and Disability;
Social Mobility; and Thrive (gender). More information about
the work of the DNA during the year can be found on page 16
of the Strategic report.
Board skills, experience and knowledge
The Nomination and Governance Committee assesses and
monitors the skills, experience and knowledge of Board
members with the aim of equipping the Board to challenge
and support the executive team effectively, taking into
consideration the Group’s evolving strategy.
Board and Committee effectiveness review:
three-year Board evaluation cycle
The Board conducts an annual review of the effectiveness of
the performance of the Board, its Committees, the Chair and
individual Directors, with the input of an external facilitator at
least every third year. In 2024, the Board decided to reset the
three-year cycle and engaged Promontory Financial Group
(“Promontory”), which has no other connection with the
Company or any Director, to facilitate the review externally.
The Board recognises that a continuous and constructive
review of its performance is a critical factor in achieving the
Group’s objectives, realising potential and promoting the
long-term sustainable success of the Company.
Promontory conducted one-to-one interviews with Board
members and senior managers who were regular attendees of
Board and Committee meetings, reviewed samples of meeting
agendas and papers and observed a meeting of the Board and
each Committee. Promontory’s findings and recommendations
were considered by the Board and its Committees in
January 2025.
Evaluation process
Step 1
The thematic priorities for the review were
established by Promontory in discussion with the
Chair and the Company Secretary.
Step 2
Promontory interviewed members of the Board
and senior managers about Board and
Committee performance and the Group’s
current and target culture, and reviewed sample
agendas and papers. Promontory observed a
Board meeting and one meeting of each of the
Committees.
Step 3
A report, covering Board and Committee
performance, was prepared and presented by
Promontory and discussed at the Board’s
January 2025 meeting.
Step 4
An action plan was defined, based on the
recommendations in Promontory’s report.
2024 evaluation outcome
The results of the review were presented to the Board and its
Committees in January 2025 and the recommendations form
the basis of an action plan for 2025 as summarised in the table
on page 98, along with an update on the action plan that
resulted from the 2023 review. Themes emerging from the
2024 review included investment in leadership capability and
culture change, a continuing focus on Board dynamics and
materials and investment in regulatory relationships.
Separately, the Senior Independent Director discussed the
Chair’s performance with the Directors (except the Chair) and
provided constructive feedback to the Chair. No Director was
involved in the review of their own performance.
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2023 focus areas and action taken during 2024
Strategic Direction
The Board supported and challenged the new senior leadership team under Adam Winslow in setting out a new strategy
focusing on the Group’s core businesses, underpinned by the development of a high-performance culture and the
delivery of a significant reduction in the cost base. The new strategy was presented at a Capital Markets Day in July 2024
and included a proposal to launch the Direct Line brand on a price comparison website for the Motor business.
Investment in Leadership
Following Adam Winslow’s appointment as CEO in March 2024, a new and highly experienced senior management team
was assembled, including the new CFO, Jane Poole, who joined the Group in October 2024. The Group also invested in
high-performance training for its wider senior leadership team and started a comprehensive review of its target operating
model based on design principles intended to streamline the organisation and foster a culture of accountability and
performance.
Refreshing Culture
The Group has continued to invest in, and report at Board level on, its culture, including in relation to customer focus,
risk-positivity and the control environment.
2024 focus areas and proposed action for 2025
Board Dynamics
The Board will continue to focus on the effectiveness of its support for, and challenge of, management, including through
the continuous improvement of the quality of Board materials.
Leadership Capability and Culture
The Group intends to continue to invest in leadership capability and the culture change required to deliver its
strategic aspirations.
Regulatory Relationships
The Board will focus on continuing to invest in strengthening the Group's relationships with its regulators.
Audit, Risk & Internal Control
An explanation of how the Board complies with the Code in
relation to audit, risk and internal control is set out below,
except for the following matters, which are covered elsewhere
in the Annual Report and Accounts:
– how the Board has assessed the Group’s longer-term viability
and the adoption of the going concern basis in the financial
statements is on page 74 and page 145; and
– the Board’s delegated responsibility to the Audit Committee
to oversee the management of the relationship with the
Company’s External Auditor.
You can find details of the Audit Committee’s role, activities and
relationship with the External Auditor in the Audit Committee
report which starts on page 101.
Responsibility for preparing the Annual Report
and Accounts
The Board’s objective is to give shareholders a fair, balanced
and understandable assessment of the Group’s position,
performance, business model and strategy. The Board is also
responsible for maintaining adequate accounting records,
and seeks to ensure compliance with statutory and
regulatory obligations.
You can find an explanation from the Directors about their
responsibility for preparing the financial statements in the
Statement of Directors’ responsibilities on page 146. The Group’s
External Auditor explains its responsibilities on page 155.
As noted in the responsibility statement on page 146, the
Directors confirm that they consider that the Annual Report
and Accounts, taken as a whole, are fair, balanced and
understandable, and provide the information that shareholders
need to assess the Group’s position, performance, business
model and strategy. In arriving at this conclusion, the Board
was supported by a number of processes, including
the following:
– management drafted the Annual Report and Accounts to
ensure consistency across sections, and a steering group
comprising a team of cross-functional senior management
provided overall governance and co-ordination;
– a verification process, to ensure the content was
factually accurate;
– members of the Executive Committee reviewed drafts
of the Annual Report and Accounts;
– the Company’s Disclosure Committee reviewed an advanced
draft of the Annual Report and Accounts; and
– the Audit Committee reviewed the substantially final draft
of the Annual Report and Accounts, before consideration
by the Board.
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Assessing emerging and principal risks
The Board determines the nature and extent of the risks that it
is willing to take to achieve its strategic objectives. The Directors
robustly assessed the emerging and principal risks facing the
Company, including risks that would threaten its business
model, future performance, solvency or liquidity and reputation.
You can find a description of these risks, and their
management or mitigation, on pages 40 to 43.
This determination is based on the Board Risk Committee’s
review and challenge of the Group’s Material Risk Assessment
(the "Assessment"), and the Board’s review and approval of the
Group’s risk appetite statements. The Assessment identifies
risks quantified as having a residual risk impact of £30 million or
greater. The quantifications are produced through stress and
scenario analysis, and our capital model.
Risk management and internal control systems
The Board, with the assistance of the Board Risk Committee
and the Audit Committee, and support from the Chief Controls
Office and Risk function as appropriate, monitored the
Company’s risk management and internal control systems that
have been in place throughout the year under review, and
reviewed their effectiveness. The monitoring and review
covered all material controls, including financial, operational
and compliance controls.
During the year, the Group continued its work to improve
its control environment through the Group-wide controls
improvement programme that was commissioned in 2023.
This was overseen by the Board Risk Committee. As part of this
programme, a number of improvements were made during
the year across the control environment and the three lines
of defence model:
– Implementation of a new quarterly Risk & Control
Self-Assessment (“RCSA”) process which assessed all
of the Group’s critical risks and controls;
– Documentation of the Group’s critical controls, including
an assessment of the design adequacy and operating
effectiveness of these controls;
– Introduction of clearer end to end ownership and
accountabilities of principal risks and critical controls;
– Implementation of a new risk management system with
improved functionality to track and monitor risks, control
deficiencies, and risk events; and
– Improvements to the quality of control testing in the first line.
To accelerate this progress and to enable the proper embedding
of these improvements, the CEO took the decision in 2024 to
create a new Chief Controls Office ("CCO") in the first line. The
primary responsibilities of the CCO includes:
– Ensuring consistency in the operation of the Group’s
Enterprise Risk Management Framework across the business;
– Facilitating the new RCSA process and assuring its outcomes
through centralised control testing; and
– Supporting the business in capturing, monitoring and
responding to risk events, control deficiencies and risk/
vulnerability management.
In addition, the Audit Committee has overseen a Control
and Oversight Remediation Programme within Finance, the
aim of which is to enhance the financial reporting control
environment across the Group. More information in respect
of these initiatives can be found in the respective Audit
Committee and Board Risk Committee reports.
The CCO Function produced a new Annual Risk and Control
Assurance (“ARCA”) report to support the Board in monitoring
the effectiveness of the Group’s risk management and internal
control systems. The CCO also facilitated a new quarterly RCSA
process, where each principal risk owner completed a self-
assessment of the key risks and controls across the Group’s risk
profile. The RCSA process is a key tool in assessing the inherent
and residual operational risk within the Group’s control
environment and aims to identify, understand and manage
these risks by reviewing the results of control assessments, risk
events, and other relevant information. The RCSA requires the
principal risk owners, which in most cases is a Senior Manager
or Executive Sponsor, to attest to the status of the effectiveness
of the risk management and internal controls across a range of
different risk types. This is supported by centralised control
testing within the CCO as well as through oversight and
challenge by the Risk function. In addition, the Group Audit
function provides an independent assessment of the overall
effectiveness of the governance, risk and control framework of
the Group.
The overall findings from the quarterly RCSA process, as well as
from other assurance mechanisms, such as second or third line
reviews, are combined into a Group-level assessment and
reported to the Board Risk Committee in the ARCA report.
The 2024 ARCA report referred to the miscalculation identified
within the Group’s audited Solvency II Own Funds for the year
ended 2023, and reported to the market on 23 August 2024, as
a material control deficiency within the Group’s financial
controls. Underlying root causes of the miscalculation are
considered to have included control deficiencies that arose in
2023. The Group has since remediated the relevant processes
and controls such that the control deficiencies were resolved for
the half year 2024 Solvency reporting and consequently by the
year-end balance sheet date.
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.
This miscalculation had no impact on the IFRS figures.
Correcting for the miscalculation, the solvency capital ratio
(post-dividend) at year end 2023 was 188%, which was above
the Group's risk appetite range of 140% to 180% (the previously
reported solvency capital ratio was 197%).
The miscalculation was identified through the Group’s half year
results preparation, and the Group has taken a number of
actions in 2024 to strengthen the control environment in
relation to the specific area where the miscalculation occurred.
These include, but were not limited to:
– Detailed root cause analyses and identification
of corresponding management actions;
– Strengthening the change delivery framework around
operational readiness, downstream financial reporting
impact, risk acceptance and post implementation review;
– Strengthening the level of precision of the Financial
Reporting Control Framework ("FRCF") preventative and
detective controls related to the translation of the Group’s
financial results from IFRS to Solvency II;
– Simplification of the accounting transactions around key
reinsurance arrangements; and
– Improved controls assurance more generally of the
FRCF controls.
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The 2024 ARCA report did not identify any further material
financial, operating, or compliance control deficiencies during
the year ended 31 December 2024, nor any further material
control deficiencies that remained unresolved at the
balance sheet date.
As discussed later in the Audit Committee report, the Group
undertook further enhancement work over its wider financial
control framework during the year.
The Group Audit function supports the Board by providing
independent and objective assurance on the adequacy and
effectiveness of the Group’s controls. It brings a systematic
and disciplined approach to evaluating and improving the
effectiveness of the Group’s risk management, control and
governance frameworks and processes. Group Audit’s 2024
annual assessment of the risk management, governance and
control environment did not identify any matters that conflict
with the 2024 ARCA report.
On behalf of the Board, the Board Risk Committee reviewed
the 2024 ARCA report and was satisfied with the conclusion
that the Group’s risk management systems, including its
internal control systems, were adequate for managing all
material risks. The Board Risk Committee also regularly reviews
significant risks and how they might affect the Group’s financial
position, comparisons to agreed risk appetites, and what the
Group does to manage risks outside its appetite.
The Board confirms that there is an ongoing process for
assessing the Company’s risk management and internal
control systems and identifying, evaluating and managing the
significant risks faced by the Group, which has been in place
throughout the period and up to the date of this report.
The Board takes the view that, on the basis of the 2024 ARCA
assessment carried out, it would be reasonable to conclude
that the Group’s risk management and internal control systems
are effective. The Directors acknowledge that any internal
control system can manage, but not eliminate, the risk of not
achieving business objectives. It can only provide reasonable,
not absolute, assurance against material misstatement
or financial loss.
Remuneration
The Board is mindful at all times that remuneration policies and
practices must be designed to support strategy and promote
the long-term sustainable success of the Group. It delegates
responsibility to the Remuneration Committee to ensure that
there are formal and transparent procedures for developing
policy on Executive remuneration and determining Director
and senior management remuneration.
In his report on pages 115 to 118, the Remuneration Committee
Chair provides an overview of the Committee’s work in setting
an appropriate framework for remuneration of the Executive
Directors, Executive Committee and other senior managers,
as well as the wider workforce, to ensure fair pay for all
our colleagues.
For details on how the Company has applied Provision 40
of the Code in determining Executive Director remuneration
policy and practices, see the summary on pages 136 to 137.
100 | Direct Line Group Annual Report and Accounts 2024
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Gregor Stewart
Chair
Committee membership
– Gregor Stewart
Chair and Independent Non-Executive Director
– Mark Gregory
Independent Non-Executive Director
– Fiona McBain
Independent Non-Executive Director
– David Neave
Independent Non-Executive Director
Key responsibilities
– Oversee the integrity of the Group’s
financial statements.
– Oversee and challenge the effectiveness of the
Group’s systems of financial internal controls and
regulatory reporting.
– Oversee Group Audit's annual assessment of the
Group's risk management, control and governance
frameworks and processes.
– Oversee the actuarial reserving process.
– Oversee the work and effectiveness of Group Audit
and the Group’s external auditors.
– Oversee the Group’s financial and non-financial
disclosures, including climate-related
financial disclosures.
Areas of focus in the reporting period
– Financial reporting: reviewed and challenged the key
accounting estimates and judgements made by
management to support the financial statements.
– Insurance reserves: reviewed the Group’s insurance
reserves to obtain assurance that they remained
appropriate for discharging expected liabilities.
– External Audit: oversaw the transition from Deloitte
LLP to KPMG LLP.
– Oversaw the continuation of the CFO Control and
Oversight Remediation Programme.
– Reviewed and challenged Group Audit's annual
assessment of the Group's risk management, control
and governance framework and processes.
Committee skills and experience
In line with the UK Corporate Governance Code 2018
(the “Code”), all members of the Audit Committee are
independent, and the Committee as a whole is deemed to have
competence relevant to the insurance and financial services
sectors in which the Group operates.
The Committee Chair is a member of the Institute of Chartered
Accountants of Scotland. Fiona McBain and Mark Gregory are
members of the Institute of Chartered Accountants in England
and Wales. David Neave is a Chartered Insurer and brings to the
Committee 40 years of experience in senior general insurance
positions including claims and underwriting.
Each member has recent and relevant financial experience
gained in a number of different financial services businesses,
including insurance, enabling them to contribute diverse
expertise to the Committee’s proceedings.
Main activities during the year
At each of its scheduled meetings, the Committee received
reports on financial reporting, insurance reserves, internal
controls and Group Audit.
Financial reporting
The Committee followed a review process before
recommending the Annual Report and Accounts and Half
Year report to the Board, and focused on the choice and
application of significant accounting policies, emphasising
those requiring a major element of estimation or judgement.
Further information on the significant matters considered
is provided in the table on page 102.
The Committee considered the estimates and judgements
used to prepare the Group’s capital position under Solvency II,
including focusing on the level of technical provisions held.
Specific matters considered included judgements made in
respect of events not in data, and the risk margin. The Committee
reviewed the Group's Solvency and Financial Condition report
on behalf of the Board before submission to the PRA.
Insurance contract liabilities – liability for
incurred claims
The Committee reviewed and challenged the key assumptions
and judgements, emerging trends, movements, and analysis of
uncertainties underlying the reserving estimates made for the
liability for incurred claims. These assumptions and judgements
were informed by actuarial analysis, wider commercial and risk
management insights, and principles of consistency from
period to period. After its review, the Committee recommended
the liability for incurred claims to the Board.
The Committee also commissioned an external independent
actuarial review of material risk areas of insurance liabilities,
carried out for the Committee by PricewaterhouseCoopers
LLP (“PwC”).
101 | Direct Line Group Annual Report and Accounts 2024
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Audit Committee report
Significant judgements and issues
Matter considered
Description
Action
Insurance liabilities
valuation
The Committee reviewed
the level of insurance
liabilities of the Group.
Insurance liabilities include
the liability for remaining
coverage and the liability for
incurred claims at the
statement of financial
position date. By its nature,
the liability for incurred
claims requires analysis of
trends and risks, and the
application of management
judgement, knowledge and
experience. The
measurement of the liability
for remaining coverage is
less judgemental than the
liability for incurred claims as
the Group applies the
Premium Allocation
Approach which simplifies
the measurement of the
Liability for Remaining
Coverage, using an
allocation of premiums over
the coverage period. Further
information on insurance
liabilities is provided on
pages 30 to 31.
During 2024, the Committee reviewed and challenged the approach,
methodology and key assumptions used by management in setting
the liability for incurred claims and monitored developing trends that
could have a material impact on them. On an ongoing basis, it
received updates from the interim Actuarial Director on emerging
experience and how this compared to expectations. Particular points
of discussion in 2024 were the developing trends in personal lines
Motor, covering large bodily injury claims experience and damage
claims, and in Home subsidence. The Committee was provided with
updates on the necessary provisions held from year end 2023 for
potential Ogden rate changes, updates to Labour Costs inflation ENID
(Auto Body Professionals rates) and updates to the General Damages
ENID (judicial court guidelines). The Committee discussed the
judgements that underpinned the year end liabilities, including those
based on current and prior-year development and settlement
patterns. The Committee reviewed analysis of the matters that
significantly impacted the booked reserves, alongside supporting
data and diagnostics, and the potential range of outcomes. The
Committee discussed the approach to identifying and recognising
those events which were not yet reflected in data and reviewed and
challenged the provisions proposed by management. Whilst headline
inflation reduced during the year, the Committee continued to closely
monitor the impact of inflation on the liabilities. Both economic and
sources of excess inflation were considered which resulted in a
reduction in the macro-ENID provisions. The Committee obtained
insight and reviewed results from an independent actuarial review of
material elements of insurance liabilities. Where there was divergence
between the independent actuarial review and that of management,
the Committee challenged the reasons for the divergence. The
Committee was satisfied that management had exercised
appropriate control and judgement in estimating insurance liabilities.
Valuation of
investments not held
at fair value and
investment property
The Committee considered
reports on the estimates and
judgements applied to the
carrying value of the Group’s
investments that are not
held at fair value, and the
basis for the valuation. These
assets principally comprise
infrastructure loans,
commercial real estate loans
and private placement
bonds held within the
investment portfolio. The
Group also holds a portfolio
of investment properties.
Information was provided to
the Committee on a regular
basis to support the value
recognised in the accounts.
In 2024, the Committee considered material accounting estimates
and judgements in respect of assets not held at fair value, and the
investment property portfolio, and was satisfied with the carrying
value of investments and the basis for their valuation. The Committee
considered the impact of the continuing challenging macro-
economic environment on the investment property portfolio and
noted the year end independent valuation resulted in a small decline
overall in the portfolio value. The Committee concluded that the
carrying values in the accounts were reasonably stated.
102 | Direct Line Group Annual Report and Accounts 2024
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Task Force on Climate-related Financial
Disclosures report
The Committee reviewed the financial disclosures in the Task
Force on Climate-related Financial Disclosures ("TCFD")report
on behalf of the Board as part of its review of the Annual Report
and Accounts. The TCFD report can be found on page 58.
Going concern, viability and fair, balanced
and understandable
The Committee considered the going concern assumptions
and viability statement in the 2024 Annual Report and
Accounts, valuation of assets and impairment reviews, non-
recurring period-specific transactions and clarity of disclosures.
The Committee reviewed and concluded that the Annual
Report and Accounts taken as a whole were fair, balanced and
understandable and provided sufficient information to enable
the reader to assess the Group’s position, performance,
business model and strategy.
When considering the 2024 Annual Report and Accounts,
the Committee considered the significant judgements and
issues which could be material to the financial statements.
These included the matters set out in the table on page 102.
The Committee challenged the estimates and judgements
being made and also discussed these matters with the
External Auditor.
For more information on the viability statement see page 74.
Internal control
During the year, the Committee continued to monitor and
review the adequacy and effectiveness of the controls that
underpin the Group’s Financial Reporting Control Framework
("FRCF"), which forms part of the Group’s wider internal controls
system. The Board delegates supervision of the framework to
the Committee, while the CFO is responsible for the
framework’s operation on a day-to-day basis.
During 2024, the miscalculation identified within the Group’s
audited Solvency II own funds for the year ended 2023 was
reported to the Audit Committee. 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. This miscalculation had no
impact on the IFRS figures.
As discussed in the Risk Management and Internal
Control Systems section of Corporate Governance Report on
page 99, the Group has taken a number of actions in 2024 to
strengthen the control environment in relation to the specific
area where the miscalculation occurred. These measures
helped to ensure that the underlying root causes of the
miscalculation were remediated for the half year 2024 Solvency
reporting such that they did not represent an unresolved
material control deficiency at the year-end balance sheet date.
Further, the underlying root causes of the miscalculation are
considered to have been caused by control deficiencies in 2023.
There were no further material control deficiencies reported to
the Committee.
In 2024, the Audit Committee continued to oversee the CFO
Control and Oversight Remediation Programme (the
"Programme"), the aim of which is to enhance the financial
reporting control environment across the Group. During the
year, the Programme, which is led by the CFO Control Steering
Group and chaired by the CFO, reported back to the
Committee on its progress. Targeted remediation activities
relating to improvement in the financial reporting processes
were completed.
The Committee reviewed and challenged Group Audit's annual
assessment of the Group's risk management, control and
governance frameworks and processes. The Committee also
reviewed Group Audit's opinion on the overall effectiveness
of the Group's internal control framework. This assessment
did not identify any matters that conflict with the 2024 Annual
Risk & Control Assurance ("ARCA") report as discussed in the
Corporate Governance section (Risk Management and Internal
Control Systems).
The Committee also considered management’s processes
and controls for identifying and responding to the risk of fraud.
The Committee noted that there were no fraud-related events
or actions to suggest that fraud might have a material impact
on the financial statements.
The Committee monitored management’s responses to the
control insights and observations raised by the External Auditor
in its annual management letter during the year and was
satisfied that management was taking appropriate and timely
action to resolve the issues raised.
Group Audit
The Committee is responsible for overseeing the work of
Group Audit and for ensuring industry best practice is adopted
appropriately. The Group Head of Audit’s primary reporting line
is to the Chair of the Committee. The secondary reporting line,
for day-to-day administration, is to the CEO.
During 2023 the Committee oversaw the independent
External Quality Assessment ("EQA") of the Group Audit
function. This rated Group Audit 'generally conformant'
with professional standards, with some improvements
recommended against relevant Internal Audit professional
standards. The Committee oversaw the development of the
action plan to address the findings from the EQA and during
2024 these were completed. PwC continued to provide
independent quality assurance activity with results reported to
the Committee.
During the year, Group Audit provided the Committee with
independent and objective reports on the adequacy and
effectiveness of the Group’s governance, risk management and
internal controls. Group Audit completed a number of reviews
of major programmes during the year. The Committee approved
Group Audit’s plan on a quarterly basis, and confirmed the
audit plan coverage on an annual basis. The Committee
received quarterly reports detailing internal audit activity, key
findings, management responses, and proposed action plans.
Following the completion of the actions from the independent
EQA and assessment by the Committee during the year, it
was concluded that the Group Audit function was effective.
The Committee approved the Group Audit Charter, which
is reviewed annually.
103 | Direct Line Group Annual Report and Accounts 2024
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Additional information
The Committee has unrestricted access to management and
external advisers to help discharge its duties. It is satisfied that
in 2024 it received sufficient, reliable and timely information to
perform its responsibilities effectively.
During the reporting period, the External Auditor and Head of
Group Audit met privately with the Audit Committee, in the
absence of management. The Chair of the Committee reported
on matters dealt with at each Committee meeting to the
subsequent scheduled Board meeting.
External Audit
The Committee is responsible for overseeing the work of
the External Auditor and agreeing the audit fee, as well as
approving the scope of the External Auditor’s annual plan.
During the year Deloitte LLP stepped down as the Company’s
auditor following completion of the audit of the financial year
2023 in line with mandatory rotation requirements. As
previously reported, the Board approved the appointment of
KPMG LLP (“KPMG”) as the Company’s auditor for the financial
year ending 31 December 2024 following a competitive tender
process, undertaken in 2022, and this appointment was
approved by shareholders at the Company's 2024 AGM. James
Anderson is the lead Audit Partner for KPMG.
During the year, the Committee oversaw the transition from
Deloitte to KPMG. The lead Audit Partner from KPMG regularly
reported to the Committee on process against the transition
plan and key transition milestones. Transition activities included
KPMG shadowing Deloitte on the 2023 audit and performing
dry runs and initial risk assessment activities.
The Company has complied, during the financial year under
review and up to the date of this report, with the provisions of
the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Committee Responsibilities) Order 2014.
Auditor independence
The Group has in place a minimum standard in relation to the
independence of the External Auditor, which is compliant with
the Financial Reporting Council’s ("FRC") review of its Ethical
Standard for Auditors. This establishes parameters for
preventing or mitigating anything that compromises
the External Auditor’s independence or objectivity. The
minimum standard includes:
– a formal process for the pre-approval of certain non-audit
services by the External Auditor;
– a requirement that any non-audit services are
reviewed annually;
– restrictions on employees of the auditor working for the
Group and vice-versa; and
– a requirement that key audit partners are rotated at least
every 5 years.
The Committee reviews the standard annually.
The Committee’s Terms of Reference require that the
Committee meet at least once annually with the External
Auditor in the absence of management.
In addition, the Committee reviews confirmation from
the External Auditor that in its professional opinion, it is
independent within the meaning of regulatory and
professional requirements.
Therefore, the Committee is satisfied that the Group has
adequate procedures to ensure that the External Auditor
is independent and objective and that these procedures
operated effectively during the year.
The Committee considers that KPMG established
independence as incoming auditor from 14 June 2023. The
Committee reviewed and reconfirmed KPMG's independence
again ahead of their official appointment at the Company’s
AGM in May 2024.
Non-Audit Fees
During the year, the Committee approved non-audit fees in
respect of agreed upon procedures in respect of Solvency
Capital Ratios. The Company's policy for non-audit services is
compliant with the FRC’s ‘Revised Ethical Standard 2019’. In line
with regulation, the Group is required to cap the level of non-
audit fees paid to its external auditor at 70% of the average
audit fees paid in the previous three consecutive financial years.
The following is a breakdown of fees paid to KPMG for the year
ended 31 December 2024 (excluding VAT).
Fees
£m
Proportion
%
Audit fees
3.6
88 %
Audit-related assurance services1
0.5
12 %
Non-audit services1
–
0 %
Total fees for audit and other services2
4.1
100 %
Notes:
1.
Fees of £0.5 million for audit-related assurance services have been
provided in 2024 (2023: £0.4 million) in respect of reporting
accountant services. Fees of £40,000 for non-audit services have
been incurred in 2024 (2023: £1.6 million) relating to agreed upon
procedures.
2.
Total audit fees, excluding VAT.
Audit-related assurance services were in respect of the Group’s
Solvency II reporting and the review of the Half Year report
2024. Further information in respect of audit fees paid to KPMG
is disclosed in note 5 to the consolidated financial statements.
104 | Direct Line Group Annual Report and Accounts 2024
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Effectiveness of the external audit process
In 2024, the Committee conducted its annual review of
the External Auditor’s effectiveness. The Committee assessed
the External Auditor through:
i.
a detailed questionnaire completed by key stakeholders;
ii. discussing matters with the CFO;
iii. formally reviewing the External Auditor’s independence;
iv. assessing the key risks identified by the External Auditor,
the quality controls put in place to deliver the audit and
whether the agreed audit plan was fulfilled; and
v. private meetings with the External Auditor in the absence
of management.
In addition, through regular interaction with the External
Auditor, the Committee was satisfied that the External Auditor
demonstrated professional scepticism and challenged
management’s assumptions.
The quality of the audit was assessed through review and
discussion of the External Auditor’s report to the Committee
at each meeting, and from the challenges and insights
brought to significant areas of judgement in the Group’s
financial statements.
After taking into account all of the information available
and considering FRC Audit Quality: Practice aid for audit
committees, the Committee concluded that Deloitte had
performed its obligations effectively and appropriately as
External Auditor to the Group in respect of their audit of the
2023 financial year.
The Committee has closely monitored the performance of
KPMG since its appointment, considers that there has been
a smooth transition of the external audit and recommends
KPMG for re-election by shareholders at the Company's
2025 AGM.
Committee effectiveness review
During the year, an evaluation of the effectiveness of the
Committee was carried out as part of the wider review of the
performance of the Board and the Board Committees which
was externally facilitated by Promontory. The review found that
the Committee operates effectively, has the right mix of skills
and experience and the appropriate level of cross-over with
the Board Risk Committee. Further information on the Board
effectiveness review can be found on pages 97 to 98.
In addition, the Committee’s terms of reference were reviewed
against the activity of the Committee during the year. The
Committee’s Terms of Reference can be found on the
corporate website: www.directlinegroup.co.uk/en/who-we-are/
leadership/board-committees
The Board reviewed and approved this report on 3 March 2025.
Gregor Stewart
Chair of the Audit Committee and Independent Non-
Executive Director
105 | Direct Line Group Annual Report and Accounts 2024
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Mark Gregory
Chair
Committee membership
– Mark Gregory
Chair and Independent Non-Executive Director
– Fiona McBain
Independent Non-Executive Director
– David Neave
Independent Non-Executive Director
– Gregor Stewart
Independent Non-Executive Director
– Dr. Richard Ward
Senior Independent Director
Key responsibilities
– Provide oversight and advice to the Board in relation
to current and emerging risk exposures of the Group
and the strategic approach to managing
risk, including determination of risk appetite.
– Promote a risk-aware culture within the Group.
– Review the design and implementation of the Risk
Management Framework, risk appetite and
tolerances.
Areas of focus in the reporting period
– Monitored and reviewed the Group’s top risks
across its financial, operational and organisational
resilience pillars.
– Regularly assessed the Group’s emerging risks,
including monitoring of the geopolitical landscape
and its impacts on the Group.
– Reviewed and provided challenge and input into
the Group’s Consumer Duty Annual Board Report.
– Continued oversight of the Controls and Risk and
Control Self-Assessment ("RCSA") Project ("CRP"), a
Company-wide controls improvement programme
aiming to set a new activity and assurance standard.
– Received regular updates on the Pricing
Practices Regulation and Motor Total Loss past
business reviews.
Further detail on these areas can be found in the body
of the Committee report.
Chief Risk Officer’s report
At each scheduled meeting, the Committee received a report
from the Chief Risk Officer (“CRO”) which outlined the
challenges and risks being faced across the Group’s financial,
operational and organisational resilience pillars. The CRO’s
report provided an overview and status of the principal risks
against the Group’s appetite, as well as: key activities
undertaken by the Risk function to further embed risk
management across the Group; outputs of regular risk
monitoring activities; and details of any current and specific
financial, non-financial or regulatory and compliance risk
matters. Alongside the CRO's report, the Committee regularly
assessed the Group’s emerging risks – defined as newly
developing or changing threats or opportunities that are
subject to a high degree of uncertainty but have the potential
to materially impact the Group over the long-term. It
challenged management on the identification of all possible
significant emerging risks during the year and on the Risk
function’s role in ensuring that such emerging risks were being
monitored and managed appropriately. The most notable
emerging risks identified included those relating to geopolitical
tension, the transition to Electric Vehicles ("EVs"), generative
Artificial Intelligence ("AI"), climate change and granular pricing.
In addition, the Committee reviewed the plan of risk assurance
activities to be undertaken for each quarter and the year
ahead to support the Group's key strategic objectives and
to ensure adherence to prevailing legal and regulatory
requirements, as well as the Group’s enterprise and risk
management framework.
Focused business and risk reviews
Set out below are some of the areas of focus and key reviews
that the Committee carried out during the reporting period,
to examine the risk profile of the business, and to challenge
the robustness of frameworks in place to manage key risk
exposures as well as regulatory requirements and expectations:
– oversaw and challenged progress and delivery of the 2024
Risk and Compliance Assurance Plan;
– review of the annual Consumer Duty Board report as part
of the Group's considerations of fair pricing and customer
outcomes across all Direct Line Group products. The Group's
pricing strategy and pricing governance and control
framework were also reviewed;
– reviewed the Group’s operational resilience self-assessment,
including important business services and associated
impact tolerances;
– reviewed the effectiveness of the Group’s risk management
and internal control systems and environment, including
material financial, operational and compliance risks, the
Group’s residual risk position, associated mitigating actions
and compensating controls. This included oversight and
challenge of the Group’s quarterly RSCA process;
– reviewed the Group’s adherence to privacy and data
protection legislation;
– reviewed the stability, security and capability of the Group’s
IT systems;
– reviewed and approved the Group’s Risk Taxonomy, forming
part of the Risk Management Framework.; and
– oversaw risks arising from corporate plan implementation.
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Board Risk Committee report
Risk appetite
The Committee undertakes an annual review of the Group’s
risk appetite framework, which includes the overarching risk
appetite and policy risk appetite statements. It monitors the
Group’s exposure against these statements, considers key
risk indicators and assesses the key drivers that affect status
against risk appetite. In line with regulatory requirements,
the Committee scrutinises and approves the Group’s overall
affirmative and non-affirmative cyber insurance underwriting
strategy, associated risk appetite statements and relevant
management information.
Committee members also reviewed and challenged the Own
Risk Self-Assessment ("ORSA") process and key content before
submission to the Board for approval. Committee challenges
on elements of the ORSA during the year included: whether
the language in the ORSA relating to changes in the control
environment was appropriately consistent with wider
assessments discussed at the Audit and Remuneration
Committees; and whether the offer from Aviva had as yet
led to any adjustments in ORSA processes. In addition, the
Committee monitored and challenged the stress and scenario
testing plan and outputs. The Committee also reviewed the
potential Contingent Management Actions to possibly be taken
in times of stress to restore the Group’s capital strength to
within an acceptable risk appetite range.
Compliance and regulatory risk
During the year, the Committee considered the Group’s
compliance with a number of regulatory requirements,
including those relating to conduct, financial crime and anti-
bribery and corruption. The Committee also received regular
reports (alongside the Customer and Sustainability Committee)
that provided oversight of customer outcomes and how the
Consumer Duty had been implemented and embedded into
the business. This included review and challenge of the Group’s
Consumer Duty Annual Board Report ahead of its submission
to the FCA in July 2024.
The Committee received regular updates in respect of
the delivery of the Group’s past business reviews on Pricing
Practices Regulation and Motor Total Loss valuations, to the
point of being materially complete. In January 2025, the FCA
confirmed that the voluntary requirements ("VREQs") in
relation to both of these matters had been satisfied and
removed from the Financial Services Register. The Committee
also received regular updates on Periodic Summary Meeting
(“PSM”) and Firm Evaluation (“FE”) Letters that the Group had
received in January 2024 from the PRA and in December 2023
from the FCA respectively.
The Committee also approved the Risk and Compliance
assurance plan which set out assurance activities to be
undertaken in the coming year, with a view to ensuring
compliance with various regulations, and supporting the Board
and colleagues to understand their regulatory responsibilities.
Internal control
During the year, the Committee continued to oversee the
control improvement programme commissioned in 2023
to improve the Group’s control environment. As part of this
programme, a number of improvements were made during
the year across the control environment and the three lines
of defence model:
– implementation of a new quarterly RSCA process which
assessed all of the Group’s critical risks and controls;
– documentation of the Group’s critical controls, including
an assessment of the design adequacy and operating
effectiveness of these controls;
– introduction of clearer end to end ownership and
accountabilities of principal risks and critical controls;
– implementation of a new risk management system with
improved functionality to track and monitor risks, control
deficiencies, and risk events; and
– improvements to the quality of control testing in the first line.
To accelerate this progress and to enable the proper
embedding of these improvements, the CEO took the decision
in 2024 to create a new Chief Controls Office ("CCO") function in
the first line. The primary responsibilities of the CCO
function include:
– Ensuring consistency in the operation of the Group’s Risk
Management Framework in the business.
– Facilitating the new RCSA process and assuring its outcomes
through centralised control testing.
– Supporting the business in capturing, monitoring and
responding to risk events, control deficiencies and risk/
vulnerability management.
This work is supported by further activity across the Group,
overseen by the Board and its relevant Committees, designed
to carry out control remediation, improve risk culture, and
develop the required capability across the first line of defence.
The Committee received updates from the CCO function on
the control improvement programme at each of its scheduled
meetings from the CCO, where it monitored and challenged
progress. Although the programme was concluded at the end
of 2024, the creation of the new CCO function will enable the
underlying improvements in risk and control to further
formalise and embed across the Group in 2025.
Climate change
The Committee regularly received updates on climate change.
In particular, the Committee reviewed the climate-related
risk management roadmap that was in place and considered
the plan to take the Group to a position whereby it could
demonstrate credible progress towards Net-Zero. There are
two key areas for development: climate change scenario
modelling and the management of financial risk from climate
change and plans are in place to address these via the
roadmap. As previously reported, the Group’s Net Zero targets
have been accepted by the Science Based Targets initiative.
107 | Direct Line Group Annual Report and Accounts 2024
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Internal capital model
The Committee regularly reviewed and challenged reports
on the Group’s partial Internal Economic Capital Model for
determining regulatory capital requirements during the year,
including key assumptions, methodologies and areas of expert
judgement used within the model, activities undertaken
to validate model outputs, model changes and future
management actions. During Q4 2024, the services of Willis
Towers Watson Limited were retained to perform a review of
the Internal Economic Capital Model used to model the Group’s
Solvency Capital Ratio: the Committee will receive and discuss
their findings in early 2025.
Whistleblowing
As delegated by the Board, the Committee routinely reviewed
the Group’s whistleblowing arrangements. The Committee
Chair oversees the independence, autonomy and effectiveness
of the Group’s policies and procedures on whistleblowing,
including the procedures for protection from detrimental
treatment for staff who raise concerns. The Committee
challenged management and was satisfied that the
whistleblowing process met the necessary standards and that
it was adequately designed, operated effectively, and adhered
to regulatory requirements.
The Committee received updates on actions agreed by
management to enhance existing whistleblowing policies and
processes. The actions are underway and will be materially
complete by June 2025.
Financial crime and anti-bribery and corruption
The Group has an overarching fraud and financial crime policy,
which includes the requirement that all employees of the
Group comply with the anti-bribery and corruption, anti-money
laundering, fraud and payment security and sanctions
minimum control standards. The aim of the anti-bribery and
corruption minimum control standard is to ensure compliance
with applicable anti-bribery and corruption legislation and
regulation and to ensure that employees act responsibly and
ethically at all times when conducting business.
The Committee considered the Group’s actions to prevent
financial crime through its review of the annual financial crime
report and noted the progress made against the agreed actions
throughout 2024 following the quarterly Risk and Control
Self-Assessments. The Committee also considered the annual
anti-bribery and corruption report, which sets out the Group’s
procedures and controls in place to prevent bribery. The
committee noted the Group’s arrangements in place and
actions being taken to ensure effective oversight of bribery risk.
The Economic Crime and Corporate Transparency Act 2023
(”ECCTA”) introduces a corporate offence called "failure to
prevent fraud." Under this law, which comes into force in
September 2025, firms can be held criminally liable if an
employee or person associated with the firm commits a fraud
offence with the intention of benefiting the firm (either directly
or indirectly) and the firm did not have reasonable procedures
in place to prevent it. The Group is working to implement
the necessary procedures and arrangements to comply with
the new legislation.
The continued conflict between Russia and Ukraine has seen
continued sanctions against the Russian regime throughout
2024. The Group continues to monitor the sanctions situation
and screen against the most up-to-date key sanctions lists on
a daily basis in order to mitigate this risk.
Risk governance
During the reporting period, the Committee received
assurance from management on the process for review
of the Group’s policies and reviewed material changes to the
Group’s most significant policies. The Committee reviewed
and challenged each of these policies and recommended them
for approval by the Board as appropriate.
The Committee has unrestricted access to management and
external advisers to help discharge its duties. It is satisfied that
in 2024 it received sufficient, reliable and timely information to
perform its responsibilities effectively. In addition to one-to-one
meetings with the Chair, the CRO also met with the Committee
in the absence of the Executive Directors. The Chair reported
on matters dealt with at each Committee meeting to the
subsequent scheduled Board meeting.
Committee effectiveness review
During the year, an external evaluation of the effectiveness
of the Committee was conducted with assistance from
Promontory, as part of the wider review of the performance
of the Board and its Committees. The review found that the
skills and experience of the Committee were appropriate, that
its interaction with the Board and other Committees was
constructive and that its level of challenge was effective,
reflecting current priorities. The review found that the
Committee has strong technical skills and has a highly effective
crossover with the Audit Committee. The Committee received
positive feedback, though it was noted that improvements
could be made to Committee papers in order to further
support constructive discussion and challenge, Further
information on the Board effectiveness review can be found
on pages 97 to 98.
In addition, the Committee’s Terms of Reference were reviewed
against the activity of the Committee during the year. The
Terms of Reference were found to be suitable, comprehensive
and of appropriate scope.
The Committee’s Terms of Reference can be found on the
corporate website:
www.directlinegroup.co.uk/en/who-we-are/leadership/board-
committees
The Board reviewed and approved this report on 3 March 2025.
Mark Gregory
Chair of the Board Risk Committee and Independent
Non-Executive Director
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Danuta Gray
Chair
Committee membership
– Danuta Gray
Chair and Independent Non-Executive Director
– Tracy Corrigan1
Independent Non-Executive Director
– Mark Gregory1
Independent Non-Executive Director
– Carol Hagh2
Independent Non-Executive Director
– Adrian Joseph1
Independent Non-Executive Director
– Mark Lewis1
Independent Non-Executive Director
– Fiona McBain1
Independent Non-Executive Director
– David Neave1
Independent Non-Executive Director
– Gregor Stewart1
Independent Non-Executive Director
– Dr Richard Ward
Senior Independent Non-Executive Director
Key responsibilities
– Review the composition of the Board and its
Committees.
– Lead the process for Board appointments and make
recommendations to the Board.
– Oversee executive succession planning at a high
level to seek to ensure the development of a diverse
senior management talent pipeline.
– Set diversity objectives and strategies.
– Oversee and monitor the corporate governance
framework of the Group.
– Monitor developments in governance and investor
ESG expectations.
Areas of focus in the reporting period
– Led the search for the new Chief Financial Officer.
– Recommended appointments to the Board and to
the Board’s Committees.
Main activities during the year
Board and senior management succession planning
The Committee continuously keeps the composition of the
Board under review, with the objective of preserving and
refreshing the Board’s collective experience, expertise and
diversity to enable it to oversee the execution of the Group’s
long-term strategy effectively.
During the year, the Committee finalised the search for a new
Group Chief Financial Officer ("CFO"). The international
executive search firm, Odgers Berndtson (a signatory to the
voluntary code of conduct for executive search firms which has
no other connection to the Company or any individual director)
was engaged to assist with the search. Shortlisted candidates
underwent a psychometric assessment and a deep interview
process, including interviews by the Chair of the Board, the
Chairs of the Audit and Board Risk Committees and the Chief
People Officer, resulting in the selection of Jane Poole as the
preferred candidate. We announced on 10 April 2024 that Jane
would join the Group as CFO, and the Board as an Executive
Director, subject to regulatory approval. Jane joined the Group
as CFO and was appointed to the Board, and as a member of
the Investment Committee, on 10 October 2024.
The Committee led a search in 2023 that culminated in the
appointment of Carol Hagh as a Non-Executive Director with
effect from 1 April 2024. The Committee was assisted by Teneo,
the global executive search and advisory firm (and a signatory
to the voluntary code of conduct for executive search firms,
which has no other connection to the Company or any
individual director). Fuller details about that search were
reported in the 2023 Annual Report. In 2024, the Committee
commenced a further search for a new Independent Non-
Executive Director with the assistance of Odgers Berndtson.
Shortlisted candidates were interviewed by members of the
Committee. The search has been put on hold following the
Board’s recommendation of the offer by Aviva to acquire the
Group and is expected only to be reactivated should it become
clear that the transaction will not successfully complete.
Composition of Board Committees
During the year, the Committee considered the effect of
changes in the Board’s composition on the skills and
experience available to the other Committees of the Board and
recommended that Tracy Corrigan be appointed as Chair of the
Customer and Sustainability Committee with effect from 1 March
2024 and that Carol Hagh be appointed as a member of the
Remuneration Committee with effect from 1 November 2024.
Notes:
1.
Tracy Corrigan, Mark Gregory, Adrian Joseph, Mark Lewis,
Fiona McBain, David Neave and Gregor Stewart were appointed
to the Committee with effect from 1 January 2024.
2.
Carol Hagh was appointed to the Committee with effect from
1 April 2024, the date of her appointment to the Board.
109 | Direct Line Group Annual Report and Accounts 2024
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Nomination and Governance
Committee report
Electing and re-electing Directors
Before recommending the proposed election or re-election
of Directors at the 2024 AGM, the Committee reviewed the
independence of the Non-Executive Directors and concluded
that all Non-Executive Directors remained independent
in judgement and character and met the criteria for
independence set out in the UK Corporate Governance Code.
The Chair of the Board was independent on appointment.
The Committee also carefully considered Directors’ external
responsibilities and concluded that all Directors had sufficient
time to dedicate to their respective roles. All current Directors
will submit themselves for election or re-election at the
Company’s 2025 AGM.
Diversity and inclusion
The Committee believes that diversity of skills and experience
equips the Board better to take a broad strategic perspective
and the management team better to lead a diverse workforce
and serve a diverse customer base.
The Board has in place a Diversity Policy, the objective of which
is to seek to ensure that individual differences, which contribute
to the success of the Company and represent the diversity
of our customers and colleagues, are reflected at Board level.
The policy underpins appointments that are made to both
the Board and its Committees and is monitored and reviewed
by the Nomination and Governance Committee. It is made
available to any executive search firm engaged to assist with
the selection and appointment process for Board positions.
The Board Diversity Policy is available to view on the Company’s
website at www.directlinegroup.co.uk/en/sustainability/reports-
policies-and-statements.
Further information on the Board’s approach to diversity,
and the progress made towards senior management gender
targets, can be found in the Corporate Governance report
on pages 95 to 96, which includes progress against key
external targets.
The Committee also oversees the Group's talent development
and succession planning, focusing on future skills needed by
the business. More information on senior management
diversity can found on pages 81 and 95.
Corporate governance
The Committee monitors arrangements made by the
Company and its subsidiaries to comply with the UK Corporate
Governance Code and other relevant governance standards.
It also considers emerging governance matters, observance
of ESG standards and developments, and reforms which may
affect the Group’s adherence to corporate governance
best practice.
Committee effectiveness review
During the year, an evaluation of the effectiveness of the
Committee was facilitated by Promontory as part of their wider
review of the performance of the Board. The review found that
the Committee had led the searches for the new CEO and CFO
effectively and that it should review its composition and the
frequency and formality of its meetings and consider renewing
its focus on executive succession planning. Further information
about the Board performance review can be found on page 94.
The Committee also reviewed its activity against its Terms
of Reference and determined that its Terms of Reference
remained comprehensive and of appropriate scope.
The Committee’s Terms of Reference can be found on the
corporate website: www.directlinegroup.co.uk/en/who-we-are/
leadership/board-committees.
The Board reviewed and approved this report on 3 March 2025.
Danuta Gray
Chair of the Nomination and Governance Committee
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Tracy Corrigan
Chair
Committee membership
– Tracy Corrigan
Chair and Independent Non-Executive Director
– Adrian Joseph OBE
Independent Non-Executive Director
– Mark Lewis
Independent Non-Executive Director
Key responsibilities
– Provide oversight and advice to the Board on
conducting its business in a responsible and
sustainable manner.
– Monitor the progress of the Group under its five
sustainability pillars.
Areas of focus in the reporting period
– Monitored the Group’s activity under the five pillars
of the Group’s sustainability strategy.
– Oversaw the Group’s improvements to reporting
and monitoring of customer outcomes.
– Oversaw the Group’s sustainability-related initiatives
and tracked progress against the Group’s Science-
Based Targets.
– Reviewed the Group's refined approach to diversity
and inclusion.
– Reviewed ethical matters, including the Group’s
Modern Slavery Statement.
Main activities during the year
Customer
Following a review of its remit, the Committee increased its
oversight of customer outcomes, conduct and experience
in 2024. An additional six Committee meetings were scheduled
to enable the Committee to review customer-related metrics
and track progress across a total of ten meetings during the
reporting period. The Committee placed particular emphasis
on identifying root causes of customer complaints and
overseeing the Group’s embedding of the Consumer Duty
(the "Duty".)
Together with the Board Risk Committee, the Committee
carefully reviewed the business's first annual Consumer
Duty report.
In addition, the Committee oversaw the development of the
Group's Customer Outcomes Improvement Plan to further
enhance compliance with and implementation of the Duty.
The Committee also reviewed the Risk Mitigation Plan ("RMP")
that was developed in conjunction with PwC with the aim of
improving the Group's compliance with monitoring and
reporting requirements under the Duty. The Committee
encouraged management to further develop the approach
to tracking progress of the RMP using metrics and a
supporting timeframe.
Planet
During the year, the Committee oversaw the Group’s
engagement with, and delivery of, its climate- and
sustainability-related commitments. In order to further
integrate sustainability into business decisions and strategic
choices, the Committee reviewed plans to assign responsibility
for key sustainability workstreams across senior management.
Progress updates from the Climate Executive Steering Group,
in relation to the Group’s five Science-Based Targets (“SBTs”),
were reviewed, with an emphasis on the importance of
delivering the Group’s carbon emissions reduction plan.
People
Over the course of 2024, the Committee reviewed the
business’s initiatives to promote a culture that helps all
colleagues thrive and celebrates difference.
During the year, the Committee oversaw the refinement of the
scope of the People Pillar. Updates were received on diversity
and inclusion (“D&I”) initiatives, as well as themes that arose
from the all-employee ‘DiaLoGue’ engagement surveys and
other engagement with colleagues.
Society
The Committee oversaw the business’s work to use its expertise
to improve outcomes for society and the communities that the
Group serves.
In the latter part of the year, the Committee reviewed
Management's proposed new approach for the Community
Fund (the "Fund"), which has donated £6.9m to charities and
good causes since 2020. The Committee supported the
intention to align the Fund with the business's wider strategic
vision and to further enhance colleagues' emotional connection
with the Group's charitable initiatives.
111 | Direct Line Group Annual Report and Accounts 2024
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Customer and Sustainability
Committee report
Modern Slavery Statement
In February 2024, the Committee reviewed the Group’s
policy on compliance with the Modern Slavery Act 2015
(the “MSA”) and how third-party suppliers complied with the
Act’s requirements.
The Committee reviewed the Procurement function’s activity
in relation to the MSA and concluded that processes and
policies in connection with the MSA were robust, effectively
embedded in supply chain processes, and reflected the
Procurement function’s updated sustainability processes.
The Modern Slavery Statement is available to view on the
corporate website:
https://www.directlinegroup.co.uk/en/sustainability/reports-
policies-and-statements
Governance
The Board is focused on ensuring that ethical and sustainable
business practice is embedded throughout the business.
During the year, the Chair of the Customer and Sustainability
Committee reported on matters dealt with at each meeting
to the subsequent scheduled Board meeting. The Board,
recognising the growing strategic significance of sustainability
matters, received additional, dedicated reports on the Group’s
approach to Customer, People and Culture.
Committee effectiveness review
During the year, an external evaluation of the effectiveness
of the Committee was conducted with assistance from
Promontory, as part of the wider review of the performance
of the Board and its Committees. The review noted that during
the year, the Committee had further deepened its focus on the
Consumer Duty and customer outcomes. Further information
on the Board effectiveness review can be found on
pages 97 to 98.
In addition, the Committee’s Terms of Reference were
reviewed against the activity of the Committee during the year.
The Terms of Reference were found to be suitable,
comprehensive and of appropriate scope.
The Committee’s Terms of Reference can be found on the
corporate website:
www.directlinegroup.co.uk/en/who-we-are/leadership/board-
committees
The Board reviewed and approved this report on 3 March 2025.
Tracy Corrigan
Chair of the Customer and Sustainability Committee and
Independent Non-Executive Director
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Fiona McBain
Chair
Committee membership1
– Fiona McBain
Chair and Independent Non-Executive Director
– Mark Gregory
Independent Non-Executive Director
– Jane Poole2
Chief Financial Officer
Key responsibilities
– Provide oversight of the Group’s investment
strategy.
– Oversee the management and performance of the
Group’s investment portfolio.
Areas of focus in the reporting period
– Monitored closely the changes in valuations and
resilience of the Group’s investment assets.
– Oversaw phases of implementation of the refreshed
target Strategic Asset Allocation exercise, including
review of adjusted recommendations and strategies
across asset classes.
– Ensured the investment portfolio held appropriately
matched assets and liabilities and remained within
agreed aggregate risk and exposure limits.
– Ensured the investment portfolio maintained
sufficient liquidity to meet a stress insurance or
financial market event in a 1 in 200-year insurance,
market, or credit risk event.
– Received progress updates on the calibration
of Science-Based Targets (“SBTs”) for each asset class
in scope within the investment portfolio.
Oversight of market developments
During the year, the Committee considered trends in economic
growth, employment figures, credit spreads, inflation and
interest rates, and wider geopolitical contexts and took these
into account when providing oversight of, and challenge to,
the Group’s investment strategy.
At each scheduled meeting, the Committee received reports
on key financial market developments from the Director of
Investments and Capital Management.
Monitoring investment activity and performance
Throughout the year, the Committee carefully reviewed the
performance of the Group’s investments. It received
presentations from representatives of its managed portfolios
at each meeting. In 2024, attendees from Rothschild & Co.,
BlackRock Inc., Neuberger Berman and Goldman Sachs Asset
Management L.P. shared their views of relevant market
performance, market outlook and wider economic context.
The Committee discussed the performance of the Group's
various assets under management, and carefully considered
the balance between flexibility, investment return and
alignment with the Group's risk appetite for each mandate.
Management shared recommendations for the Group's
in house portfolios, which were reviewed and challenged by
the Committee to ensure the investment strategy remained
appropriate and well-positioned. During the year, the
Group's investment strategy was reviewed and compared
to a peer group, and the Group's portfolio was found to
be performing well.
Reviewing investment strategy and liquidity
Early in 2024, the Committee conducted its annual review
of the business’s asset liability management, which was
undertaken to ensure that the Group’s asset and liability
matching, along with stressed liquidity requirements, remained
appropriate. The Committee reviewed Management's
recommendations for the Group's overnight liquidity
requirements, ensuring an improved balance was struck
between the business’s performance and the Group’s ability
to access sufficient liquidity if it were to meet a 1 in 200-year
stress risk event.
In the second half of the year, the Committee reviewed both
interim and end solutions for improved hedging against
interest rate risk. It made recommendations for key areas
to be brought back for review and challenge in 2025.
Strategic Asset Allocation ("SAA")
During the year, the Committee oversaw the phasing of
implementation of the refreshed SAA. A detailed action point
plan and corresponding timeline was produced to the
Committee, and progress carefully monitored by the
Committee.
Throughout the year, the Committee reviewed amendments
to the target SAA as and when these occurred.
Notes:
1.
Neil Manser was a member of this Committee until he stepped down from the Board of Directors on 10 October 2024.
2.
Jane Poole was appointed as a member of this Committee with effect from 10 October 2024.
113 | Direct Line Group Annual Report and Accounts 2024
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Investment Committee report
Risk management
During 2024, a Risk and Control Self-Assessment was carried
out in conjunction with PwC and covered three risk areas: asset
and portfolio management; investment counterparty credit
and default; and liquidity management. No control gaps were
identified for the Investment and Treasury ("I&T") team in any of
the three risk areas and the two documentation enhancements
for liquidity management made by PwC were implemented.
The Risk function was engaged throughout the relevant
decision-making processes and a representative from Risk
attended each meeting of the Committee.
During the second half of the year, the Risk function carried out
a review of the I&T team's existing key risk indicators and made
some suggestions for adjustment.
Oversight of responsible investment
The Committee monitored the Group's externally managed
mandates for compliance with the Group's responsible
investment framework. The Committee was pleased to learn
that the Group achieved its targeted 50% reduction in
Weighted Average Carbon Intensity in its corporate bond
portfolio ahead of schedule.
During the year, a gap analysis against PRA SS3/191
requirements was performed and the Group updated its
climate change roadmap.
Governance
The Chair reported on matters dealt with at each Committee
meeting to the subsequent scheduled Board meeting.
Committee effectiveness review
Towards the end of the year, an external evaluation of
the performance of the Committee was conducted with
assistance from Promontory, as part of the wider review of
the performance of the Board and its Committees. The review
found that the Committee was highly organised and well-
structured, benefiting from a very active Chair. In addition,
the quality of materials available to the Committee was good.
Further information on the Board effectiveness review can
be found on pages 97 to 98.
In addition, the Committee’s Terms of Reference were reviewed
against the activity of the Committee during the year. The Terms
of Reference were found to be suitable, comprehensive and
of appropriate scope. Updates were made regarding the
Committee’s oversight of climate and sustainability.
The Committee’s Terms of Reference can be found on the
corporate website:
www.directlinegroup.co.uk/en/who-we-are/leadership/board-
committees
The Board reviewed and approved this report on 3 March 2025.
Fiona McBain
Chair of the Investment Committee and Independent Non-
Executive Director
Note:
1.
The Prudential Regulation Authority's Supervisory Statement SS3/19:
Enhancing banks' and insurers' approaches to managing the
financial risks from climate change.
114 | Direct Line Group Annual Report and Accounts 2024
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Dr Richard Ward
Chair of the
Remuneration
Committee
Committee membership
– Dr Richard Ward
Chair and Senior Independent Director
– Tracy Corrigan
Independent Non-Executive Director
– Danuta Gray
Chair of the Board
– Mark Gregory
Independent Non-Executive Director
– Carol Hagh1
Independent Non-Executive Director
– Mark Lewis
Independent Non-Executive Director
Note:
1.
Carol Hagh was appointed to the Committee effective
1 November 2024.
Key responsibilities
– Determine the policy for rewarding Executive
Directors and senior leadership for results that are
generated within the risk appetite set by the Board
and oversee how the Group implements its
Remuneration Policy.
– Oversee the level and structure of remuneration
arrangements for senior executives, approve share
incentive plans, and recommend them to the Board
and shareholders.
– Review workforce remuneration and related policies
and the alignment of incentives and rewards with
culture, ensuring all our colleagues are paid fairly.
Areas of focus in the reporting period
– Adam Winslow was appointed as CEO on 1 March
2024 and the Committee approved the grant
of buyout awards to compensate him for awards
forfeited from his previous employer, in accordance
with the remuneration arrangements approved
in 2023.
– Jane Poole was appointed as CFO on 10 October
2024 and the Committee carefully considered and
approved the appropriate remuneration package for
this role.
– The Committee also considered the remuneration
arrangements for the departing CFO, Neil Manser, in
accordance with the Directors’ Remuneration Policy
and incentive plan rules, contractual obligations and
shareholder expectations.
– Remuneration packages for senior hires below
the main Board were reviewed and approved
by the Committee.
– The Committee approved the measures and targets
for the 2024 AIP awards, which were subsequently
reviewed in July 2024.
– The Committee approved the measures and
targets for the 2024 LTIP awards to align with the
new strategy.
– The Committee reviewed the potential
remuneration implications associated with a change
of control, including in the context of the Ageas non-
binding offer and subsequent Aviva offer.
– Reviewed and approved risk adjustments in relation
to the solvency capital ratio misstatement.
– The Committee (and Board) continued to be
updated on wider workforce actions, including
employee feedback, voluntary turnover and salary
increase decisions.
115 | Direct Line Group Annual Report and Accounts 2024
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Directors’ Remuneration report
Dear Shareholders,
On behalf of the Remuneration Committee ("the Committee"),
I am pleased to introduce the Directors’ Remuneration Report
for the 2024 financial year.
In 2024, we welcomed a new senior leadership team, led
by Adam Winslow, and the Group made significant progress
on our strategic objectives following the priorities set out
at the Capital Markets Day in July 2024. This performance
has been delivered in the context of a number of additional
unanticipated activities, including an approach from
Ageas in early 2024 and an agreement on the terms
of a recommended offer for Direct Line Group by Aviva,
as announced in December.
The Committee has continued to make remuneration
decisions on a "business as usual" basis wherever possible,
carefully considering a range of factors in ensuring that 2024
remuneration outcomes are consistent with our broader
employee and shareholder experience (as outlined in detail
in the remainder of this report).
The Report is set out in the following sections:
Section
Page
Chair’s statement
115 to 118
Remuneration at a glance – summarising the
remuneration arrangements for Executive Directors
119
Annual Report on Remuneration – detailing pay
outcomes for 2024 and covering how the Group
will implement the Policy for 2025
120 to 137
Summary of the Policy approved at the 2023 AGM
138 to 141
Performance and incentive outcomes for 2024
As noted above, the Group has delivered on the strategic
objectives set out by Adam Winslow at our Capital Markets
Day in July. Strong growth in our core product areas has driven
improved trading performance, further supported by bringing
Direct Line Motor onto price comparison websites for the first
time. During this transitional year, the Group has delivered
ongoing operating profit of £205m (2023: (£189.5m)) and
Net Insurance Margin from ongoing operations of 3.6%
(2023: (8.3%)) whilst making excellent progress on managing
costs. Our capital position remains strong – we announced
a 2024 interim dividend of 2.0p per share (2023: Nil) and are
proposing a final year dividend of 5.0p per share (2023: 4.0p).
The Group has also placed significant focus on the experience
of our colleagues and our customers, with an improved
employee engagement score despite the challenging
business landscape, launching two new apps which have been
downloaded almost 300,000 times and delivering an improved
overall Net Promoter Score.
2024 AIP
As outlined in last year’s report, the Committee decided to
delay setting the 2024 LTIP targets until a strategic review had
taken place following Adam Winslow’s appointment as CEO.
However, given the shorter nature of the AIP performance
period, the Committee set the majority of the AIP targets
at the start of the year (with the exception of the strategic
objectives (20% weighting), which were finalised following
Adam's appointment and split equally between Cost and Risk
objectives). These targets were set prior to this business wide
review, which culminated in the Capital Markets Day in July
and included a full financial re-forecast.
In this context, following the strategic review, the Committee
reviewed the original targets in light of the new strategic plan,
with particular focus on the operating profit targets (55%
weighting). The key consideration for the Committee was that
it considered it essential to have an incentive that supported
the critical work to be done in delivering the strategy over the
balance of 2024, especially given that the AIP scorecard targets
are applicable to many colleagues participating in the AIP
across the Group. The Committee considered the updated
internal financial forecasts as well as consensus performance
expectations (although the Committee noted that the
consensus forecasts at that time varied significantly, primarily
due to the way some analysts had treated investment income
from the sale of our Brokered commercial insurance business).
The Committee discussed potential options to improve the
alignment between the AIP and the new strategy, in particular
whether to amend the operating profit targets during the year
or leave them unchanged but consider the exercise of discretion
at the end of the year. Whilst the Committee recognised the
challenges around the appropriateness of changing targets at
the mid-year, ultimately we decided that it was the right thing
to do to amend the targets – in order to provide greater clarity
to participants, to ensure that the AIP remained incentivising
and motivating to all colleagues and to drive the right
outcomes for the business. The Committee was also mindful of
the truly exceptional circumstances faced by the Group at the
time, with a new CEO and senior leadership team, challenging
insurance market landscape and business uncertainty following
the Ageas approach earlier in 2024. Taking all of these factors
into account, the Committee approved amended Ongoing
Operating Profit targets. Full details of the original and
amended Operating Profit targets are set out on page 122.
As noted in the introduction to this letter, the Group delivered
rapidly on key strategic priorities, particularly during the second
half of the year. In particular, we saw strong premium growth
in both Motor and Non-Motor, with a return to profitability
in Motor alongside a strong result in Non-Motor. As a result,
ongoing operating profit (£205m) exceeded the revised
maximum level for this element of the AIP (55% weighting).
At our Capital Markets Day, we set out an ambition to deliver
at least £100m cost savings by the end of 2025 on an annualised
run-rate basis. Over 2024 we made excellent progress
towards this target by making improvements in procurement,
rationalising technology and simplifying our operating model.
As a result, 2024 cost performance exceeded the maximum
level for this element (10% weighting).
The 2024 AIP also included targets related to Risk
(10% weighting), Customer (15% weighting) and People
(10% weighting). Performance under the Risk and Customer
elements were assessed to be around the target level and
slightly below the target level respectively, whilst performance
in relation to the People element was determined to be at
the maximum level. Further details are set out on page 123.
Based on the Committee’s assessment against the performance
targets, the overall 2024 AIP outcome was 86.4% of maximum.
The Committee debated the appropriateness of this outcome,
recognising the broader context in which the performance
was delivered. The Committee’s view was that our 2024
performance was particularly impressive given the relatively
short period that the new senior leadership team had been
in place, as well as the significant time spent during the year
in relation to the Ageas approach and subsequent Aviva offer,
which could easily have impacted the Group’s ability to deliver
on our key priorities.
116 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Following extensive discussion, the Committee determined
that the 86.4% overall outcome appropriately reflects the
performance of the Executive Directors, senior leadership team
and wider employees in delivering in an extremely challenging
environment and unprecedented year for the Group, and
therefore did not exercise discretion to adjust this outcome. In
line with the Policy, 40% of any AIP for the Executive Directors
will be deferred for three years under the Deferred Annual
Incentive Plan ("DAIP").
As noted above, the AIP outturn also impacts around 3,400
employees below Board level and the Committee was pleased
to be able to recognise the performance of all of our colleagues
in delivering our 2024 results, noting that the 2022 and 2023 AIP
outturns were 0% and 15% respectively. Full details on the
outcomes for the year are included on pages 122 to 123.
2021 and 2022 LTIP
The 2021 LTIP awards were granted in two tranches in March
and August 2021 and were subject to RoTE (60% weighting) and
relative TSR (40% weighting) performance. The performance
period for the RoTE element of the awards ended on 31
December 2023 was disclosed in last year’s report (0% vesting).
The performance period of the TSR element of the 2021 LTIP
awards ended on 26 March 2024 and 31 August 2024.
Performance was below the threshold performance level
(median) for both awards, and therefore these elements lapsed
in full. This means that the overall outcome of the March and
August 2021 LTIP awards was 0% vesting.
The 2022 LTIP awards were also granted in two tranches
in March and August 2022, and were subject to RoTE (50%
weighting), relative TSR (40% weighting) and Emissions (10%
weighting) performance. The performance period for the RoTE
and emissions elements of the 2022 LTIP awards ended on
31 December 2024, with performance as follows:
– RoTE (50% weighting): Average RoTE for the three-year
performance period ending 31 December 2024 was minus
3.63%. This is below the threshold target level of 17.5%, and
therefore this element will lapse in full.
– Emissions (10% weighting): All of the 3 emissions metric
targets were met and therefore this element will vest at 100%.
The performance period of the TSR element of the 2022 LTIP
awards (40% weighting) ends on 28 March 2025 and 29 August
2025 (or shortly before completion of the potential Aviva
acquisition if earlier) respectively and is therefore not yet
known. The outcome of these elements, and therefore the
overall outcome of the 2022 LTIP awards (including the RoTE
and emissions outcomes as above) will be disclosed in next
year’s report (subject to the status of the Aviva acquisition) once
the performance period is complete.
Committee decisions on remuneration outcomes
As noted above, the overall AIP outcome was considered
appropriate and therefore no discretion to adjust the outcome
was exercised.
The 0% vesting outcomes for the 2021 LTIP awards were
considered appropriate in the light of the Group’s performance
over the three-year performance period, and therefore no
discretion to adjust the outcome was exercised in relation
to these awards.
Although the RoTE element (50% weighting) of the 2022 LTIP
awards will lapse, the full vesting in relation to the emissions
metric (10% weighting) reflects the strong progress on our
environmental targets and commitment to sustainability.
The extent to which the TSR elements (40% weighting) vest will
be considered by the Committee in March and August 2025
(or shortly before completion of the potential Aviva acquisition
if earlier), as the TSR performance period continues until the
vesting date.
Taking the points above into account, the Committee believes
the Policy has delivered an appropriate quantum of reward for
the corporate performance achieved. The Committee was
therefore satisfied that the Group’s Remuneration Policy has
operated as intended.
Wider workforce pay considerations and
engagement for 2024
The Committee regularly and carefully considers wider
employee pay as context for the decisions it makes.
As part of the wider Committee oversight on all-employee pay
matters, the Committee is pleased to confirm that the Group
will apply an increase to the Group's minimum salary of 5%
from 1 April 2025, to align with the Living Wage Foundation's
Real Living Wage. This will result in the Group-wide minimum
salary increasing to £24,570 on a full-time basis (for a 37.5hr
working week).
For employees who earn above the minimum salary, all eligible
employees will receive a salary increase of between 3.5%-4.0%
effective 1 April 2025.
As Chair of the Committee, I have attended at least one
meeting of the Group’s Employee Representative Body (“ERB”)
each year since 2018. The Group’s ERB is a valued forum for
having a two-way dialogue on many important matters.
I attended the ERB meeting in December 2024, where I
discussed executive remuneration with colleagues and took
questions. The Q&A session covering topics such as the
alignment of pay and performance and the possible impacts
of the potential Aviva acquisition. Feedback was shared on how
people are experiencing the level of ongoing change in the
business as well as the response to the enhanced
communication strategy.
The outcome of our DiaLoGue People Survey is an important
factor for the Committee to reflect on and it has been kept
abreast of matters by the Chief People Officer and Chief
Executive Officer throughout the year.
Our existing workforce engagement is strengthened through
“town halls” and other forums. To supplement this, the
Committee receives papers setting out details of all-employee
pay and workforce policies across the Group at each meeting.
For 2024 this included information on the Group's gender and
ethnicity pay gaps, the approach to 2025 salary increases for the
wider workforce, as well as reward design changes to support in
driving a high-performance culture. This standing agenda item
provides valuable insight and context for framing executive pay
and policies.
Directors’ Remuneration Policy (the “Policy”)
The Company is required to submit the Directors'
Remuneration Policy to a shareholder vote by 31 December
2026 (and ordinarily at the 2026 AGM) in accordance with the
Companies Act 2006.
In the context of the potential Aviva acquisition, the Committee
will keep under review the appropriate approach given the
current uncertainty in the precise timing of completion.
A summary of the current Policy is set out on pages 138 to 141.
117 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Executive Director changes
As explained in last year's report, Adam Winslow was appointed
to the Board as Chief Executive Officer on 21 March 2024. Acting
CEO Jon Greenwood stepped down from the Board on the
same date and returned to a non-Board role.
As announced on 10 April 2024, Jane Poole was appointed
to the Board as Chief Financial Officer on 10 October 2024.
In setting Jane's remuneration, the Committee considered her
wealth of experience in general insurance, market data in
respect of FTSE51-150 companies and other FTSE350 insurers,
the previous CFO's remuneration package, our Directors'
Remuneration Policy and the pay and conditions of the wider
workforce. Taking these factors into account, Jane's salary was
set at £550,000, broadly in line with the previous CFO.
In accordance with the Directors' Remuneration Policy, Jane
receives pension contributions (or cash in lieu) in line with the
wider workforce (9% of salary) and her variable remuneration
opportunities (AIP and LTIP) are in line with the current
Directors' Remuneration Policy. Jane also received buyout
awards to compensate for awards forfeited from her previous
employer in connection with her appointment at DLG. Further
details are set out on page 134.
Neil Manser stepped down as CFO and from the Board on
10 October 2024 and commenced his 12-month notice period.
He completed a handover period to the new CFO to assist with
an orderly transition and was then placed on garden leave for
the remainder of his notice period. His employment will cease
on 9 October 2025.
Neil will retain his 2022 DAIP and LTIP awards, which will vest
on the normal vesting dates and (in the case of the LTIP)
subject to the relevant performance conditions and a two-year
post-vesting holding period. In light of the Company’s
announcement on 23 August 2024 relating to the
misstatement of the Company’s Solvency Ratio for the 2023
financial year, and following a review process conducted with
external support and advice, the Committee considered
whether any actions in relation to variable pay were
appropriate. The Committee determined that the malus
provisions under the DAIP rules should be applied in relation to
Neil’s DAIP award granted in 2024 in respect of the deferred
element of the 2023 AIP, and therefore this award has lapsed in
full. In addition, Neil's LTIP awards granted in 2023 and 2024 will
lapse on cessation of employment. He will not receive a
payment under the AIP in respect of the financial year ended 31
December 2024 and will not be eligible to participate in the
2025 AIP or LTIP awards.
Further details of Neil’s terms in relation to his departure are
provided on page 133.
Potential Aviva acquisition
In the context of the Aviva offer announced on 23 December
2024, the Remuneration Committee has been discussing the
impact that the transaction would have on our remuneration
arrangements for Executive Directors, senior leadership and the
wider workforce. This will continue to be an area of focus for the
Committee during 2025 as we work towards completion. The
agreed principles for the treatment of remuneration in
connection with the transaction are set out in the co-operation
agreement agreed by Direct Line and Aviva in December 2024,
but do not impact the 2024 outcomes set out in this report.
Executive Director remuneration for 2025
The Committee carefully considered salary increases for the
Executive Directors (and the Executive Committee) for 2025
and determined that Adam Winslow and Jane Poole should
receive an increase of 3.5% (below the wider workforce level)
from 1 April 2025.
Over the summer, (and prior to the Aviva approach), the
Committee undertook a review of our remuneration
arrangements, taking into consideration the new strategy
outlined at the Capital Markets Day in July. The Committee
concluded that it is critical that our new CEO and CFO and
newly appointed wider management team have a meaningful
incentive that aligns with delivering the key transformation
objectives over the next 1-3 years, recognising that the
performance required to achieve this transformation goes far
beyond “business as usual” and the need to ensure the
remuneration package is competitive in this context.
In view of the exceptional circumstances, the Committee
therefore proposed to use the exceptional 300% of salary limit for
LTIP awards in the Policy for Executive Directors (above the
normal grant level of 200% of salary). We were part way through
a consultation with our major shareholders and proxy agencies
when the initial Aviva announcement was made. Up to that
point, shareholders had been broadly supportive of the proposal
to grant awards at this level, with differing views on the
appropriate performance measures to be used. However, given
the Aviva approach, it was appropriate to pause the consultation.
Although agreement has been reached on the terms of an offer
by Aviva for Direct Line, the Committee strongly believes that
the 2025 LTIP awards must operate effectively in all scenarios,
noting that the acquisition is still subject to shareholder and
regulatory approval. The Committee determined that the 2025
LTIP awards would be granted at 300% of salary for the Executive
Directors, in line with the Committee's original intention.
Further details on the approach for the 2025 AIP and LTIP
awards are set out on pages 136 to 137.
Committee performance
During the year, an evaluation of the effectiveness of the
Committee was facilitated by Promontory, as part of their wider
review of the Board’s effectiveness. The review found the
Committee to be well structured with a good awareness of the
remuneration of the wider workforce. Further information about
the Board effectiveness review can be found on pages 97 to 98.
The Committee’s terms of reference can be found on the
corporate website: www.directlinegroup.co.uk/en/who-we-are/
leadership/board-committees
Your AGM vote
The Committee welcomes investor feedback on an ongoing
basis and this report seeks to describe and explain our
remuneration decisions clearly. I hope that having read the
information in this report, you will vote in support of the
Remuneration Report resolution at the upcoming AGM.
Should you have any questions about the Committee’s Report
please email our AGM email address
shareholderenquiries@directlinegroup.co.uk and I or one of my
colleagues at Direct Line Group will respond to you.
Yours sincerely,
Dr Richard Ward
Chair of the Remuneration Committee and Senior
Independent Director
118 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Remuneration outcomes for 2024
Total pay (£’000)
£7,875
£2,170
£0
£1,000
£2,000
£3,000
£4,000
£5,000
£6,000
£7,000
£8,000
Adam Winslow
(CEO)
2024
Jane Poole
(CFO)
2024
n Base salary
n Pensions and benefits
n Annual bonus
n Buyouts
Find out more on page 121.
Notes:
1.
Adam Winslow was appointed as CEO effective 21 March 2024. His remuneration has been pro-rated accordingly for this period.
2.
Jane Poole was appointed CFO effective 10 October 2024. Her remuneration has been pro-rated accordingly for this period.
AIP achievement
This chart illustrates the actual amounts earned from the AIP reflecting performance in 2024. 60% of the amount is payable in
March 2025 and 40% will be deferred into shares for three years.
£0
£200
£400
£600
£800
£1,000
£1,200
£1,400
Adam Winslow
(CEO)
Jane Poole
(CFO)
n Actual (% of salary)
n Maximum (% of salary)
…
Actual (£)
Find out more on page 122 to 123.
Shareholding at 31 December 2024
This chart illustrates the number of shares held at the end of 2024 by the Executive Directors against the share ownership
guidelines of 250% of salary for the CEO and 200% of salary for the CFO.
466%
174%
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
Adam Winslow
(CEO)
Jane Poole
(CFO)
n 2024
…
Guideline
Find out more on page 129.
119 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Remuneration at a glance
£1,240k
£187k
175%
151%
175%
151%
Annual Report on Remuneration
Introduction
We have prepared this Report in accordance with the
requirements of the Companies Act 2006 and the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended) (the “Regulations”). The Report
also meets the relevant requirements of the Listing Rules of
the FCA and describes how the Board has complied with the
principles and provisions of the Corporate Governance Code
2018 relating to remuneration matters. Remuneration tables
subject to audit in accordance with the relevant statutory
requirements are contained in this report and stated
to be audited. Unless otherwise stated, the information within
the Report is unaudited.
Committee members and governance
The following list details members of the Committee during
2024. You can find information about each member’s
attendance at meetings on pages 84-85. You can find their
biographies on pages 77 to 80.
Committee Chair
Dr Richard Ward
Non-Executive Directors
Danuta Gray
Tracy Corrigan
Mark Gregory
Carol Hagh (from 1 November 2024)
Mark Lewis
Advisers to the Committee
The Committee consults with the Chief Executive Officer, the
Chief Financial Officer, the Chief People Officer, and senior
representatives of the HR, Risk and Finance functions on
matters relating to the appropriateness of all remuneration
elements for Executive Directors and Executive Committee
members. No Director or other attendee is present when
their remuneration is discussed. The Committee works closely
with the Chair of the Audit Committee, and the Board Risk
Committee Chair is a member of the Remuneration
Committee. Input was received regarding target-setting and
payouts under incentive plans, and whether it is appropriate to
apply malus and/or clawback. The Remuneration and Board
Risk Committees can also hold joint meetings to consider
matters of common interest.
The Committee appointed PricewaterhouseCoopers LLP
(“PwC”) as its independent adviser from 1 January 2019
following a competitive tender process.
During the year, PwC advised on market practice, corporate
governance and regulations, incentive plan design and target-
setting, recruitment, and other matters that the Committee
was considering. PwC supported the Group in several ways,
including the provision of internal audit, risk and controls, tax
and actuarial services during 2024. PwC is a member of the
Remuneration Consultants Group and a signatory to its Code
of Conduct and the Committee is therefore satisfied that the
advice PwC provided was objective and independent from the
Group and its Directors.
PwC’s total fees for remuneration-related advice in 2024 were
£198,650 excluding VAT. PwC charged its fees on a time and
expenses basis.
120 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Implementing Policy and pay outcomes relating to 2024 performance
Single figure table (Audited)
£’000
Salary1
Benefits2
Annual
bonus357
Long-
term
Incentives
All-
employee
share
plans
Pension
Buyout
awards89
Other12
Fixed pay
and
benefits
sub-total
Variable
remunera
tion sub-
total
Total
Adam Winslow4
2024
683
55
1,240
–
1
62
5,835
–
800
7,075
7,875
2023
–
–
–
–
–
–
–
–
–
–
–
Jane Poole6
2024
124
1
187
–
0
11
1,848
–
135
2,035
2,170
2023
–
–
–
–
–
–
–
–
–
–
–
Jon Greenwood10
2024
160
32
240
–
0
14
–
–
206
240
446
2023
668
125
177
0
1
60
–
–
854
177
1,031
Neil Manser11
2024
419
2
0
–
1
38
–
(55)
460
(55)
405
2023
527
2
138
0
1
47
–
–
577
138
715
Notes:
1.
Salary – the Company operates a flexible benefits policy, and salary is reported before any personal elections are made.
2.
Benefits – include a private medical insurance, life assurance, income protection, health screening and discounted insurance. The CEO uses a
car service for travelling on journeys between home and office; the Group also paid for any associated tax liability on this benefit. Jon Greenwood's
benefits also included a car allowance. Whilst Acting CEO, Jon Greenwood received reimbursement of reasonable travel and accommodation
expenses between his home in the North of England and the Group's London office to reflect the interim nature of this role; the Group also paid
for any associated tax liability on this benefit. The total cost to provide this travel and accommodation benefit in 2024 to 21 March 2024, being the
date he stepped down from the Board, was £23,467. The Acting CEO also received an allowance of £25,000 per annum (payable monthly, £5,511
received in respect of 2024) to reflect the significant disturbance to Jon and his family as a result of spending the majority of his time in London.
3.
Annual bonus – includes amounts earned for performance during the year but deferred for three years under the DAIP. For more information,
see pages 122 to 123. These deferred awards are normally subject to continuous employment. Awards remain subject to malus and clawback.
4. Adam Winslow joined DLG on 1 March 2024 and was appointed to the Board on 21 March 2024. In accordance with the reporting regulations,
his fixed pay and benefits shown above relate to his services as the CEO from 1 March 2024.
5.
As agreed as part of his recruitment terms, Adam Winslow was eligible for a full-year bonus for 2024, as no buyout award in respect of the 2024
bonus forfeited from his previous employer was made.
6.
Jane Poole joined the Board on 10 October 2024. Her fixed pay and benefits shown above reflect this period.
7.
The annual bonus figure for Jane Poole is pro-rated from the date she joined DLG and was appointed to the Board.
8. Buyout awards – this relates to the value of the buyout awards made to Adam Winslow as compensation for awards forfeited from his previous
employer upon joining DLG. This includes compensation for his 2023 bonus which was delivered, 50% in cash and 50% deferred into shares, in 2024.
Also included are the share awards granted as compensation for the share awards Adam forfeited. These buyout awards are detailed on page 128.
9.
Buyout awards – this relates to the value of the buyout awards made to Jane Poole as compensation for awards forfeited from her previous
employer upon joining DLG. This includes an estimated payment in lieu of the 2024 bonus forfeited, pro-rated to the date she joined DLG,
assumed for these purposes to be at the maximum level (£510,328). The actual payment will be confirmed in next year's report (subject to the
status of the Aviva acquisition). Also included are the share and cash awards granted as compensation for the share awards Jane forfeited.
These buyout awards are detailed on page 128.
10. Jon Greenwood stepped down from the Board effective 21 March 2024 and returned to a below-Board role. His remuneration has been pro-rated
accordingly for this period.
11. Neil Manser stepped down from the Board on 10 October 2024. His remuneration has been pro-rated accordingly for this period. Details of Neil's
exit arrangements can be found on page 133.
12. Other – this relates to the value of the malus adjustment applied to Neil Manser’s 2024 DAIP award in respect of the deferred element of the 2023
AIP which has lapsed in full as detailed on page 133.
Each Executive Director has confirmed they have not received any other form of remuneration from the Group in relation to their
services as a Director, other than that already disclosed in the single figure table.
121 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Annual Incentive Plan outcomes for 2024 (Audited)
The chart illustrates the final assessment, performance measures and weightings under the AIP.
Performance measures and weighting
55%
10%
15%
10%
10%
l Operating profit
l Strategic financial
l Customer
l People
l Risk
Performance achievement 2024
Outcome 2024
86.4%
Total
Operating profit
55%
Strategic financial
10%
Customer
6.4%
People
10%
Risk
5%
Executive Director
Achievement under the 2024 AIP
2024 AIP payment
Adam Winslow
86.4%
£1,239,840
Jane Poole
86.4%
£186,809
Jon Greenwood
86.4%
£239,607
Neil Manser
–
–
Notes:
1.
The AIP for Jon Greenwood is pro-rated to reflect the period to 21 March 2024, being the date he stepped down from the Board.
2.
40% of any AIP award is deferred into shares under the DAIP, vesting three years after grant.
Operating profit (55% weighting)
The primary financial performance measure for 2024 was operating profit for ongoing operations. The Committee established
threshold and maximum performance levels at the start of the year considering internal budgets and analysts’ consensus forecasts.
The original targets were £179.1m for threshold and £268.7m for maximum. As outlined in the Chair's statement, the Committee
reviewed the original targets, conscious of the updated Strategic Plan that was now in place following Adam Winslow’s
appointment. The Committee determined that the original targets were no longer appropriate or incentivising, noting that the
targets are applicable to all AIP participants. The Committee therefore approved an amended set of performance targets, as
outlined in the table below. Further details on this decision are set out in the Chair's Statement.
The approach taken to assessing financial performance against this measure was based on a straight-line outcome between 10%
for threshold performance and 100% for achievement of maximum performance.
The table below sets out the threshold and maximum performance targets for the year, and the actual performance achieved.
Measure
Threshold 10%
Maximum 100%
2024 Actual
2024 Achievement
Operating Profit
£160m
£200m
£205m
100 %
122 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Cost savings
(10% weighting)
Achieve at least
£100m gross cost
savings by the end
of 2025 on an
annualised run-
rate basis.
– The Group's cost saving programme aimed at simplifying the organisation and achieving the cost
savings ambition set out at the Capital Markets Day has made strong progress over 2024. Noting the
2025 nature of the £100m ambition, the Committee set a cost target for 2024 as follows:
Threshold
(0%)
Target
(55%)
Maximum
(100%)
2024
Actual
2024
Achievement
<£949m
£949m
£929m
£891m
100%
– This has been delivered by:
– Refining procurement: By making improvements in our procurement processes.
– Digitalisation: We have invested in digital distribution channels to improve customer accessibility,
streamline our operations and enhance the overall customer experience. This includes the launch of
two apps which have been downloaded almost 300,000 times to date.
– Rationalising technology: Reduction in costs by removing legacy technology systems and leveraging
our existing platforms.
– Simplifying our operating model: Our drive to create a leaner, less complex, and more efficient
operating model is well advanced, with consultations now complete as part of a reduction of 550 roles.
2024 outcome: 100% (10% out of 10%)
Customer
(15% weighting)
To better align
focus of our
leadership teams
on delivery of
customer
experience
Net promoter score (10% weighting)
– The Committee set a target to achieve a Group NPS score of 52 by the end of 2024 and a stretch target
of 53 – end of year Group NPS was just above the target level a 52.1.
– Underlying NPS score targets by brand are considered commercially sensitive, but strong performance
was delivered in Rescue and in Churchill, with weaker performance in Direct Line.
Complaints (5% weighting)
– The Committee set a target performance level of 4.5 complaints per 1000 in force policies (based on 2024
as a whole). Actual performance was in excess of this level (5.4 per 1000), although the Committee noted
a positive trajectory in reducing complaints during H2 2024.
– The Committee recognised that the outcome against the complaints metric was impacted by lower
levels of capacity across the motor repair industry and high inflation which drove price related
complaints. The impact of both led to higher resulting call volumes, leading to longer wait times.
– Nevertheless, the Committee concluded that the overall performance did not warrant any payout in
respect of this element of the AIP.
2024 outcome: 43% (6.4% out of 15%)
People
(10% weighting)
A range of
indicators around
employee
engagement,
reflecting the
importance of this
agenda to the
success of the
Group
Performance was assessed based on two key areas:
– Employee engagement: Employee engagement score of 72 (target: 72, 2023: 70). Overall engagement
among colleagues rose by 2 points since February 2024. The response rate has remained fairly consistent
in 2024, with a slight increase from 81% to 82% between February and September. The Committee
considered this an exceptional result given the uncertainty for colleagues following the Ageas non-
binding offer in March 2024 and the proposed changes to the business operating model. It should also
be noted that the DiaLoGue surveys occurred prior to the Aviva announcement, however the feedback
about the engagement programme and communication that has taken place with colleagues post-
announcement continues to be extremely positive.
– Confidence in Senior Leadership: Score of 71 (target: 69, 2023: 61). Given DLG’s ongoing period of
transformation and turnaround, highly effective leadership remains critical. In 2024, we focused on
uplifting leadership capability, specifically focusing on the Enterprise Leaders Network (“ELN”) and ExCo
populations. Our September 2024 DiaLoGue survey reported a significant 10-point increase in
confidence in our senior leadership since February 2024, reflecting the significant efforts taken by the
new Executive Committee team to foster a culture of open, honest engagement and communication.
2024 Outcome: 100% (10% out of 10%)
Risk
(10% weighting)
Continuously
strengthen risk
and controls
– In 2024, we sought to further embed a sustainable risk culture and promote continuous strengthening
of the risk & controls.
– Performance was assessed based on 5 indicator metrics:
– % of planned RCSAs completed – Outcome: Fully achieved
– % of planned ‘Controls Assurance’ activities completed – Outcome: Partially achieved
– Timely recording of Risk Events on the Group’s risk management system – Outcome: Broadly achieved
– Timely raising of MAPs and subsequent closure – Outcome: Partially achieved
– Timely closure of Line 2 risk recommendation – Outcome: Fully achieved
2024 outcome: 50% (5% out of 10%)
Note:
1.
Group total operating expenses, acquisition expenses, and claims handling expenses, adjusted to exclude restructuring and one-off costs,
commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.
123 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
LTIP outcomes for 2024 (Audited)
2021 LTIP awards (vesting in 2024)
Awards under the LTIP granted in March and August 2021 vested during 2024. They were subject to relative TSR performance over
the three-year period from the date of grant, and average RoTE performance over 2021, 2022 and 2023.
Consistent with the Regulations, the expected RoTE vesting outcomes for the year ended 31 December 2023 (together with the TSR
elements from the 2020 awards) were disclosed last year and included in the 2023 LTIP column of the single figure table because
the performance period for these elements ended in 2023. The performance outcomes of these elements are included in the table
below. Jon Greenwood and Neil Manser were participants in the 2021 LTIP awards (although Jon Greenwood’s awards were granted
prior to his appointment as Acting CEO).
The TSR elements of the 2021 awards (and the RoTE and emissions elements of the 2022 LTIP awards – see below) are included in
the 2024 single remuneration figure because the performance period for those elements ended in 2024. Details of the targets and
performance achieved are set out in the table below. As above, Jon Greenwood and Neil Manser were participants in the 2021 LTIP
awards, but the performance period ended after Jon Greenwood stepped down from the Board (and therefore the outcome is not
included in the 2024 LTIP column of single figure table for him in accordance with the Regulations, albeit the outcome was zero).
The performance achieved against the targets was as follows:
Award
Performance measure
Weighting
Threshold
(20% of
maximum)
Maximum
(100% of maximum)
Actual performance
Achievement
Outcome
March 2021
RoTE
(2023 single figure)
60%
17.5%
20.5%
0.9%
0.0%
0.0%
Relative TSR
(2024 single figure)
40%
Median
Upper quintile
Below median
0.0%
0.0%
August 2021
RoTE
(2023 single figure)
60%
17.5%
20.5%
0.9%
0.0%
0.0%
Relative TSR
(2024 single figure)
40%
Median
Upper quintile
Below median
0.0%
0.0%
2022 LTIP awards (vesting in 2025)
Awards under the LTIP granted in March and August 2022 are subject to relative TSR performance over the three-year vesting
period, and average RoTE performance over 2022, 2023 and 2024 and progress on our emission targets to 31 December 2024.
The performance in respect of the RoTE and emissions elements are set out in the table below. Performance under the relative
TSR measure will be assessed at the end of the vesting periods in March 2025 and August 2025 respectively (or shortly before
completion of the potential Aviva acquisition if earlier) and will be disclosed in the 2025 Directors’ Remuneration Report. Vesting
is subject to the Committee’s satisfaction that the financial and risk underpins have been met at the end of the vesting period.
Consistent with the Regulations, the expected RoTE and emissions vesting outcomes for the 2022 LTIP awards (together with
the TSR elements from the 2021 awards above) are included in the 2024 single remuneration figures. You can find details
of this on page 121.
Jon Greenwood and Neil Manser were participants in the 2022 LTIP awards (although Jon Greenwood’s awards were granted prior
to his appointment as Acting CEO). As the performance period ended after Jon Greenwood and Neil Manser stepped down from
the Board, in accordance with the Regulations, the outcome is not included in the 2024 LTIP column of single figure table.
Award
Performance measure
Weighting
Threshold
(20% of
maximum)
Maximum
(100% of maximum)
Actual performance
Achievement
Outcome
March 2022
RoTE (average)
(2024 single figure)
50%
17.5%
20.5%
(3.6%)
0.0%
0.0%
Emissions
10.0%
1 out of 3
3 out of 3
3 out of 3
100.0%
10.0%
Relative TSR
(2025 single figure)
40%
Median
Upper quintile
Performance period not yet complete
August 2022
RoTE (average)
(2024 single figure)
50%
17.5%
20.5%
(3.6%)
0.0%
0.0%
Emissions
10.0%
1 out of 3
3 out of 3
3 out of 3
100.0%
10.0%
Relative TSR
(2025 single figure)
40%
Median
Upper quintile
Performance period not yet complete
124 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
LTIP awards granted during 2024 (Audited)
The table below shows awards granted under the LTIP to Executive Directors in 2024 in the form of nil-cost options. Prior to
granting the awards, the Committee considered the potential for windfall gains and determined that it would not be appropriate
to make an adjustment at the time of grant, and will instead review whether there has been a "windfall gain" at the time of vesting
(to the extent that the performance conditions have been met).
Awards granted in 2024 under the LTIP1
Director
Position
Award as % of salary
Number of shares granted
Face value of awards (£)
Adam Winslow
Chief Executive Officer
200%
858,638
£1,640,000
Jane Poole
Chief Financial Officer
200%
668,693
£1,100,000
Neil Manser
Chief Financial Officer
200%
572,108
£1,092,728
Notes:
1.
The number of shares awarded was based on the average share price in the three-day period prior to grant. This was £1.91 for the award granted
to Adam Winslow and Neil Manser on 5 April 2024, and £1.65 for the award granted to Jane Poole on 11 November 2024.
2.
Neil Manser's LTIP award will lapse on cessation of his employment. Further details are set out on page 133.
The performance conditions that apply to the LTIP awards granted in 2024 are set out below:
Performance conditions for awards granted in 2024 under the LTIP
Performance Measure
Proportion of award
Performance for threshold
vesting (20%)
Performance for
maximum vesting (100%)
RoTE (2026)
25%
15.0%
22.0%
Operating earnings per share (2026)
25%
24.0p
30.0p
Expense ratio (2026)
20%
27.0 %
23.9 %
TSR vs. FTSE 51-150 (excluding Investment Trusts)
20%
Median
Upper quintile
Emissions
10%
1 out of 3 targets are met
All 3 targets are met
Note:
1.
Emissions targets are:
a.
Operational Scope 1 and 2: Reduce Scope 1 emissions by 38% by 2026 versus the 2019 baseline.
b. Corporate bonds (Scope 1 and 2): Reduce Scope 1 + 2 portfolio temperature score by invested value within corporate bonds portfolio from 2.44°C
in 2019 to 2.16°C in 2026.
c.
Corporate bonds (Scope 1, 2 and 3): Reduce Scope 1 + 2 + 3 portfolio temperature score by invested value within corporate bonds portfolio from
2.80°C in 2019 to 2.40°C in 2026.
A straight-line interpolation occurs from threshold to maximum performance.
The performance period for the awards granted on 5 April 2024 will end on 31 December 2026 for all performance measures.
DAIP awards granted during 2024 (Audited)
The table below shows the deferred share awards granted under the DAIP to Executive Directors on 5 April 2024 in respect of 40% of
the 2023 AIP. Awards will vest after three years, normally subject to continued service, and were granted in the form of nil-cost options.
Awards granted in 2024 under the AIP1
Director
Position
Number of shares granted
Face value of deferred bonus
(£)
Jon Greenwood2
Acting Chief Executive Officer
38,560
73,651
Neil Manser3
Chief Financial Officer
289,482
55,292
Notes:
1.
The number of shares awarded was based on the average share price in the three-day period prior to grant, which was £1.91. In accordance with
the DAIP rules, dividends in respect of the deferred shares are reinvested in additional shares, which vest when the deferred shares vest.
2.
The face value of the DAIP represents the deferred element (40%) of Jon Greenwood's full year 2023 AIP. The 2023 AIP value in the single figure
table on page 121 represents the pro-rated AIP for the period from 27 January 2023 from which he was Acting CEO.
3.
As outlined in the Chair's Statement and on page 133, the Committee determined that the malus provisions under the DAIP rules should be applied
in relation to Neil’s DAIP award granted in 2024 in respect of the deferred element of the 2023 AIP, and therefore this award has lapsed in full.
125 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Direct Line Group 2012 Share Incentive Plan (“SIP”) (Audited)
During 2024, all employees, including Executive Directors, were eligible to invest from £10 to £150 a month from their pre-tax pay
into the scheme, and receive one matching share for every two shares they purchased in the form of a conditional share award.
The matching shares vest after 3 years subject to continued employment and continuing to hold the purchased shares. This table
details the number of shares held by the current and former Executive Directors under the SIP.
Matching shares
granted during
the year
Matching shares
cancelled during
the year
Value of matching
shares granted (£)1
Total number of
matching shares at
31 December 202423
Adam Winslow
312
–
600
312
Jane Poole
29
–
73
29
Jon Greenwood
90
–
150
1,268
Neil Manser
360
–
674
1,362
Notes:
1.
The total market value of matching shares granted at the time of each award. Purchase of the matching shares takes place within 30 days
of the contributions being deducted from salary.
2.
Matching shares which are subject to forfeiture.
3.
Jon Greenwood stepped down from the Board on 21 March 2024 and Neil Manser stepped down from the Board on 10 October 2024. The interests
shown here are as at those dates respectively.
126 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Directors’ share interests (Audited)
Executive Directors commit not to hedge their exposure to outstanding awards under these plans or in respect of shares they
are reporting to the Company within their ownership for the purposes of any share ownership guidelines. They also agree not to
pledge as collateral their participation under any of the plans or any shares which they are required to hold in the Company for any
purposes, including for share ownership guidelines. The table below sets out details of the Executive Directors’ share interests
exercised whilst serving as a Director in the year to 31 December 2024.
At 31 December 2024
Share plan interests exercised
whilst serving as a Director during
the year to 31 December 2024
Share plan
awards subject
to performance
conditions1,2,3
Share plan
awards subject
to continued
service1
Share plan
awards vested
but unexercised1
Shares held
outright4
Number of
options
exercised1
Share price on
date of exercise
(£)5
Adam Winslow
858,638
1,830,090
–
516,799
965,619
2.03
Jane Poole
668,693
708,537
–
59
–
–
Jon Greenwood6
1,318,972
76,883
–
169,232
–
–
Neil Manser7
433,683
100,480
–
366,794
50,476
1.98
Notes:
1.
These awards take the form of nil-cost options over the Company’s shares. Such awards accrue dividend entitlement from the grant date to the
date on which an award vests, or the end of the applicable holding period. Dividends added post vesting are shown to 31 December 2024 but are
not realised until exercise.
2.
LTIP awards granted to Executive Directors include an additional two-year holding period before awards may be released.
3.
Unvested awards subject to performance conditions represent LTIP awards.
4. Shares held outright include beneficial share interests acquired under the SIP. At 3 March 2025, the number of shares beneficially held by Adam
Winslow has increased to 516,910, and the number of shares held by Jane Poole has increased to 169. There are no other changes in the Directors'
interests as set out above between 1 January 2025 and 3 March 2025.
5.
Neil Manser exercised options on 28 March 2024. Adam Winslow exercised options on 21 May 2024.
6.
The above share plan interests for Jon Greenwood are as at 21 March 2024 being the date he stepped down from the Board.
7.
The above share plan interests for Neil Manser are as at 10 October 2024 being the date he stepped down from the Board, and exclude awards
which have lapsed in connection with his departure.
The table below shows the Non-Executive Directors’ beneficial interests in the Company’s shares1.
Director
Shares held at
31/12/2024
Shares held at
31/12/2023
Danuta Gray
26,500
26,500
Tracy Corrigan
–
–
Mark Gregory
–
–
Carol Hagh
10,000
–
Adrian Joseph
–
–
Mark Lewis
–
–
Fiona McBain
–
–
David Neave
–
–
Gregor Stewart
2,925
2,925
Richard Ward
–
–
Notes:
1.
This information includes holdings of any connected persons, as defined in section 253 of the Companies Act 2006.
2.
There were no changes to the above between 1 January 2025 and 3 March 2025.
127 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Buyout awards (Audited)
Adam Winslow
The table below details the awards made to Adam Winslow, granted on 5 April 2024, as compensation for awards forfeited from his
previous employer (Aviva), as set out in last year's report. The awards were made in the form of restricted stock options. The awards
granted to replace forfeited deferred bonus awards are not subject to performance conditions, in line with the terms of the original
awards. For the remaining awards, which were subject to performance assessment, the 2021 LTIP was based on the performance
disclosed in the 2023 Aviva Directors' Remuneration Report, and the 2022 and 2023 LTIPs were based on an estimated performance
outturn. The final values shown here have been updated from the estimated values given last year. All awards will accrue dividend
equivalents, in line with the original award terms.
Award
Three-day average share
price for grant of awards £
Face value award £
No. of share options
granted
Vesting date
Deferred bonus 2021
1.913
162,515
84,953
8/4/2024
Deferred bonus 2022
1.913
160,169
83,726
8/4/2024
LTIP 2021
1.913
1,524,548
796,940
8/4/2024
Deferred bonus 2021
1.913
162,515
84,953
21/3/2025
Deferred bonus 2022
1.913
160,169
83,726
21/3/2025
LTIP 2022
1.913
1,204,839
629,816
21/3/2025
Deferred bonus 2023
1.913
162,500
84,945
28/3/2025
Deferred bonus 2022
1.913
160,169
83,727
20/3/2026
LTIP 2023
1.913
1,325,177
692,721
20/3/2026
Deferred bonus 2023
1.913
162,500
84,945
27/3/2026
Deferred bonus 2023
1.913
162,500
84,945
25/3/2027
In addition to the above, as disclosed in last year’s Directors’ Remuneration Report, Adam was compensated for the 2023 bonus he
forfeited from his previous employer. The value was determined by the Committee with reference to the Aviva Group CEO 2023
annual bonus outcome (prior to any personal performance adjustment) following publication of Aviva’s 2023 annual report.
The Committee also considered the performance of the business unit Adam led, and considered that this would have led to an
upwards adjustment to his bonus. On this basis, the Committee approved an outturn at the maximum level. The resultant value
of this award (£975,000) was delivered 50% in cash and 50% deferred into shares (i.e. an award of 254,835 DLG shares in three equal
tranches, made on 5 April 2024, which are detailed in the table above).
Jane Poole
The table below details the awards made to Jane Poole, granted on 11 November 2024, as compensation for awards forfeited from
her previous employer (Aviva). The awards were made in the form of restricted stock options, and are not subject to performance
conditions, in line with the terms of the original awards. The awards will accrue dividend equivalents, also in line with the original
award terms.
Award
Three-day average share
price for grant of awards £
Face value award £
No. of share options
granted
Vesting date
Deferred bonus 2022
1.645
50,081
30,444
21/3/2025
Deferred bonus 2023
1.645
73,867
44,903
21/3/2025
LTIP 2022
1.645
246,996
150,149
21/3/2025
Deferred bonus 2024
1.645
67,991
41,332
28/3/2025
LTIP 2022
1.645
41,199
25,044
11/8/2025
LTIP 2024
1.645
125,791
76,468
22/9/2025
Deferred bonus 2023
1.645
73,872
44,906
20/3/2026
LTIP 2023
1.645
223,931
136,128
20/3/2026
Deferred bonus 2024
1.645
67,991
41,332
27/3/2026
LTIP 2024
1.645
125,791
76,468
22/9/2026
Deferred bonus 2024
1.645
67,996
41,334
25/3/2027
In addition to the above, Jane received cash payments of £46,183 and £125,791 in November 2024 as compensation for forfeited
share awards which would have vested before her start date.
As outlined further on page 134, Jane will also be compensated for the 2024 bonus she forfeited from her previous employer
on a pro-rata basis, delivered two thirds in cash and one third in shares (vesting in equal tranches on the anniversary of grant
over a three-year period consistent with the original award). The maximum value of this award is £510,328. The final value of this
award will be determined after the publication of the 2024 Aviva Directors' Remuneration Report and will be set out in next year’s
report (subject to the status of the Aviva acquisition). However, for the purpose of the estimate in the 2024 single figure table
on page 121, we have included the maximum value (£510,328).
128 | Direct Line Group Annual Report and Accounts 2024
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Non-Executive Directors (Audited)
Non-Executive Directors receive a basic fee plus additional fees for specific Board responsibilities and time commitments.
The Chair of the Board receives a single fee. Non-Executive Directors may also claim for reasonable travel and subsistence expenses,
in accordance with the Group’s travel and expenses policy, and, where these are classified as taxable by HMRC, they are shown
under ‘Taxable benefits’ below. The Non-Executive Directors receive no other benefits.
Fees
Taxable benefits2,3,4
Total
Director
2024
£’000
2023
£’000
2024
£’000
2023
£’000
2024
£’000
2023
£’000
Danuta Gray
350
350
19
10
369
360
Tracy Corrigan
103
90
–
–
103
90
Mark Gregory
135
130
–
–
135
130
Carol Hagh5
62
–
–
–
62
–
Adrian Joseph
85
80
1
–
86
80
Mark Lewis6
95
68
2
4
97
72
Fiona McBain
115
110
8
14
123
124
David Neave6
100
29
6
3
106
32
Gregor Stewart
120
115
15
22
135
137
Richard Ward
150
150
1
–
151
150
Notes:
1.
Non-Executive Directors are not eligible to participate in any of the Group’s bonus or share incentive schemes or to join any Group pension scheme.
2.
The values shown under ‘Taxable benefits’ above comprise the value of taxable travel and subsistence expenses reimbursed by the Company
(including any gross-up for tax and national insurance contributions due).
3.
The value of taxable benefits for Danuta Gray for 2024 reflects expenses incurred due to her increased presence in the London office during 2024.
4. The value of benefits for Tracy Corrigan, Mark Gregory and Carol Hagh in 2024, and for Tracy Corrigan, Mark Gregory, Adrian Joseph and Richard
Ward in 2023, were all less than £500. The values have been rounded to 0 for consistency in the table above.
5.
Carol Hagh joined the Board on 1 April 2024. Her fees and expenses for 2024 reflect this period.
6.
Mark Lewis and David Neave joined the Board on 30 March 2023 and 19 October 2023 respectively. Their fees and expenses for 2023 reflect
these periods.
Shareholdings (Audited)
This table sets out the Executive Directors’ share ownership guidelines and actual share ownership levels:
Director
Position
Share ownership guideline1
(% of salary)
Value of shares held at
31 December 20242,34
(% of salary)
Adam Winslow
Chief Executive Officer
250%
466%
Jane Poole
Chief Financial Officer
200%
174%
Notes:
1.
Executive Directors are normally expected to retain all the ‘after tax’ Ordinary Shares they obtain from any of the Company’s share incentive plans
until they achieve a shareholding level that is equal to 250% of base salary for the CEO and 200% of base salary for the CFO respectively.
2.
For these purposes, holdings of Ordinary Shares will be treated as including unvested DAIP awards, all vested but unexercised awards, or awards
unvested but after the performance period and in the holding period. Holdings of Ordinary Shares are valued on a basis that is net of applicable
personal taxes payable on acquiring such Ordinary Shares.
3.
Shares held also include Partnership Shares, Matching Shares and Dividend Shares under the SIP, and share interests of connected persons.
4. Shareholding as a percentage of salary has been calculated based on the 31 December 2024 share price of £2.55.
As at the date he stepped down from the Board (21 March 2024), Jon Greenwood had not met the share ownership guideline
applicable to the CEO (250% of salary), but the Committee noted that the interim nature of the role means that this would
not be expected.
As at the date he stepped down from the Board (10 October 2024), Neil Manser had met his share ownership guideline
(200% of salary). As set out on page 133, he is subject to a post-employment share ownership requirement.
Service agreements and letters of appointment
The Executive Directors are employed under service contracts with no fixed term, and are subject to annual re-election at the AGM.
The Non-Executive Directors do not have service contracts and instead are appointed under letters of appointment.
129 | Direct Line Group Annual Report and Accounts 2024
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CEO pay ratio
The table below compares the single total figure of remuneration for the CEO since 2019 with that of the Group employees who are
paid at the 25th percentile (lower quartile), 50th percentile (median) and 75th percentile (upper quartile) of its employee
population.
Director
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
20241
Option A
270:1
187:1
132:1
20232
Option A
36:1
27:1
19:1
2022
Option A
35:1
27:1
18:1
2021
Option A
122:1
95:1
65:1
2020
Option A
132:1
108:1
73:1
20193
Option A
123:1
101:1
67:1
Notes:
1.
As required by the regulations, the CEO single figure used to determine the 2024 pay ratios is based on the sum of the total single figures
of remuneration for Jon Greenwood and Adam Winslow.
2.
As required by the regulations, the CEO single figure used to determine the 2023 pay ratios is based on the sum of the total single figures
of remuneration for Penny James and Jon Greenwood.
3.
As required by the regulations, the CEO single figure used to determine the 2019 pay ratios is based on the sum of the total single figures
of remuneration for Paul Geddes and Penny James, but with remuneration in respect of Penny’s service as CFO excluded.
The UK employees included are those full-time employees employed on 31 December 2024 for the full financial year, and
remuneration figures are determined with reference to the financial year ending on 31 December 2024.
Option A, as set out under the reporting regulations, was used to calculate remuneration for 2024 as we continue to believe that
that is the most robust methodology for calculating these figures. The value of each employee's total pay and benefits was
calculated using the single figure methodology consistent with the CEO. No elements of pay have been omitted.
The table below sets out the salary and total pay and benefits of the employee at the lower quartile, median and upper quartile for
the 2024 financial year:
Director
25th percentile (P25)
Median (P50)
75th percentile (P75)
Salary
£28,553
£41,475
£53,819
Total pay and benefits
£30,828
£44,513
£62,979
Base salaries of all employees, including our Executive Directors, are set with reference to a range of factors including market
practice, experience and performance in role. In reviewing the ratios, the Committee also noted that the CEO’s remuneration
package is weighted more heavily towards variable pay (including the AIP and LTIP) than the wider workforce due to the nature
of the role, and this means the ratio is likely to fluctuate depending on the performance of the business and associated outcomes
of incentive plans in each year.
The 2024 ratios have increased significantly versus 2023 levels, driven primarily by a higher AIP outcome for 2024 compared to
recent years and the value of buyout awards granted to Adam Winslow to replace awards forfeited from his previous employer,
which are included within the 2024 single figure (but vest over several years). Pay and benefits across the organisation reflect
a combination of salary increases and bonus outturns across the incentive schemes we operate.
The Group’s employees are fundamental to the Group’s strategy and to ensuring a high level of service to our customers.
We are proud that a high number of consultants in our customer service centres are employed by the Group (rather than being
outsourced) and note that the impact of these lower paid roles is reflected in the ratios above. Further details on the remuneration
of Executive Directors and the wider workforce are set out on page 117. The Committee notes that the pay ratios for 2024 reflect the
nature of the CEO’s package being more heavily weighted towards variable pay compared to more junior colleagues, consistent
with our reward policies. Furthermore, the Committee is satisfied that these policies drive the right behaviours and reinforces the
Group’s values which in turn drives the correct culture, and for the reasons outlined above, believes that the ratios are consistent
with the Group’s reward policies.
130 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Percentage change in Executive Directors’ and Non-Executive Directors’ pay for 2020 to 2024
The table below shows the year-on-year percentage change in salary, taxable benefits, and bonus (where applicable) of the
Executive Directors and Non-Executive Directors, compared to the average pay for all other employees.
Director
Salary/Fees1
Benefits2
Bonus
(including deferred amount)3
2024
2023
2022
2021
2020
2024
2023
2022
2021
2020
2024
2023
2022
2021
2020
Executive Directors
Adam Winslow
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Jane Poole
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Jon Greenwood
0%
0%
0%
–
–
30 %
0%
–
–
–
473 %
–
–
–
–
Neil Manser
3 %
2%
0%
–
–
22 %
7 %
4 %
–
– (100) %
–
(100) %
–
–
Non-Executive
Directors4,5,6
Danuta Gray
0%
0%
0%
67%
90%
91 %
56%
–
0%
(100%)
–
–
–
–
–
Tracy Corrigan
14 %
2%
18%
–
–
(4) %
0%
–
–
–
–
–
–
–
–
Mark Gregory
4 %
1%
3%
15%
7%
173 %
0%
0%
0%
(100%)
–
–
–
–
–
Carol Hagh
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Adrian Joseph
6 %
0%
0%
–
–
462 %
0%
–
–
–
–
–
–
–
–
Mark Lewis
6 %
–
–
–
–
(54) %
–
–
–
–
–
–
–
–
–
Fiona McBain
5 %
1%
7%
7%
15%
(40) %
26%
–
(100%)
(80%)
–
–
–
–
–
David Neave
33 %
–
–
–
–
97 %
–
–
–
–
–
–
–
–
–
Gregor Stewart
4 %
0%
0%
0%
0%
(31) %
92%
–
(100%)
(87%)
–
–
–
–
–
Richard Ward
0%
0%
5%
19%
0%
32 %
(4%)
105%
193%
(6%)
–
–
–
–
–
All employees (average)
Average employee
6 %
9%
6%
3%
4%
53 %
0%
57%
(19%)
(1%)
51 %
34%
(41%)
9%
4%
Notes:
1.
Based on the change in average pay for employees employed in the year ended 31 December 2024 and the year ended 31 December 2023. Adam
Winslow and Jane Poole both joined the Board during 2024 and therefore there is no comparison to prior year. Non-Executive Director fee levels
were unchanged between 2023 and 2024.
2.
For all employees, there were no changes in benefits provision between 2023 and 2024. For Non-Executive Directors, benefits comprise taxable
travel and subsistence expenses reimbursed by the Company (including any gross-up for tax and national insurance contributions due).
3.
This includes average amounts earned under the AIP, and other variable incentive schemes, including monthly incentive schemes operated
in certain parts of the Group. Non-Executive Directors are not eligible to participate in any of the Group’s bonus or incentive schemes.
4. Carol Hagh joined the Board during 2024.
5.
The value of taxable benefits for Danuta Gray for 2024 reflects expenses incurred due to her increased presence in the London office during 2024.
6.
The value of benefits for Mark Gregory and Adrian Joseph in 2023 was less than £500. The percentage increase therefore appears significant,
but the actual value of increase is minimal, at less than £500 for Mark, and less than £1,000 for Adrian.
131 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Chief Executive Officer’s pay between 2015 and 2024 and historical performance of TSR
The table below shows historical levels of the CEO’s pay between 2015 and 2024. It also shows vesting of annual and long-term
incentive pay awards as a percentage of the maximum available opportunity. The graph reflects the TSR for the Company and the
FTSE 350 index (excluding Investment Trusts) on a cumulative basis over the period from 31 December 2014 to 31 December 2024,
as the Company is a constituent of this index.
Total Shareholder Return (%)
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
31 Dec
2023
31 Dec
2024
100
150
200
250
— DLG
— FTSE 350 (excluding Investment Trusts)
Director
2015
20161
2017
2018
20192
20192
2020
2021
2022
20233
20233
20244
20244
Paul Geddes
Penny James
Jonathan
Greenwood
Adam
Winslow
CEO single figure of
remuneration (£’000s)
4,795
4,071
4,039
3,250
774
2,773
3,286
3,137
940
63
1,031
446
7,875
Annual bonus payment
(% of maximum)
83%
43%
88%
68%
76%
76%
82%
84%
0%
n/a
15%
86%
86%
LTIP vesting
(% of maximum)1
96%
86%
99%
71%
0%
100%
80%
75%
0%
n/a
0%
10%
n/a
Notes:
1.
The 2016 single figure and annual bonus payment reflect an adjustment to the original award, made in 2019, of 20% of maximum opportunity
related to the Ogden discount rate change.
2.
The 2019 single figure reflects part of the year for the outgoing CEO, Paul Geddes, and the entire year for the newly appointed CEO, Penny James.
3.
The 2023 single figure reflects part of the year for the outgoing CEO, Penny James, and part of the year for the Acting CEO, Jon Greenwood.
4. The 2024 single figure reflects part of the year for the outgoing Acting CEO, Jon Greenwood, and part of the year for the CEO Adam Winslow.
132 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Payments for Loss of Office (Audited)
Neil Manser
Neil Manser stepped down from the Board on 10 October 2024 and commenced his 12-month notice period. His contractual salary,
pension and benefits will continue to be paid in the normal way until the end of his employment on 9 October 2025.
The table below sets out the total value of the amounts paid (or which are due to be paid) to Neil in relation to his departure,
as outlined above:
Salary (£’000)
Benefits (£’000)
Pension (£’000)
Total (£’000)
Total pay and benefits
£
546
3
49
598
Neil also had legal fees paid on his behalf (£24,500) and was eligible to receive outplacement support (up to £50,000) in connection
with the termination of his employment.
The Committee carefully considered the appropriate leaving arrangements for Neil, including in relation to the timing of
commencing the notice period. The Committee acknowledged typical market practice and investor expectations that notice
periods should commence immediately once a decision has been made and announced. However, the Committee felt strongly
that this would not be appropriate in these circumstances because Jane Poole could only join DLG on 10 October 2024 due to
existing contractual obligations and the regulatory approvals process. In the event of any unforeseen circumstances where Jane
did not join the Board as planned, noting the significant business challenges and Ageas takeover bid, it would have been critical
to ensure continued business stability in the CFO role. In this context, if Neil’s notice period ended before a new CFO joined DLG,
the Remuneration Committee concluded (in collaboration with the Nomination Committee) that there would be no sufficiently
experienced internal interim CFO candidates available. The Committee therefore determined that it would not be in the best
interests of shareholders to commence Neil’s notice period until the new CFO had joined the Board.
The Committee also considered the treatment of variable remuneration awards for Neil, as set out below.
2022 awards
The 2022 DAIP award (in respect of the 2021 AIP) will continue to vest on the third anniversary of grant and remain subject to the
scheme rules, including malus and clawback provisions. The award will be exercisable for 12 months after vesting.
No DAIP award was granted in 2023, as no payment was made under the AIP in respect of 2022.
The 2022 LTIP awards will continue to vest on the normal vesting dates, subject to the relevant performance measures. The final
outcome will be set out in next year's report (subject to the status of the Aviva acquisition). The awards are subject to a two-year
post-vesting holding period and will be exercisable (to the extent performance targets are met and the awards vest) for 12 months
after the end of the holding period. As Neil will be in employment on the normal vesting dates (March and August 2025
respectively), no time pro-rating will be applied. These awards will remain subject to all scheme rules, including malus and
clawback provisions.
2023 and 2024 awards
In light of the Company’s announcement on 23 August 2024 relating to the misstatement of the Company’s Solvency Ratio for
the 2023 financial year, and following a review process conducted with external support and advice, the Committee considered
whether any actions in relation to variable pay were appropriate. The Committee determined that the malus provisions under the
DAIP rules should be applied in relation to Neil’s DAIP award granted in 2024 in respect of the deferred element of the 2023 AIP,
and therefore this award has lapsed in full. This amount is shown as a negative value in the “single figure table” on page 121.
In addition, awards granted under the LTIP in 2023 and 2024 will lapse on cessation of Neil's employment and he will not receive
a payment under the AIP in respect of the financial year ended 31 December 2024.
2025 awards
Neil will not be eligible to participate in the 2025 AIP and will not be granted any further LTIP awards.
All-employee share schemes
Neil's shares held under the DLG SIP will be treated in accordance with the rules of the SIP. Any shares subject to forfeiture
provisions under the rules will be forfeited.
Share Ownership Guidelines
Neil will comply with the post-employment shareholding guidelines outlined under the Directors’ Remuneration Policy,
maintaining a shareholding of the lower of 200% of salary or his actual shareholding on cessation of employment for a period of two
years post employment. Neil’s current shareholding includes shares owned outright, unvested DAIP awards (excluding the 2024
DAIP as outlined above) and all-employee share scheme awards. Neil will be permitted to sell sufficient shares to cover any tax
liability on exercise of any awards as applicable.
133 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Payments to Past Directors (Audited)
Jon Greenwood
Jon Greenwood stepped down as Acting Chief Executive Officer and an Executive Director effective 21 March 2024, at which point
Jon returned to a non-Board role. The AIP award in relation to Jon's tenure as an Executive Director has been included in the single
figure of remuneration table on page 121.
New Executive Director
Jane Poole
Jane Poole was appointed as Chief Financial Officer effective from 10 October 2024 and was appointed to the Board on the same date.
In setting Jane’s remuneration, the Committee considered her experience in general insurance, market data in respect of FTSE
51-150 companies and other FTSE 350 insurers, the previous CFO’s remuneration package, our Directors’ Remuneration Policy and
the pay and conditions of the wider workforce. Taking these factors into account, Jane’s salary was set at £550,000, broadly in line
with the previous CFO.
Pension and variable remuneration opportunities have been set in line with the Directors’ Remuneration Policy.
On joining, Jane received an LTIP award of 200% of salary on the same terms as the April 2024 grant (except that the three-year
vesting period will commence from the date of grant on 11 November 2024). This award was made at the same level as her
standard annual LTIP award as no buyout award was made to compensate her for the loss of her 2024 award from her
previous employer.
The Committee also approved share awards to compensate Jane for awards forfeited from her previous employer in connection
with her appointment, as disclosed on page 128. These awards were made in the form of nil-cost options, and are not subject to
performance conditions, in line with the terms of the original awards. The awards will vest on the original timescales and accrue
dividend equivalents (also in line with the original award terms).
Jane received two payments in cash, £46,183 and £125,791 in November 2024, to compensate for two tranches of shares forfeited
where the vesting date preceded her joining DLG.
Jane will also receive an amount in lieu of the bonus forfeited from her previous employer for the period 1 January to 9 October
2024. In order to mirror the original award as far as possible, the final value will be determined based on the published Aviva
Group CEO 2024 annual bonus outcome, prior to any personal adjustment. The Remuneration Committee will then consider
the performance of the business unit for which Jane was the CFO, based on published information, and may adjust the outcome
upwards or downwards accordingly. The award will be delivered two thirds in cash and one third in shares, vesting in equal
tranches on the anniversary of grant over a three-year period, in line with the original award terms. The single figure disclosures
on page 121 include an estimated amount of £510,328, which is based on the maximum level. This will only be paid once the
Committee has made a final determination of the amount due and any change to the estimated amount will be confirmed
in next year's report (subject to the status of the Aviva acquisition).
Full details of the (share) awards bought out are set out in the relevant section on page 128.
134 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Distribution statement
This chart shows the overall pay expenditure across all Group employees compared with the total dividend value paid to
shareholders in 2023 and 2024.
Dividend (£m)
Overall expenditure on pay (£m)
78.2
0
2024
2023
% change
100.0%
n Ordinary
553.2
511.7
2024
2023
% change
8.1%
Note:
1.
The dividends paid information has been taken from note 11 to the Consolidated financial statements. The overall expenditure on pay has
been taken from note 6 and therefore, consistent with market practice, it has not been calculated in a manner consistent with the single figure
in this report.
AGM voting outcomes
The table below shows the percentage of shareholders’ votes which were for or against, and the percentage of votes withheld,
relating to the resolutions to approve the 2023 Directors’ Remuneration Report (which was put to shareholders at the 2024 AGM)
and the Policy (which was put to shareholders at the 2023 AGM).
For
Against
Number of
votes withheld
(abstentions)
Number
Percentage
Number
Percentage
Approval of Directors’ Remuneration Policy (2023 AGM)
1,030,959,263
98.1%
19,918,567
1.9%
1,356,094
Approval of Directors’ Remuneration Report (2024 AGM)
998,020,044
98.6%
14,387,945
1.4%
5,070,730
135 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Implementing the Policy in 2025
Base salary
Key features
– Reviewed annually with any increases taking effect
on 1 April
– The Committee considers a range of factors when
determining salaries, including pay increases throughout
the Group, individual performance, and market data
Implementation in 2025
– The CEO’s salary will increase by 3.5% to £848,700 from
1 April 2025
– The CFO's salary will increase by 3.5% to £569,250 from
1 April 2025
– These increases are in line with the average increase for
the wider workforce
Pensions
Key features
– Pension contributions are paid only in respect
of base salary
– The Executive Directors’ pension is set in line with the
pension level received by the employee population
Implementation in 2025
– Pension contributions remain at 9% (in line with
the workforce)
Annual Incentive Plan
Key features
– Maximum opportunity of 175% of salary for the CEO and
the CFO
– At least 50% of the AIP is based on financial measures.
The Committee considers various non-financial
performance measures such as strategic measures
for the remainder
– The outcome is assessed at the end of the performance
period with reference to targets agreed at the start
of the year
– Any payment is subject to an additional gateway
assessment, including assessing risk factors
– Malus and clawback provisions apply
Implementation in 2025
– No change to the maximum opportunity
– There will be a straight-line vesting between AIP threshold
and maximum performance
– Operating Profit (55% weighting)
– Customer (15% weighting)
– People (10% weighting)
– Cost (10% weighting)
– Risk (10% weighting)
– The performance targets are considered commercially
sensitive and will therefore be disclosed in next
year’s report (subject to the status of the Aviva acquisition).
Deferred Annual Incentive Plan
Key features
– 40% of the AIP is deferred into shares
– Typically vesting after three years, normally subject
to continued employment
– Malus and clawback provisions apply
Implementation in 2025
– No further performance conditions apply
136 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Implementing the Policy in 2025 continued
Long-Term Incentive Plan
Key features
– Awards typically granted as nil-cost options
– Awards granted once per year
– The LTIP allows for awards with a maximum value
of 200% of base salary per financial year
– Performance is measured over three years
– Awards vest subject to financial underpin and
payment gateway
– Malus and clawback provisions apply
– Awards are subject to an additional two-year holding
period following the end of the three-year
performance period
Implementation in 2025
– As outlined in the Chair's Statement, the Committee
intends to use the exceptional circumstances provision set
out in the approved 2023 Remuneration Policy to grant
Adam Winslow and Jane Poole LTIP awards at 300%
of salary opportunity
– Single grant intended in March 2025
– No change from the performance conditions or
weightings used for the 2024 LTIP, being RoTE (25%), EPS
(25%), Expense Ratio (20%), TSR (20%) and Emissions (10%)
– A RoTE target range of 15% to 23.5% (2027) is required for
the awards to vest under this element
– The target for EPS is based on Threshold 25.5p and
Maximum 31.9p (2027)
– Vesting under the Expense Ratio will be based on
Threshold 27.8% and Maximum 25% (2027)
– The relative TSR comparator group will be vs. FTSE 51-150
(excluding Investment Trusts)
– The emissions targets for the 2025 LTIP awards will be set
based on the SBTi certified targets with the targets being:
– Operational emissions (Scope 1 and 2): Reduce Scope 1
and 2 emissions by 62% by 2027 versus the 2019 baseline
– Corporate Bonds (Scope 1 and 2): Reduce Scope 1 + 2
portfolio temperature score by invested value within
corporate bonds portfolio from 2.44°C in 2019
to 2.01°C in 2027
– Corporate Bonds (Scope 1, 2 and 3): Reduce Scope 1, 2 + 3
portfolio temperature score by invested value within
corporate bonds portfolio from 2.80°C in 2019
to 2.31°C in 2027
Non-Executive Directors’ fees
The fees for the Chair and Non-Executive Directors for 2025 are set out below (unchanged from 2024).
Position
Fees for 2025
£’000
Board Chair fee
350
Basic Non-Executive Director fee
75
Additional fees
Senior Independent Director fee
30
Chair of Audit, Board Risk and Remuneration Committees
30
Chair of Sustainability and Investment Committees
15
Member of Board Committee (Audit, Board Risk or Remuneration)
10
Member of Board Committee (Sustainability, Investment or Nomination)
5
137 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Directors’ Remuneration Policy
The following is a copy of the main table from the Policy approved by shareholders at the 2023 AGM on 9 May 2023. The full Policy
is available in the Directors' Remuneration report of the 2022 Annual Report and Accounts, which is available on the Direct Line
Group website, under the 'Results and Reports' heading in the Investors page. You can find further details regarding the operation
of the Policy for 2025 on pages 136 and 139.
Policy table
Base salary
– This is the core element
of pay that reflects the
individual’s role and
position within the Group
– Staying competitive in the
market allows us to attract,
retain and motivate high-
calibre executives with the
skills to achieve our key
aims while managing costs
Operation
– Base salaries are typically reviewed annually and set in April of each year, although the
Committee may undertake an out-of-cycle review if it determines this to be appropriate
– When reviewing base salaries, the Committee typically takes the following into account:
– general base salary movements across the Group;
– level of skill, experience and scope of responsibilities, individual and business
performance, economic climate, and market conditions; and
– the appropriate benchmarking peer group(s) that reflects the Group’s size and industry
focus, the corresponding market pay range(s) and the relevant positioning within the
market pay range(s).
– The Committee does not follow market data in isolation, and instead uses it as a
reference point when considering, in its judgement, the appropriate salary level, while
regarding other relevant factors, including corporate and individual performance, and
any changes to an individual’s role and responsibilities
– The principles for setting base salary are like those applied to other employees in the
Group. However, the specific benchmarking groups used to review external market
relativities may differ across employee groups
– Base salary is typically paid monthly
Maximum opportunity
– When determining salary increases, the Committee will consider the factors outlined
in this table under ‘Operation’
Performance measures
– Not applicable
Pension
– To remain competitive
within the marketplace
– To encourage retirement
planning and retain
flexibility for individuals
Operation
– Pension contributions are paid only in respect of base salary
– Executive Directors are eligible to participate in the defined contribution pension
arrangement or alternatively they may choose to receive a cash allowance in lieu
of pension
– The Executive Directors’ pension will be set in line with the pension level for the
wider workforce
Maximum opportunity
– The maximum pension percentage contributions are set at the wider workforce level
(currently 9% of salary)
Performance measures
– Not applicable
138 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Policy table continued
Benefits
– A comprehensive and
flexible benefits package
is offered, emphasising
individuals being able
to choose the combination
of cash and benefits
that suits them
Operation
– Executive Directors receive a benefits package generally set by reference to market
practice in companies of a similar size and complexity. Benefits currently provided
include a Company car, use of a car or car allowance, private medical insurance,
life insurance, health screening, and income protection
– The Executive Directors are eligible to receive such additional benefits as the Committee
considers appropriate having regard to market norms
– In line with our approach to all employees, certain Group products are offered to
Executive Directors at a discount
– Executive Directors are eligible to participate in any of the employee share plans
operated by the Company, in line with HMRC guidelines (where relevant) and on the
same basis as other eligible employees. Currently, this includes our HMRC-approved SIP,
which has been used to provide an award of free shares to all employees (including
Executive Directors) and permits employees to purchase shares with a corresponding
matching award
– Where an Executive Director is required to relocate to perform their role, they may be
offered appropriate relocation benefits. The level of such benefits would be determined
based on the circumstances of the individual and typical market practice and be consistent
with the relocation arrangements available to the workforce generally. In normal
circumstances, relocation benefits will only be paid for a period of up to 12 months
Maximum opportunity
– The costs of benefits provided may fluctuate from year to year, even if the level of
provision has remained unchanged
– Additionally, the limit for any employee share plans in which the Executive Directors
participate will be in line with the caps permitted by HMRC from time to time
– The Executive Directors may be entitled to retain fees received for any directorships held
outside the Group
– Similarly, while not benefits in the normal usage of that term, certain other items such
as hospitality or retirement gifts may also be provided
Performance measures
– Not applicable
139 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Element and purpose in supporting the Group’s strategic objective
AIP
– To motivate executives and
incentivise delivery of
performance over a one-
year operating cycle and
enable a stronger focus
and alignment with the
short to medium-term
elements of our strategic
aims
– Deferral delivers further
alignment with
shareholders and aids
retention of key executive
talent
Operation
– The AIP is measured based on performance over the financial year against performance
targets which the Committee considers to be appropriate
– At least 40% of the AIP is deferred into shares (typically in the form of nil-cost options
or conditional share awards) under the DAIP
– This typically vests three years after grant (with deferred awards also capable of being
settled in cash at the discretion of the Committee, for example, when it gives rise to
legal difficulties to settle in shares). The remainder of the award is paid in cash following
the year-end
– The Committee will keep the percentage deferred and terms of deferral under review.
This will ensure levels are in line with regulatory requirements and best practice and may
be changed in future years but will not, in the Committee’s view, be changed to be less
onerous overall
– Dividends will accrue during the deferral period
– Malus and clawback provisions apply to the cash and deferred elements of the AIP
Maximum opportunity
– The maximum bonus opportunity under the AIP is 175% of base salary per year
– The current maximum bonus opportunity applying for each individual Executive Director
is shown in the statement of implementation of Policy
– Threshold and maximum bonus levels for Executive Directors are set by considering
annual bonus practice throughout the organisation and referring to practice at other
insurance and general market comparators
– Outcomes for performance between threshold and maximum will be determined
on a straight-line basis
– No more than 10% of the bonus is paid for threshold performance
– However, the Committee retains flexibility to amend the pay-out level at different levels of
performance for future bonus cycles. This is based on its assessment of the level of stretch
inherent in the set targets, and the Committee will disclose any such determinations
appropriately
Performance measures
– Performance measures for the AIP may be financial and non-financial (Group, divisional,
business line or individual)
– Each year, at least 50% of the AIP is based on financial measures. The remainder of the
AIP may be based on a combination of, for example, strategic, operational, ESG, shared
or individual performance measures
– The Committee sets targets at the beginning of each financial year
– Before any payment can be made, the Committee will perform an additional gateway
assessment (including in respect of any risk concerns). This will determine whether
the amount of any bonus is appropriate in view of facts or circumstances which the
Committee considers relevant. This assessment may result in moderating (positively
or negatively) each AIP performance measure, subject to the individual maximum
bonus levels
– The AIP remains a discretionary arrangement. In line with the Code requirements, the
Committee maintains discretion to override formulaic outcomes where those outcomes
are not reflective of the overall Group performance. DAIP awards vest subject to
continued employment only
140 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Element and purpose in supporting the Group’s strategic objective continued
LTIP
– Aligning executives’
interests with those of
shareholders to motivate
and incentivise delivering
sustained business
performance over the long
term
– To aid retaining key
executive talent long term
and deliver market
competitive remuneration
Operation
– Awards will typically be made in the form of nil-cost options or conditional share awards,
which vest to the extent performance conditions are satisfied over a period of at least
three years. Under the Plan rules, awards may also be settled in cash at the discretion
of the Committee. This may be appropriate, for example, if legal difficulties arise with
settling in shares
– Vested options will remain exercisable for up to the tenth anniversary of grant
– Malus and clawback provisions apply to the LTIP.
– Executive Directors will be subject to an additional two-year holding period following the
vesting period, during which time awards may not normally be exercised or released
– During the vesting period and additional holding period (during which time awards
cannot be exercised) the awards will continue to accrue dividends. Following the holding
period, awards will cease to accrue dividends if not exercised
Maximum opportunity
– The maximum LTIP award in normal circumstances is 200% of salary
– Awards of up to 300% of base salary are permitted in exceptional circumstances,
for example relating to recruiting or retaining an employee, as determined
by the Committee
Performance measures
– The Committee will determine the performance conditions for each award made
under the LTIP, measuring performance over a period of at least three years with
no provision to retest
– Performance is measured against targets set at the beginning of the performance
period, which may be set by referring to the time of grant or financial year
– Awards vest based on performance against financial and/or such other measures (including
share return), as set by the Committee, to be aligned with the Group’s long-term strategic
objectives. The Committee may alter the precise measures used for future awards
– Not less than 50% of the award shall be subject to one or more financial measures
– Awards will be subject to a payment gateway, such that the Committee must be satisfied
that there are no material risk failings, reputational concerns or regulatory issues
– 20% of the award vests for threshold performance, with 100% vesting for
maximum performance
– The Committee reserves the right in respect of future awards to lengthen (but not
reduce) any performance period and/or amend the terms of any holding period; however,
there is no intention to reduce the length of the holding period
– In line with the Code requirements, the Committee maintains discretion to override
formulaic outcomes where those outcomes are not reflective of the overall
Group performance
Share ownership
guidelines
– To align the interests of
Executive Directors with
those of shareholders
Operation
– Executive Directors are expected to retain all the ordinary shares vesting under any of the
Company’s share incentive plans, after any disposals for paying applicable taxes, until
they have achieved the required shareholding level; unless earlier sale, in exceptional
circumstances, is permitted by the Chair of the Board
– Shares considered will include those held by the director and their connected persons,
vested awards subject to holding requirements and unvested awards not subject to
performance conditions (on a net of tax basis). Executive Directors are also expected to
retain their in-employment shareholding requirement (or actual shareholding, if lower)
post their employment for a period of two years
– In exceptional circumstances, earlier sale is permitted subject to the Chair’s discretion
Maximum opportunity
– 250% of salary for the CEO and 200% for the CFO
– The Committee reserves the discretion to amend these levels in future years
Performance measures
– Not applicable
141 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
The Board of Directors present their report for the financial
year ended 31 December 2024 as required by the Companies
Act 2006.
The Board would like to draw your attention to the
forward-looking statements disclaimer which can be found
on page 254.
Directors’ report disclosures
The Board takes the view that some of the matters required to
be disclosed in the Directors’ report are of strategic importance
and these are, therefore, included in the Company’s Strategic
report which is on pages 1 to 74 as permitted by the
Companies Act 2006. These matters, and all matters referenced
in the table below, are incorporated into this Directors’ report:
Subject
Pages
Use of financial instruments
28 to 30
Important events since the financial year end
8 to 14
Likely future developments in the business
12
Employee engagement
15, 89, 91 and 92
Engagement with suppliers, customers and other
business relationships
44, 89 and 90
Research and development
3 to 5
Greenhouse gas emissions, energy consumption
and energy-efficient action
61, 64 to 65, 70
to 72 and 73
Branches outside the UK
233
Disclosure of information required by
Disclosure Guidance and Transparency Rule 7.2
The FCA’s Disclosure Guidance and Transparency Rule 7.2
requires a Corporate Governance statement in the Directors’
report to include certain information. You can find information
that fulfils the Corporate Governance statement’s
requirements in this Directors’ report, the Corporate
Governance report, the Committee reports and the Directors’
Remuneration report, all of which are incorporated into the
Directors’ report by reference.
Disclosure of information under UK Listing
Rule 6.6.1
In accordance with UK Listing Rule 6.6.1, the table below sets
out the location of the information required to be disclosed
under LR 6.6.1, where applicable:
Subject
Pages
Interest capitalised by the Group
Not applicable
Unaudited financial information
Note 1.4
Details of long-term incentive schemes
140 to 141
Directors’ waivers of emoluments
Not applicable
Directors’ waivers of future emoluments
Not applicable
Non pro-rata allotments for cash (issuer)
Not applicable
Non pro-rata allotments for cash (major subsidiaries)
Not applicable
Listed company is a subsidiary of another company
Not applicable
Contracts of significance involving a Director
Not applicable
Contracts of significance involving a
controlling shareholder
Not applicable
Details of shareholder dividend waivers
143
Controlling shareholder statement
Not applicable
Dividends
As explained in the Chair's statement on page 8, the Board
is recommending a final dividend of 5.0 pence per share for
2024. More information on dividends and capital management
can be found in the Group financial performance section
on page 21.
Directors
The names of all current Directors and their biographies are set
out on pages 77 to 80.
All Directors will retire and those wishing to continue to serve
will be submitted for election or re-election at the 2025 AGM.
This is in accordance with the UK Corporate Governance Code
and the Articles of Association of the Company, which govern
appointing and replacing Directors.
Changes in the composition of the Board during the year
under review and up to the date of this report were as follows:
– Adam Winslow was appointed to the Board with effect from
21 March 2024.
– Jon Greenwood stepped down from the Board with effect
from 21 March 2024.
– Carol Hagh was appointed to the Board with effect from
1 April 2024.
– Jane Poole was appointed to the Board with effect from
10 October 2024.
– Neil Manser stepped down from the Board with effect from
10 October 2024.
142 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Directors’ report
The Company’s Articles of Association set out the Directors’
powers. You can view these on the Company’s website at
www.directlinegroup.co.uk. The Directors’ powers are also
subject to relevant legislation and, in certain circumstances,
including in relation to the issuing or buying back of shares,
authority from the Company’s shareholders. You can find
details of the Directors’ remuneration, service contracts,
employment contracts and interests in the shares of the
Company in the Directors’ Remuneration report
on pages 115 to 141.
The Articles of Association of the Company permit it
to indemnify the Company’s officers, and officers of any
associated company, against liabilities arising from conducting
Company business, to the extent permitted by law. As such, the
Company has executed deeds of indemnity for each Director’s
benefit regarding liabilities that may attach to them in their
capacity as Directors of the Company or associated companies.
These indemnities are qualifying third-party indemnities as
defined by Section 234 of the Companies Act 2006. No amount
was paid under any of these indemnities during the year.
The Company maintains directors’ and officers’ liability
insurance. This provides appropriate cover for legal actions
brought against its Directors. The Company has also provided
the Directors of DLG Pension Trustee Limited with qualifying
pension scheme indemnities. This is in accordance with
Section 235 of the Companies Act 2006. During 2024, DLG
Pension Trustee Limited acted as trustee for two of the
Company’s occupational pension schemes.
Secretary
Roger Clifton is the Company Secretary of Direct Line
Insurance Group plc and can be contacted at the Company’s
Registered Office, details of which are on page 255.
Share capital
The Company has an Equity Shares (Commercial Companies)
listing on the London Stock Exchange. As at 31 December 2024,
the Company’s share capital comprised 1,311,388,157 fully paid
Ordinary Shares of 10 10/11 pence each.
At the Company’s 2024 AGM, the Directors were authorised to:
– allot shares in the Company or grant rights to subscribe for or
convert any security into shares, up to an aggregate nominal
amount of £47,686,842, and to allot further shares up to a
total aggregate nominal amount of £95,373,684 for the
purpose of a rights issue or other pre-emptive offer;
– allot shares having a nominal amount not exceeding in
aggregate £14,306,052 for cash, without offering the shares
first to existing shareholders in proportion to their holdings,
and with the possibility of a follow-on offer as described in
the Statement of Principles published by the Pre-emption
Group in November 2022 (the 'Statement of Principles');
– allot additional shares having a nominal amount not
exceeding in aggregate £14,306,052 for the purposes
of financing a transaction which the Board of the Company
determines to be an acquisition or other capital investment,
without offering the shares first to existing shareholders in
proportion to their holdings, and with the possibility of a
follow-on offer as described in the Statement of Principles;
– make market purchases of up to 131,138,815 shares in the
Company, representing 10% of the Company’s issued share
capital at the time; and
– allot shares (with the disapplication of pre-emption rights) up
to an aggregate nominal amount of £23,250,000 in relation
to the issue of Restricted Tier 1 Instruments.
To date, the Directors have not used these authorities granted
in 2024. At the 2025 AGM, shareholders will be asked to renew
these authorities. The Company has not held any shares in
treasury during the period under review. You can find out more
about the Company’s share capital and shares under option
as at 31 December 2024 in notes 6 and 27 of the consolidated
financial statements.
Under the Company’s Share Incentive Plan, Trustees hold
shares on behalf of employee participants. The Trustees will
only vote on those shares, and receive dividends that a
participant beneficially owns, in accordance with the
participant’s wishes. An Employee Benefit Trust also operates
which has discretion to vote on any shares it holds as it sees
fit, except any shares participants own beneficially, in which
case the Trustee will only vote on such shares as per a
participant’s instructions.
The Trustee of the Employee Benefit Trust has waived its right
to dividends on all shares within the Trust. You can find out
more about the number of shares held by the employee share
plan trusts in note 27 from page 226. The Company is not aware
of any other dividend waivers or voting restrictions in place.
Shareholder voting rights and restrictions
on transfer of shares
All the Company’s issued Ordinary Shares rank equally in all
respects. The Company’s Articles of Association set out the
rights and obligations attaching to the Company’s
Ordinary Shares.
Employees of the Company and Directors must comply with
the UK Market Abuse Regulation and the Company’s share
dealing rules. These rules restrict particular employees’ and
Directors’ ability to deal in the Company’s shares at certain
times, and require the employee or Director to obtain
permission to deal before doing so. Some of the Company’s
employee share plans also include restrictions on transferring
shares while the shares are held within the plans.
Each general meeting notice will specify a time, not more than
48 hours before the time fixed for the meeting (which may
exclude non-working days), for determining a shareholder’s
entitlement to attend and vote at the meeting. To be valid, all
proxy appointments must be filed at least 48 hours (which
may exclude non-working days) before the time of the
general meeting.
Where the Company has issued a notice under Section 793
of the Companies Act 2006, and the person interested in the
relevant shares has been in default of the notice for at least 14
days, they shall not be entitled to attend or vote at any general
meeting until the default has been corrected or the shares sold.
There is no arrangement or understanding with any
shareholder, customer or supplier, or any other external party,
which provides the right to appoint a Director or a member of
the Executive Committee, or any other special rights regarding
control of the Company.
143 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Articles of Association
Unless expressly specified to the contrary in the Articles of
Association, the Articles may only be amended by a special
resolution of the Company’s shareholders at a general meeting.
Significant agreements affected by a change
of control
A number of agreements may take effect, alter or terminate
upon a change of control of the Company. None of these
agreements is considered significant in terms of its impact on
the Group’s business as a whole. All the Company’s employee
share incentive plans contain provisions relating to a change of
control. Outstanding awards would typically vest and become
exercisable. This is subject to satisfying any performance
conditions, and normally with an additional time-based
pro-rata reduction where performance conditions apply,
and with approval from the Remuneration Committee.
Substantial shareholdings
The table below shows the holdings of the major shareholders
in the Company’s ordinary issued share capital, as at
31 December 2024 and as at 15 March 2025, as notified in
accordance with the provisions of Chapter 5 of the FCA’s
Disclosure Guidance and Transparency Rules. It should be
noted that these holdings may have changed since the
Company was notified. However, notification of any change
is not required until the next notifiable threshold is crossed.
Information provided by the Company pursuant to the FCA’s
Disclosure Guidance and Transparency Rules is publicly
available via the regulatory information services and on
the Company’s website.
Subject
31 December
2024
28 February
2025
Nature of
Holding
abrdn plc
4.57 %
4.57 % Indirect
Ameriprise Financial Inc.
4.99 %
4.99 % Indirect
APG Asset Management
N.V.
2.99 %
2.99 %
Direct
Ariel Investments, LLC
4.90 %
4.90 %
Direct/
Indirect
Artemis Investment
Management LLP
4.82 %
4.82 % Indirect
BlackRock, Inc.
3.76 %
3.76 %
Direct/
Indirect
FIL Limited
4.81 %
4.81 % Indirect
FMR LLC
7.11 %
7.11 % Indirect
Majedie Asset Management
Limited
4.99 %
4.99 % Indirect
Norges Bank
4.17 %
2.33 %
Direct
RWC Asset Management
LLP
4.86 %
4.86 %
Direct
Schroders plc
4.96 %
4.96 % Indirect
Société Générale
0.00 %
5.86 %
Direct
T.Rowe Price Associates, Inc.
4.68 %
4.68 % Indirect
Political donations
The Group made no political donations during the year (2023: £nil).
Disabled and neuro-divergent colleagues
The Group is committed to supporting those who are
neuro-divergent or have a disability and recognises the benefits
that diversity of thought or body brings to an organisation.
For recruitment purposes, we adjust and enhance our
application and selection process, and guide and provide
additional training for interviewers where necessary.
We reasonably adjust colleagues’ working environments and
equipment, and roles and role requirements (including for
colleagues who become disabled during their time working
in the Group). We also seek to ensure that everyone can access
the same opportunities.
The Neuro-Diversity & Disability strand of our Diversity
Network Alliance (“DNA”) works to celebrate and support those
who are neuro-divergent or disabled with the aim of ensuring
that all our colleagues feel understood, fully appreciated, and
empowered to be their best selves. More information about
the work of the DNA strand can be found on page 48 of the
Strategic report.
144 | Direct Line Group Annual Report and Accounts 2024
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Going concern
As a standalone business, the Directors believe that the Group
and Company have sufficient financial resources to meet their
financial needs, including managing a mature portfolio of
insurance risk. The Directors believe the Group and Company
are well positioned to manage its business risks successfully
in the current economic climate. The Chief Financial Officer
Review describes the Group’s capital management strategy,
including the capital actions taken to ensure the continued
strength of the balance sheet. The Group’s financial position
is also covered in that section, including a commentary on cash
and investment holdings, claims reserves and management
of insurance liabilities, and the Group's financial leverage. This
covers insurance, market, credit, liquidity and operational risk;
and the Group's approach to monitoring, managing and
mitigating exposures to these risks.
Having made due enquiries, the Directors believe they can
reasonably expect that the Group and Company has adequate
resources to continue in operational existence on a standalone
basis for at least 12 months from 3 March 2025 (the date of
approval of the consolidated financial statements). Accordingly,
the Directors have adopted the going concern basis in
preparing the consolidated financial statements.
Material uncertainty in relation to going concern`
On 23 December 2024, the Boards of the Company and Aviva
plc ("Aviva") reached an agreement pursuant to which Aviva
agreed to purchase the entire share capital of the Company,
subject to regulatory and shareholder approval. Although the
Directors cannot be certain about the actions of Aviva should a
deal complete, they consider that the ability of the Group to
continue as a going concern should not be adversely affected
by the transaction should it proceed. In making this
assessment, they have considered many factors, including the
strategic fit of Aviva for the Group as well as Aviva's record of
executing transactions, including integrating a number of
acquisitions, and of delivering profitable growth. While the
Directors would expect Aviva to continue to deliver long term
value from the Group’s ongoing operations they note however,
that it is beyond their control as to whether Aviva would
undertake any restructuring of the Group’s legal entities.
Therefore, given the potential change in control, the Directors
consider these conditions to constitute a material uncertainty
(as defined under IAS 1) which may cast significant doubt over
the Company’s and therefore, the Group’s ability to continue as
a going concern. The Directors would not expect this to impact
the continued operation of the Group’s core insurance activities.
Notwithstanding this uncertainty, the Directors are satisfied
that the going concern basis remains appropriate for the
preparation of the financial statements.
Disclosing information to the Auditor
Each Director at the date of approving these Annual Report
and Accounts confirms that: as far as they are aware, there is
no relevant audit information of which KPMG, the Company’s
External Auditor, is unaware; and they have taken all the steps
that they ought to have taken as a Director to make themselves
aware of any relevant audit information, and to establish that
KPMG is aware of that information. This confirmation is given
and should be interpreted in accordance with the provisions
of section 418 of the Companies Act 2006.
Auditor
A resolution to re-appoint KPMG will be proposed at the
forthcoming 2025 AGM. You can find more information about
the External Auditor in the Audit Committee report on page 101.
Conflicts of interest
Each Director has a duty to avoid conflicts of interest and must
declare any conflict of interest that could interfere with their
ability to act in the Group’s best interests. In accordance with
the Companies Act 2006, the Company’s Articles of Association
allow the Board to authorise matters where there is, or may be,
a conflict between the Group’s interests and the direct or
indirect interests of a Director, or between a Director’s duties to
the Group and another person. As a matter of course, the Board
authorises certain potential conflicts of interest in this way,
including Directors’ external directorships and their interests
in securities of other financial service institutions. The Company
Secretary maintains a register of potential conflicts which the
Board reviews at each scheduled Board meeting.
145 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Directors’ responsibility statement
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare such financial
statements for each financial year in accordance with UK-
adopted international accounting standards.
The Directors have elected to prepare the Parent Company
financial statements in accordance with FRS 101 'Reduced
Disclosure Framework'. Under company law, the Directors
must not approve the accounts unless they are satisfied that
they give a true and fair view of the Company’s state of affairs
and profit or loss for that period.
In preparing these financial statements, IAS 1 requires that
Directors: properly select and apply accounting policies;
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information; provide additional disclosures
when compliance with the specific requirements in IFRS is
insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the
entity’s financial position and financial performance, and to
assess the Company’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that: are sufficient to show and explain the Company’s
transactions and disclose, with reasonable accuracy, the
Company’s financial position at any time; and enable them to
ensure the financial statements comply with the Companies
Act 2006. Additionally, the Directors are responsible for
safeguarding the Company’s assets and, hence, taking
reasonable steps to prevent and detect fraud and other
irregularities. The Directors are responsible for maintaining
and ensuring the integrity of the corporate and financial
information included on the Company’s website at:
www.directlinegroup.co.uk.
Legislation in the UK governing preparing and disseminating
financial statements may differ from legislation in other
jurisdictions.
Each of the Directors in office as at the date of this report,
whose names and functions are listed on pages 77 to 80
confirms that, to the best of their knowledge:
– the financial statements, prepared in accordance with IFRS,
give a true and fair view of the assets, liabilities, financial
position, and profit or loss of the Company, and the
undertakings included in the consolidation taken as a whole;
– the Strategic report (on pages 1 to 74) and Directors’ report
(on pages 142 to 146) include a fair review of: (i) the business’s
development and performance; and (ii) the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties they face; and
– the Annual Report and the financial statements, taken as a
whole, are fair, balanced and understandable, and provide
the information necessary for shareholders to assess the
Company’s position, performance, business model
and strategy.
This report was approved by the Board on 3 March 2025
and signed on its behalf by:
Roger C. Clifton
Company Secretary
Registered address: Churchill Court, Westmoreland Road,
Bromley, BR1 1DP
Registered number: 02280426
146 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Group Financial Statements
Independent Auditor's Report
148
Accounting policies
156
Consolidated Financial Statements
Consolidated Statement of Profit or Loss
168
Consolidated Statement of Comprehensive Income
169
Consolidated Statement of Financial Position
170
Consolidated Statement of Changes in Equity
171
Consolidated Cash Flow Statement
172
Notes to the Consolidated Financial
Statements
1. Risk management
173
2. Segmental analysis
189
3. Insurance service result
192
4. Insurance finance result
193
5. Other operating expenses
194
6. Employee information
194
7. Auditors remuneration
196
8. Other finance costs
196
9. Disposal of business
196
10. Tax charge
197
11. Dividends and appropriations
198
12. Earnings per share
198
13. Net asset value per share
199
14. Net tangible asset value per share
199
15. Goodwill and other intangible assets
200
16. Property, plant and equipment
201
17. Lease assets and liabilities
202
18. Investment property
203
19. Insurance contract assets and liabilities
– gross and reinsurance
204
20. Tax assets and liabilities
218
21. Prepayments, accrued income and other assets
218
22. Fair value
218
23. Financial investments
221
24. Retirement benefit obligations
223
25. Cash and cash equivalents and borrowings
225
26. Assets held for sale
226
27. Share capital
226
28. Other reserves
226
29. Tier 1 notes
227
30. Subordinated liabilities
227
31. Provisions
227
32. Trade and other payables
227
33. Commitments and contingent liabilities
228
34. Notes to the consolidated cash flow statement
228
35. Related undertakings
229
36. Post balance sheet events
229
Parent Company Financial Statements
Accounting policies
230
Parent Company Statement of Financial Position
231
Parent Company Statement of Changes in Equity
232
Notes to the Parent Company Financial
Statements
1. Risk management
233
2. Investment in subsidiary undertakings
233
3. Other receivables
234
4. Tax assets and Liabilities
234
5. Financial Instruments
234
6. Cash and cash equivalents and borrowings
235
7. Share capital, capital reserves and
distributable reserves
235
8. Tier 1 notes
235
9. Subordinated liabilities
235
10. Dividends
235
11. Share-based payments
235
12. Employees, Directors and key
management remuneration
235
147 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Contents
1. Our opinion is unmodified
We have audited the financial statements of Direct Line Insurance Group plc (the "Company”) for the year ended 31 December
2024 which comprise the Consolidated Statement of Profit or Loss, Consolidated Statement of Comprehensive Income,
Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement,
Parent Company Statement of Financial Position, Parent Company Statement of Comprehensive Income, Parent Company
Statement of Changes in Equity and the related notes, including the accounting policies on pages 156 to 167, except the
information being disclosed as unaudited in Note 1.4.
In our opinion:
– the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 December 2024 and of the Group’s profit for the year then ended;
– the Group financial statements have been properly prepared in accordance with UK-adopted international accounting
standards;
– the Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion is consistent with our report to the audit committee.
We were appointed as auditor by the shareholders for the financial year ended 31 December 2024. We have fulfilled our ethical
responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements, including the FRC
Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.
2 Material uncertainty related to going concern
The risk:
Our response:
Going concern
We draw attention to
note (A) to the financial
statements which
indicates that because
of the potential change
in control, the directors
have concluded it is
beyond their control to
conclude as to whether
Aviva would undertake
any restructuring of the
Group’s legal entities
should a deal complete.
These events and
conditions constitute a
material uncertainty
that may cast
significant doubt on the
parent company’s
ability to continue as a
going concern.
Our opinion is not
modified in this respect.
Refer to page 103 (Audit
Committee Report),
page 145 (Director’s
report) and page 156
(Going concern basis of
preparation)
Disclosure quality
The financial statements explain how the Board
has formed a judgement that it is appropriate to
adopt the going concern basis of preparation for
the Group and parent Company.
That judgement is based on an evaluation of the
inherent risks to the Group’s and Company’s
business model and how those risks might
affect the Group’s and Company’s financial
resources or ability to continue operations over a
period of at least a year from the date of
approval of the financial statements.
There is limited audit judgement required in
evaluating the directors’ conclusion that the
circumstances related to the Aviva deal
described in note (A) to the financial statements
represent a material uncertainty over the
company, and, therefore the group to continue
as a going concern for a period of at least a year
from the date of approval of the financial
statements.
However, clear and full disclosure of the facts
and the directors’ rationale for the use of the
going concern basis of preparation, including
that there is a related material uncertainty, is a
key financial statement disclosure and so was
the focus of our audit in this area. Auditing
standards require that to be reported as a key
audit matter.
Our procedures included:
Assessing transparency
We considered whether the going concern disclosure on page 156
to the financial statement gives a full and accurate description of
the directors’ assessment of going concern, including the identified
risks and dependencies.
Enquiry of directors
We inquired with the directors as to their discussions to date with
Aviva plc in relation to their intention following the purchase
transaction.
Considering the existence of any barriers to restructuring
We evaluated the assessment by management of whether they
believed there were any economic, financial or legal barriers that
existed which could influence Aviva plc not to restructure the
existing group.
Our assessment of management’s going concern assessment also
included the procedures set out in section 6 of our report.
Our results
We found the going concern disclosure in note (A) with a material
uncertainty to be acceptable.
3. Other key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing
the efforts of the engagement team. Going concern is a significant key audit matter and is described in section 2 of our report.
We summarise below the other key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above,
together with our key audit procedures to address those matters and, as required for public interest entities, our results from those
procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for
the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are
incidental to that opinion, and we do not provide a separate opinion on these matters.
148 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Independent Auditor's Report to the shareholders of Direct Line
Insurance Group plc
Valuation of the
Liability for Incurred
Claims (£4,109.7m)
Refer to page 101
(Audit Committee
Report), page 160
(accounting policy)
and page 204 (financial
disclosures)
The liability for incurred claims
represents the largest liability for the
Group and the estimation of the
incurred but not reported claims
(“IBNR”) is the most subjective
component of the liability for incurred
claims.
There is significant complexity and
subjectivity in the valuation of the
fulfilment cash flows related to IBNR
claims due to the level of estimation
uncertainty inherent in the assumptions.
It involves significant judgement and the
use of actuarial and statistical
projections, as some claims can take
some time to emerge or develop.
A number of assumptions are required
to be made with high estimation
uncertainty such as: frequency, severity,
inflationary assumptions and discount
rates. There may also be additional
amounts held in the form of Events Not
In Data reserves (“ENIDs”) which are
judgemental and can be significant in
value. Certain perils have greater
inherent uncertainty. The losses arising
from bodily injury and subsidence claims
are significant and can be both large in
value and difficult to predict. Some
bodily injury claims may also be
expected to settle partly as lump sum
amounts and partly as periodic payment
orders (“PPOs”). Claims may also be
impacted by changes in the market or
regulations: for example: through the
impact of whiplash reform, higher
inflationary environment, Judicial
College Guidelines reviews and changes
to Ogden rates.
The determination and application of
the methodology and performance of
the calculations are also complex.
The effect of these matters is that we
determined that valuation of the liability
for incurred claims has a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the consolidated
financial statements as a whole, and
possibly many times that amount.
We performed the tests below over the valuation rather than seeking to rely
on the Group’s controls because the nature of the balance is such that we
would expect to obtain audit evidence primarily through the detailed
procedures described.
We have used our own actuarial specialists to assist us in performing our
procedures in this area.
Our procedures included:
Control design and implementation
We obtained an understanding of the design and implementation of the
relevant controls over the appropriateness of the methodology and
assumptions for setting actuarial assumptions and the calculation of the
liability for incurred claims.
Independent re-projections
Using our own models we performed independent re-projections across
93% of all perils for certain classes of business. The determination of which
classes to re-project was based on qualitative and quantitative risk
assessment procedures.
Assessment of assumptions and methodology
We assessed and challenged whether methodologies applied are
appropriate with reference to Direct Line’s business and industry practice
including consideration of the effect of uncertain economic conditions. We
also evaluated the appropriateness of models and assumptions used to
develop the best estimate of liabilities by comparing with industry practice
and understanding any key differences.
Sector Experience and Benchmarking
We applied our industry experience and market benchmarks to support our
consideration and challenge of the Group’s reserving methodology, key
judgements and assumptions.
We assessed the impact of regulatory changes on the valuation of best
estimate liabilities by using appropriate benchmarks and/or performing
sensitivity testing on key assumptions.
Assessing ENIDs
We assessed the documentation over the selection and completeness of
ENIDs and evaluated the rationale for their inclusion.
Discounting
We evaluated the actuarial assumptions applied in the discounting of cash
flows. This included assumptions related to payment patterns and the
determination of the discount rates used. We also tested the accuracy of the
discounting of reserves by independently reperforming the discounting
recalculations.
Reconciliations over actuarial data
We performed completeness and accuracy testing over actuarial data used
in projections, by reconciling the key data elements from the data used in
projections to policy and claims administration systems and data recorded
in the ledger. For a sample of transactions, we traced these through to
appropriate documentation.
Assessing Transparency
We considered the adequacy of the Group’s disclosures over the degree of
estimation uncertainty and the sensitivity of recognised amounts to
changes in assumptions and assessed whether the disclosures comply with
relevant accounting standards.
Our results
We found the valuation of the liability for incurred claims to be acceptable.
The risk:
Our response:
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Parent company –
Recoverability of the
Parent Company’s
investment in
subsidiaries
(£3,460.9m)
Refer to page 101
(Audit Committee
Report), page 232
(accounting policy)
and page 233 (financial
disclosures)
Low risk, high value
The carrying amount of the parent
Company’s investments in subsidiaries
represents 94.2% (2023: 95.6%) of the
parent Company’s total assets.
Their recoverability is not at a high risk of
material misstatement or subject to
significant judgement. However, due to
their materiality in the context of the
parent Company financial statements,
this is considered to be the area that had
the greatest effect on our overall parent
Company audit.
We performed the tests below rather than seeking to rely on any of the
parent Company’s controls because the nature of the balance is such that
we would expect to obtain audit evidence primarily through the detailed
procedures described.
Our procedures included:
Tests of detail
Comparing the carrying amount of 100% of investments with the relevant
subsidiaries’ draft balance sheet to identify whether their net assets, being
an approximation of their minimum recoverable amount, were in excess of
their carrying amount and assessing whether those subsidiaries have
historically been profit-making.
Comparing valuations
For investments where the carrying amount exceeded the net asset value,
comparing the carrying amount of the investment with the expected fair
value less costs of disposal.
Our results
Based on our procedures performed, we found the Parent Company’s
conclusion that there is no impairment of its investment in subsidiaries to
be acceptable.
The risk:
Our response:
4. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £24.0m, determined with reference to a benchmark of Net
Assets, of which it represents 0.97%.
Materiality for the Parent Company financial statements as a whole was set at £19.2m, determined with reference to a benchmark
of Company Net Assets, of which it represents 0.61%.
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an acceptable level the risk that immaterial misstatements in individual
account balances add up to a material amount across the financial statements as a whole.
Performance materiality was set at 65% of materiality for the financial statements as a whole, which equates to £15.6m for the
Group and £12.4m for the Parent Company. We applied this percentage in our determination of performance materiality based
on the Group’s history of uncorrected misstatements, control deficiencies and a significant turnover of senior management in the
period.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £1.1m for the Group
and £0.8m for Parent Company, in addition to other identified misstatements that warranted reporting on qualitative grounds.
Overview of the scope of our audit
We applied the revised group auditing standard in our audit of the consolidated financial statements. The revised standard
changes how an auditor approaches the identification of components, and how the audit procedures are planned and executed
across components.
In particular, the definition of a component has changed, shifting the focus from how the entity prepares financial information
to how we, as the group auditor, plan to perform audit procedures to address group risks of material misstatement (“RMMs”).
Similarly, the group auditor has an increased role in designing the audit procedures as well as making decisions on where these
procedures are performed (centrally and/or at component level) and how these procedures are executed and supervised. As a
result, we assess scoping and coverage in a different way and comparisons to prior period coverage figures are not meaningful.
In this report we provide an indication of scope coverage on the new basis.
We performed risk assessment procedures to determine which of the Group’s components are likely to include risks of material
misstatement to the Group financial statements and which procedures to perform at these components to address those risks.
In total, we identified three components, having considered our evaluation of the Group’s legal structure, the existence of common
information systems the presence of key audit matters business activities and our ability to perform audit procedures centrally.
All components were identified as quantitatively significant components which contained the largest percentages of either total
revenue or total assets of the Group, for which we performed audit procedures.
We note that audit procedures for all components are also performed by the Group audit team.
We set the component materialities, ranging from £14.4m to £21.6m, having regard to the mix of size and risk profile of the Group
across the components.
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Insurance Group plc continued
Group Net Assets
£2,404m
Group materiality
£24.0m
£24m
Whole financials statements materiality
£15.6m
Whole financials statements performance materiality
£21.6m
Range of materiality at 3 components (£14.4m to £21.6m)
£1.1m
Misstatements reported to the audit committee
l Net Assets
l Group materiality
Our audit procedures covered the following percentage of Group Net Assets:
We performed audit procedures in relation to components that accounted for the following percentages of Group total revenue
and Group total assets:
Group total assets
Group insurance revenue
4.2%
95.8%
99.8%
Group auditor oversight
As part of establishing the overall Group audit strategy and plan, we conducted the risk assessment and planning discussion
meeting to discuss Group audit risks relevant to the components, including the key audit matters in respect of the valuation
of the liability for incurred claims, and recoverability of the parent company’s investment in subsidiaries.
We considered the work performed at the components for the purpose of the Group audit and evaluated the appropriateness
of conclusions drawn from the audit evidence obtained and consistencies between communicated findings and work performed.
Impact of controls on our group audit
We identified a number of IT systems to be relevant to our audit, including those supporting the policy and claims administration,
actuarial data processing, expense payment and financial reporting processes. Our IT auditors assisted us in assessing the design
and, for certain IT systems, operating effectiveness of relevant general IT controls.
For some IT systems related to policy and claims administration and journals, following our testing of controls, including
compensating controls or additional follow up testing where relevant, we were able to rely on general IT controls, and automated
controls and related manual controls and took this into account in determining our audit work.
For the remaining identified relevant IT systems, we were not able to rely on general IT controls due to deficiencies identified.
As a result, we increased the extent of our substantive testing, and tested additional manual compensating controls addressing
the completeness and reliability of data from the affected IT systems. As a result, our audit was predominantly substantive.
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5. The impact of climate change on our audit
In planning our audit, we performed a risk assessment, including enquiries of management, to consider the potential impact that
commitments made by the Group in respect of the transition to net zero carbon emissions, as well as the physical risks of climate
change could impact on the financial statements and our audit. We held discussions with our own climate change professionals to
challenge our risk assessment. Through the procedures we performed, we did not identify any material impact of climate change
on the Group’s material accounting estimates and there was no significant impact of this assessment on our key audit matters.
The Group primarily underwrites short-term personal line insurance. Climate change may result in an increase in the frequency and
severity of natural catastrophes and other weather-related events leading to an increase in volume and higher insurance pay-outs,
adversely impacting the insurance liabilities, in particular for property insurance products. However, the risk is factored into
insurance premium rates for new policies and periodic repayments and is also mitigated by the short-term nature of policies and
the reinsurance arrangements in place.
Climate risk may also impact the valuation of investments, in particular investment properties, held by the Group. Considering the
nature of the Group’s investment portfolio and valuation techniques used, we concluded that while climate change may pose a risk
to the determination of asset values, the risk is not significant.
We have also read the disclosures of climate related information in the Annual Report and Accounts as set out on pages 58 to 73
and considered their consistency with the financial statements and our audit knowledge.
6. Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position
means that this is realistic for at least a year from the date of approval of the financial statements (the "going concern period”).
As stated in section 2 of our report, they have also concluded that there is a material uncertainty related to going concern. We used
our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model
and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the
going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial
resources over this period were adverse claims inflation, failure to achieve Motor pricing initiative benefits, delays to delivering
expense reductions and falls in asset values.
We also considered less predictable but realistic second order impacts that could affect demand in the Group’s markets, such
as the impact of climate change on the Group’s results and operations, and credit ratings of key reinsurers.
We considered whether these risks could plausibly affect the liquidity in the going concern period by assessing the directors’
sensitivities over the level of available financial resources indicated by the Group’s financial forecasts taking account of severe,
but plausible adverse effects that could arise from these risks individually and collectively.
Our procedures also included evaluation of the consistency, arithmetical accuracy and reasonableness of the data and assumptions
used in management’s Going Concern assessment paper.
An explanation of how we evaluated management’s assessment of going concern is further set out in section 2 of our report.
Our conclusions based on this work:
– we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate;
– we have nothing material to add or draw attention to in relation to the directors’ statement in the Accounting Policies on page
156 to the financial statements on the use of the going concern basis of accounting and their identification therein of a material
uncertainty over the Group and Company’s ability to continue to use that basis for the going concern period, and we found the
going concern disclosure in the Accounting Policies on page 156 to be acceptable; and
– the related statement under the Listing Rules set out in the Viability statement and Accounting Policies on page 156 is materially
consistent with the financial statements and our audit knowledge.
7. Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
– Enquiring of directors, the audit committee, internal audit and the risk committee and inspection of policy documentation as to
the Group high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s
channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud;
– Reading Board, Audit Committee and Risk Committee minutes;
– Considering remuneration incentive schemes and performance targets for management;
– Using analytical procedures to identify any unusual or unexpected relationships;
– Consultation with our own forensic professionals regarding the identified fraud risks and the design of the audit procedures
planned in response to these. This involved the forensic professionals attending the Risk Assessment and Planning Discussion
and discussion between the engagement partner, and the forensic professional;
– inspecting correspondence with regulators to identify instances or suspected instances of fraud; and
– reading broker reports and other public information to identify third-party expectations and concerns.
We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout
the audit.
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Independent Auditor's Report to the shareholders of Direct Line
Insurance Group plc continued
As required by auditing standards, and taking into account possible pressures to meet profit targets, changes to senior
management, and our overall knowledge of the control environment, we perform procedures to address the risk of management
override of controls, in particular the risk that Group management may be in a position to make inappropriate accounting entries
and the risk of bias in accounting estimates such as the liability for incurred claims. On this audit we do not believe there is a fraud
risk related to revenue recognition due to the routine nature of revenue transactions.
We also identified a fraud risk related to the valuation of insurance contract liabilities in response to possible pressures to meet profit
targets. Further detail in respect of our response to these areas is set out in the key audit matter disclosures in section 3 of this report.
We also performed procedures including:
– Identifying journal entries and other adjustments to test at the Group level and for all components based on risk criteria and
comparing the identified entries to supporting documentation. These include, but are not limited to, journals that represent
unexpected pairing to revenue, or cash, journal entries made to seldom-used accounts and journals posted by senior
management or unauthorised users.
– Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.
Identifying and responding to risks of material misstatement related to compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements
from our general commercial and sector experience, through discussion with the directors and others management (as required
by auditing standards), and from inspection of the Group’s regulatory and legal correspondence regarding compliance with laws
and regulations.
As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the
entity’s procedures for complying with regulatory requirements. This includes engaging internal KPMG regulatory specialists to
provide additional expertise and guidance on regulatory risk and conduct matters that impact the Group.
We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance
throughout the audit.
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting
legislation (including related companies legislation), distributable profits legislation, taxation legislation and regulatory capital,
solvency and liquidity regulations, and we assessed the extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a
material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the
loss of the Group’s license to operate. We identified the following areas as those most likely to have such an effect: data protection
laws, money laundering, anti-bribery, regulatory consumer conduct, and certain aspects of company legislation recognising
the financial and regulated nature of the Group’s activities. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory
and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
For the matter discussed in note 33 we assessed disclosures against our understanding from legal correspondence and inquiries
with management and management’s experts.
We discussed with the audit committee other matters related to actual or suspected breaches of laws or regulations, for which
disclosure is not necessary, and considered any implications for our audit.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards
would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance
with all laws and regulations.
8. We have nothing to report on the other information in the Annual Report and Accounts
The directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely
on that work we have not identified material misstatements in the other information.
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Strategic report and directors’ report
Based solely on our work on the other information:
– we have not identified material misstatements in the strategic report and the directors’ report;
– in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
– in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and longer-term viability
We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in
respect of emerging and principal risks and the Viability statement, and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or draw attention to in relation to:
– the directors’ confirmation within the Viability statement page 74 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those that would threaten its business model, future performance,
solvency and liquidity;
– the Emerging and Principal Risks disclosures describing these risks and how emerging risks are identified, and explaining how
they are being managed and mitigated; and
– the directors’ explanation in the Viability statement of how they have assessed the prospects of the Group, over what period they
have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the Viability statement, set out on page 74 under the Listing Rules. Based on the above procedures,
we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit.
As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with
judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a
guarantee as to the Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements
and our audit knowledge:
– the directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced
and understandable, and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy;
– the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit
committee considered in relation to the financial statements, and how these issues were addressed; and
– the section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal
control systems.
We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect.
9. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been
received from branches not visited by us; or
– the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
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Independent Auditor's Report to the shareholders of Direct Line
Insurance Group plc continued
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 146, the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing
the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance
and Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report has
been prepared in accordance with those requirements.
10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report,
or for the opinions we have formed.
James Anderson (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
3 March 2025
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Direct Line Insurance Group plc (the "Group") is a public limited
company registered in England and Wales (company number
02280426). The address of the registered office is Churchill
Court, Westmoreland Road, Bromley, BR1 1DP, England.
The principal activity of the Group is the provision of general
insurance.
(A) Basis of preparation
As required by the Companies Act 2006, the Group's
consolidated financial statements are prepared in accordance
with UK adopted International Accounting Standards ("IASs")
and International Financial Reporting Standards ("IFRSs") as
endorsed by the International Accounting Standards Board
("IASB"). The Group has elected to prepare its parent company
financial statements in accordance with FRS 101 'Reduced
Disclosure Framework'.
The consolidated financial statements are prepared on the
historical cost basis except for (i) insurance and reinsurance
contract assets and liabilities which are measured at their
fulfilment value in accordance with IFRS 17 'Insurance
Contracts'; (ii) debt and equity investments held at either fair
value through profit or loss ("FVTPL") or fair value through other
comprehensive income ("FVOCI"); (iii) defined benefit scheme
liabilities measured on an actuarial basis and scheme assets
measured at their fair value; and (iv) financial assets; investment
property and derivative financial instruments, which are
measured at fair value (fair value is defined in note 22).
Where necessary, adjustments have been made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
The policies set out below have been applied consistently
throughout the years ended 31 December 2024 and
31 December 2023 to items considered material to the financial
statements. The accounting policies are consistent with those
set out in the Group’s 2023 annual financial statements, with
the exception of new accounting standards which became
effective for periods beginning on or after 1 January 2024. The
nature and effect of these changes are disclosed in note (A).
The Company's financial statements and the Group's
consolidated financial statements are presented in sterling,
which is the functional currency of the Company.
Going concern
As a standalone business, the Directors believe that the Group
and Company have sufficient financial resources to meet their
financial needs, including managing a mature portfolio of
insurance risk. The Directors believe the Group and Company
are well positioned to manage its business risks successfully
in the current economic climate. The Chief Financial Officer
Review describes the Group’s capital management strategy,
including the capital actions taken to ensure the continued
strength of the balance sheet. The Group’s financial position
is also covered in that section, including a commentary on cash
and investment holdings, claims reserves and management
of insurance liabilities, and the Group's financial leverage. This
covers insurance, market, credit, liquidity and operational risk;
and the Group's approach to monitoring, managing and
mitigating exposures to these risks.
Having made due enquiries, the Directors believe they can
reasonably expect that the Group and Company has adequate
resources to continue in operational existence on a standalone
basis for at least 12 months from 3 March 2025 (the date of
approval of the consolidated financial statements). Accordingly,
the Directors have adopted the going concern basis in
preparing the consolidated financial statements.
Material uncertainty in relation to going concern
On 23 December 2024, the Boards of the Company and Aviva
plc ("Aviva") reached an agreement pursuant to which Aviva
agreed to purchase the entire share capital of the Company,
subject to regulatory and shareholder approval. Although the
Directors cannot be certain about the actions of Aviva should a
deal complete, they consider that the ability of the Group to
continue as a going concern should not be adversely affected
by the transaction should it proceed. In making this
assessment, they have considered many factors, including the
strategic fit of Aviva for the Group as well as Aviva's record of
executing transactions, including integrating a number of
acquisitions, and of delivering profitable growth. While the
Directors would expect Aviva to continue to deliver long term
value from the Group’s ongoing operations they note however,
that it is beyond their control as to whether Aviva would
undertake any restructuring of the Group’s legal entities.
Therefore, given the potential change in control, the Directors
consider these conditions to constitute a material uncertainty
(as defined under IAS 1) which may cast significant doubt over
the Company’s and therefore, the Group’s ability to continue as
a going concern. The Directors would not expect this to impact
the continued operation of the Group’s core insurance activities.
Notwithstanding this uncertainty, the Directors are satisfied
that the going concern basis remains appropriate for the
preparation of the financial statements.
New standards, interpretations and amendments
to published standards that have been issued and
endorsed by the UK and adopted by the Group
or the Company
The Group has adopted the following new amendments to
IFRSs and IASs that became mandatorily effective for the Group
for the first time from 1 January 2024. None of these
amendments have a material impact upon the Group.
In January 2020, the IASB issued ‘Classification of Liabilities
as Current or Non-current (Amendments to IAS 1 'Presentation
of Financial Statements')’ which clarifies the requirements for
classifying liabilities as current or non-current. More specifically
these amendments:
– specify that an entity’s right to defer settlement must exist
at the end of the reporting period;
– clarify that classification is unaffected by management’s
intentions or expectations about whether the entity will
exercise its right to defer settlement of a liability;
– clarify how lending conditions affect classification; and
– clarify requirements for classifying liabilities an entity will or
may settle by issuing its own equity instruments.
In January 2020, the IASB issued ‘Non-current liabilities with
covenants (Amendments to IAS 1)’ which clarified how an entity
classifies debt and other financial liabilities as current or non-
current in particular circumstances.
On 22 September 2022, the IASB issued 'Lease Liability in a
Sale and Leaseback (Amendments to IFRS 16)’, which adds
subsequent measurement requirements for sale and
leaseback transactions.
On 25 May 2023, the IASB issued ‘Supplier Finance
Arrangements (Amendments to IAS 7 'Statement of Cash
Flows' and IFRS 7 'Financial Instruments: Disclosures')’ to add
disclosure requirements, and ‘signposts’ within existing
disclosure requirements, that ask entities to provide qualitative
and quantitative information about supplier finance
arrangements.
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Accounting policies
Standards, interpretations and amendments
to published standards that are not yet effective
and have not been early adopted by the Group
or the Company
New IFRS standards and amendments that are issued but are
not effective until after 31 December 2024 have not yet been
adopted by the UK and have not been early adopted by the
Group are disclosed below. The Group intends to adopt these
standards, if applicable, when they become effective.
The following amendments have been adopted by the UK and
are effective from 1 January 2025.
The IASB issued amendments Lack of Exchangeability
(Amendments to IAS 21 The Effect of Changes in Foreign
Exchange Rates) that provide guidance to specify when a
currency is exchangeable and how to determine the exchange
rate when it is not. This amendment is not expected to have a
significant impact on the Group’s consolidated financial
statements or the Company’s financial statements.
The following amendments are effective from 1 January 2026
but are yet to be adopted by the UK for which The Group
intends to undertake an assessment of the impact in 2025.
‘Amendments to IFRS 9 'Financial Instruments' and IFRS 7
Amendments to the Classification and Measurement of
Financial Instruments’ which provide further clarification and
requirements for:
– the recognition and derecognition criteria for financial assets
and liabilities;
– the classification requirements for financial assets, particularly
those containing contingent, non-recourse features or
contractually linked instruments; and
– disclosures related to the amendments to the classification
requirements, and also for investments in equity instruments
designated at fair value through other comprehensive
income.
Annual improvements to IFRS Accounting Standards – Volume 11.
The following new standards are effective from 1 January 2027
but are yet to be adopted by the UK for which the Group
intends to undertake an assessment of the impact in 2025.
IFRS 18 ‘Presentation and Disclosures in Financial Statements’
which aims to ensure that financial statements provide relevant
information that faithfully represents an entity’s assets,
liabilities, equity, income, and expenses. The standard
introduces new requirements for the presentation of the
statement of profit or loss, including mandatory sub-totals,
aggregation, disaggregation, and disclosures related to
management-defined performance measures.
IFRS 19 ‘Subsidiaries without Public Accountability: Disclosures’
specifies reduced disclosure requirements that an eligible
entity is permitted to apply instead of the disclosure
requirements in other IFRS accounting standards.
(B) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and the entities that are controlled
by the Group at 31 December 2024 and 31 December 2023.
Control exists when the Group is exposed, or has rights, to
variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. In assessing whether the Group controls another entity,
the existence and effect of the potential voting rights that are
currently exercisable or convertible are considered.
A subsidiary acquired is included in the consolidated financial
statements from the date it is controlled by the Group until
the date the Group ceases to control it. On acquisition of a
subsidiary, its identifiable assets, liabilities and contingent
liabilities are included in the consolidated financial statements
at fair value.
The Group accounts for the disposal of subsidiary undertakings
or a disposal group when it ceases to exert control.
A gain or loss is measured as the difference between the fair
value of consideration received or receivable and the value
of the assets and liabilities de-recognised, which relate to
businesses disposed of. The gain or loss is recognised on the
effective date of the completion of the disposal.
All intercompany transactions, balances, income and expenses
between Group entities are eliminated on consolidation.
(C) Material accounting policies and the use of
estimates and judgements
Material accounting policies
The preparation of financial statements requires the Group
to select accounting policies and make estimates and
assumptions that affect items reported in the consolidated
income statement, consolidated statement of financial position,
other primary statements and notes to the consolidated
financial statements.
The accounting policies in the table below are those that have
the most material impact on the amounts recognised in the
financial statements, with those judgements involving
estimation summarised thereafter.
Material accounting policies
Policy
reference
Insurance and reinsurance contracts (IFRS 17)
(F), (J)
Fair value of investment properties (IAS 40)
(O)
Financial instruments (IFRS 9)
(P)
Impairment provisions – financial assets (IFRS 9)
(P)
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(C) Material accounting policies and the use of
estimates and judgements continued
Critical accounting judgements
The following are the critical judgements, apart from those
involving estimations (which are presented separately below),
that the Directors have made in the process of applying the
Group’s accounting policies and that have the most significant
effect on the amounts recognised in financial statements.
Critical accounting judgements
Note
reference
Level of aggregation and combination of
insurance contracts
The Group exercises judgement in determining
whether a set of insurance and reinsurance
contracts with the same or related counterparty
should be treated collectively, considering both
qualitative and quantitative factors like pricing
and credit risk exposure. Additionally,
judgement is applied in defining portfolios of
insurance contracts by grouping contracts with
similar risks that are managed together. This
involves assessing which risks are similar and
how contracts are operationally managed, with
contracts in the same product line typically
grouped in the same portfolio.
(J)
Classification of financial instruments
The Group exercises judgement in assessing the
business model within which the assets are
held and whether the contractual terms of the
assets are solely payments of principal and
interest on the principal amount outstanding.
The Group assesses its business models at a
portfolio level based on its objectives for the
relevant portfolio, how the performance of the
portfolio is managed and reported, and the
frequency of asset sales and has concluded on
the classification category of each portfolio of
financial instrument in accordance with IFRS 9.
(P)
Impairment of financial assets
The measurement of the expected credit loss
("ECL") allowance under IFRS 9 for financial
assets measured at amortised cost requires
significant judgements and assumption in
particular, for the estimation of the amount and
timing of future cash flows when determining
impairment losses and the assessment of a
significant increase in credit risk. These
estimates are driven by the outcome of
modelled ECL scenarios, and the relevant inputs
used.
(P)
The critical accounting judgements made by management
in applying the Group’s accounting policies and the key sources
of estimation uncertainty were the same as those that applied
to the consolidated financial statements for the year ended
31 December 2023, except for a new accounting judgement
in relation to combination of direct and reinsurance contracts
with Motability.
Additionally, the following areas are no longer considered
significant:
– PAA eligibility (see note (J) Level of aggregation for further
details)
– Onerous contracts (see note (J) Loss components and loss
offsetting)
Key sources of estimation uncertainty
The table below sets out those items considered particularly
susceptible to changes in estimates and assumptions, that
have a significant risk of resulting in a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year, and the relevant note disclosures.
Key sources of estimation uncertainty
Policy
reference
Carrying
value
Sensitivity
Measurement of insurance
and reinsurance contracts
The ultimate cost of
outstanding claims is
estimated by using a range of
standard actuarial claims
projection techniques. Key
estimates involved in
determining both the
insurance liabilities and the
corresponding recoverable
amount from reinsurance
contracts include the amount
and timing of future claims
payments in relation to claims
already incurred, the
allowance for illiquidity
premium in the determination
of discount rates, and the
calibration of risk adjustment.
(J)
Note 19
Note
1.3.1
Fair value of financial
instruments and investment
property
Where quoted market prices
are not available, valuation
techniques are used to value
financial instruments and
investment property. These
include broker quotes and
models using both observable
and unobservable market
inputs. The valuation
techniques involve judgement
with regard to the valuation
models used and the inputs to
these models can lead to a
range of plausible valuations
for financial instruments and
investment property.
(O), (P)
Note 22
Note
1.3.2
There have been no significant changes in the basis upon
which judgement and estimates have been determined,
compared to that applied as at 31 December 2023.
(D) Foreign currency translation
Group entities record transactions in the currency of the
primary economic environment in which they operate (their
functional currency), translated at the foreign exchange rate
ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated into the relevant functional currency
at the foreign exchange rates ruling at the statement of
financial position date. Foreign exchange differences arising
on the settlement of foreign currency transactions and from
the translation of monetary assets and liabilities are reported
in the statement of profit or loss.
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Accounting policies continued
Non-monetary items denominated in foreign currencies that
are stated at fair value are translated into the relevant
functional currency at the foreign exchange rates ruling at the
dates the values are determined. Translation differences arising
on non-monetary items measured at fair value are recognised
in the statement of profit or loss except for differences arising
on equity investments held at FVOCI, which are recognised in
other comprehensive income.
Assets and liabilities of foreign operations, including goodwill
and fair value adjustments arising on acquisition, are translated
into sterling at the foreign exchange rates ruling at the
statement of financial position date. Income and expenses of
foreign operations are translated into sterling at average
exchange rates unless these do not approximate the foreign
exchange rates ruling at the dates of the transactions. Foreign
exchange differences arising on the translation of a foreign
operation are recognised in the consolidated statement of
other comprehensive income. The amount accumulated in
equity is reclassified from equity to the consolidated statement
of profit or loss on disposal or partial disposal of a foreign
operation.
(E) Fair value measurement
Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of
whether that price is directly observable or estimated using
another valuation technique. There were no changes in
valuation techniques during the year.
(F) Insurance service result
Insurance revenue
For insurance contracts applying the premium allocation
approach ("PAA"), the insurance revenue for the period is the
amount of expected premium receipts allocated to the period.
The Group allocates the expected premium receipts and
instalment income (being the additional fees payable by a
policyholder associated with paying for an insurance contract
over 12 months that are considered non-distinct from the
underlying insurance policy) to each period of insurance
contract services on the basis of the passage of time.
Cash flows associated with arrangement fee and administrative
fee income are included within the insurance revenue cash
flows as they are considered non-distinct from the underlying
insurance policy, and spread evenly over the term of the policy.
Insurance service expenses
Insurance service expenses include the following:
– incurred claims and other claims expenses;
– other incurred directly attributable expenses, such as
marketing and acquisition costs;
– changes that relate to past service (i.e. changes in fulfilment
cash flows relating to liability for incurred claims ("LIC")); and
– other directly attributable claims income including vehicle
replacement referral fees, salvage income and legal services
fees which have been assessed as part of the IFRS 17 contract
boundary.
Other expenses not included above are included in other
operating expenses in the consolidated statement of profit or
loss. Directly attributable overheads are allocated using a
systematic and rational basis.
Income and expenses from reinsurance
contracts held
Income and expenses from reinsurance contracts held
represents the insurance service result for groups of
reinsurance contracts held and is comprised of:
– the allocation of reinsurance premiums paid, which is
calculated using the same principles as used to calculate
revenue on insurance contracts;
– amounts recoverable from reinsurers, which is calculated
using the same principles as used to calculate insurance
service expenses on insurance contracts;
– the recognition of, and subsequent movements in,
reinsurance loss recovery components; and
– the effect of changes in the risk of reinsurers’ non-
performance.
(G) Insurance finance result
Insurance finance income and expenses comprise the change
in the carrying amount of the group of insurance contracts in
respect of incurred claims arising from:
– the effect of the time value of money and changes in the
time value of money. This mainly comprises interest accreted
on the LIC; and
– the effect of financial risk and changes in financial risk. This
mainly includes the effect of changes in interest rates (i.e
discount rates) and the inflation assumptions for Periodic
Payment Orders ("PPOs") (which are predominantly inflated
with respect to the ASHE 6115 index).
(H) Investment return
Interest income on financial assets held at amortised cost is
determined using the effective interest rate method. The
effective interest rate method is a way of calculating the
amortised cost of a financial asset (or group of financial assets)
and of allocating the interest income over the expected life of
the asset.
Rental income from investment property is recognised in the
statement of profit or loss on a straight-line basis over the
period of the contract.
Dividend income is recognised when the right to receive
payment is established.
(I) Other income
The Group's other operating income comprises vehicle recovery
and repair services provided to other third-party customers.
Income in respect of vehicle recovery and repairs is recognised
upon completion of the repair obligations in accordance with
IFRS 15 'Revenue from contracts with customers'. The price is
determined using market rates for the services and materials
used after discounts have been deducted where applicable.
Revenue from any goods provided is accounted for at the point
of sale.
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(J) Insurance and reinsurance contracts
IFRS 17 measurement models
Insurance contracts are those contracts where the Group (the
insurer) has accepted significant insurance risk from another
party (the policyholder) by agreeing to compensate the
policyholder if a specified uncertain future event (the insured
event) adversely affects the policyholder.
Once a contract has been classified as an insurance contract, it
remains an insurance contract for the remainder of its lifetime,
even if the insurance risk reduces significantly during this period.
The Group issues mainly short-term insurance contracts for
various products in the normal course of business, under which
it accepts significant insurance risk from its policyholders.
The Group has reinsurance treaties and other reinsurance
contracts, in the form of quota share and excess of loss ("XoL"),
that transfer significant insurance risk. The Group cedes
insurance risk by reinsurance in the normal course of business.
The Group applies the following measurement model to its
insurance and reinsurance contracts:
Model
Applicable business
PAA
Short duration insurance contracts automatically
eligible for PAA
Longer duration insurance contracts which meet
the PAA eligibility requirements
Reinsurance contracts issued or held automatically
eligible for PAA
Reinsurance contracts issued or held which meet
PAA eligibility requirements
The basis for the measurement model is determined as follows:
– the coverage period of each contract in the group is one year
or less and therefore automatically eligible, including
insurance contract services arising from all premiums within
the contract boundary; or
– for groups of insurance and reinsurance contracts longer
than one year, the Group has modelled possible future
scenarios to test the measurement of the liability for
remaining coverage, for the group containing those
contracts under the PAA does not differ materially from the
measurement that would be produced by applying the
General Measurement Model. Materiality is a key
consideration in the quantitative assessment of results, and
qualitative factors about the nature of the contracts,
including the timing and size of cash flows are considered
when forming conclusions on PAA applicability.
The Group’s reinsurance contracts (both quota share and Motor
excess of loss) include contracts with a coverage period greater
than one year and therefore do not automatically qualify for
PAA. The measurement of the asset for remaining coverage
between the PAA and the general model is determined and
where the difference in measurement is immaterial, PAA is
applied.
Insurance contracts – initial measurement
For a group of contracts that is not onerous at initial
recognition, the Group measures the liability for remaining
coverage as:
– the premiums, if any, received at initial recognition; plus
– any other asset or liability previously recognised for cash flows
related to the group of contracts that the Group pays or
receives before the group of insurance contracts is
recognised.
An insurance or reinsurance contract acquired in a transfer of
contracts or a business combination is recognised on the date
of acquisition.
When the contract is recognised, it is added to an existing
group of contracts or, if the contract does not qualify for
inclusion in an existing group, it forms a new group to which
future contracts are added. Groups of contracts are established
on initial recognition and their composition is not revised once
all contracts have been added to the group.
Any premiums received before the recognition of the
corresponding group of insurance contracts are recognised as
deferred revenues in trade and other liabilities. When a group of
contracts is recognised as per above the premiums received are
reclassified to the liability for remaining coverage.
Reinsurance contracts – initial measurement
The Group measures its reinsurance assets for a group of
reinsurance contracts that it holds on the same basis as
insurance contracts that it issues. However, they are adapted
to reflect the features of reinsurance contracts held that differ
from insurance contracts issued, for example, the generation
of expenses or reduction in expenses rather than revenue.
Insurance contracts – subsequent measurement
The Group measures the carrying amount of the liability for
remaining coverage at the end of each reporting period as:
– the liability for remaining coverage at the beginning of the
period; plus
– premiums received in the period; minus
– the amount recognised as insurance revenue for the services
provided in the period.
Where an entity is required to apply IAS 34 (as for the Group)
there is an option as to whether to choose a "year-to-date” basis
or a “period-to-period” basis for financial reporting. The Group
has opted to apply the option to use "period-to-period"
accounting for interim reporting.
Claims reserves are assessed separately for large and attritional
claims, typically using standard actuarial methods of projection
such as the Chain Ladder and Bornhuetter-Furguson methods.
Reinsurance contracts – subsequent measurement
The subsequent measurement of reinsurance contracts held
follows the same principles as those for insurance contracts
issued and has been adapted to reflect the specific features
of reinsurance contracts held.
A credit exposure exists with respect to reinsurance contracts
held, to the extent that any reinsurer is unable to meet its
obligations.
Combination of insurance contracts
The Group exercises judgement in deciding whether a set of
insurance and reinsurance contracts with the same or a related
counterparty should be treated collectively. Specifically, the
Group assesses whether the direct and reinsurance contracts
with Motability should be considered a combined agreement
or as separate contracts. Based on management's assessment,
it was concluded that each contract should be treated on
a standalone basis.
Separating components from insurance and
reinsurance contracts
The Group assesses its insurance contracts to determine
whether they contain distinct components which must be
accounted for under another IFRS instead of under IFRS 17.
After separating any distinct components, the Group applies
IFRS 17 to all remaining components of the (host) insurance
contract. Currently, the Group's contracts do not include any
distinct components that require separation.
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Accounting policies continued
Level of aggregation
Insurance contracts are aggregated into groups for
management purposes at initial recognition. The grouping
of contracts is not subsequently reconsidered. The level of
aggregation for the Group is determined firstly by dividing
the business written into portfolios.
The Group defines a portfolio as insurance contracts subject to
similar risks and managed together. Contracts within the same
product line are expected to be in the same portfolio as they
have similar risks and are managed together. The assessment
of which risks are similar and how contracts are managed
requires the exercise of judgement. The general principles for
defining the portfolio of insurance contracts for level of
aggregation are equally applicable to reinsurance contracts
held. Portfolios and groups may be changed prospectively if
there are changes to facts and circumstances.
The Group manages insurance contracts issued by product and
brand. Contracts within each product and brand are grouped
together into different sub-groups for IFRS 17 reporting and
disclosure based on the criterial of similar risks which are
managed together, the nature of the product and brand and
profitability.
Portfolios are further divided based on expected profitability
and within a calendar year at inception into three categories:
i.
onerous contracts, if any;
ii. contracts with no significant risk of becoming onerous; and
iii. the remainder group of contracts in the portfolio.
A group of insurance contracts is considered to be onerous at
initial recognition if the fulfilment cashflows allocated to that
group of contracts in total are a net outflow. This occurs if the
present value of expected claims, attributable expenses and risk
adjustment exceeds the premium. As all inwards contracts are
measured under the PAA model, due to the short-term nature
of the contracts, the Group takes the standard’s default
assumption that no groups are onerous unless facts and
circumstances indicate otherwise.
Portfolios of reinsurance contracts held are assessed for
aggregation separately from portfolios of insurance contracts
issued. Applying the grouping requirements to reinsurance
contracts held, the Group aggregates reinsurance contracts
held based on the criteria of similar risks which are managed
together on a product level. The reinsurance contract held
portfolios are further divided within a calendar year into three
groups that comprise:
i.
contracts for which there is a net gain at initial recognition,
if any;
ii. contracts for which, at initial recognition, there is no
significant possibility of a net gain arising subsequently; and
iii. remaining contracts in the portfolio.
The grouping of insurance and reinsurance contracts is
determined at initial recognition and is not subsequently
reassessed.
Recognition, modification and derecognition
Recognition
The Group recognises groups of insurance contracts it issues
from the earliest of the following:
– the beginning of the coverage period of the group
of contracts;
– the date when the first payment from a policyholder in the
group is due or when the first payment is received if there
is no due date; or
– for a group of onerous contracts, when facts and
circumstances indicate that the group is onerous.
The Group recognises a group of reinsurance contracts held
it has entered into from the earlier of the following:
– the beginning of the coverage period of the group of XoL
reinsurance contracts held. However, the Group delays the
recognition of a group of reinsurance contracts held that
provide proportionate coverage (the Group's quota share
reinsurance) until the date any underlying insurance contract
is initially recognised, if that date is later than the beginning
of the coverage period of the group of reinsurance contracts
held; and
– the date the Group recognises an onerous group of
underlying insurance contracts if the Group entered into the
related reinsurance contract held at or before that date.
Modification and derecognition
The Group derecognises insurance contracts when:
– the rights and obligations relating to the contract are
extinguished (i.e. discharged, cancelled or expired); or
– the contract is modified such that the modification results
in a change in the measurement model or the applicable
standard for measuring a component of the contract
substantially changes the contract boundary, or requires the
modified contract to be included in a different group. In such
cases, the Group derecognises the initial contract and
recognises the modified contract as a new contract.
When a modification is not treated as a derecognition,
the Group recognises amounts paid or received for the
modification of the contract as an adjustment to the estimate
of fulfilment cash flows.
Estimates of future cash flows
The estimate of future cash flows for the liability for incurred
claims represents the best estimate of the Group's cost to fulfil
a contract incorporating current estimates of non-financial
assumptions. The estimate allows for all the cash inflows and
outflows expected to occur within the contract boundary.
In estimating future cash flows, the Group incorporates, in an
unbiased way, all reasonable and supportable information that
is available without undue cost or effort at the reporting date.
This information includes both internal and external historical
data about claims and other experience, updated to reflect
current expectations of future events. The estimates of future
cash flows reflects the Group's view of current conditions at
the reporting date, ensuring the estimates of any relevant
market variables are consistent with observable market
prices. However, these cash flows are inherently uncertain
in size, timing and are based on probability-weighted
average expectations.
Cash flows are modelled separately for gross and reinsurance
contracts for which the effect of any risk of non-performance
by the issuer of the reinsurance contract, including the effects
of collateral and losses from disputes, is included.
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(J) Insurance and reinsurance contracts
continued
Contract boundaries
Cash flows are within the boundary of an insurance contract
if they arise from substantive rights and obligations that exist
during the reporting period in which the Group can compel
the policyholder to pay the premiums, or in which the Group
has a substantive obligation to provide the policyholder with
insurance contract services.
A liability or asset relating to expected premiums or
claims outside the boundary of the insurance contract
is not recognised, as such amounts relate to future
insurance contracts.
The contract boundary is reassessed at each reporting date to
include the effect of changes in circumstances on the Group's
substantive rights and obligations and therefore may
change over time.
The contract boundary for a reinsurance contract is dependent
on the terms and conditions of the reinsurance contract and
therefore may not necessarily be the same as for the underlying
insurance contracts. For groups of reinsurance contracts held,
cash flows are within the contract boundary if they arise from
substantive rights and obligations of the Group that exist
during the reporting period in which the Group is compelled
to pay amounts to the reinsurer or in which the Group has a
substantive right to receive insurance contract services from
the reinsurer.
Risk adjustment
A risk adjustment for non-financial risk is determined to reflect
the compensation that the Group would require for bearing
non-financial risk and its degree of risk aversion.
The Group estimates the probability distribution of the
expected present value of future cash flows from the contracts
at each reporting date and calculates the risk adjustment for
non-financial risk as the excess of the value at risk at the target
confidence level over the expected present value of the future
cash flows allowing for the associated risks over all future years.
Once the risk adjustment is determined at Group level on a
gross and net of reinsurance basis, it is allocated to groups of
contracts based on the size of their reserves. More recent
accident periods tend to be less developed with generally
larger reserves than older contract periods, so that a higher
proportion of the overall risk adjustment is allocated to these
more uncertain groups of contracts.
The target confidence level is at the 75th percentile for the
liability for incurred claims.
Financial assumptions
Discount rates
The Group adjusts the future cash flows for the time value of
money and the effect of financial risk for the measurement of
liability for incurred claims, including those that are expected to
be paid within one year of being incurred.
The Group has selected to apply the ‘bottom up’ approach to
determine discount rates which requires the use of risk-free
rate curves and adding the illiquidity premium.
The Group determines the risk-free discount rate using
Solvency II risk-free rates sourced from the Bank of England.
The illiquidity premium is determined by using a fundamental
spread approach by deducting the risk-free rate and credit risk
premium from corresponding corporate bond reference
portfolios having regard to the assumptions on the Prudential
Regulation Authority ("PRA") Solvency II website. The term and
credit rating of the underlying bonds is aligned with the
duration of the liabilities and quality of assets held to match the
liabilities. For non-PPOs, the reference portfolio is A rated bonds
with terms of 1 to 3 years and for PPOs, the reference portfolio is
BBB rated bonds with a remaining term of 15 or more years.
Judgement is applied when determining the illiquidity
premium with respect to allowances for past and future trends,
considering changes in the economic environment. Generally,
the illiquidity premium is expected to be stable over time
however, assessment of the illiquidity premium assumption
is reviewed periodically and adjusted where required.
The Group has chosen to take the effect of the time value of
money and changes in the time value of money and financial
risk to the statement of profit or loss.
There is no allowance made for the time value of money
where insurance premiums are due within one year of the
coverage period.
Inflation assumptions
Future inflation assumptions that are contractually linked
to an inflation index are treated as a financial assumption.
Presentation of financial assumption changes
The Group recognises the impact of financial assumption
changes in the statement of profit or loss.
Loss components and loss offsetting
In utilising the PAA measurement model approach, the Group
assumes that no material contracts are onerous at initial
recognition unless facts and circumstances indicate otherwise.
Where facts and circumstances indicate that contracts are
onerous at initial recognition, the Group performs additional
analysis based on the Strategic Business Plan to determine
if a net outflow is expected from the contract. Such onerous
contracts are separately grouped from other contracts and the
Group recognises a loss in the consolidated statement of profit
or loss for the net outflow, resulting in the carrying amount of
the liability for the group being equal to the fulfilment cash
flows. A loss component is established by the Group for the
liability for remaining coverage for any such onerous group
depicting the losses recognised. Accordingly, by the end of the
coverage period of the group of contracts the loss component
will be zero.
Where the Group recognises a loss on initial recognition of
an onerous group of underlying insurance contracts or when
further onerous underlying insurance contracts are added to
a group, the Group establishes a loss-recovery component of
the asset for remaining coverage for a group of reinsurance
contracts held depicting the recovery of losses.
After initial recognition quarterly reviews are undertaken to
determine the likelihood of changes in facts and circumstances
which could result in groups of contracts subsequently
becoming onerous.
Insurance acquisition cash flows
The Group has taken the option to expense insurance
acquisition cash flows as they are incurred.
Presentation
The Group presents in the consolidated statement of financial
position:
– the carrying amount of portfolios of insurance contracts
issued that are assets;
– portfolios of insurance contracts issued that are liabilities;
– portfolios of reinsurance contracts held that are assets; and
– portfolios of reinsurance contracts held that are liabilities.
The Group presents net the income or expenses from
reinsurance contracts held and the expenses or income from
insurance contracts issued gross.
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Accounting policies continued
The Group treats reinsurance cash flows that are contingent
on claims on the underlying contracts as part of the claims
recoverable from reinsurance contract held and treats amounts
not dependent on the underlying claims, such as ceding
commissions, as a reduction in the premiums paid to
the reinsurer.
Presentation of reinsurance contract with
‘funds withheld’ arrangement
The Group has quota share reinsurance contracts that have
funds withheld features, whereby the quota share proportion
of reinsurance premiums and related recoveries are retained
by the Group and will be settled on a net basis at commutation.
Under this arrangement, no assets are transferred to the
reinsurer at the inception of the contract. Instead, the asset
is deposited within a segregated funds withheld account that
is maintained by the Group with a third-party custodian. Cash
withheld under funds withheld arrangements is presented
in cash and cash equivalents within the statement of
financial position.
The funds withheld account balance is adjusted at the agreed
commutation date, with any shortfall or surplus resulting from
reinsurance premium compared to reinsurance recoveries
necessitating an adjustment to funds withheld. The funds
withheld account is measured by reference to the fulfilment
cash flows (of the reinsurance contract held) that, according to
the contractual terms, give rise to the funds withheld feature.
Until it is settled in cash, the funds withheld liability is included
within reinsurance contract assets or liabilities.
Whilst the funds withheld arrangement operates on a net
settlement basis, the Group’s policy is to present the
reinsurance results on a gross basis in the notes to the financial
statements, but combine them into a single line in the
consolidated statement of profit or loss.
(K) Goodwill and other intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over
the Group's share of the net fair value of the identifiable assets,
liabilities and contingent liabilities of the subsidiary acquired,
and which is initially recognised at cost and subsequently at
cost less any accumulated impairment losses. Goodwill arising
on the acquisition of subsidiaries is included in the statement of
financial position category "goodwill and other intangible
assets". The gain or loss on the disposal of a subsidiary includes
the carrying value of any related goodwill.
Other intangible assets
Other intangible assets consists primarily of internally
generated software acquired by the Group and are stated at
cost less accumulated amortisation and impairment losses.
Amortisation is charged to the statement of profit or loss over
the assets' economic lives from the point it is operating as
intended using methods that best reflect the pattern of
economic benefits and is included in operating expenses.
Other intangible assets are amortised on a straight line method
over a period up to 10 years.
Expenditure on indirect advertising costs is written off as
incurred. Direct costs relating to the development of internal-
use computer software and associated business processes are
capitalised once technical feasibility and economic viability
have been established. These costs include payroll costs,
the costs of materials and services and directly attributable
overheads. Capitalisation of costs ceases when the software
is capable of operating as intended.
During and after development, accumulated costs are
reviewed for impairment against the projected benefits that
the software is expected to generate. Costs incurred prior to
the establishment of technical feasibility and economic viability
are expensed as incurred, as are all training costs and
general overheads.
(L) Property, plant and equipment
Items of property, plant and equipment are stated at cost
less accumulated depreciation and impairment losses. Where
an item of property, plant and equipment comprises major
components having different useful lives, they are accounted
for separately.
Depreciation is charged to the statement of profit or loss on a
straight-line basis so as to write off the depreciable amount of
property, plant and equipment over their estimated useful lives.
The depreciable amount is the cost of an asset less its residual
value. Land is not depreciated. The estimated useful lives
are as follows:
Freehold and leasehold
buildings
50 years or the period
of the lease if shorter
Other equipment, including
computer equipment,
vehicles and property
adaptation costs
2 to 15 years
The gain or loss arising from the derecognition of an item of
property, plant and equipment is determined as the difference
between the disposal proceeds, if any, and the carrying amount
of the item.
(M) Leases
Where the Group is a lessee
At inception, the Group assesses whether a contract contains a
lease arrangement, which involves assessing whether it obtains
substantially all the economic benefits from the use of a specific
asset, and it has the right to direct the use of that asset. The
Group recognises a right-of-use ("ROU") asset and a lease
liability at the commencement of the lease (when the
underlying asset is available for use), except for short-term
leases of 12 months or less and low-value leases which are
expensed on a straight-line basis in the statement of profit or
loss. The ROU asset is initially measured based on the present
value of the lease payments, plus initial direct costs less any
incentives received. Lease payments include fixed payments
and variable payments. Variable payments relate to contractual
rent increases linked to inflation indices. When leases contain
an extension or purchase option which is reasonably expected
to be exercised this is included in the measurement of the lease.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease
commencement date unless the interest rate implicit in the
lease is readily determinable. The incremental borrowing rate
is determined based on available risk-free market yield-to-
maturity pricing linked to the lease amount and term, and
includes a credit spread. The lease liability is subsequently
measured at amortised cost using the effective interest rate
method and remeasured, with a corresponding adjustment
to the ROU asset, when there is a change in future lease
payments, terms or reassessment of options.
The Group's property leases mainly relate to office space and
vehicle repair centres. Leases in respect of motor vehicles relate
to recovery and replacement vehicles, and management cars.
The Group also leases certain IT equipment which is not a
significant portion of the total leased asset portfolio.
163 | Direct Line Group Annual Report and Accounts 2024
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(M) Leases continued
Where the Group is a lessor
Leases where a significant proportion of the risks and rewards
of ownership is retained by the lessor are classified as operating
leases. Lease income from operating leases is recognised in the
statement of profit or loss on a straight-line basis over the
lease term.
Right of use assets
Where the Group is the lessee, a lease liability equal to the
present value of outstanding lease payments and a
corresponding ROU asset equal to cost are initially recognised.
The ROU asset is depreciated over the lease term, or its
economic useful life if shorter, and is subject to impairment
testing if there is an indicator of impairment.
(N) Impairment of non-financial assets
At each reporting date, the Group assesses whether any events
or circumstances indicate that the carrying amount of its
goodwill, intangible assets, property, plant and equipment or
ROU assets may not be recoverable. If such indication exists, the
Group estimates the recoverable amount of the asset and the
impairment loss, if any.
Goodwill is tested for impairment annually or more frequently, if
events or changes in circumstances indicate that it might be
impaired. If an asset does not generate cash flows that are
independent of those of other assets or groups of assets, the
recoverable amount is determined for the cash-generating unit
("CGU") to which the asset belongs.
The recoverable amount of an asset is the higher of its fair value
less costs to sell and its value-in-use.
Value-in-use is the present value of future cash flows from the
asset or CGU, discounted at a rate that reflects market interest
rates, adjusted for risks specific to the asset or CGU that have
not been reflected in the estimation of future cash flows.
If the recoverable amount of an intangible or a tangible asset
is less than its carrying value, an impairment loss is recognised
immediately in the statement of profit or loss and the
carrying value of the asset is reduced by the amount of the
impairment loss.
A reversal of an impairment loss on intangible assets, property,
plant and equipment or ROU assets is recognised as it arises
provided the increased carrying value does not exceed the
carrying amount that would have been determined had no
impairment loss been recognised. Impairment losses on
goodwill are not reversed.
(O) Investment property
Investment property comprises freehold and leasehold
properties that are held to earn rentals or for capital
appreciation or both. Investment property is not depreciated
but is stated at fair value based on valuations completed
quarterly by independent registered valuers, who hold
recognised and relevant professional qualifications and have
recent experience in the location and category of the
investment property being valued, and in accordance with
guidance issued by the Royal Institution of Chartered Surveyors.
Fair value is based on current prices for similar properties
adjusted for the specific characteristics of each property. Any
gain or loss arising from a change in fair value is recognised in
the statement of profit or loss.
Any significant risk of a material adjustment to the carrying
amount of the investment property portfolio within the next
financial year will be dependent on a number of factors
including the developments in the economic outlook which
could result in volatility in market prices, rental yields or
occupancy rates. Sensitivity analysis for the investment property
portfolio has been independently calculated by the Group's
registered valuers by flexing inputs of internal models to a
reasonable alternative yield to ascertain the impact on property
valuations. There are no significant sources of estimation
uncertainty in relation to climate-related matters in valuing the
investment property portfolio.
Investment property is derecognised when it has been either
disposed of or permanently withdrawn from use and no future
economic benefit is expected from disposal. Any gains or losses
on the retirement or disposal of investment property are
recognised in the statement of profit or loss in the year of
retirement or disposal.
(P) Financial instruments
Recognition and initial measurement
Financial assets and financial liabilities are recognised in the
statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
On initial recognition, financial assets are measured at fair value
net of transaction costs. Subsequently they are measured at
amortised cost, FVOCI or FVTPL, depending on the Group's
business model for managing the financial assets and whether
the cash flows represent solely payments of principal and
interest. The Group assesses its business models at a portfolio
level based on its objectives for the relevant portfolio, how the
performance of the portfolio is managed and reported, and the
frequency of asset sales. The Group reclassifies financial assets
when and only when its business model for managing those
assets changes.
Financial liabilities are initially recognised at fair value net of
transaction costs incurred. Other than derivatives which are
recognised and measured at fair value, all other financial
liabilities are subsequently measured at amortised cost using
the effective interest rate method.
Classification and subsequent measurement
Financial instruments measured at amortised cost
Financial assets that are held to collect contractual cash flows
where those cash flows represent solely payments of principal
and interest are measured at amortised cost. Interest income is
accounted for using the effective interest method. Such assets
held by the Group include some of the Group's debt security
portfolio, loans and receivables, trade and other receivables, and
cash and cash equivalents.
Financial liabilities are measured at amortised cost, except for
derivative financial liabilities, which are held at fair value.
Financial assets measured at fair value through other
comprehensive income
Financial assets that are held to collect contractual cash flows
and for subsequent sale, where the assets’ cash flows represent
solely payments of principal and interest, are recognised in the
statement of financial position at their fair value, inclusive of
transaction costs.
The Group elects at initial recognition to account for equity
instruments at FVOCI. For these investments, dividends are
recognised in the statement of profit or loss but fair value gains
and losses are not subsequently reclassified to the statement of
profit or loss following derecognition of the investment. The
Group has one equity investment which is measured at fair
value through other comprehensive income, being an
investment in unlisted insurtech-focused equity funds.
164 | Direct Line Group Annual Report and Accounts 2024
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Accounting policies continued
If the Group assesses the need to recognise a loss allowance on
a financial asset carried at fair value through other
comprehensive income, the loss allowance is recognised in
other comprehensive income; however, the recognition of a
loss allowance does not impact the carrying value of the asset
on the statement of financial position. Cumulative gains and
losses on equity instruments at fair value through other
comprehensive income are not recycled to the statement of
profit or loss.
Financial instruments measured at fair value through
profit or loss
Financial assets are classified as FVTPL where they do not meet
the criteria to be measured at amortised cost or FVOCI or
where they are designated at FVTPL to reduce an accounting
mismatch. The Group has elected to account for those debt
securities which back its insurance contracts as FVTPL to
reduce the accounting mismatch caused by fluctuations
in values of underlying insurance contracts due to changes
in discount rates.
Derivatives are initially recognised at fair value on the date
on which a derivative contract is entered into and are
subsequently valued at fair value at each statement of
financial position date.
Financial assets measured at FVTPL are recognised in the
statement of financial position at their fair value. Fair value
gains and losses together with interest coupons and dividend
income are recognised in the statement of profit or loss within
the investment return in the period in which they occur.
Financial liabilities are measured at FVTPL where they are
trading liabilities such as derivative financial instruments.
Financial liabilities measured at FVTPL are recognised in the
statement of financial position at their fair value. Fair value
gains and losses are recognised in the statement of profit
or loss in the period in which they occur.
The fair values of assets and liabilities traded in active markets
are based on current bid and offer prices respectively. If the
market is not active the Group establishes a fair value by using
valuation techniques.
Derecognition
A financial asset is derecognised when the contractual rights to
receive the cash flows from that asset have expired or when the
Group has transferred its rights to receive cash flows from the
asset and either the Group has transferred substantially all the
risks and rewards of ownership of the asset or the Group has
neither transferred nor retained substantially all the risks and
rewards of ownership and the Group has not retained control.
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expires.
Derivative financial instruments
Derivative financial instruments are recognised initially at fair
value on the date the derivative contract is entered into, and
subsequently remeasured to their fair value at the end of each
reporting period. Derivative fair values are determined from
quoted prices in active markets where available. Where there
is no active market for an instrument, fair value is derived from
prices for the derivative's components using appropriate
pricing or valuation models. Gains and losses arising from
changes in the fair value of a derivative are recognised as they
arise in the statement of profit or loss unless the derivative is the
hedging instrument in a qualifying hedge.
The Group enters into a small number of immaterial cash flow
hedges and applies the hedge accounting requirements of
IFRS 9. Hedge accounting relationships are formally
documented at inception. The documentation includes the
Group’s risk management objective and strategy for
undertaking the hedge, identifying the hedged item and the
hedging instrument, the nature of the risk that is being
hedged, and the way in which the Group will assess whether
the hedging relationship meets the hedge effectiveness
requirements (including identifying potential sources of hedge
ineffectiveness).
In a cash flow hedge, the effective portion of the gain or loss on
the economic hedging instrument is recognised in other
comprehensive income. Any ineffective portion is recognised in
the statement of profit or loss.
Impairment of financial assets
The ECL model is used to calculate the impairment to be
recognised for all financial assets measured at amortised cost.
The general approach, which utilises the three-stage model,
is used for financial investment and debt securities, whilst
impairment for the remaining assets is measured using the
simplified approach.
The assessment of credit risk and the estimation of an ECL are
unbiased, probability-weighted and incorporate all available
information relevant to the assessment, including information
about past events, current conditions and reasonable and
supportable forecasts of economic conditions at the reporting
date. The forward-looking aspect of IFRS 9 requires judgement
as to how changes in economic factors affect ECLs.
The ECL three-stage model is based on forward looking
information regarding changes in credit quality since inception.
The three stages of ECL are defined and assessed as follows:
Stage 1 – no significant increase in credit risk since inception;
Stage 2 – significant increase in credit risk since inception;
Stage 3 – asset is impaired.
For assets in stage 1, the allowance is calculated as the ECLs
from events within 12 months after the reporting date.
For assets in stage 2 and 3, the allowance is calculated as the
expected credit loss from events in the remaining lifetime
of each asset.
The loss allowance reduces the carrying value of the financial
asset and is reassessed at each reporting date. ECL impairment
charges are recognised in the statement of profit or loss within
the investment return.
Note 1.3.3 explains how the Group assesses whether the credit
risk of a financial asset has increased since initial recognition
and the approach to estimating ECLs.
(Q) Cash and cash equivalents and borrowings
Cash and cash equivalents comprise cash in hand and demand
deposits with banks together with short-term highly liquid
investments that are readily convertible to known amounts
of cash and subject to insignificant risk of change in value.
The average maturity of short-term highly liquid investments
is 10 days.
Borrowings, which consist of bank overdrafts, are measured at
amortised cost using the effective interest rate method. As part
of the Group's cash management strategy, they are repayable
on demand and are therefore included within cash and cash
equivalents in the cash flow statement. Bank overdrafts
primarily arise from short-term timing differences between
transactions recorded by the Group and those processed by
the bank. In the statement of financial position, bank overdrafts
are presented within current liabilities under borrowings.
165 | Direct Line Group Annual Report and Accounts 2024
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(R) Assets and liabilities held for sale
Non-current assets, including investment property, are
classified as held for sale if their carrying amount will be
recovered principally through a sale transaction rather than
through continuing use and if the sale is considered highly
probable. Investment property is measured at fair value less
costs to sell. Other non-current assets are measured at the
lower of their carrying amount and fair value less costs to sell.
An impairment loss is recognised in the statement of profit or
loss for any initial or subsequent write down of the asset to fair
value less costs to sell. A gain is recognised for any subsequent
increase in fair value less costs to sell of an asset but not in
excess of any cumulative impairment loss previously
recognised. A gain or loss not previously recognised by the date
of the sale is recognised at the date of derecognition.
Non-current assets classified as held for sale are presented
separately from the other assets in the statement of financial
position and are not depreciated or amortised.
(S) Subordinated liabilities
Subordinated liabilities comprise subordinated guaranteed
dated notes which are initially measured at fair value net of
transaction costs incurred. Subsequently, subordinated
liabilities are measured at amortised cost using the effective
interest rate method.
(T) Provisions
The Group recognises a provision for a present legal or
constructive obligation from a past event when it is more likely
than not that it will be required to transfer economic benefits to
settle the obligation and the amount can be reliably estimated.
When the Group has an onerous contract outside of the scope
of IFRS 17, it recognises the present obligation under the
contract as a provision. A contract is onerous when the
unavoidable costs of meeting the contractual obligations
exceed the expected future economic benefit.
Restructuring provisions are made, including redundancy costs,
when the Group has a constructive obligation to restructure. An
obligation exists when the Group has a detailed formal plan
and has communicated the plan to those affected.
(U) Employee benefits
Short-term employee benefits
Liabilities recognised in respect of staff bonuses and rewards
are measured at the undiscounted amount of benefits
expected to be paid in exchange for the related service.
Pensions and other post-retirement benefits
The Group provides post-retirement benefits in the form of
pensions and healthcare plans to eligible employees.
Contributions to the Group's defined contribution pension
scheme are recognised in the statement of profit or loss
when payable.
The Group's defined benefit pension scheme, as described in
note 24, was closed in 2003. Scheme liabilities are measured on
an actuarial basis, using the projected unit credit method, and
discounted at a rate that reflects the current rate of return on a
high-quality corporate bond of equivalent term and currency to
the scheme liabilities.
Scheme assets are measured at their fair value. Any surplus or
deficit of scheme assets over liabilities is recognised in the
statement of financial position as an asset (surplus) or liability
(deficit). The past service costs, together with the net interest on
the net pension liability or asset, are charged or credited to
operating expenses. Actuarial gains and losses are recognised
in full in the period in which they occur outside the statement
of profit or loss and presented in other comprehensive income
under "Items that will not be reclassified subsequently to the
statement of profit or loss".
Insurance assets resulting from a bulk annuity insurance policy
‘buy-in’ transaction result in the insurance asset exactly
matching the pension liability. A ‘buy-in’ is not a settlement and
the liability is not derecognised as the Group retains ultimate
responsibility for funding the plan.
Share-based payments
The Group operates a number of share-based compensation
plans under which it awards Ordinary Shares and share options
to its employees. Such awards are generally subject to vesting
conditions that can alter the amount of shares to which an
employee is entitled.
Vesting conditions include service conditions (requiring the
employee to complete a specified period of service) and
performance conditions (requiring the Group to meet specified
performance targets).
The fair value of options granted is estimated using valuation
techniques which incorporate exercise price, term, risk-free
interest rates, the current share price and its expected volatility.
The cost of employee services received in exchange for an
award of shares or share options granted is measured by
reference to the fair value of the shares or share options on the
date the award is granted and takes into account non-vesting
conditions and market performance conditions (conditions
related to the market price of the Company's Ordinary Shares).
The cost is expensed on a straight-line basis over the vesting
period (the period during which all the specified vesting
conditions must be satisfied) with a corresponding increase in
equity in an equity-settled award. The cost is adjusted for
vesting conditions (other than market performance conditions)
so as to reflect the number of shares or share options that
actually vest.
The cancellation of an award through failure to meet non-
vesting conditions triggers an immediate expense for any
unrecognised element of the cost of an award.
(V) Income taxes
Current tax
The tax charge or credit represents the proportion of the tax
payable and receivable arising in the current year only.
The current tax charge is based on the taxable profits for the
year as determined in accordance with the relevant tax
legislation, after any adjustments in respect of prior years.
Taxable profit differs from net profit as reported in the
statement of profit or loss because it excludes items of income
or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible.
Provision for taxation is calculated using tax rates that have
been enacted, or substantively enacted, by the statement
of financial position date and is allocated over profits before
taxation or amounts charged or credited to components
of other comprehensive income or equity, as appropriate.
166 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Accounting policies continued
Deferred tax
Deferred taxation is accounted for in full using the statement of
financial position liability method on all temporary differences
between the carrying amount of an asset or liability for
accounting purposes and its carrying amount for tax purposes.
Deferred tax liabilities are generally recognised for all taxable
temporary timing differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary
differences can be utilised.
Deferred tax assets are reviewed at each statement of financial
position date and reduced to the extent that it is probable that
they will not be recovered.
Deferred tax assets and liabilities are calculated at the tax rates
expected to apply when the assets are realised or liabilities are
settled based on laws and rates that have been enacted or
substantively enacted at the statement of financial position
date. Deferred tax is charged or credited in the statement of
profit or loss, except when it relates to items charged or
credited to other comprehensive income or equity, in which
case the deferred tax is also dealt with in other comprehensive
income or directly in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends to
settle its current assets and liabilities on a net basis.
(W) Share capital
Ordinary share capital
Incremental external costs directly attributable to the issue of
new shares are shown in equity as a deduction, net of tax, from
the proceeds of the issue and disclosed where material.
Employee share trust shares
Where the Company or its subsidiaries purchase the
Company’s share capital or obtain rights to purchase its share
capital, the consideration paid (including any attributable
transaction costs net of income taxes) is shown as a deduction
from total shareholders’ equity.
Dividends
Interim dividends on Ordinary Shares are recognised in equity
in the period in which they are paid. Final dividends on Ordinary
Shares are recognised when they have been approved at the
Annual General Meeting ("AGM").
(X) Capital instruments
The Group classifies a financial instrument that it issues as a
financial liability or an equity instrument in accordance with the
substance of the contractual arrangement. An instrument is
classified as a liability if it is a contractual obligation to deliver
cash or another financial asset, or to exchange financial assets
or financial liabilities on potentially unfavourable terms, or as
equity if it evidences a residual interest in the assets of the
Group after the deduction of liabilities.
The Tier 1 notes are classified as equity as they have a perpetual
maturity and the Group has full discretion over interest
payments, including ability to defer or cancel interest payments
indefinitely.
(Y) Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to the owners of the Company less coupon
payments in respect of Tier 1 notes by the weighted average
number of Ordinary Shares during the period, excluding
Ordinary Shares held as employee trust shares.
Diluted earnings per share is calculated by dividing the
earnings attributable to the owners of the Company less
coupon payments in respect of Tier 1 notes by the weighted
average number of Ordinary Shares during the period,
excluding Ordinary Shares held as employee trust shares,
adjusted for the dilutive potential Ordinary Shares.
(Z) Subsidiaries exemption from audit by parent
guarantee
The following subsidiaries incorporated in the United Kingdom,
are exempt from the requirements relating to the audit of
individual accounts, under s479A-479C of the Companies Act
2006. The parental guarantee is provided by Direct Line
Insurance Group plc.
– Direct Line Group Limited (Registered number: 02811437)
– Finsure Premium Finance Limited (Registered number:
01670887)
– Green Flag Holdings Limited (Registered number: 03577191)
167 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
2024
2023
Notes
£m
£m
Insurance revenue
3
4,567.0
3,601.7
Insurance service expenses
3
(4,185.0)
(3,806.3)
Net expense from reinsurance contracts held1
3
(259.6)
(46.8)
Insurance service result
3
122.4
(251.4)
Total interest income calculated using effective interest rate method
4
226.6
171.8
Other interest and similar income
4
17.4
16.1
Investment fees
4
(8.8)
(9.3)
Investment income
4
235.2
178.6
Total net fair value gains on financial assets held at fair value through profit or loss
4
30.3
127.0
Net fair value gains/(losses) on investment property
4
6.6
(1.9)
Net credit impairment gains/(losses) on financial investments
4
0.2
(0.7)
Investment return
4
272.3
303.0
Net finance expenses from insurance contracts issued
4
(21.0)
(193.8)
Net finance (expenses)/income from reinsurance contracts held
4
(20.2)
28.0
Investment return and net insurance finance result
4
231.1
137.2
Other operating income
20.3
21.8
Other operating expenses
5
(135.3)
(59.6)
Other finance costs
8
(15.4)
(14.5)
(Loss)/gain on disposal of business
9
(4.7)
443.9
Profit before tax
218.4
277.4
Tax charge2
10
(55.8)
(54.5)
Profit for the year attributable to the owners of the Company
162.6
222.9
Earnings per share:
Basic (pence)
12
11.2
15.9
Diluted (pence)
12
11.1
15.7
Notes:
1.
To improve presentation, the Group has opted to combine the net income and expense from reinsurance contracts held into a single item. Prior
period amounts have been re-presented for comparability.
2.
Tax on (loss)/gain on disposal of business is included in this figure.
The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.
168 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Consolidated Statement of Profit or Loss
For the year ended 31 December 2024
2024
2023
Notes:
£m
£m
Profit for the year attributable to the owners of the Company
162.6
222.9
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain on defined benefit pension scheme
24
0.6
0.1
Fair value gain on equity investments measured at fair value through other
comprehensive income
4
1.2
3.3
Realised gain/(loss) on equity investments measured at fair value through other
comprehensive income
4
0.4
(0.6)
Tax relating to items that will not be reclassified
20
(0.2)
–
2.0
2.8
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges
0.2
(0.2)
0.2
(0.2)
Other comprehensive income for the year net of tax
2.2
2.6
Total comprehensive income for the year attributable to the owners of the Company
164.8
225.5
The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.
169 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2024
2024
2023
Notes:
£m
£m
Assets
Goodwill and other intangible assets
15
776.3
818.6
Property, plant and equipment
16
92.7
91.6
Right-of-use assets
17
101.0
96.1
Investment property
18
287.6
277.1
Insurance contract assets
19
5.7
5.4
Reinsurance contract assets
19
1,802.1
1,346.0
Deferred tax assets
20
53.0
56.5
Current tax assets
19.9
82.8
Other receivables
21.8
35.2
Prepayments, accrued income and other assets
21
103.6
101.5
Derivative financial instruments
23
19.1
27.4
Retirement benefit asset
24
0.8
1.3
Financial investments
23
4,343.3
3,691.6
Cash and cash equivalents
25
1,156.0
1,772.2
Assets held for sale
26
12.2
13.9
Total assets
8,795.1
8,417.2
Equity
Shareholders' equity
14
2,137.9
2,058.2
Tier 1 notes
29
346.5
346.5
Total equity
2,484.4
2,404.7
Liabilities
Subordinated liabilities
30
259.1
258.8
Insurance contract liabilities
19
5,086.9
5,238.8
Reinsurance contract liabilities
19
549.5
116.6
Borrowings
25
66.8
82.4
Derivative financial instruments
23
38.7
15.4
Provisions
31
15.6
30.8
Trade and other payables
32
178.9
163.6
Lease liabilities
17
113.7
106.1
Current tax liabilities
20
1.5
–
Total liabilities
6,310.7
6,012.5
Total equity and liabilities
8,795.1
8,417.2
The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 3 March 2025 and were signed
on its behalf by:
Jane Poole
Chief Financial Officer
Registration No. 02280426
170 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Consolidated Statement of Financial Position
As at 31 December 2024
Share
capital
(note 27)
Employee
trust
shares
Capital
reserves
(note 28)
Equity
investments
revaluation
reserve
Foreign
exchange
translation
reserve
Retained
earnings
Shareholders'
equity
Tier 1
notes
(note 29)
Total
equity
£m
£m
£m
£m
£m
£m
£m
£m
£m
Balance at 1 January 2023
143.1
(39.0) 1,456.9
0.9
–
283.4
1,845.3
346.5 2,191.8
Profit for the year
–
–
–
–
–
222.9
222.9
–
222.9
Other comprehensive income/(loss)
–
–
–
2.7
(0.2)
0.1
2.6
–
2.6
Total comprehensive income/(loss) for the year
–
–
–
2.7
(0.2)
223.0
225.5
–
225.5
Dividends and appropriations paid (note 11)
–
–
–
–
–
(16.6)
(16.6)
–
(16.6)
Shares acquired by employee trusts
–
(10.2)
–
–
–
–
(10.2)
–
(10.2)
Credit to equity for equity-settled share-based
payments
–
–
–
–
–
13.9
13.9
–
13.9
Shares distributed by employee trusts
–
19.3
–
–
–
(19.3)
–
–
–
Tax on share-based payments
–
–
–
–
–
0.3
0.3
–
0.3
Total transactions with equity holders
–
9.1
–
–
–
(21.7)
(12.6)
–
(12.6)
Balance at 31 December 2023
143.1
(29.9) 1,456.9
3.6
(0.2)
484.7
2,058.2
346.5 2,404.7
Profit for the year
–
–
–
–
–
162.6
162.6
–
162.6
Other comprehensive income
–
–
–
1.4
0.2
0.6
2.2
–
2.2
Total comprehensive income for the year
–
–
–
1.4
0.2
163.2
164.8
–
164.8
Dividends and appropriations paid (note 11)
–
–
–
–
–
(94.8)
(94.8)
–
(94.8)
Shares acquired by employee trusts
–
(7.2)
–
–
–
–
(7.2)
–
(7.2)
Credit to equity for equity-settled share-based
payments
–
–
–
–
–
14.6
14.6
–
14.6
Shares distributed by employee trusts
–
17.6
–
–
–
(17.6)
–
–
–
Tax on share-based payments
–
–
–
–
–
2.3
2.3
–
2.3
Total transactions with equity holders
–
10.4
–
–
–
(95.5)
(85.1)
–
(85.1)
Balance at 31 December 2024
143.1
(19.5) 1,456.9
5.0
–
552.4
2,137.9 346.5 2,484.4
The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.
171 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2024
2024
2023
Notes:
£m
£m
Cash (used in)/generated from operating activities before investment of insurance assets
34
(31.0)
132.0
Cash (used in)/generated from investment of insurance assets
34
(347.1)
304.4
Cash (used in)/generated from operating activities
(378.1)
436.4
Taxes received/(paid)
13.9
(30.9)
Cash flow hedges
(0.3)
(0.6)
Net cash (used in)/generated from operating activities
(364.5)
404.9
Cash flows (used in)/generated from investing activities
Payments for acquisition of intangible assets
15
(93.2)
(124.1)
Purchases of property, plant and equipment
16
(13.3)
(18.9)
Proceeds on disposals of assets held for sale
–
21.9
Proceeds from disposal of business
9
–
520.0
Net cash inflow/(outflow) from acquisition of businesses
–
(0.6)
Net cash (used in)/generated from investing activities
(106.5)
398.3
Cash flows used in financing activities
Dividends and appropriations paid
11
(94.8)
(16.6)
Other finance costs (including lease interest)
(15.1)
(14.2)
Principal element of lease payments
(12.5)
(10.8)
Purchase of employee trust shares
(7.2)
(10.2)
Net cash used in financing activities
(129.6)
(51.8)
Net (decrease)/increase financing activities
(600.6)
751.4
Cash and cash equivalents at the beginning of the year
25
1,689.8
938.4
Cash and cash equivalents at the end of the year
25
1,089.2
1,689.8
The attached notes on pages 173 to 229 form an integral part of these consolidated financial statements.
172 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Consolidated Cash Flow Statement
For the year ended 31 December 2024
1. Risk management
1.1 The risk management framework
The Risk Management Framework sets out, at a high level, the Group's approach to setting risk strategy, and managing risks to the
strategic objectives and day-to-day operations of the business. Further information can be found in the Risk management section
of the Strategic report on page 38.
1.2 Risk and capital management modelling
The Board has ultimate responsibility for ensuring that the Group has sufficient funds to meet its liabilities as they fall due. The
Group carries out detailed modelling of its assets, liabilities and the key risks to which these are exposed. This modelling includes
the Group's own assessment of its solvency capital requirement ("SCR"), using its partial internal model approved by the PRA in
2016. The SCR quantifies the insurance, market, credit and operational risks that its regulated entities are undertaking.
The Board maintains an active and integral role in the SCR process and reviews, challenges and approves its results.
1.3 Principal risks from insurance activities and use of financial instruments
The Risk management section of the Strategic report sets out the material risks assessed by the Group as principal risks and
provides details of emerging risks that the Group has considered as part of its emerging risk process. Also detailed in the section
below is the Group's risk exposure arising from its insurance activities and use of financial instruments specifically in respect of
insurance risk, market risk, credit risk, operational risk and liquidity risk.
Geopolitical Risks
The global and UK economic environment remains uncertain, influenced by heightened geopolitical tensions, particularly the
ongoing conflicts in the Middle East and Ukraine. In the UK, these geopolitical risks may impact government economic policies,
with potential effects on the Group through claims inflation, rising living costs, and interest rate fluctuations affecting the Group's
investment portfolio. These factors may also influence the Group's ability to meet the evolving needs and preferences of its target
markets. The trend in claims inflation remains uncertain and continues to be closely monitored.
A geopolitical event may also increase the risk of a cyber-attack on critical infrastructure, disruption in supply chains or trigger a
need to onshore outsourced activities. Impacts on supply chains and operations could cause significant disruption to business
processes leading to an increased potential for customer and conduct risk, and a distraction from other strategic business priorities.
The Group's Investment and Treasury function continues to assess the impact of adverse economic conditions on its investment
portfolio holdings as part of its ongoing investment management oversight.
Claims inflation
The insurance sectors in which the Group operates are affected by inflation. In particular, reserves and claims from policies
underwritten are exposed to the risk of claims inflation which can increase the costs of car parts, used car prices, services, care
worker labour rates and construction materials. In recent years, there have been significant increases in the Group's claims for
motor, home and commercial property due to high levels of claims inflation. Although this has subsided, the uncertainty from
future inflation volatility and its outlook continues to be closely monitored. Details of the Group's sensitivity to claims inflation are
included in note 1.3.1.
Environmental
The Group recognises that the effects of climate change are wide-ranging, and the Group reflects the effects of climate change in
the drivers of the risks defined in the Group Risk Taxonomy. This has the effect of embedding the management of climate related
risks in the normal risk management processes for managing risks across the Group’s risk profile. In addition, the Group Risk
Taxonomy includes an environmental, social, and governance risk that provides coverage of the operational and strategic aspects
of climate change that are not addressed within other core risk types.
The Group has continued to enhance its climate risk management and governance during 2024 as it works through the actions
included in the Group Climate Action Roadmap. The roadmap sets out a range of actions, implemented by 2025 to further
integrate climate risk management across the business and to build additional capabilities in areas such as climate risk modelling
and scenario analysis.
1.3.1 Insurance risk
The Group is exposed to insurance risk as a primary consequence of its business. Key insurance risks focus on the risk of loss
due to fluctuations in the timings, amount, frequency and severity of an insured event relative to the expectations at the time
of underwriting.
The Group is mainly exposed to the following insurance risks:
Reserve risk
This is the risk of understatement or overstatement of claims reserves arising from:
– the uncertain nature of claims, in particular large bodily injury claims;
– the unexpected future impact of socio-economic trends or regulatory changes, for example changes to the Ogden discount rate;
– data issues and changes to the claims reporting process;
– operational failures;
– failure to recognise claims trends in the market including a slow-down in the processing of recoveries and liabilities with third
party insurers which increases the estimation risk of these amounts; and
– changes in underwriting and business written so that past trends are not necessarily a predictor of the future.
Understatement of reserves may result in not being able to pay claims when they fall due. Alternatively, overstatement of reserves
can lead to a surplus of funds being retained resulting in opportunity cost; for example insufficient resource to pursue strategic
projects and develop the business.
173 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements
1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.1 Insurance risk continued
Reserve risk is managed through a range of processes and controls:
– regular reviews of the claims and premiums, in line with IFRS 17 requirements for the main classes of business by the internal
actuarial team;
– the use of external actuaries to review periodically the actuarial best estimate reserves produced internally, either through peer
review or through provision of independent reserve estimates;
– accompanying reserve reviews with actuarial assessment of the uncertainties through a variety of techniques including
bootstrapping1 and scenario analysis;
– use of reinsurance programmes, through motor, liability, property catastrophe and travel, which are renewable annually;
– oversight of the reserving process by relevant senior management and the Board;
– quarterly reconciliation of the data used in the actuarial reviews against general ledger data and reconciliation of the claims data
history against the equivalent data from prior reviews; and
– regular assessment of the uncertainty in the reserves to help set the risk adjustment within the liability for incurred claims.
The Group's reserves are subject to the risk of retrospective changes in judicial conditions such as changes in the Ogden discount
rate. Detailed information on the Ogden discount rate is provided in note 19.4.
Uncertainty in claims reserves estimation is larger for claims such as PPOs for which annually indexed payments are made, typically
over the lifetime of the injured party. Under IFRS 17 all claims reserves are held on a discounted basis and so are sensitive to
changes in the discount rate, however this sensitivity tends to be more significant to the Group's PPO reserves given their longer
duration.
There is the risk that claims are reserved or paid inappropriately, including the timing of such activity. However, there are claims
management controls in place to mitigate this risk, as outlined below:
– claims are managed utilising a range of IT system-driven controls coupled with manual processes outlined in detailed policies
and procedures to ensure claims are handled in an appropriate, timely and accurate manner;
– each Reserving exercise for on-going business includes meetings with Pricing, Underwriting and Claims to ensure that any
operational changes are understood with appropriate adjustments made;
– each member of staff has a specified handling authority, with controls preventing them handling or paying claims outside their
authority, as well as controls to mitigate the risk of paying invalid claims. In addition, there are various outsourced claims handling
arrangements, all of which are monitored closely by management, with similar principles applying in terms of the controls and
procedures;
– loss adjusters are used in certain circumstances to handle claims to conclusion. This involves liaising with the policyholder, third
parties, suppliers and the Claims Function;
– specialist bodily injury claims teams are responsible for handling these types of losses, with the nature of handling dependent on
the level and type of claim. Claims exceeding a certain threshold are referred to the technical and large loss teams who also deal
with all other claim types above defined limits or within specific criteria; and
– a process is in place to deal with major weather and other catastrophic events, known as the 'Surge Demand Plan'. A surge is the
collective name given to an incident which significantly increases the volume of claims reported to the Group's Claims Function.
The plan covers surge demand triggers, stages of incident, operational impact, communication and management information
monitoring of the plan.
Note:
1.
See glossary on pages 238 to 241 for definitions.
174 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
The table below provides a sensitivity analysis of the potential net impact of a change in a single factor (for example the illiquidity
premium ("ILP")) with all other assumptions left unchanged. Other potential risks beyond the ones described could have additional
financial impacts on the Group.
Increase/(decrease) in profit
before tax and equity gross of
reinsurance1,2
Increase/(decrease) in profit
before tax and equity net of
reinsurance1,2
2024
2023
2024
2023
At 31 December
£m
£m
£m
£m
Discount curve - PPOs3
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points
87.0
95.0
38.5
39.0
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points
(115.1)
(127.8)
(51.4)
(52.1)
Discount curve - other claims4
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points
65.1
55.9
41.3
37.2
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points
(68.3)
(58.6)
(43.2)
(38.9)
Ogden discount rate5
Impact of the Group reserving at a discount rate of 1.5% compared to 0.5%
(2023: 0.75% compared to minus 0.25%)
143.6
105.1
57.7
48.1
Impact of the Group reserving at a discount rate of minus 0.5% compared
to 0.5% (2023: minus 1.25% compared to minus 0.25%)
(204.9)
(220.6)
(73.8)
(97.0)
Claims inflation
Impact of a decrease in claims inflation by 200 basis points for two
consecutive years
129.7
112.8
73.9
71.7
Impact of an increase in claims inflation by 200 basis points for two
consecutive years
(131.7)
(114.6)
(75.0)
(72.8)
Risk adjustment (restated)6
Impact of a risk adjustment at the 70th percentile compared to the booked
risk adjustment at the 75th percentile
52.3
52.3
26.9
28.9
Impact of a risk adjustment at the 80th percentile compared to the booked
risk adjustment at the 75th percentile
(61.4)
(60.5)
(30.2)
(33.9)
The PPO sensitivity above is calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves
as at 31 December. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance bad
debt assumptions.
Notes:
1.
These sensitivities exclude the impact of taxation.
2.
These sensitivities reflect one-off impacts at the statement of financial position date and should not be interpreted as predictions.
3.
The sensitivities relating to an increase or decrease in the discount rate used for PPOs illustrate a movement in the time value of money. The PPO
sensitivity has been calculated on the direct impact of the change in the discount rate with all other factors remaining unchanged. The sensitivity is
calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves as at 31 December. It does not take into
account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.
4. The sensitivities relating to an increase or decrease in the yield curve used to discount all reserves excluding PPOs illustrate a movement in the
time value of money from the assumed level at the statement of financial position dates. The sensitivity has been calculated on the direct impact of
the change in the discount curve with all other factors remaining unchanged.
5.
Ogden discount rate sensitivity has been calculated on the direct impact of a permanent change in the discount rate in England and Wales with
all other factors remaining unchanged.
6.
The risk adjustment sensitivities are with respect to the discounted risk adjustment at the statement of financial position dates, with the year-end
2023 sensitivities having been restated from an undiscounted basis as reported in the Group's 2023 Annual Report and Accounts.
175 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.1 Insurance risk continued
Underwriting risk
This is the risk that future claims experience on business written is materially different from the results expected, resulting in
current-year losses. The Group predominantly underwrites personal lines insurance including motor, residential property, roadside
assistance, creditor, travel and pet business. The launch of Direct Line on Price Comparison Websites ("PCWs") will increase the
Group’s existing exposure to personal lines motor business written through price comparison websites (previously obtained
through the Churchill and Privilege brands).The Group also underwrites commercial risks primarily for low-to-medium risk trades
within the small and medium-sized enterprises market. Contracts are typically issued on an annual basis which means that the
Group's liability usually extends for a 12-month period, after which the Group is entitled to decline to renew or can revise renewal
terms by amending the premium or other policy terms and conditions such as the excess as appropriate. Since 2023, the Group also
underwrites vehicle insurance under a fleet arrangement for the Motability Scheme that is reviewed and repriced every 6 months.
The Solvency II definition of underwriting risk includes catastrophe risk and the risk of loss, or of adverse change in the value of the
insurance liabilities resulting from significant uncertainty of pricing, underwriting and provisioning assumptions related to extreme
or exceptional circumstances.
The key underwriting risks relating to climate change today are UK floods and major UK windstorms. The Group recognises that
climate change may impact its business over the longer term. In particular, there is a risk that climate change affects the frequency
and severity of extreme weather events (physical risk), which may change the Group's view of underwriting risk, reinsurance and
pricing. The Group will continue to develop its risk management systems and monitoring tools over 2025 in line with the Group's
Climate Risk Roadmap. Low-frequency, high-severity weather losses are significantly mitigated by the catastrophe reinsurance
programme, the ceding of Home high flood risks to Flood Re, and the commercial direct underwriting strategy which actively
reduces high flood risk exposure. The Group expects these specific risks to materialise in the medium to longer term (see page 60
for definition). Furthermore, there is a risk that the Group's insurance products will not meet its customers' needs as a result of
changes in market dynamics and customer behaviour in relation to climate change, for example a rapid shift towards electric
vehicle usage. The Group anticipates that its continued strategic and operational response to the transition to a lower-carbon
economy will support mitigation of these risks and the associated impacts in the long term.
When underwriting policies, the Group is subject to concentration risk in a variety of forms, including:
– geographic concentration risk – the Group's business is wholly written in the UK general insurance market. The Group purchases
a catastrophe reinsurance programme to protect against a modelled 1-in-200 year windstorm/storm surge and flood losses. The
programme has been renewed on 1 January 2025 and will cover a 12 month period; and
– product concentration risk – the Group offers a diversified portfolio of products and a variety of brands sold through a range of
distribution channels to its customers.
It is important to note that none of these risk categories are independent of the others and that giving due consideration to the
relationship between these risks is an important aspect of the effective management of insurance risk.
Pricing risk
This is the risk of economic loss arising from business being incorrectly priced or inappropriately underwritten. Pricing risk may
occur due to errors in pricing models, pricing or underwriting rule change implementation or through inappropriately accepting
business. The Group manages these risks through the operational controls including controls around model build, data usage,
permitted factors and rate deployment. The effectiveness of these controls is assessed through the Risk and Control Assessment
process and control testing. Governance around pricing changes includes the Model Governance Board which approves pricing
models for use and pricing committees that approve pricing and underwriting change deployment and monitor rate performance.
Reinsurance risk
This is the risk of inappropriate selection and/or placement of reinsurance arrangements, with either individual or multiple
reinsurers, which renders the transfer of insurance risk to the reinsurer(s) inappropriate and/or ineffective.
Other risks include:
– reinsurance credit risk – the management of concentration of credit exposure to any given counterparty is controlled by the
Group Reinsurance Credit Risk Framework;
– reinsurance capacity being reduced and/or withdrawn;
– underwriting risk appetite and reinsurance contract terms not being aligned;
– reinsurance contract terms being inappropriate or ineffective resulting in classes or types of business not being
appropriately reinsured;
– non-adherence to the reinsurance policy terms and conditions, in terms of both policy management and claims not being
handled within the reinsurance contract terms and conditions, or paid on an ex-gratia basis, resulting in reinsurance recoveries
not being made in full;
– inappropriate or inaccurate management information and/or modelling being used to determine the value for money and
purchasing of reinsurance (including aggregate modelling); and
– changes in the external legal, regulatory, social or economic environment (including changes resulting from climate change)
altering the definition and application of reinsurance policy wordings or the effectiveness or value for money of reinsurance.
176 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
The Group uses a range of external reinsurance to:
– protect its insurance results against the impact of major individual or catastrophic events such as windstorms, storm surge or floods;
– protect its insurance results against unexpected volumes of, or adverse trends in, individual large claims, in order to reduce
volatility and to improve stability of earnings;
– facilitate effective capital management and protection of the Group's capital position; and
– transfer risk that is not within its current risk appetite or where there is limited expertise or regulatory constraints on underwriting
that business.
The Group may also utilise reinsurance in respect of risks that are within risk appetite but where there could be other reasons
to reinsure. The Group does not have a significant exposure to a single reinsurer.
1.3.2 Market risk
Market risk is the risk of loss resulting from fluctuations in the level and in the volatility of market prices of assets, liabilities
and financial instruments.
The Group is mainly exposed to the following market risk factors:
– spread risk;
– interest rate risk;
– property risk; and
– currency risk.
The Group has clearly defined market risk policies which include a range of parameters that are subject to approval by the
Investment Committee. These policies also set out the principles to which the Group should adhere when considering investment
strategy, including risk appetites and capital efficiency.
The Group monitors its market risk exposure on a daily basis and has established an aggregate exposure limit consistent with its
risk objective to maintain capital adequacy. Interdependencies across risk factors have also been considered within the aggregate
exposure limit. The allocation of the Group's investments across asset classes has been approved by the Investment Committee.
The Committee also determines policy and controls, covering such areas as risk, liquidity and performance. The Investment
Committee meets at least three times a year to evaluate risk exposure, the current strategy, associated policies and investment
guidelines and to consider investment recommendations submitted to it.
In 2024, the Group continued with the implementation of the proposals from a Strategic Asset Allocation exercise undertaken
during Q2 2023 and approved by the Investment Committee. This included moving excess cash exposures to increasing the
proportions invested in US credit holdings and investing in a new asset class, index linked gilts to partially match the PPOs.
The long-term PPO ALM strategy is under review and the Group may undertake additional investments to further hedge PPOs.
The investment management objectives are to:
– maintain the safety of the portfolio's principal both in economic terms and from a capital, accounting and reporting perspective;
– maintain sufficient liquidity to provide cash requirements for operations, including in the event of a catastrophe; and
– maximise the portfolio's total return within the constraints of the other objectives and the limits defined by the investment
guidelines and capital allocation.
The Investment Committee has agreed long-term targets for the investment portfolio in relation to supporting the Group's
objectives on climate change. These are: ensuring the Group's entire investment portfolio is net zero emissions by 2050 in line with
the aims of the Race to Zero campaign; and an interim target of a 50% reduction in weighted average greenhouse gas emissions
intensity by 2030 within the Group's corporate bonds portfolio, the largest part of its investment portfolio, compared to a 2020
baseline. See page 53 for more information on investment portfolio targets, exclusions and preferences and pages 51 to 53 for the
Group's approved Science-Based Targets.
The Group has a property portfolio and invests in index linked gilts and infrastructure debt to generate a real return which, from
an asset and liability matching perspective, is used to offset the liability arising from longer duration PPOs.
When setting the strategic asset allocation, the Group is subject to concentration risk in a variety of forms including:
– large exposures to individual assets (either bond issuers or deposit-taking institutions); and
– large exposures to different assets where movements in values and ratings are closely correlated.
Concentration risk on investments arises through excessive exposure to particular industry sectors, groups of business
undertakings or similar activities. The Group may suffer significant losses in its investment portfolio as a result of over-exposure
to particular sectors engaged in similar activities or having similar economic features that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic, political or other conditions.
177 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.2 Market risk continued
The table below analyses the distribution of debt securities by geographical area (commercial real estate loans and infrastructure
debt are all within the UK):
Corporate
Local
government
Sovereign
Supranational
Debt
securities total
At 31 December 2024
£m
£m
£m
£m
£m
Australia
131.2
–
–
–
131.2
Austria
4.9
–
–
–
4.9
Belgium
30.0
12.0
–
–
42.0
Canada
90.1
–
–
–
90.1
Cayman Islands
0.4
–
–
–
0.4
China
6.6
–
–
–
6.6
Denmark
19.7
–
–
–
19.7
Finland
13.2
–
–
–
13.2
France
241.8
–
–
–
241.8
Germany
174.0
–
–
–
174.0
Hong Kong
8.2
–
–
–
8.2
Ireland
3.2
–
–
–
3.2
Italy
25.5
–
–
–
25.5
Japan
58.8
–
–
–
58.8
Luxembourg
5.1
–
–
–
5.1
Mexico
9.1
–
–
–
9.1
Netherlands
118.5
–
–
–
118.5
New Zealand
0.3
–
–
–
0.3
Norway
–
1.0
–
–
1.0
South Africa
6.4
–
–
–
6.4
Spain
57.9
–
–
–
57.9
Sweden
26.4
–
–
–
26.4
Switzerland
57.2
–
–
–
57.2
United Kingdom
813.3
–
746.0
–
1,559.3
USA
1,314.9
–
–
–
1,314.9
Supranational
–
–
–
17.9
17.9
Total
3,216.7
13.0
746.0
17.9
3,993.6
178 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
The table below analyses the distribution of debt securities by geographical area (commercial real estate loans and infrastructure
debt are all within the UK):
Corporate
Local
government
Sovereign
Supranational
Debt securities
total
At 31 December 2023
£m
£m
£m
£m
£m
Australia
119.8
–
–
–
119.8
Austria
3.1
–
–
–
3.1
Belgium
39.3
–
–
–
39.3
Canada
48.2
–
–
–
48.2
China
0.6
–
–
–
0.6
Denmark
18.2
–
–
–
18.2
Finland
8.9
–
–
–
8.9
France
229.3
–
–
–
229.3
Germany
140.8
–
–
–
140.8
Hong Kong
0.8
–
–
–
0.8
Italy
17.4
–
–
–
17.4
Japan
20.8
–
–
–
20.8
Luxembourg
4.8
–
–
–
4.8
Mexico
7.1
–
–
–
7.1
Netherlands
105.4
–
–
–
105.4
Norway
0.5
0.9
–
–
1.4
Portugal
6.5
–
–
–
6.5
South Africa
6.4
–
–
–
6.4
Spain
66.0
–
–
–
66.0
Sweden
23.4
–
–
–
23.4
Switzerland
55.0
–
–
–
55.0
United Kingdom
745.4
–
657.1
–
1,402.5
USA
933.7
–
23.7
–
957.4
Supranational
–
–
–
25.6
25.6
Total
2,601.4
0.9
680.8
25.6
3,308.7
The table below analyses the distribution of debt securities by industry sector classifications:
2024
2023
At 31 December
£m
%
£m
%
Basic materials
67.1
2%
43.0
1%
Communications
156.6
4%
135.7
4%
Consumer, cyclical
329.3
8%
244.2
7%
Consumer, non-cyclical
352.3
9%
216.2
7%
Diversified
16.8
0%
16.9
1%
Energy
77.9
3%
81.6
3%
Financial
1,678.8
42%
1,424.5
43%
Industrial
220.2
6%
145.8
4%
Sovereign, supranational and local government
776.9
19%
707.3
21%
Technology
97.4
2%
65.6
2%
Transport
13.1
0%
12.8
0%
Utilities
207.2
5%
215.1
7%
Total
3,993.6
100%
3,308.7
100%
179 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.2 Market risk continued
The table below analyses the distribution of infrastructure debt by industry sector classifications:
2024
2023
At 31 December
£m
%
£m
%
Social, of which:
Education
86.7
46%
93.0
44%
Health
56.4
30%
60.5
28%
Other
41.5
22%
43.9
20%
Transport
4.1
2%
16.8
8%
Total
188.7
100%
214.2
100%
The Group uses its partial internal model to determine its regulatory capital requirements and monitors its market risk exposure
based on a 99.5% value-at-risk measure. The Group also conducts market risk stress and scenario testing to determine the
economic impact of specific severe market conditions. The results of this analysis are used to enhance the Group's understanding
of market risk. The market risk minimum control standard, which is part of the Group's Risk Policy and Minimum Control Standard
Framework, explicitly prohibits the use of derivatives for speculative or gearing purposes. However, the Group is able to and does
use derivatives to hedge its currency risk and interest rate risk exposures in some mandates.
Spread risk
This is the risk of loss from the sensitivity of the value of assets and investments to changes in the level or in the volatility of credit
spreads over the risk-free interest rate term structure. The level of spread is the difference between the risk-free rate and actual rate
paid on the asset, with larger spreads being associated with higher-risk assets. The Group is exposed to spread risk through its asset
portfolio, most notably through its investment in corporate bonds.
Net interest rate risk
This is the risk of loss from changes in the term structure of interest rates or interest rate volatility which impact assets and liabilities.
The Group's interest rate risk arises mainly from its debt, floating interest rate investments and assets and liabilities exposed to fixed
interest rates.
The Group has subordinated Tier 2 notes with fixed coupon rates with a nominal value of £260 million that were issued on 5 June
2020 and perpetual Tier 1 notes with fixed coupon rates with a nominal value of £350 million that were issued on 7 December 2017.
The Group also invests in floating rate debt securities, whose investment income is influenced by the movement of the short-term
interest rate. A movement of the short-term interest rate will affect the expected return on these investments.
The market value of the Group’s financial investments with fixed coupons is affected by the movement of interest rates. At 31
December 2024, £227.1m (2023: £419.4 million) fixed rate investment grade US dollar and Euro corporate debt securities were
hedged using interest rate swaps.
The Group is exposed to the following interest rate benchmarks within its hedging relationships: GBP SONIA, USD SOFR and
EURIBOR. The hedged items include holdings of US dollar and Euro denominated fixed rate debt securities.
Property risk
This is the risk of loss arising from sensitivity of assets and financial investments to the level or volatility of market prices, rental
yields, or occupancy rates of properties. At 31 December 2024, the value of these property investments was £287.6 million (2023:
£277.1 million). The property investments are located in the UK.
Currency risk
This is the risk of loss from changes in the level or volatility of currency exchange rates. Exposure to currency risk is generated
by the Group's investments in US dollar and Euro denominated debt bonds.
The Group maintains exposure to US dollar securities through £1,214.0 million (2023: £763.1 million) of investments in US dollar
bonds and Euro securities through £232.8 million (2023: £219.1 million) of Euro bonds. The foreign currency exposure of these
investments is hedged by foreign currency forward contracts, maintaining a minimal unhedged currency exposure on these
portfolios, as well as a low basis risk on the hedging contracts.
A limited exposure to currency risk also arises through the Group's insurance and other contractual liabilities. Currency risk is not
material at Group level.
180 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
Use of derivatives
The Group uses derivatives to hedge against interest rate and currency risk.
The tables below analyse the maturity of the Group's derivative assets and liabilities:
Notional
amounts
Maturity and fair value
Less than 1
year
1 – 5 years
Over 5 years
Total
At 31 December 2024
£m
£m
£m
£m
£m
Derivative assets
At fair value through profit or loss
Foreign exchange contracts (forwards)
907.4
14.9
–
–
14.9
Interest rate swaps
106.7
–
0.9
3.3
4.2
Designated as hedging instruments
Foreign exchange contracts (forwards)
24.0
–
–
–
–
Total
1,038.1
14.9
0.9
3.3
19.1
Notional
amounts
Maturity and fair value
Less than 1
year
1 – 5 years
Over 5 years
Total
At 31 December 2024
£m
£m
£m
£m
£m
Derivative liabilities
At fair value through profit or loss
Foreign exchange contracts (forwards)
2,007.0
36.4
–
–
36.4
Interest rate swaps
93.3
–
0.7
1.6
2.3
Total
2,100.3
36.4
0.7
1.6
38.7
Notional
amounts
Maturity and fair value
Less than 1
year
1 – 5 years
Over 5 years
Total
At 31 December 2023
£m
£m
£m
£m
£m
Derivative assets
At fair value through profit or loss
Foreign exchange contracts (forwards)
1,568.7
27.1
–
–
27.1
Interest rate swaps
49.2
0.1
0.2
–
0.3
Total
1,617.9
27.2
0.2
–
27.4
Notional
amounts
Maturity and fair value
Less than 1
year
1 – 5 years
Over 5 years
Total
At 31 December 2023
£m
£m
£m
£m
£m
Derivative liabilities
At fair value through profit or loss
Foreign exchange contracts (forwards)
908.4
8.2
–
–
8.2
Interest rate swaps
252.8
–
1.7
5.2
6.9
Designated as hedging instruments
Foreign exchange contracts (forwards)
14.2
0.3
–
–
0.3
Total
1,175.4
8.5
1.7
5.2
15.4
181 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.2 Market risk continued
Sensitivity analysis
The table below provides a sensitivity analysis of the impact on financial investments and derivatives of a change in a single factor
that is reasonably possible, with all other assumptions left unchanged. Other potential risks beyond the ones described in the table
could have an additional financial impact on the Group.
Increase/(decrease) in profit
before tax1 at 31 December
2024
2023
£m
£m
Spread
Impact of a 100 basis points increase in spreads on financial investments2
(80.5)
(72.1)
Interest rate
Impact of a 100 basis points increase in interest rates on financial investments and derivatives2,3
(108.7)
(62.2)
Investment property
Impact of a 15% decrease in property markets
(43.1)
(41.6)
Notes:
1.
These sensitivities exclude the impact of taxation and have not considered the impact of the general market changes on the value of the Group's
insurance liabilities. They reflect one-off impacts at 31 December and should not be interpreted as predictions.
2.
The impact on profit or loss does not reflect any fair value movement in infrastructure debt, commercial real estate loans and private placement
debt securities that would not be recorded in the financial statements under IFRS 9 as they are classified as loans and receivables and private
placement respectively, which are carried at amortised cost. It is estimated that a fair value reduction in these asset categories resulting from a 100
basis points increase in credit spreads would have been £10.2 million (2023: £11.7 million) and a 100 basis points increase in interest rates would have
been £2.1 million (2023: £2.8 million).
3.
The sensitivities set out above reflect one-off impacts at 31 December, with the exception of the statement of profit or loss interest rate sensitivity
on financial investments and derivatives, which projects a movement in a full year's interest charge as a result of the increase in the interest rate
applied to these assets or liabilities on those positions held at 31 December.
The Group has a number of open interest rate and foreign exchange derivative positions. Collateral management arrangements
are in place for significant counterparty exposures. At 31 December 2024, the Group has pledged £8.3 million in cash (2023:
£16.6 million) to cover initial margins and out-of-the-money derivative positions. At 31 December 2024, counterparties have pledged
£7.6 million in cash (2023: £12.8 million in cash) to the Group to cover in-the-money derivative positions.
The terms and conditions of collateral pledged for both assets and liabilities are market-standard. When securities are pledged they
are required to be readily convertible to cash, and as such no policy has been established for the disposal of assets not readily
convertible into cash.
1.3.3 Credit risk
This is the risk of loss resulting from defaults in obligations due and/or changes in credit standing of either issuers of securities,
counterparties or any debtors to which the Group is exposed. The Group's credit risk policy sets out the assessment and
determination of what constitutes credit risk for the Group. The Group is mainly exposed to counterparty default risk.
Counterparty default risk
This is the risk of loss from unexpected default or deterioration in the credit standing of the counterparties and debtors of Group
undertakings, and is monitored at Group Level.
An account is deemed to have defaulted when the Group considers that a customer is in significant financial difficulty or that
the customer meets certain quantitative and qualitative criteria regarding their ability to make contractual payments when due.
This includes instances where the customer makes a declaration of significant financial difficulty, or the account has been
transferred to recoveries and the relationship is terminated.
The main sources of counterparty default risk for the Group are:
– investments – this arises from the investment of funds in a range of investment vehicles permitted by the investment policy;
– reinsurance recoveries – this represents amounts receivable from the reinsurer to cover claims paid to policyholders. PPOs have
the potential to increase the ultimate value of a claim and, by their very nature, to increase significantly the length of time to
reach final payment. This can increase reinsurance counterparty default risk in terms of both amount and longevity;
– commercial credit – this arises as brokers collect premiums on behalf of the Group; and
– consumer credit – exposure from offering monthly instalments on annual insurance contracts.
The Group cedes insurance risk to reinsurers but, in return, assumes counterparty default risk against recoveries as it remains liable
for claims payments to policyholders in case of reinsurer default. The financial security of the Group's panel of reinsurers is therefore
important and both the quality and amount of the assumed counterparty default risk are subject to an approval process whereby
reinsurance is only purchased from reinsurers that hold a credit rating of at least A– for short tail reinsurance and the majority
of long tail reinsurance is to be purchased from reinsurers rated A+ or above. Exceptions to the above or strategic reinsurance
arrangements are assessed on a case-by-case basis and follow internal credit risk processes. The reinsurance team monitors the
credit rating of the Group's current and potential reinsurance counterparties on a regular basis. The Group aims to deal with a diverse
range of reinsurers on its contracts to mitigate the credit and/or non-payment risks associated with its reinsurance exposures.
182 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
The following tables analyse the carrying value of the Group's financial, insurance and reinsurance contracts assets that bear
counterparty default risk between those assets that have not been impaired by age in relation to due date and those that have
been impaired.
The Group's maximum exposure to credit risk is represented by the carrying value of financial investments, cash and cash
equivalent, the carrying value of loans and advances and the excess of reinsurance assets over amounts owed to reinsurers under
funds withheld arrangements which are settled on a net basis. In addition, the Group operates a 100% quota share reinsurance
treaty on its Brokered commercial business which was sold to RSA Insurance Limited on a funds withheld basis, which substantially
reduces credit risk, as the Group retains the cash received from policyholders. The Group does not use credit derivatives or similar
instruments to mitigate exposure.
All financial investments held at amortised cost have been assessed for impairment using the ECL model under IFRS 9.
The assessment has been made on mark to model credit ratings which would adopt similar processes to those applied by external
rating agencies on corporate debt securities.
Infrastructure debt and commercial real estate loans are categorised as loans and receivables and thus reported within the
statutory accounts at amortised cost. The credit rating of these loans are monitored regularly and are considered low risk under
IFRS 9, with the majority remaining within stage 1 and a 12 month ECL for the impairment provision. Any loans downgraded to
below BBB or any sub BBB loan that is downgraded by 1 full credit rating, are considered by the Group to have significantly
increased in credit risk, and therefore are stage 2 or stage 3 under IFRS 9. Credit ratings for Investment assets held at FVTPL are
market observable from a combination of external credit ratings agencies.
Neither past
due nor
impaired
Past due 1 – 90
days
Past due more
than 90 days
Carrying value
in the
statement of
financial
position
At 31 December 2024
£m
£m
£m
£m
Reinsurance contract assets1
1,785.9
8.4
7.8
1,802.1
Other receivables
16.6
2.3
2.9
21.8
Derivative financial instruments
19.1
–
–
19.1
Debt securities
3,993.6
–
–
3,993.6
Infrastructure debt
188.7
–
–
188.7
Commercial real estate loans
135.5
–
–
135.5
Cash and cash equivalents2
1,156.0
–
–
1,156.0
Other loans
5.4
–
–
5.4
Total
7,300.8
10.7
10.7
7,322.2
Neither past
due nor
impaired
Past due 1 – 90
days
Past due more
than 90 days
Carrying value
in the
statement of
financial
position
At 31 December 2023
£m
£m
£m
£m
Reinsurance contract assets1
1,340.4
5.5
0.1
1,346.0
Other receivables
32.9
2.0
0.3
35.2
Derivative financial instruments
27.4
–
–
27.4
Debt securities
3,308.7
–
–
3,308.7
Infrastructure debt
214.2
–
–
214.2
Commercial real estate loans
145.9
–
–
145.9
Cash and cash equivalents2
1,772.2
–
–
1,772.2
Other loans
3.1
–
–
3.1
Total
6,844.8
7.5
0.4
6,852.7
Notes:
1.
Before the recognition of the £298.1 million (2023: £241.8 million) funds withheld amount associated with the quota share arrangement with RSA
Insurance Limited.
2.
This represents money market funds with no notice period for withdrawal and cash at bank and in hand.
The Group's maximum exposure to credit risk from insurance contract assets is £5.7 million (2023: £5.4 million). The Group's
maximum exposure to credit risk from reinsurance contract assets is the excess of reinsurance assets over amounts owed to
reinsurers under funds withheld arrangements which are settled on a net basis, being £1,487.8 million (2023: £1,098.6 million).
183 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.3 Credit risk continued
The tables below analyse the credit quality of debt securities that are neither past due nor impaired:
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
BB+ and below
Not rated
Total
At 31 December 2024
£m
£m
£m
£m
£m
£m
£m
Corporate
69.0
221.1
1,549.5
1,074.4
301.2
1.5
3,216.7
Supranational
17.9
–
–
–
–
–
17.9
Local government
1.0
12.0
–
–
–
–
13.0
Sovereign
–
746.0
–
–
–
–
746.0
Total
87.9
979.1
1,549.5
1,074.4
301.2
1.5
3,993.6
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
BB+ and below
Not rated
Total
At 31 December 2023
£m
£m
£m
£m
£m
£m
£m
Corporate
56.8
152.7
1,201.6
899.6
289.2
1.5
2,601.4
Supranational
25.6
–
–
–
–
–
25.6
Local government
0.9
–
–
–
–
–
0.9
Sovereign
4.7
676.1
–
–
–
–
680.8
Total
88.0
828.8
1,201.6
899.6
289.2
1.5
3,308.7
The tables below analyse the credit quality of financial and insurance assets that are neither past due nor impaired (excluding debt
securities analysed above). The tables include reinsurance exposure, after provision. The Group's approach to reinsurance
counterparty default risk is detailed on page 182.
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
BB+ and below
Not rated
Total
At 31 December 2024
£m
£m
£m
£m
£m
£m
£m
Reinsurance contract assets
–
343.7
1,439.7
2.4
–
0.1
1,785.9
Other receivables
0.2
–
1.1
–
–
15.3
16.6
Derivative financial instruments
–
17.6
1.5
–
–
–
19.1
Infrastructure debt
–
–
31.0
157.7
–
–
188.7
Commercial estate loans
19.8
38.0
40.4
31.6
5.7
–
135.5
Cash and cash equivalents1
1,019.3
44.7
86.3
0.9
–
4.8
1,156.0
Other loans
–
–
–
–
–
5.4
5.4
Total
1,039.3
444.0
1,600.0
192.6
5.7
25.6
3,307.2
AAA
AA+ to AA-
A+ to A-
BBB+ to BBB-
BB+ and below
Not rated
Total
At 31 December 2023
£m
£m
£m
£m
£m
£m
£m
Reinsurance contract assets
–
290.5
1,047.5
2.4
–
–
1,340.4
Other receivables
0.4
1.7
4.8
0.3
–
25.7
32.9
Derivative financial instruments
–
26.4
0.4
0.6
–
–
27.4
Infrastructure debt
–
–
34.5
179.7
–
–
214.2
Commercial estate loans
12.1
47.9
51.6
28.6
5.7
–
145.9
Cash and cash equivalents1
1,624.2
14.0
133.0
0.9
–
0.1
1,772.2
Other loans
–
–
–
–
–
3.1
3.1
Total
1,636.7
380.5
1,271.8
212.5
5.7
28.9
3,536.1
Note:
1.
This represents money market funds with no notice period for withdrawal and cash at bank and in hand.
184 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
Debt instruments measured at amortised cost.
The table below shows the credit quality and the maximum exposure to credit risk per the Group's internal credit rating model.
The amounts presented are gross of ECL allowances:
2024
2023
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
£m
£m
£m
£m
£m
£m
AA+ to AA-
11.5
–
11.5
11.5
–
11.5
A+ to A-
16.0
–
16.0
16.0
–
16.0
BBB+ to BBB-
28.6
–
28.6
33.8
–
33.8
BB+ and below
–
–
–
–
10.1
10.1
Total
56.1
–
56.1
61.3
10.1
71.4
Loans and receivables measured at amortised cost
The table below shows the credit quality and the maximum exposure to credit risk per the Group’s internal credit rating model.
The amounts presented are gross of ECL allowances:
2024
2023
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
£m
£m
£m
£m
£m
£m
AAA
19.8
–
19.8
12.1
–
12.1
AA+ to AA-
38.0
–
38.0
47.9
–
47.9
A+ to A-
71.5
–
71.5
86.2
–
86.2
BBB+ to BBB-
190.4
–
190.4
209.4
–
209.4
BB+ and below
–
13.3
13.3
–
28.9
28.9
Not rated
–
5.9
5.9
–
3.4
3.4
Total
319.7
19.2
338.9
355.6
32.3
387.9
The Group’s Investment and Treasury team prepares internal ratings for instruments held in which its counterparties are rated
using internal grades (AAA to BB+ and below). The ratings are determined incorporating both qualitative and quantitative
information that builds on information from credit agencies, supplemented with information specific to the counterparty and other
external information that could affect the counterparty’s behaviour. These information sources are first used to determine whether
an instrument has had a significant increase in credit risk.
The tables below analyse the change in the carrying amount and loss allowance of debt securities measured at amortised cost
and the corresponding ECL.
2024
2023
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
Carrying amount
£m
£m
£m
£m
£m
£m
Amortised cost as at 1 January
61.3
10.1
71.4
88.1
10.1
98.2
Assets derecognised or matured
(15.2)
–
(15.2)
(26.8)
–
(26.8)
Accrued interest capitalised
(0.1)
–
(0.1)
–
–
–
Transfer to 12 month ECL
10.1
(10.1)
–
–
–
–
Amortised cost as at 31 December
56.1
–
56.1
61.3
10.1
71.4
2024
2023
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
Loss allowance
£m
£m
£m
£m
£m
£m
Loss allowance as at 1 January
(0.3)
(0.5)
(0.8)
(0.4)
(0.6)
(1.0)
Transfer to lifetime ECL
(0.5)
0.5
–
–
–
–
Effect of changes in assessed ECL
0.4
–
0.4
0.1
0.1
0.2
Loss allowance as at 31 December
(0.4)
–
(0.4)
(0.3)
(0.5)
(0.8)
185 | Direct Line Group Annual Report and Accounts 2024
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1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.3 Credit risk continued
The tables below analyse the change in the carrying amount and loss allowance of loans and receivables measured at amortised
cost and the corresponding ECL.
2024
2023
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
Carrying amount
£m
£m
£m
£m
£m
£m
Amortised cost as at 1 January
355.6
32.3
387.9
423.3
37.8
461.1
New assets originated or purchased
24.2
2.5
26.7
–
1.5
1.5
Assets derecognised or matured
(59.3)
(15.7)
(75.0)
(75.5)
–
(75.5)
Accrued interest capitalised
(0.8)
0.1
(0.7)
0.8
–
0.8
Transfer to 12 month ECL
–
–
–
7.0
(7.0)
–
Amortised cost as at 31 December
319.7
19.2
338.9
355.6
32.3
387.9
2024
2023
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
12 month
expected
credit loss
Lifetime
expected
credit loss
Total
Loss allowance
£m
£m
£m
£m
£m
£m
Loss allowance as at 1 January
(1.1)
(23.6)
(24.7)
(1.5)
(22.3)
(23.8)
New assets originated or purchased
–
(0.2)
(0.2)
–
–
–
Assets derecognised or matured
0.1
15.6
15.7
–
–
–
Transfer to lifetime ECL
–
–
–
(0.1)
0.1
–
Effect of changes in assessed ECL
(0.1)
–
(0.1)
0.5
(1.4)
(0.9)
Loss allowance as at 31 December
(1.1)
(8.2)
(9.3)
(1.1)
(23.6)
(24.7)
1.3.4 Operational risk
This is the risk of loss due to inadequate or failed internal processes or systems, including from human error or from external events.
Material sources of operational risk for the Group include:
Change risk
Change risk is defined as the risk of failing to manage the change portfolio and associated change initiatives, within desired scope,
time, cost, quality and Group risk appetite, leading to a failure to deliver strategic benefits, good customer outcomes and possibly
causing business disruption.
Technology and infrastructure risk
Technology and infrastructure risk is defined as the risk of loss resulting from inadequate or failed information technology
processes through strategy, design, build or run components internally or externally provisioned.
Supplier management and outsourcing risk
Procurement and outsourcing is the risk an outsourcing arrangement that is deemed critical or material failing to deliver the
service provision in question to the expected levels. This includes both domestic and offshore outsourcing activities.
Cyber risk
Cyber risk arises from inadequate internal and external cyber security, where failures impact the confidentiality integrity and
availability of data.
Partnership contractual obligations
This is the risk of contractual obligations not being delivered for business partners resulting in damaged reputation, the loss
of contract at renewal, significant liability payments and/or the early termination of a partnership scheme.
The Group has in place agreed policies and standards to establish and monitor key controls relating to operational risk.
Risk concentrations and management
The Group is subject to concentration in its operational risk profile. For example, the Group's IT infrastructure and change
initiatives can expose the Group to the risk of losses in a number of scenarios such as system outages and data security breaches.
There is a dedicated resilience framework in place across the Group to mitigate operational risk concentrations.
The Group proactively manages its operational risks to mitigate potential customer harm, regulatory or legal censure, financial and
reputational impacts. The Group has in place operational processes and systems, including prevention and detection measures.
These include processes which seek to ensure the Group can absorb and/or adapt to internal or external events that could impact
customer operations and the wider business, as well as to learn from these situations to improve the Group's overall risk and control
systems moving forward.
186 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
1.3.5 Liquidity risk
This is the risk of being unable to access cash from the sale of investments or other assets in order to settle financial obligations
as they fall due.
The measurement and management of the Group's liquidity risk is undertaken within the limits and other policy parameters
of the Group's liquidity risk appetite and is detailed in the liquidity risk minimum standard. As part of this process, the Investment
Management and Treasury team is required to put in place a liquidity plan which must consider expected and stressed scenarios
for cash inflows and outflows that is reviewed at least annually by the Investment Committee. Compliance is monitored in respect
of both the minimum standard and the regulatory requirements of the PRA.
The following table analyses the carrying value of financial investments and cash and cash equivalents, by contractual maturity,
which can fund the repayment of liabilities as they crystallise.
Within
1 year
1 – 3 years
3 – 5 years
5 – 10 years
Over
10 years
Total
At 31 December 2024
£m
£m
£m
£m
£m
£m
Debt securities
937.0
1,565.4
803.6
422.9
264.7
3,993.6
Infrastructure debt
17.8
33.1
34.5
76.0
27.3
188.7
Commercial real estate loans
23.7
64.2
47.6
–
–
135.5
Cash and cash equivalents1
1,156.0
–
–
–
–
1,156.0
Other loans
–
5.4
–
–
–
5.4
Total
2,134.5
1,668.1
885.7
498.9
292.0
5,479.2
Within
1 year
1 – 3 years
3 – 5 years
5 – 10 years
Over
10 years
Total
At 31 December 2023
£m
£m
£m
£m
£m
£m
Debt securities
566.1
1,542.0
598.2
503.6
98.8
3,308.7
Infrastructure debt
20.4
32.8
41.2
81.8
38.0
214.2
Commercial real estate loans
46.5
55.5
43.9
–
–
145.9
Cash and cash equivalents1
1,772.2
–
–
–
–
1,772.2
Other loans
–
0.4
2.7
–
–
3.1
Total
2,405.2
1,630.7
686.0
585.4
136.8
5,444.1
Note:
1.
This represents money market funds with no notice period for withdrawal and cash at bank and in hand.
The following table analyses the undiscounted cash flows of insurance and financial liabilities, based on the future cash flows
expected to be paid out in the periods presented, and financial and other liabilities by maturity dates.
Less than 1
year
1 – 3 years
3 – 5 years
5 – 10 years
Over 10 years
Total
Carrying value
At 31 December 2024
£m
£m
£m
£m
£m
£m
£m
Insurance contract liabilities1
1,446.4
1,112.7
790.7
601.5
1,686.2
5,637.5
3,900.0
Subordinated liabilities
10.4
20.8
20.8
286.0
–
338.0
259.1
Borrowings2
66.8
–
–
–
–
66.8
66.8
Trade and other payables
176.8
16.0
0.7
–
–
193.5
178.9
Total
1,700.4
1,149.5
812.2
887.5
1,686.2
6,235.8
4,404.8
Less than 1
year
1 – 3 years
3 – 5 years
5 – 10 years
Over 10 years
Total
Carrying value
At 31 December 2023
£m
£m
£m
£m
£m
£m
£m
Insurance contract liabilities1.3
1,444.3
1,052.3
643.0
517.0
1,706.6
5,363.2
3,874.0
Subordinated liabilities
10.4
20.8
20.8
296.4
–
348.4
258.8
Borrowings2
82.4
–
–
–
–
82.4
82.4
Trade and other payables
157.4
6.1
0.1
–
–
163.6
163.6
Total
1,694.5
1,079.2
663.9
813.4
1,706.6
5,957.6
4,378.8
Notes:
1.
Insurance contract liabilities represent the estimate of present value cash flows as disclosed in note 19.1 and are presented gross of reinsurance.
2.
See note 25 for details of borrowings.
3.
The 2023 Insurance contract liabilities numbers have been restated to correct a misallocation of amounts related to maturity dates.
187 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
1. Risk management continued
1.3 Principal risks from insurance activities and use of financial instruments continued
1.3.5 Liquidity risk continued
The following table analyses the undiscounted cash flows of derivative financial instruments, by contractual maturity.
Within 1 year
1 – 3 years
3 – 5 years
5 – 10 years
Total
Carrying value
At 31 December 2024
£m
£m
£m
£m
£m
£m
Derivative assets
19.1
–
–
–
19.1
19.1
Derivative liabilities
(38.7)
–
–
–
(38.7)
(38.7)
Total
(19.6)
–
–
–
(19.6)
(19.6)
Within 1 year
1 – 3 years
3 – 5 years
5 – 10 years
Total
Carrying value
At 31 December 2023
£m
£m
£m
£m
£m
£m
Derivative assets
27.6
(0.1)
(0.1)
–
27.4
27.4
Derivative liabilities
(14.4)
(1.0)
–
–
(15.4)
(15.4)
Total
13.2
(1.1)
(0.1)
–
12.0
12.0
1.4 Capital management
Group Capital
At 31 December 2024, the Group's capital position was comprised of shareholders' equity of £2,137.9 million (31 December 2023: £2,058.2
million) and Tier 1 notes of £346.5 million (31 December 2023: £346.5 million). In addition, the Group's consolidated statement of financial
position also included £259.1 million of subordinated loan capital (31 December 2023: £258.8 million) which is classified as Tier 2 for
Solvency II purposes.
The Solvency II financial information in this note is estimated, unaudited and is not part of the financial statements.
Solvency balance sheet management
The Group manages capital in accordance with the Group's capital management minimum standard, the aims of which are to
manage capital efficiently and generate long-term sustainable value for shareholders, while balancing operational, regulatory,
credit rating agency and policyholder requirements. The Group has a solvency risk appetite of 140% of the Group’s solvency capital
requirement (“SCR”). In normal circumstances, the Board expects that a solvency capital ratio of around 180% is appropriate and will
take this into account when considering the potential for additional returns, alongside expectations for future capital requirements
and other relevant factors. In the short term, the Group expects to maintain a solvency capital ratio above this level.
At 31 December 2024, the Group's (unaudited) solvency capital ratio, post dividends, was 195% (31 December 2023: 188%1).
Further details on the Group's capital position is included in the Group financial performance section of the Strategic Report
Capital adequacy
The Group's regulatory capital position is assessed against the Solvency II framework. From 1 July 2016, the Group gained approval
to assess its SCR using a partial internal model, including a full internal model for the U K Insurance Limited underwriting entity.
The model is calibrated to a 99.5% confidence interval and considers business written to date and one year of future written
business over a one-year time horizon, in line with Solvency II requirement, as modified by the PRA's 2024 reforms.
During the year, the Group and its regulated entities complied with all external capital requirements.
Using the Group's partial internal model, there is a capital surplus of approximately £1.11 billion above an estimated SCR of £1.16
billion as at 31 December 2024 (31 December 2023: £1.00 billion and £1.13 billion respectively). The Group's capital requirements
and solvency position are produced and presented to the Board on a regular basis. The Solvency II capital regime requires insurers
to calculate regulatory capital adequacy at both individual regulated subsidiaries and an aggregate Group level. This information
is estimated and is therefore subject to change. This paragraph is unaudited.
Note:
1.
During the Group's half year results preparation, a miscalculation has been identified within the Group's audited Solvency II own funds for the year
ended 2023. Correcting for the miscalculation, the solvency capital ratio (post-dividend) at year end 2023 was 188%, which was above the Group's
risk appetite range of 140% to 180% (the previously reported solvency capital ratio was 197%). The Group has taken action to strengthen the control
environment in relation to the specific area where the miscalculation occurred.
188 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
2. Segmental information
The chief operating decision maker, being the Chief Executive Officer, regularly reviews the operating results at the segmental level
as described below and disclosed in the tables in this note to assess performance and make decisions about allocation of resources.
During 2024, the Group redefined its operating segments following changes in management responsibilities and its decision to exit
or stop investing in Non-core businesses. The redefined segments are detailed below. Data relating to previous periods has been re-
presented to reflect these changes.
Ongoing operations
Motor
This segment consists of personal Motor insurance together with the associated legal protection cover. The Group sells Motor
insurance direct to customers through its own brands Direct Line, Churchill, Privilege, By Miles and Darwin, through price
comparison websites ("PCWs") and through partnership brands, including the Group's partnership with Motability Operations, as
well as via vehicle manufacturers.
Non-Motor
Non-Motor includes three primary businesses: Home insurance, Rescue products and Commercial insurance for small and micro-
sized enterprises.
– Home insurance: The Group offers home insurance through its Direct Line, Churchill, and Privilege brands, as well as through
partnership brands such as Natwest Group. These products are also available on PCWs.
– Rescue products: Rescue services are provided primarily through the Group's Green Flag brand, sold directly to customers.
Additionally, rescue policies are available as add-ons to Motor policies and through various partnerships.
– Commercial Insurance: The Group provides Commercial insurance for small and micro-businesses through its Direct Line for
Business and Churchill brands. Both brands sell products directly to customers, while Churchill also offers products through
PCWs.
Non Ongoing Operations
The Group has aggregated the results of the Brokered commercial business and the non-core and run-off businesses and excluded
them from its ongoing results. All relevant comparatives have been restated and the segmental analysis has been amended to
reflect the changes. Results relating to ongoing operations are clearly labelled. The profit/(loss) before restructuring and one-off
costs relating to the Brokered commercial business and non-core and run-off businesses in 2024 was £33.9 million profit and £5.3
million profit (2023: £50.0 million profit and £25.0 million loss respectively).
Brokered commercial business
On 6 September 2023 the Group announced the sale of its Brokered commercial insurance business to Royal & Sun Alliance
Insurance Limited ("RSAI"). Under the terms of the agreement, the Group has retained the back book of the business written and
earned prior to 1 October 2023 (the "Risk Transfer Date"). Business written or earned on or subsequent to the Risk Transfer Date is
subject to a quota share reinsurance arrangement between the two companies with RSAI as the reinsurer. The parties are working
towards a Part VII transfer relating to the policies dealt with under the quota-share reinsurance arrangement, as envisaged in the
agreements entered into on 6 September 2023.
Non-core and Run-off
Non-core and Run-off includes the following Other Personal Lines insurance: Travel and Pet, which are sold directly to customers
through Direct Line and Churchill brands; Select, which targets mid- to high-net worth customers and is sold through Direct Line
and partnership brands; and Creditor, which is closed to new business with renewal policies written under the UKI brands. The
Group has now exited all Run-off Rescue and Travel partnerships.
Inter-segmental transactions
Where inter-segment transactions occur, transfer prices between operating segments are set on an arm's-length basis in a manner
similar to transactions with third parties. Segment income, expenses and results will include those transfers between business
segments which will then be eliminated on consolidation. Inter-segment revenue between segments was not material.
For each operating segment, there are no individual policyholders or customers that represent 10% or more of the Group's total
revenue.
Restructuring and one-off costs
Restructuring costs are costs incurred in respect of those business activities which have a material effect on the nature and focus of
the Group's operations. One-off costs are costs that are non-recurring in nature. These costs have not been allocated between
business segments as they relate to the business as a whole.
189 | Direct Line Group Annual Report and Accounts 2024
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2. Segmental information continued
Group results and assets and liabilities by segment
The table below analyses the Group's revenue and results by reportable segment for the year ended 31 December 2024, and the
Group's assets and liabilities by reportable segment3 at 31 December 2024.
Motor
Non-Motor
Total Group
- ongoing
operations1
Brokered
commercial
business1
Non-core
and Run-off1
Restructuring
and one-off
costs1,2
Total Group
£m
£m
£m
£m
£m
£m
Statement of profit or loss
Insurance revenue
2,739.0
1,020.9
3,759.9
620.4
186.7
–
4,567.0
Insurance service expenses
(2,669.9)
(868.3)
(3,538.2)
(470.2)
(172.6)
(4.0)
(4,185.0)
Net expense from reinsurance contracts held
(49.8)
(67.3)
(117.1)
(135.2)
(7.3)
–
(259.6)
Insurance service result
19.3
85.3
104.6
15.0
6.8
(4.0)
122.4
Investment return
191.2
38.1
229.3
40.6
2.4
–
272.3
Net finance income/(expense) from insurance
contracts issued
12.1
(15.4)
(3.3)
(15.0)
(2.7)
–
(21.0)
Net finance income/(expense) from reinsurance
contracts held
(14.2)
2.0
(12.2)
(8.3)
0.3
–
(20.2)
Investment return and net insurance finance result
189.1
24.7
213.8
17.3
–
–
231.1
Other operating income
0.6
17.2
17.8
1.3
1.2
–
20.3
Other operating expenses
(2.0)
(16.8)
(18.8)
0.3
(2.7)
(114.1)
(135.3)
Profit/(loss) before other finance costs
207.0
110.4
317.4
33.9
5.3
(118.1)
238.5
Loss on disposal of business
(4.7)
Other finance costs
(15.4)
Profit before tax
218.4
Assets
Goodwill
134.0
74.5
208.5
–
–
208.5
Assets held for sale
7.7
2.0
9.7
2.0
0.4
12.1
Other segment assets
4,468.2
1,280.9
5,749.1
891.1
126.5
6,766.7
Reinsurance contract assets
1,136.1
55.4
1,191.5
608.9
1.7
1,802.1
Insurance contract assets
–
–
–
–
5.7
5.7
Total segment assets
5,746.0
1,412.8
7,158.8
1,502.0
134.3
8,795.1
Liabilities
Reinsurance contract liabilities
(58.6)
(5.9)
(64.5)
(484.0)
(1.0)
(549.5)
Insurance contract liabilities
(3,338.8)
(927.6)
(4,266.4)
(718.5)
(102.0)
(5,086.9)
Other segment liabilities
(442.7)
(122.9)
(565.6)
(95.2)
(13.5)
(674.3)
Total segment liabilities
(3,840.1)
(1,056.4)
(4,896.5)
(1,297.7)
(116.5)
(6,310.7)
Segment net assets
1,905.9
356.4
2,262.3
204.3
17.8
2,484.4
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
2.
The Group incurred £118.1 million of restructuring and one-off costs in 2024, which were a result of several items including cost out and control
initiatives, non-cash impairments, as well as work carried out in relation to the takeover approach from Ageas NV and the offer from Aviva plc.
3.
This segmental analysis is prepared using a combination of asset and liability balances directly attributable to each operating segment and an
apportionment of assets and liabilities managed at a Group-wide level. This does not represent the Group's view of the capital requirements for its
operating segments.
190 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
The table below analyses the Group's revenue and results by reportable segment for the year ended 31 December 2023, and the
Group's assets and liabilities by reportable segment4 at 31 December 2023 (restated1).
Motor
Non-Motor
Total Group
- ongoing
operations2
Brokered
commercial
business1
Non-core
and Run-off2
Restructuring
and one-off
costs3
Total Group
£m
£m
£m
£m
£m
£m
£m
Statement of profit or loss
Insurance revenue
1,805.4
919.2
2,724.6
600.8
276.3
–
3,601.7
Insurance service expenses
(2,145.2)
(768.6)
(2,913.8)
(564.3)
(303.4)
(24.8)
(3,806.3)
Net expense from reinsurance contracts held
8.2
(31.0)
(22.8)
(22.6)
(1.4)
–
(46.8)
Insurance service result
(331.6)
119.6
(212.0)
13.9
(28.5)
(24.8)
(251.4)
Investment return
179.3
56.8
236.1
59.0
7.9
–
303.0
Net finance income/(expense) from insurance
contracts issued
(146.2)
(22.3)
(168.5)
(21.9)
(3.4)
–
(193.8)
Net finance income/(expense) from reinsurance
contracts held
25.5
1.9
27.4
0.4
0.2
–
28.0
Investment return and net insurance finance result
58.6
36.4
95.0
37.5
4.7
–
137.2
Other operating income
4.2
16.4
20.6
0.4
0.8
–
21.8
Other operating expenses
(5.6)
(15.5)
(21.1)
(1.8)
(2.0)
(34.7)
(59.6)
Profit/(Loss) before other finance costs
(274.4)
156.9
(117.5)
50.0
(25.0)
(59.5)
(152.0)
Gain on disposal of business
443.9
Other finance costs
(14.5)
Profit before tax
277.4
Assets
Goodwill
134.0
74.5
208.5
–
–
208.5
Assets held for sale
8.7
2.5
11.2
2.3
0.4
13.9
Other segment assets
4,356.6
1,212.8
5,569.4
1,059.6
214.4
6,843.4
Reinsurance contract assets
1,076.4
61.0
1,137.4
203.6
5.0
1,346.0
Insurance contract assets
–
–
–
–
5.4
5.4
Total segment assets
5,575.7
1,350.8
6,926.5
1,265.5
225.2
8,417.2
Liabilities
Reinsurance contract liabilities
(16.9)
(8.4)
(25.3)
(89.6)
(1.7)
(116.6)
Insurance contract liabilities
(3,305.9)
(892.7)
(4,198.6)
(866.0)
(174.2)
(5,238.8)
Other segment liabilities
(415.1)
(112.1)
(527.2)
(108.7)
(21.2)
(657.1)
Total segment liabilities
(3,737.9)
(1,013.2)
(4,751.1)
(1,064.3)
(197.1)
(6,012.5)
Segment net assets
1,837.8
337.6
2,175.4
201.2
28.1
2,404.7
Notes:
1.
2023 balances are re-presented to reflect changes in operating segments (see explanation on page 189)
2.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
3.
The Group incurred £59.5 million of restructuring and one-off costs in 2023, which were predominantly driven by work carried out in relation
to the Group’s two past business reviews, cost efficiency initiatives and impairments.
4. This segmental analysis is prepared using a combination of asset and liability balances directly attributable to each operating segment and an
apportionment of assets and liabilities managed at a Group-wide level. This does not represent the Group's view of the capital requirements for its
operating segments.
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3. Insurance service result
The table below analyses insurance and reinsurance revenue and expenses that comprise the Group's insurance service result in
profit or loss:
2024
2023
£m
£m
Insurance revenue
4,567.0
3,601.7
Insurance service expenses
Incurred claims and other claims expenses
(3,360.4)
(2,817.5)
Past service – incurred claims
82.5
(80.9)
Other directly attributable expenses1
(907.1)
(907.9)
Total insurance service expenses
(4,185.0)
(3,806.3)
Allocation of reinsurance premiums paid
(1,439.6)
(470.2)
Insurance claims recoverable from reinsurance contracts held
Claims recoveries
1,232.3
495.7
Past service – claim recoveries
(85.0)
(63.1)
Other directly attributable expenses2
30.8
(3.4)
Effect of non-performance risk of reinsurers
1.9
(5.8)
Total amounts recoverable from reinsurance contracts held
1,180.0
423.4
Total insurance service result
122.4
(251.4)
Notes:
1.
This includes insurance acquisition expenses of £233.0 million (2023: £292.3 million) which are fully expensed at initial recognition in accordance
with the Group's accounting policy and do not form part of the liability for remaining coverage.
2.
This includes expenses recoverable under the reinsurance arrangement in place for the Brokered commercial business.
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Notes to the financial statements continued
4. Insurance finance result
This note analyses the Group's finance result, including its insurance and reinsurance finance income/(expenses) in profit or loss and
other comprehensive income.
Interest income calculated using effective interest rate method:
Debt securities
129.8
78.9
Cash and cash equivalents
72.0
65.2
Infrastructure debt
14.7
14.8
Commercial real estate loans
10.0
12.9
Other loans
0.1
–
Total interest income calculated using effective interest rate method
226.6
171.8
Rental income from investment property
17.4
16.1
Other interest and similar income
17.4
16.1
Investment income
244.0
187.9
Investment fees
(8.8)
(9.3)
Net investment income
235.2
178.6
Net fair value gains on financial assets held at fair value through profit or loss:
Debt securities
23.9
134.1
Derivatives
6.5
(6.4)
Equity investments
(0.1)
(0.7)
Total net fair value gains on financial assets held at fair value through profit or loss
30.3
127.0
Net fair value gains/(losses) on investment property
6.6
(1.9)
Net credit impairment gains/(losses) on financial investments
0.2
(0.7)
Investment return
272.3
303.0
Insurance finance expense from insurance contracts issued:
Interest accreted to insurance contracts using current financial assumptions
(21.0)
(193.8)
Reinsurance finance (expense)/income from reinsurance contracts held:
Interest accreted to reinsurance contracts using current financial assumptions
(20.2)
28.0
Insurance and reinsurance finance expenses
(41.2)
(165.8)
Total investment return, insurance and reinsurance finance expenses
231.1
137.2
Amounts recognised in other comprehensive income
Net fair value gains on equity investments measured at fair value through other comprehensive
income
1.6
2.7
2024
2023
£m
£m
Amounts recognised in profit or loss
The table below analyses the realised and unrealised gains and losses on derivative financial instruments included in investment return.
2024
2023
£m
£m
Gains/(losses) on foreign exchange hedging:
Foreign exchange forward contracts1
(11.5)
43.0
Associated foreign exchange risk
11.5
(48.5)
Total gains/(losses) on foreign exchange hedging
–
(5.5)
Interest rate swaps:
Gains/(losses) on interest rate swaps1
6.5
(0.9)
Total gains/(losses) on foreign exchange hedging and interest rate hedging instruments
6.5
(6.4)
Note:
1.
Foreign exchange forward contracts and interest rate swaps are measured at fair value through the statement of profit or loss.
The Group holds fixed rate USD and EUR denominated bonds whose fair value is exposed to movements in interest rates. In order
to economically hedge the interest rate risk of these bonds the Group enters into interest rate swaps, paying a fixed rate and
receiving a floating rate.
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5. Other operating expenses
This note analyses the Group's other operating expenses in profit or loss.
2024
2023
£m
£m
Non-directly attributable IT and other operating expenses
92.5
33.4
Non-directly attributable staff expenses
17.9
15.7
Impairment of intangible and fixed assets
24.9
10.5
Total other operating expenses
135.3
59.6
Other operating expenses include cost efficiency initiatives, non-cash impairments of software development and response work
carried out in relation to the takeover approach from Ageas NV and the offer from Aviva plc.
6. Employee information
This note shows where the Group's staff are employed, their aggregate remuneration, analyses Directors' emoluments and the
Group's share-based payments obligations.
The table below analyses the number of people employed by the Group’s operations.
At 31 December
Average for the year
2024
2023
2024
2023
Insurance operations
5,941
7,015
6,480
6,743
Repair centre operations
1,709
1,715
1,731
1,620
Support
1,403
1,401
1,390
1,321
Total
9,053
10,131
9,601
9,684
The aggregate remuneration of those employed by the Group’s operations comprised:
2024
2023
£m
£m
Wages and salaries
452.4
421.4
Social security costs
55.6
47.7
Pension costs
30.6
28.7
Share-based payments
14.6
13.9
Total
553.2
511.7
Of the total aggregate remuneration, £17.9 million (2023: £15.7 million) relates to other operating expenses with the remainder
included in note 3, in the insurance service result, as part of other directly attributable expenses.
Aggregate Directors' emoluments
The table below analyses the total amount of Directors' remuneration in accordance with Schedule 5 to the Accounting Regulations.
2024
2023
£m
£m
Salaries, fees, bonuses and benefits in kind
3.9
3.7
Gains on exercise of share options
2.1
0.3
Total
6.0
4.0
Further information about the remuneration of individual current Directors is provided in the Directors' Remuneration Report.
At 31 December 2024, no Directors (2023: no Directors) had retirement benefits accruing under the defined contribution
pension scheme in respect of qualifying service. During the year ended 31 December 2024, two Directors exercised share options
(2023: one Director).
Shared-based payments
The Group operates equity-settled, share-based compensation plans in the form of a Long-Term Incentive Plan ("LTIP"),
a Restricted Shares Plan, a Deferred Annual Incentive Plan ("DAIP") and Direct Line Group Share Incentive Plans, including
both the Free Share awards and a Buy-As-You-Earn Plan, details of which are set out below. All awards are to be satisfied using
market-purchased shares.
Long-Term Incentive Plan
Executive Directors and certain members of senior management are eligible to participate in the LTIP with awards granted in the
form of nil-cost options. Under the plan, the shares vest at the end of a three-year period dependent upon continued employment
by the Group and also the Group achieving predefined performance conditions associated with total shareholder return ("TSR"),
return on tangible equity ("RoTE"), from 2022 emissions, from 2023 operating earnings per share ("Operating EPS") and from 2024
expenses ratio. The Executive Directors are subject to an additional two-year holding period following the three-year vesting period.
194 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
An award was made in the year ended 31 December 2024 of 8.1 million Ordinary Shares with an estimated fair value of £15.4 million
at the 2024 grant date (2023: 8.0 million Ordinary Shares with an estimated fair value of £10.9 million).
The estimated fair value of the LTIP share awards with market-based performance conditions was calculated using a Monte Carlo
simulation model. The table below details the inputs into the model:
2024
2023
Weighted average assumptions during the year:
Share price (pence)
180
139
Exercise price (pence)
0
0
Volatility of share price
40%
32%
Average comparator volatility
33%
35%
Expected life
2 years
3 years
Risk-free rate
3.78 %
3.54%
Expected volatility was determined by considering the actual volatility of the Group's share price since its initial public offering
and that of a group of listed UK insurance companies.
Plan participants are entitled to receive additional shares in respect of dividends paid to shareholders over the vesting period.
Therefore, no deduction has been made from the fair value of awards in respect of dividends.
Expected life was based on the contractual life of the awards and adjusted based on management's best estimate, for the effects
of exercise restrictions and behavioural considerations.
Restricted Shares Plan
The purpose of the Restricted Shares Plan is to facilitate the wider participation in Group share-based awards of eligible employees.
These awards can be granted in the form of a nil-cost option at any time during the year, generally have no performance criteria,
and vest over periods ranging up to seven years from the date of the grant, subject to continued employment. During the year
awards were made of 5.8 million Ordinary Shares (2023: 7.8 million Ordinary Shares) with an estimated fair value of £11.1 million
(2023: £11.6 million) using the market value at the date of grant.
Deferred Annual Incentive Plan
To incentivise delivery of performance over a one-year operating cycle, Executive Directors and certain members of senior
management are eligible for awards under the Annual Incentive Plan ("AIP"), of which at least 40% is granted in the form
of a nil-cost option under the DAIP with the remainder being settled in cash following year end. During the year awards were
made of 0.1 million Ordinary shares (2023: No Ordinary Shares) with an estimated fair value of £0.1 million using the market value
at the date of grant.
The awards outstanding at 31 December 2024 have no performance criteria attached; there is a requirement that the employee
remains in employment with the Group for three years from the date of grant.
Direct Line Group Share Incentive Plans
No free share awards have been granted to eligible employees since 2021.
The Buy-As-You-Earn Plan entitles employees to purchase shares from pre-tax pay for between £10 and £150 per month and
receive one nil-cost matching share for every two shares purchased.
In the year ended 31 December 2024, matching share awards were granted of 0.8 million Ordinary Shares (2023: 1.0 million Ordinary
Shares) with an estimated fair value of £1.4 million (2023: £1.7 million). The fair value of each matching share award is estimated
using the market value at the date of grant.
Under the plan, the shares vest at the end of a three-year period dependent upon continued employment with the Group together
with continued ownership of the associated purchased shares up to the point of vesting.
195 | Direct Line Group Annual Report and Accounts 2024
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6. Employee information continued
Movement in total share awards
Number of share awards
2024
2023
millions
millions
At 1 January
34.0
28.7
Granted during the year
14.0
13.5
Additional awards in respect of the equivalent dividend
0.8
3.3
Forfeited during the year
(6.8)
(8.1)
Exercised during the year
(7.1)
(3.4)
At 31 December
34.9
34.0
Exercisable at 31 December
4.1
3.8
In respect of the outstanding options at 31 December 2024, the weighted average remaining contractual life is 1.52 years
(2023: 1.50 years). No share awards expired during the year (2023: nil).
The weighted average share price for awards exercised during the year ended 31 December 2024 was £1.99 (2023: £1.63).
The Group recognised total expenses in the year ended 31 December 2024 of £14.6 million (2023: £13.9 million) relating
to equity-settled share-based compensation plans.
The Share-based payment reserve within Retained earnings at 31 December 2024 was £7.4 million (2023: £5.6 million).
Further information on share-based payments, in respect of Executive Directors, is provided in the Directors' Remuneration Report.
7. Auditors remuneration
This note analyses the Auditor's remuneration in respect of the Group's operations.
2024
2023
£m
£m
Fees payable for the audit of:
The Company's annual accounts
0.4
0.5
The Company's subsidiaries
3.2
3.3
Total audit fees
3.6
3.8
Audit-related assurance services1
0.5
0.4
Other assurance services
–
0.2
Non-audit services1
–
1.6
Total2
4.1
6.0
Notes:
1.
Fees of £0.5 million for audit-related assurance services have been provided in 2024 (2023: £0.4 million) in respect of reporting accountant services.
Fees of £40,000 for non-audit services have been incurred in 2024 (2023: £1.6 million) relating to agreed upon procedures.
2.
Total audit fees, excluding VAT.
8. Other finance costs
This note analyses the Group's interest and other finance costs on its subordinated debt and interest expense on its lease liabilities.
2024
2023
£m
£m
Interest expense on subordinated liabilities
10.5
10.5
Amortisation of arrangement costs, discount on issue and fair value hedging adjustment of
subordinated liabilities
0.3
0.2
Interest expense on lease liabilities
4.6
3.8
Total
15.4
14.5
9. (Loss)/gain on disposal of business
On 6 September 2023, the Group announced that it had entered into an agreement with RSAI, a wholly-owned subsidiary of Intact
Financial Corporation, to dispose of its Brokered commercial business. For further details of the transaction see the Annual Report &
Accounts 2023. During the year an additional amount of £4.7 million has been provided for relating to additional transaction costs.
There is potential for further consideration of up to £30 million contingent upon certain earn-out provisions relating to the financial
performance of the business. At 31 December 2024, based on a probability-weighted average of scenario analysis of the estimated
future profitability of the contracts, no contingent consideration has been recognised.
196 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
The operations of the Brokered commercial business have not been classified as discontinued operations since they do not
represent a separate major line of business or geographical operations.
The table below summarises the pre-tax (loss)/gain on disposal recognised.
2024
2023
£m
£m
Cash consideration
–
520.0
Less: Net assets disposed of
–
(6.3)
Transaction cost
(4.7)
(50.3)
Assets written-off and impaired as part of disposal
–
(19.5)
(Loss)/gain on disposal – pre-tax impact
(4.7)
443.9
10. Tax charge
This note analyses the tax charge for the year and explains the factors that affect it.
2024
2023
£m
£m
Current taxation:
Charge for the year
54.9
24.3
Over-provision in respect of prior period
(4.4)
(2.6)
50.5
21.7
Deferred taxation (note 20)
Charge for the year
3.5
29.5
Under-provision for the year-provision in respect of prior year
1.8
3.3
5.3
32.8
Current taxation
50.5
21.7
Deferred taxation (note 20)
5.3
32.8
Tax charge for the year
55.8
54.5
The following table analyses the difference between the actual income tax charge and the expected income tax charge computed
by applying the standard rate of corporation tax of 25.0% (2023: 23.5%1).
2024
2023
£m
£m
Profit for the year
218.4
277.4
Expected tax charge
54.6
65.2
Effects of:
Previously unrecognised capital losses now offset against capital gains
–
(12.4)
Disallowable expenses
8.1
3.7
Non-taxable items
(0.3)
(0.1)
Movement in deferred tax asset/liability not recognised
0.2
(0.1)
Effect of change in corporation taxation rate1
–
0.2
(Over)/under-provision in respect of prior year
(2.6)
0.7
Revaluation of property
–
1.2
Deductible Tier 1 notes coupon payment in equity
(4.2)
(3.9)
Tax charge for the year
55.8
54.5
Effective income tax rate
25.5%
19.6%
Notes:
1.
In the Finance Act 2021, the UK Government enacted, on 10 June 2021, an increase in the UK corporation tax rate from 19% to 25% effective from
1 April 2023. As a consequence closing deferred tax assets and liabilities were recognised at the tax rates expected to apply when the temporary
differences reversed. The impact of these changes on the tax charge for the year is set out in the table above.
2.
The Group is within the scope of the OECD Pillar Two Model rules and Pillar two legislation has been enacted in the UK with effect from 1 January
2024. However, in line with the position previously expressed, there is no expectation of any exposure to Pillar Two Top-up Taxes and accordingly
no accrual has been recorded in these 2024 Financial Statements.
3.
The Group has applied the temporary exception issued by the IASB in May 2023 from the accounting requirements for deferred taxes in IAS 12.
Accordingly, the Group neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes.
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11. Dividends and appropriations
This note analyses the total dividends and Tier 1 coupon payments paid during the year, as set out in the table below. Details are
also provided for the year's final dividend for the year, which is not accrued in the financial statements and are excluded from the
table's totals.
2024
2023
£m
£m
Amounts recognised as distributions to equity holders in the period:
2024 interim dividend of 2.0 pence per share paid on 11 October 2024
26.1
–
2023 final dividend of 4.0 pence per share paid on 17 May 2024
52.1
–
78.2
–
Coupon payments in respect of Tier 1 notes
16.6
16.6
94.8
16.6
Proposed dividends:
2023 final dividend of 4.0 pence per share
52.0
2024 final dividend of 5.0 pence per share
65.1
–
Note:
1.
Coupon payments on the Tier 1 notes issued in December 2017 are treated as an appropriation of retained profits and, accordingly, are accounted
for when paid.
The proposed final dividend for 2024 has not been included as a liability in these financial statements.
The trustees of the employee share trusts waived their entitlement to dividends on shares held to meet obligations arising on the
Long-Term Incentive Plan, Deferred Annual Incentive Plan and Restricted Share Plan awards, which reduced the total dividends
paid for the year ended 31 December 2024 by £0.6 million. No dividends were paid or proposed during the year ended 31 December
2023.
12. Earnings per share
Earnings per share is calculated by dividing earnings attributable to the owners of the Company less coupon payments in respect
of Tier 1 notes by the weighted average number of Ordinary Shares during the year.
Basic earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to the owners of the Company less coupon payments in
respect of Tier 1 notes by the weighted average number of Ordinary Shares during the period, excluding Ordinary Shares held as
employee trust shares.
Diluted earnings per share
Diluted earnings per share is calculated by dividing the earnings attributable to the owners of the Company less coupon payments
in respect of Tier 1 notes by the weighted average number of Ordinary Shares during the period, excluding Ordinary Shares held as
employee trust shares, adjusted for the dilutive potential Ordinary Shares. The Company has share options and contingently
issuable shares as categories of dilutive potential Ordinary Shares. All awards are to be satisfied using market-purchased shares.
2024
2023
£m
£m
Earnings attributable to the owners of the Company
162.6
222.9
Coupon payments in respect of Tier 1 notes
(16.6)
(16.6)
Profit for the calculation of earnings per share
146.0
206.3
Weighted average number of Ordinary Shares in issue for the purpose of basic earnings per share
(millions)
1,300.6
1,299.0
Effect of dilutive potential of share options and contingently issuable shares (millions)
19.5
17.3
Weighted average number of Ordinary Shares for the purpose of diluted earnings per share (millions)
1,320.1
1,316.3
Basic earnings per share (pence)
11.2
15.9
Diluted earnings per share (pence)
11.1
15.7
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Notes to the financial statements continued
13. Net asset value per share and net tangible asset value per share
Net asset value per share is calculated as total shareholders' equity (which excludes Tier 1 notes) divided by the number of Ordinary
Shares at the end of the period excluding shares held by employee share trusts.
Tangible net asset value per share is calculated as total shareholders' equity less goodwill and other intangible assets divided by the
number of Ordinary Shares at the end of the period, excluding shares held by employee share trusts.
The table below analyses net asset and tangible net asset value per share:
2024
2023
£m
£m
Net assets
2,137.9
2,058.2
Goodwill and other intangible assets1
(776.3)
(818.6)
Tangible net assets
1,361.6
1,239.6
Number of Ordinary Shares (millions)
1,311.4
1,311.4
Shares held by employee trusts (millions)
(10.4)
(13.7)
Closing number of Ordinary Shares (millions)
1,301.0
1,297.7
Net asset value per share (pence)
164.3
158.6
Tangible net asset value per share (pence)
104.7
95.5
Note:
1. Goodwill has arisen on acquisition by the Group of subsidiary companies and on acquisition of new accident repair centres. Other intangible assets
primarily comprise software development costs.
14. Return on equity
The return on equity is calculated by using earnings attributable to the owners of the Company divided by the average
shareholders' equity for the year. The average shareholders' equity for the year is the mean average of the opening and closing
shareholders' equity.
The table below details the calculation of return on equity:
2024
2023
£m
£m
Earnings attributable to the owners of the Company
162.6
222.9
Coupon payments in respect of Tier 1 notes
(16.6)
(16.6)
Profit for the calculation of return on equity
146.0
206.3
Opening shareholders' equity
2,058.2
1,845.3
Closing shareholders' equity
2,137.9
2,058.2
Average shareholders' equity
2,098.1
1,951.8
Return on equity
7.0%
10.6%
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15. Goodwill and other intangible assets
This note analyses the changes to the carrying amounts of goodwill and other intangible assets during the year and details the
results of impairment testing on goodwill.
Goodwill
Other
intangible
assets
Total
£m
£m
£m
Cost
At 1 January 2023
215.0
1,218.8
1,433.8
Acquisitions and additions
3.6
124.1
127.7
Disposals and write-off1
(10.1)
(14.1)
(24.2)
At 31 December 2023
208.5
1,328.8
1,537.3
Acquisitions and additions
–
93.2
93.2
Disposals and write-off
–
–
–
At 31 December 2024
208.5
1,422.0
1,630.5
Accumulated amortisation and impairment
At 1 January 2023
–
611.6
611.6
Amortisation charge for the year
–
100.6
100.6
Disposals and write-off1
–
(8.1)
(8.1)
Impairment losses2
–
14.6
14.6
At 31 December 2023
–
718.7
718.7
Amortisation charge for the year
–
112.5
112.5
Disposals and write-off
–
–
–
Impairment losses2
–
23.2
23.2
At 31 December 2024
–
854.2
854.2
Carrying amount
At 31 December 2024
208.5
567.8
776.3
At 31 December 2023
208.5
610.1
818.6
Notes:
1.
Disposals and write-off of goodwill in 2023 arose from the sale of the Brokered commercial business. The sale of the Brokered commercial business
is detailed further in note 9. Disposals and write-off of other intangible assets include fully amortised intangible assets no longer utilised by the
Group in its operating activities.
2.
Impairment losses in 2024 relate to capitalised software development costs for ongoing IT projects primarily relating to development of new
systems, and intangible assets no longer utilised by the Group in its operating activities. Of this amount, £23.2 million (2023: £5.4 million) is included
within Other operating expenses and £nil (2023: £9.2 million) is included within (Loss)/gain on disposal of business.
Goodwill
Goodwill arose on the acquisitions of U K Insurance Limited (£141.0 million), Churchill Insurance Company Limited (£70.0 million),
By Miles Group Limited (£2.7 million) and accident repair networks (£4.9 million), offset with the disposal of the Brokered
commercial business (£10.1 million).
Goodwill is allocated to a CGU or group of CGUs for the purpose of impairment testing. The allocation is made to those CGUs
that are expected to benefit from the business combination in which the goodwill arose and represents the lowest level at which
goodwill is monitored for internal management purposes, being the reportable segments (note 2).
Other intangible assets
Included within other intangible assets are assets still under development of £26.4 million (2023: £100.8 million). The decrease
of £74.4 million is primarily due to the building of a new Home platform and development of new capabilities for the Group's
Motor platform which is now in use. Assets under development at 31 December 2024 relate mainly to finance and core technology
projects which are expected to be ready for use in 2025. These assets are tested for impairment during the Group's annual
impairment review at each reporting date.
Other intangible assets relate mainly to internally generated software. For year ended 31 December 2024, other intangible assets
additions, which are internally generated, are £92.7 million (2023: £122.8 million).
Impairment assessments
The Group's testing for impairment of goodwill and intangible assets includes the comparison of the recoverable amount of each
CGU or group of CGUs to which goodwill and other intangible assets have been allocated with its carrying value and is updated
annually for goodwill, at each reporting date for other intangibles, and whenever there are indications of impairment.
200 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
A segment-level summary of the goodwill allocation is presented below:
2024
2023+
£m
£m
Motor
134.0
134.0
Non-Motor
74.5
74.5
Total
208.5
208.5
There is no goodwill impairment for the year ended 31 December 2024 (2023: £nil).
Goodwill is tested for impairment by comparing the carrying value of the CGU or group of CGUs to which the goodwill relates
to the recoverable value of those CGUs. The recoverable amount is the value in use of the CGUs unless otherwise stated.
Value in use and sensitivity analysis
Value in use is calculated as the discounted value of expected future profits of each business, using the Group's strategic plan
covering a three year period. The long-term growth rates have been based on gross domestic product rates adjusted for inflation.
The risk discount rates incorporate observable market long-term government bond yields and average industry betas adjusted
for an appropriate risk premium based on independent analysis.
Key assumptions used in the value in use calculation and sensitivity information on the key assumptions are presented below:
Assumptions
Change to key assumptions needed to reduce headroom to nil
2024
20231
Segment
Terminal
growth rate
Pre-tax
discount rate
Terminal
growth rate
Pre-tax
discount rate
Headroom
under key
assumptions
Reduction to
future profits
in the Groups
strategic plan
Reduction in
terminal
growth rate
Increase in
pre-tax
discount rate
%
%
%
%
£m
%
% (abs)
% (abs)
Motor
1.5
14.1
1.5
11.4
833.2
30.2
7.2
5.0
Non-Motor
1.5
14.0
1.5
11.4
1,372.1
81.4
n/a2
47.2
Notes:
1.
Re-presented to reflect segmental changes.
2.
No change in this metric could reduce the headroom to nil.
Management considers that no reasonably possible changes to the key assumptions would reduce a CGU’s headroom to £nil.
16. Property, plant and equipment
This note analyses the Group's property, plant and equipment.
Land and
buildings
Other
equipment
Total
£m
£m
£m
Cost
At 1 January 2023
36.9
174.2
211.1
Acquisition of subsidiary
–
2.7
2.7
Additions
–
18.9
18.9
Disposals
–
(8.8)
(8.8)
At 31 December 2023
36.9
187.0
223.9
Additions
–
13.2
13.2
Disposals
–
(7.6)
(7.6)
At 31 December 2024
36.9
192.6
229.5
Accumulated depreciation and impairment
At 1 January 2023
4.6
122.8
127.4
Depreciation charge for the year
0.5
10.5
11.0
Disposals
–
(6.1)
(6.1)
At 31 December 2023
5.1
127.2
132.3
Depreciation charge for the year
0.5
11.3
11.8
Disposals
–
(7.3)
(7.3)
At 31 December 2024
5.6
131.2
136.8
Carrying amount
At 31 December 2024
31.3
61.4
92.7
At 31 December 2023
31.8
59.8
91.6
The Group is satisfied that the aggregate fair value of property, plant and equipment is not less than its carrying value.
201 | Direct Line Group Annual Report and Accounts 2024
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17. Lease assets and liabilities
This note contains analysis of the Group's right-of-use assets and operating lease commitments where the Group is the lessor
and lessee.
The following table analyses the right-of-use assets relating to property and motor vehicles:
Property
Motor vehicles
Total
£m
£m
£m
Cost
At 1 January 2023
121.0
9.6
130.6
Additions
30.9
5.5
36.4
Disposals
(6.9)
(5.0)
(11.9)
At 31 December 2023
145.0
10.1
155.1
Additions
11.4
8.8
20.2
Disposals
(4.7)
(1.0)
(5.7)
At 31 December 2024
151.7
17.9
169.6
Accumulated depreciation and impairment
At 1 January 2023
51.3
6.3
57.6
Depreciation charge for the year
9.1
2.8
11.9
Disposals
(5.8)
(4.7)
(10.5)
At 31 December 2023
54.6
4.4
59.0
Depreciation charge for the year
9.8
5.5
15.3
Disposals
(4.7)
(1.0)
(5.7)
At 31 December 2024
59.7
8.9
68.6
Carrying amount
At 31 December 2024
92.0
9.0
101.0
At 31 December 2023
90.4
5.7
96.1
The weighted average contract duration at inception for Property is 20 years, and for Motor vehicles is three years.
Operating lease commitments where the Group is the lessor
The following table analyses future aggregate minimum lease payments receivable under non-cancellable operating leases
in respect of property leased to third-party tenants:
2024
2023
£m
£m
Within one year
16.7
14.8
Between 1 and 2 years
15.0
13.8
Between 2 and 3 years
13.0
12.9
Between 3 and 4 years
11.0
11.0
Between 4 and 5 years
10.6
9.1
Later than 5 years
85.4
66.8
Total1,2
151.7
128.4
Notes:
1.
In the table above, the amounts disclosed for year ended 31 December 2024 exclude total future aggregate minimum lease payments receivable
of £0.2 million (2023: £0.1 million) which relate to leases to third-party tenants on properties the Group has classified as assets held for sale.
2.
At year ended 31 December 2024: £150.0 million of the total operating lease commitments where the Group is the lessor relates to the lease
of investment properties detailed in note 18 (2023: £126.5 million).
The Group's investment properties portfolio consists of 18 (2023: 18) properties in total, all based in the UK with exposure
predominantly to the South of England operating in the following sectors; retail, retail warehouse, supermarkets, industrial, hotels
and alternative sectors.
The investment properties are leased to tenants under operating leases with rental income for the majority paid a quarter in
advance with an average unexpired lease to expiry (including break clauses and tenants currently in rent free periods) of 9.9 years
(2023: 9.8 years). 55% (2023: 49%) of rental income is RPI/index linked.
Where considered necessary to reduce credit risk, the Group may obtain guarantees from parent companies for the terms
of the leases.
202 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
Other lease disclosures
The following table analyses the amounts that have been included in the consolidated statement of profit or loss for leases:
31 Dec 2024
31 Dec 2023
£m
£m
Depreciation of ROU assets
15.3
11.9
Loss on disposal of leases
–
1.4
Interest on lease liabilities
4.6
3.8
Short-term leases2
2.3
2.2
Low-value leases2
1.5
1.4
Total1
23.7
20.7
Notes:
1.
Total cash outflows in respect of leases were £20.9 million (2023: £18.2 million) which includes amounts expensed for short-term leases and leases
of low-value assets.
2.
At years ended 31 December 2024 and 31 December 2023, expenses relating to short-term leases and leases of low-value assets were not included
in the measurement of lease liabilities as they were not considered significant.
Lease commitments where the Group is the lessee
Lease liabilities total £113.7 million (2023: £106.1 million). Future contractual aggregate minimum lease payments are as follows:
2024
2023
£m
£m
Within one year
14.0
12.7
In the second to fifth year inclusive
48.6
45.3
After five years
81.1
78.7
Sub total
143.7
136.7
Less effect of discounting and unearned interest
(30.0)
(30.6)
Total
113.7
106.1
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included
in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease
liability is reassessed.
The lease agreements do not impose any covenants other than the security interest in the leased assets that are held by the lessor.
18. Investment property
This note gives details of the properties that the Group holds for long-term rental yields or capital appreciation.
Retail
Retail
warehouse
Supermarkets
Industrials
Hotels
Alternative
sector
Total
£m
£m
£m
£m
£m
£m
£m
At 1 January 2023
25.3
21.3
51.1
112.0
50.3
18.5
278.5
Capitalised expenditure
0.1
–
–
0.4
–
–
0.5
Fair value adjustments
(1.0)
(0.5)
(4.0)
3.3
0.2
0.1
(1.9)
At 31 December 20231
24.4
20.8
47.1
115.7
50.5
18.6
277.1
Capitalised expenditure
0.5
–
–
3.2
–
0.2
3.9
Fair value adjustments
(0.7)
8.5
(2.2)
2.5
(1.5)
–
6.6
At 31 December 20241
24.2
29.3
44.9
121.4
49.0
18.8
287.6
Note:
1.
The cost included in the carrying value at 31 December 2024 is £220.9 million (2023: £217.0 million).
The investment properties are measured at fair value derived from valuation work carried out at the statement of financial position
date by independent property valuers. The valuation conforms to international valuation standards. The fair value was determined
using a methodology based on recent market transactions for similar properties, which have been adjusted for the specific
characteristics of each property within the portfolio. This approach to valuation is consistent with the methodology used in the
year ended 31 December 2023.
Lease agreements with tenants are drawn up in line with local practice and the Group has no exposure to leases that include
contingent rents.
203 | Direct Line Group Annual Report and Accounts 2024
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18. Investment property continued
The following tables provide a sensitivity analysis for +/- 5 basis points and +/- 50 basis points movement in tenants' rental income
and impact on property valuation in sterling:
2024
-50bp
-5bp
Baseline as at
31 December
2024
+5bp
+50bp
Equivalent yield
%
5.62
6.11
6.17
6.22
6.72
Value
£m
264.7
285.1
287.6
290.1
314.9
2023
-50bp
-5bp
Baseline as at
31 December
2022
+5bp
+50bp
Equivalent yield
%
5.31
5.81
5.87
5.92
6.42
Value
£m
253.5
274.6
277.1
279.8
305.7
19. Insurance contract assets and liabilities - gross and reinsurance
This note analyses the following in respect of insurance and reinsurance contracts:
– carrying amount by segment;
– movements in the year;
– claims development; and
– significant judgements, estimates and assumptions.
19.1 Carrying amount by segment
The Group has presented its analyses of net assets and liabilities for insurance contracts issued and reinsurance contracts held for
remaining coverage and incurred claims for the whole Group, Motor, Non-motor and Non-ongoing operations.
Motor
Non-Motor
Total Group
- ongoing
operations1
Brokered
commercial
business1
Non-core
and Run-off1
Total Group
£m
£m
£m
£m
£m
£m
2024
Insurance contract assets
–
–
–
–
5.7
5.7
Insurance contract liabilities
(3,338.8)
(927.6) (4,266.4)
(718.5)
(102.0) (5,086.9)
Net insurance contract liabilities
(3,338.8)
(927.6) (4,266.4)
(718.5)
(96.3)
(5,081.2)
Reinsurance contract assets
1,136.1
55.4
1,191.5
608.9
1.7
1,802.1
Reinsurance contract liabilities
(58.6)
(5.9)
(64.5)
(484.0)
(1.0)
(549.5)
Net reinsurance contract assets
1,077.5
49.5
1,127.0
124.9
0.7
1,252.6
2023
Insurance contract assets
–
–
–
–
5.4
5.4
Insurance contract liabilities
(3,305.9)
(892.7)
(4,198.6)
(866.0)
(174.2) (5,238.8)
Net insurance contract liabilities
(3,305.9)
(892.7)
(4,198.6)
(866.0)
(168.8) (5,233.4)
Reinsurance contract assets
1,076.4
61.0
1,137.4
203.6
5.0
1,346.0
Reinsurance contract liabilities
(16.9)
(8.4)
(25.3)
(89.6)
(1.7)
(116.6)
Net reinsurance contract assets
1,059.5
52.6
1,112.1
114.0
3.3
1,229.4
Note:
1.
See glossary on pages 238 to 241 for definitions
The following table sets out the carrying amounts of insurance and reinsurance contracts expected to be settled/(recovered) more
than 12 months after the reporting date.
2024
2023
£m
£m
Insurance contract liabilities
(2,496.0)
(2,828.0)
Reinsurance contract assets
1,108.3
821.6
204 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
The table below analyses insurance and reinsurance contract assets and liabilities for remaining coverage and for incurred
claims by segment:
Motor
Non-Motor
Total Group
– ongoing
operations1
Brokered
commercial
business1
Non-core
and Run-off1
Total Group
£m
£m
£m
£m
£m
£m
2024
Insurance contracts assets/(liabilities)
Remaining coverage
(463.2)
(362.9)
(826.1)
(125.6)
(19.8)
(971.5)
Excluding loss component
(463.2)
(362.9)
(826.1)
(125.6)
(19.8)
(971.5)
Loss component
–
–
–
–
–
–
Incurred claims
(2,875.6)
(564.7) (3,440.3)
(592.9)
(76.5) (4,109.7)
Estimate of present value cash flows
(2,727.3)
(537.0)
(3,264.3)
(562.6)
(73.1) (3,900.0)
Risk adjustment
(148.3)
(27.7)
(176.0)
(30.3)
(3.4)
(209.7)
Total insurance contracts assets/(liabilities)
(3,338.8)
(927.6) (4,266.4)
(718.5)
(96.3)
(5,081.2)
2023
Insurance contracts assets/(liabilities)
Remaining coverage
(514.7)
(326.1)
(840.8)
(289.2)
(22.5)
(1,152.5)
Excluding loss component
(514.7)
(326.1)
(840.8)
(289.2)
(22.5)
(1,152.5)
Loss component
–
–
–
–
–
–
Incurred claims
(2,791.2)
(566.6) (3,357.8)
(576.8)
(146.3) (4,080.9)
Estimate of present value cash flows
(2,647.6)
(538.3)
(3,185.9)
(547.1)
(141.0) (3,874.0)
Risk adjustment
(143.6)
(28.3)
(171.9)
(29.7)
(5.3)
(206.9)
Total insurance contracts assets/(liabilities)
(3,305.9)
(892.7) (4,198.6)
(866.0)
(168.8) (5,233.4)
Motor
Non-Motor
Total Group
– ongoing
operations1
Brokered
commercial
business1
Non-core
and Run-off1
Total Group
£m
£m
£m
£m
£m
£m
2024
Reinsurance contracts (liabilities)/assets
Remaining coverage
(58.5)
(6.0)
(64.5)
(484.0)
(1.0)
(549.5)
Excluding loss component
(58.5)
(6.0)
(64.5)
(484.0)
(1.0)
(549.5)
Loss component
–
–
–
–
–
–
Incurred claims
1,136.0
55.5
1,191.5
608.9
1.7
1,802.1
Estimate of present value cash flows
1,065.5
48.7
1,114.2
589.4
1.0
1,704.6
Risk adjustment
70.5
6.8
77.3
19.5
0.7
97.5
Total reinsurance contracts assets/(liabilities)
1,077.5
49.5
1,127.0
124.9
0.7
1,252.6
2023
Reinsurance contracts (liabilities)/assets
Remaining coverage
(16.9)
(8.4)
(25.3)
(89.6)
(1.7)
(116.6)
Excluding loss component
(16.9)
(8.4)
(25.3)
(89.6)
(1.7)
(116.6)
Loss component
–
–
–
–
–
–
Incurred claims
1,076.4
61.0
1,137.4
203.6
5.0
1,346.0
Estimate of present value cash flows
1,012.7
55.1
1,067.8
192.4
4.2
1,264.4
Risk adjustment
63.7
5.9
69.6
11.2
0.8
81.6
Total reinsurance contracts assets/(liabilities)
1,059.5
52.6
1,112.1
114.0
3.3
1,229.4
Note:
1.
See glossary on pages 238 to 241 for definitions.
205 | Direct Line Group Annual Report and Accounts 2024
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19. Insurance contract assets and liabilities - gross and reinsurance continued
19.2 Movement in carrying amounts of insurance and reinsurance contracts
The following movements have occurred in the carrying amounts of insurance contract balances in the year:
2024
2023
Carrying amount
Notes:
£m
£m
At 1 January
(5,233.4)
(4,608.5)
Insurance revenue
3
4,567.0
3,601.7
Insurance service expenses
3
(3,952.0)
(3,514.0)
Insurance finance expense
4
(21.0)
(193.8)
Premiums received
19.2.2
(4,386.0)
(3,758.9)
Claims and expenses paid, including investment component
19.2.1
3,944.2
3,240.1
At 31 December
(5,081.2)
(5,233.4)
The carrying amount for reinsurance contracts is recognised separately from insurance contract balances. Detailed movements
on both are included in the notes below.
The following reconciliations show how the net carrying amounts of insurance and reinsurance contracts in each segment
changed during the year as a result of cash flows and amounts recognised in the statement of profit and loss.
Judgement is required when determining the appropriate level of disaggregation for disclosure. Management have disaggregated
information by reportable segment, as defined in IFRS 8 'Operating Segments'. This is so that useful information is not obscured
either by the inclusion of a large amount of insignificant detail or by the aggregation of items that have different characteristics.
For Motor, Non-Motor and non-ongoing operations, the Group presents a table that separately analyses the movements in the
liabilities for remaining coverage and movements in the liabilities for incurred claims and reconciles these movements to the
statement of profit and loss.
206 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
19.2.1 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for incurred claims – total Group
Insurance contracts issued - liability for
incurred claims
Reinsurance contracts held - amounts
recovered on incurred claims
Net
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
–
–
–
966.3
95.3
1,061.6
1,061.6
Insurance/reinsurance contract liabilities as at
1 January 2023
(3,394.3)
(218.9)
(3,613.2)
–
–
–
(3,613.2)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(3,394.3)
(218.9)
(3,613.2)
966.3
95.3
1,061.6
(2,551.6)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(3,360.6)
(72.5)
(3,433.1)
464.6
27.7
492.3
(2,940.8)
Past service – incurred claims
(165.4)
84.5
(80.9)
(21.7)
(41.4)
(63.1)
(144.0)
Effect of non-performance risk of reinsurers
(5.8)
(5.8)
(5.8)
Insurance service result
(3,526.0)
12.0 (3,514.0)
437.1
(13.7)
423.4
(3,090.6)
Insurance/reinsurance finance expenses/
income
(193.8)
(193.8)
28.0
28.0
(165.8)
Total amounts recognised in comprehensive
income
(3,719.8)
12.0 (3,707.8)
465.1
(13.7)
451.4
(3,256.4)
Cash flows:
Claims and other expenses paid/recovered
3,240.1
3,240.1
(167.0)
(167.0)
3,073.1
Total cash flows
3,240.1
3,240.1
(167.0)
(167.0)
3,073.1
Insurance/reinsurance contract assets as at 31
December 2023
–
–
–
1,264.4
81.6
1,346.0
1,346.0
Insurance/reinsurance contract liabilities as at
31 December 2023
(3,874.0)
(206.9) (4,080.9)
–
–
–
(4,080.9)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(3,874.0)
(206.9) (4,080.9)
1,264.4
81.6
1,346.0
(2,734.9)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(3,957.7)
(76.8) (4,034.5)
1,224.0
39.1
1,263.1
(2,771.4)
Past service – incurred claims
8.5
74.0
82.5
(61.8)
(23.2)
(85.0)
(2.5)
Effect of non-performance risk of reinsurers
1.9
1.9
1.9
Insurance service result
(3,949.2)
(2.8) (3,952.0)
1,164.1
15.9
1,180.0
(2,772.0)
Insurance/reinsurance finance expenses/
income
(21.0)
(21.0)
(20.2)
(20.2)
(41.2)
Total amounts recognised in comprehensive
income
(3,970.2)
(2.8) (3,973.0)
1,143.9
15.9
1,159.8
(2,813.2)
Cash flows:
Claims and other expenses paid/recovered
3,944.2
3,944.2
(703.7)
(703.7)
3,240.5
Total cash flows
3,944.2
3,944.2
(703.7)
(703.7)
3,240.5
Insurance/reinsurance contract assets as at 31
December 2024
–
–
–
1,704.6
97.5
1,802.1
1,802.1
Insurance/reinsurance contract liabilities as at
31 December 2024
(3,900.0)
(209.7) (4,109.7)
–
–
–
(4,109.7)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(3,900.0)
(209.7) (4,109.7)
1,704.6
97.5
1,802.1
(2,307.6)
Note:
1.
The amounts recognised in Insurance service result for the year of £3,952.0 million (2023: £3,514.0 million) does not include insurance acquisition
expenses of £233.0 million (2023: £292.3 million). Please see note 3.
207 | Direct Line Group Annual Report and Accounts 2024
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19. Insurance contract assets and liabilities - gross and reinsurance continued
19.2.2 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for remaining coverage – total Group
Insurance contracts issued - liability for
remaining coverage
Reinsurance contracts held - asset for
remaining coverage
Net
Excluding
loss
component
Loss
component
Total
Excluding
loss recovery
component
Loss
recovery
component
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
17.3
–
17.3
13.3
–
13.3
30.6
Insurance/reinsurance contract liabilities as at
1 January 2023
(1,012.6)
–
(1,012.6)
(13.9)
–
(13.9)
(1,026.5)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(995.3)
–
(995.3)
(0.6)
–
(0.6)
(995.9)
Insurance revenue/reinsurance expenses
3,601.7
3,601.7
(470.2)
(470.2)
3,131.5
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
3,601.7
–
3,601.7
(470.2)
–
(470.2)
3,131.5
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
3,601.7
–
3,601.7
(470.2)
–
(470.2)
3,131.5
Cash flows:
Premium received/paid
(3,758.9)
(3,758.9)
354.2
354.2
(3,404.7)
Total cash flows
(3,758.9)
(3,758.9)
354.2
354.2
(3,404.7)
Insurance/reinsurance contract assets as at 31
December 2023
5.4
–
5.4
–
–
–
5.4
Insurance/reinsurance contract liabilities as at
31 December 2023
(1,157.9)
–
(1,157.9)
(116.6)
–
(116.6)
(1,274.5)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(1,152.5)
–
(1,152.5)
(116.6)
–
(116.6)
(1,269.1)
Insurance revenue/reinsurance expenses
4,567.0
4,567.0
(1,439.6)
(1,439.6)
3,127.4
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
4,567.0
–
4,567.0
(1,439.6)
– (1,439.6)
3,127.4
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
4,567.0
–
4,567.0
(1,439.6)
– (1,439.6)
3,127.4
Cash flows:
Premium received/paid
(4,386.0)
(4,386.0)
1,006.7
1,006.7
(3,379.3)
Total cash flows
(4,386.0)
(4,386.0)
1,006.7
1,006.7
(3,379.3)
Insurance/reinsurance contract assets as at 31
December 2024
5.7
–
5.7
–
–
–
5.7
Insurance/reinsurance contract liabilities as at
31 December 2024
(977.2)
–
(977.2)
(549.5)
–
(549.5)
(1,526.7)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(971.5)
–
(971.5)
(549.5)
–
(549.5)
(1,521.0)
208 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
19.2.3 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for incurred claims – Motor
Insurance contracts issued - liability for
incurred claims
Reinsurance contracts held - amounts
recovered on incurred claims
Net
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
–
–
–
866.5
76.3
942.8
942.8
Insurance/reinsurance contract liabilities as at
1 January 2023
(2,259.6)
(148.9) (2,408.5)
–
–
–
(2,408.5)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(2,259.6)
(148.9) (2,408.5)
866.5
76.3
942.8
(1,465.7)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(1,946.5)
(42.2) (1,988.7)
302.0
17.2
319.2
(1,669.5)
Past service – incurred claims
(139.4)
47.5
(91.9)
(35.1)
(29.8)
(64.9)
(156.8)
Effect of non-performance risk of reinsurers
(5.7)
(5.7)
(5.7)
Insurance service result1
(2,085.9)
5.3 (2,080.6)
261.2
(12.6)
248.6
(1,832.0)
Insurance/reinsurance finance expenses/
income
(146.2)
(146.2)
25.5
25.5
(120.7)
Total amounts recognised in comprehensive
income
(2,232.1)
5.3 (2,226.8)
286.7
(12.6)
274.1
(1,952.7)
Cash flows:
Claims and other expenses paid/recovered
1,844.1
1,844.1
(140.5)
(140.5)
1,703.6
Total cash flows
1,844.1
1,844.1
(140.5)
(140.5)
1,703.6
Insurance/reinsurance contract assets as at 31
December 2023
–
–
–
1,012.7
63.7
1,076.4
1,076.4
Insurance/reinsurance contract liabilities as at
31 December 2023
(2,647.6)
(143.6)
(2,791.2)
–
–
–
(2,791.2)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(2,647.6)
(143.6)
(2,791.2)
1,012.7
63.7
1,076.4
(1,714.8)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(2,611.1)
(48.8)
(2,659.9)
815.7
22.8
838.5
(1,821.4)
Past service – incurred claims
29.3
44.1
73.4
(44.0)
(16.0)
(60.0)
13.4
Effect of non-performance risk of reinsurers
2.4
2.4
2.4
Insurance service result1
(2,581.8)
(4.7) (2,586.5)
774.1
6.8
780.9
(1,805.6)
Insurance/reinsurance finance expenses/
income
12.1
12.1
(14.2)
(14.2)
(2.1)
Total amounts recognised in comprehensive
income
(2,569.7)
(4.7) (2,574.4)
759.9
6.8
766.7
(1,807.7)
Cash flows:
Claims and other expenses paid/recovered
2,489.9
2,489.9
(707.1)
(707.1)
1,782.8
Total cash flows
2,489.9
2,489.9
(707.1)
(707.1)
1,782.8
Insurance/reinsurance contract assets as at 31
December 2024
–
–
–
1,065.5
70.6
1,136.1
1,136.1
Insurance/reinsurance contract liabilities as at
31 December 2024
(2,727.4)
(148.3) (2,875.7)
–
(0.1)
(0.1)
(2,875.8)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(2,727.4)
(148.3) (2,875.7)
1,065.5
70.5
1,136.0
(1,739.7)
Note:
1.
The amounts recognised in Insurance service result do not include insurance acquisition expenses. Please see note 3.
209 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
19. Insurance contract assets and liabilities - gross and reinsurance continued
19.2.4 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for remaining coverage – Motor
Insurance contracts issued - liability for
remaining coverage
Reinsurance contracts held - asset for
remaining coverage
Net
Excluding
loss
component
Loss
component
Total
Excluding
loss recovery
component
Loss
recovery
component
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
–
–
–
13.3
–
13.3
13.3
Insurance/reinsurance contract liabilities as at
1 January 2023
(451.8)
–
(451.8)
–
–
–
(451.8)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(451.8)
–
(451.8)
13.3
–
13.3
(438.5)
Insurance revenue/reinsurance expenses
1,805.4
1,805.4
(240.5)
(240.5)
1,564.9
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
1,805.4
–
1,805.4
(240.5)
–
(240.5)
1,564.9
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
1,805.4
–
1,805.4
(240.5)
–
(240.5)
1,564.9
Cash flows:
Premium received/paid
(1,868.3)
(1,868.3)
210.3
210.3
(1,658.0)
Total cash flows
(1,868.3)
(1,868.3)
210.3
210.3
(1,658.0)
Insurance/reinsurance contract assets as at 31
December 2023
–
–
–
–
–
–
–
Insurance/reinsurance contract liabilities as at
31 December 2023
(514.7)
–
(514.7)
(16.9)
–
(16.9)
(531.6)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(514.7)
–
(514.7)
(16.9)
–
(16.9)
(531.6)
Insurance revenue/reinsurance expenses
2,739.0
2,739.0
(830.8)
(830.8)
1,908.2
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
2,739.0
–
2,739.0
(830.8)
–
(830.8)
1,908.2
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
2,739.0
–
2,739.0
(830.8)
–
(830.8)
1,908.2
Cash flows:
Premium received/paid
(2,687.4)
(2,687.4)
789.2
789.2
(1,898.2)
Total cash flows
(2,687.4)
(2,687.4)
789.2
789.2
(1,898.2)
Insurance/reinsurance contract assets as at 31
December 2024
–
–
–
–
–
–
–
Insurance/reinsurance contract liabilities as at
31 December 2024
(463.1)
–
(463.1)
(58.5)
–
(58.5)
(521.6)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(463.1)
–
(463.1)
(58.5)
–
(58.5)
(521.6)
210 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
19.2.5 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for incurred claims – Non-motor
Insurance contracts issued - liability for
incurred claims
Reinsurance contracts held - amounts
recovered on incurred claims
Net
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
–
–
–
30.8
8.3
39.1
39.1
Insurance/reinsurance contract liabilities as at
1 January 2023
(524.6)
(34.5)
(559.1)
–
–
–
(559.1)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(524.6)
(34.5)
(559.1)
30.8
8.3
39.1
(520.0)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(677.3)
(13.3)
(690.6)
27.2
3.1
30.3
(660.3)
Past service – incurred claims
(21.2)
19.5
(1.7)
6.0
(5.6)
0.4
(1.3)
Effect of non-performance risk of reinsurers
–
–
–
Insurance service result
(698.5)
6.2
(692.3)
33.2
(2.5)
30.7
(661.6)
Insurance/reinsurance finance expenses/
income
(22.3)
(22.3)
1.9
1.9
(20.4)
Total amounts recognised in comprehensive
income
(720.8)
6.2
(714.6)
35.1
(2.5)
32.6
(682.0)
Cash flows:
Claims and other expenses paid/recovered
707.1
707.1
(10.7)
(10.7)
696.4
Total cash flows
707.1
707.1
(10.7)
(10.7)
696.4
Insurance/reinsurance contract assets as at 31
December 2023
–
–
–
55.2
5.8
61.0
61.0
Insurance/reinsurance contract liabilities as at
31 December 2023
(538.3)
(28.3)
(566.6)
–
–
–
(566.6)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(538.3)
(28.3)
(566.6)
55.2
5.8
61.0
(505.6)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(748.7)
(13.2)
(761.9)
10.9
3.2
14.1
(747.8)
Past service – incurred claims
(28.2)
13.8
(14.4)
(7.1)
(2.2)
(9.3)
(23.7)
Effect of non-performance risk of reinsurers
–
–
–
Insurance service result
(776.9)
0.6
(776.3)
3.8
1.0
4.8
(771.5)
Insurance/reinsurance finance expenses/
income
(15.4)
(15.4)
2.0
2.0
(13.4)
Total amounts recognised in comprehensive
income
(792.3)
0.6
(791.7)
5.8
1.0
6.8
(784.9)
Cash flows:
Claims and other expenses paid/recovered
793.6
793.6
(12.4)
(12.4)
781.2
Total cash flows
793.6
793.6
(12.4)
(12.4)
781.2
Insurance/reinsurance contract assets as at 31
December 2024
–
–
–
48.6
6.8
55.4
55.4
Insurance/reinsurance contract liabilities as at
31 December 2024
(537.0)
(27.7)
(564.7)
–
–
–
(564.7)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(537.0)
(27.7)
(564.7)
48.6
6.8
55.4
(509.3)
Note:
1.
The amounts recognised in Insurance service result do not include insurance acquisition expenses. Please see note 3.
211 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
19. Insurance contract assets and liabilities - gross and reinsurance continued
19.2.6 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for remaining coverage – Non-motor
Insurance contracts issued - liability for
remaining coverage
Reinsurance contracts held - asset for
remaining coverage
Net
Excluding
loss
component
Loss
component
Total
Excluding
loss recovery
component
Loss
recovery
component
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
–
–
–
–
–
–
–
Insurance/reinsurance contract liabilities as at
1 January 2023
(292.9)
–
(292.9)
(7.8)
–
(7.8)
(300.7)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(292.9)
–
(292.9)
(7.8)
–
(7.8)
(300.7)
Insurance revenue/reinsurance expenses
919.2
919.2
(61.5)
(61.5)
857.7
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
919.2
–
919.2
(61.5)
–
(61.5)
857.7
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
919.2
–
919.2
(61.5)
–
(61.5)
857.7
Cash flows:
Premium received/paid
(952.4)
(952.4)
60.9
60.9
(891.5)
Total cash flows
(952.4)
(952.4)
60.9
60.9
(891.5)
Insurance/reinsurance contract assets as at 31
December 2023
–
–
–
–
–
–
–
Insurance/reinsurance contract liabilities as at
31 December 2023
(326.1)
–
(326.1)
(8.4)
–
(8.4)
(334.5)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(326.1)
–
(326.1)
(8.4)
–
(8.4)
(334.5)
Insurance revenue/reinsurance expenses
1,020.9
1,020.9
(72.0)
(72.0)
948.9
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
1,020.9
–
1,020.9
(72.0)
–
(72.0)
948.9
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
1,020.9
–
1,020.9
(72.0)
–
(72.0)
948.9
Cash flows:
Premium received/paid
(1,057.7)
(1,057.7)
74.5
74.5
(983.2)
Total cash flows
(1,057.7)
(1,057.7)
74.5
74.5
(983.2)
Insurance/reinsurance contract assets as at 31
December 2024
–
–
–
–
–
–
–
Insurance/reinsurance contract liabilities as at
31 December 2024
(362.9)
–
(362.9)
(5.9)
–
(5.9)
(368.8)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(362.9)
–
(362.9)
(5.9)
–
(5.9)
(368.8)
212 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
19.2.7 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for incurred claims – Non-ongoing operations
Insurance contracts issued - liability for
incurred claims
Reinsurance contracts held - amounts
recovered on incurred claims
Net
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Estimate of
present
value cash
flows
Risk
adjustment
for non-
financial risk
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
–
–
–
69.0
10.6
79.6
79.6
Insurance/reinsurance contract liabilities as at
1 January 2023
(610.2)
(35.5)
(645.7)
–
–
–
(645.7)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(610.2)
(35.5)
(645.7)
69.0
10.6
79.6
(566.1)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(736.7)
(17.1)
(753.8)
135.4
7.4
142.8
(611.0)
Past service – incurred claims
(4.8)
17.5
12.7
7.4
(5.9)
1.5
14.2
Effect of non-performance risk of reinsurers
–
–
–
Insurance service result
(741.5)
0.4
(741.1)
142.8
1.5
144.3
(596.8)
Insurance/reinsurance finance expenses/
income
(25.3)
(25.3)
0.6
0.6
(24.7)
Total amounts recognised in comprehensive
income
(766.8)
0.4
(766.4)
143.4
1.5
144.9
(621.5)
Cash flows:
Claims and other expenses paid/recovered
688.9
688.9
(15.9)
(15.9)
673.0
Total cash flows
688.9
688.9
(15.9)
(15.9)
673.0
Insurance/reinsurance contract assets as at 31
December 2023
–
–
–
196.5
12.1
208.6
208.6
Insurance/reinsurance contract liabilities as at
31 December 2023
(688.1)
(35.1)
(723.2)
–
–
–
(723.2)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(688.1)
(35.1)
(723.2)
196.5
12.1
208.6
(514.6)
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
(598.0)
(14.7)
(612.7)
397.5
13.0
410.5
(202.2)
Past service – incurred claims
7.4
16.1
23.5
(10.7)
(5.0)
(15.7)
7.8
Effect of non-performance risk of reinsurers
(0.5)
(0.5)
(0.5)
Insurance service result
(590.6)
1.4
(589.2)
386.3
8.0
394.3
(194.9)
Insurance/reinsurance finance expenses/
income
(17.7)
(17.7)
(8.0)
(8.0)
(25.7)
Total amounts recognised in comprehensive
income
(608.3)
1.4
(606.9)
378.3
8.0
386.3
(220.6)
Cash flows:
Claims and other expenses paid/recovered
660.7
660.7
15.7
15.7
676.4
Total cash flows
660.7
660.7
15.7
15.7
676.4
Insurance/reinsurance contract assets as at 31
December 2024
–
–
–
590.5
20.1
610.6
610.6
Insurance/reinsurance contract liabilities as at
31 December 2024
(635.7)
(33.7)
(669.4)
–
–
–
(669.4)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(635.7)
(33.7)
(669.4)
590.5
20.1
610.6
(58.8)
Note:
1.
The amounts recognised in Insurance service result do not include insurance acquisition expenses. Please see note 3.
213 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
19. Insurance contract assets and liabilities - gross and reinsurance continued
19.2.8 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held
showing the liability for remaining coverage – Non-ongoing operations
Insurance contracts issued - liability for
remaining coverage
Reinsurance contracts held - asset for
remaining coverage
Net
Excluding
loss
component
Loss
component
Total
Excluding
loss recovery
component
Loss
recovery
component
Total
Total
£m
£m
£m
£m
£m
£m
£m
Insurance/reinsurance contract assets as at 1
January 2023
17.3
–
17.3
–
–
–
17.3
Insurance/reinsurance contract liabilities as at
1 January 2023
(267.8)
–
(267.8)
(6.1)
–
(6.1)
(273.9)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023
(250.5)
–
(250.5)
(6.1)
–
(6.1)
(256.6)
Insurance revenue/reinsurance expenses
877.1
877.1
(168.2)
(168.2)
708.9
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
877.1
–
877.1
(168.2)
–
(168.2)
708.9
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
877.1
–
877.1
(168.2)
–
(168.2)
708.9
Cash flows:
Premium received/paid
(938.2)
(938.2)
83.0
83.0
(855.2)
Total cash flows
(938.2)
(938.2)
83.0
83.0
(855.2)
Insurance/reinsurance contract assets as at 31
December 2023
5.4
–
5.4
–
–
–
5.4
Insurance/reinsurance contract liabilities as at
31 December 2023
(317.0)
–
(317.0)
(91.3)
–
(91.3)
(408.3)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023
(311.6)
–
(311.6)
(91.3)
–
(91.3)
(402.9)
Insurance revenue/reinsurance expenses
807.1
807.1
(536.8)
(536.8)
270.3
Insurance service expenses:
Incurred claims/claims recovered and other
attributable expenses
–
–
–
–
–
Losses/ loss recovery and reversal of losses
from onerous contracts
–
–
–
–
–
Insurance service result
807.1
–
807.1
(536.8)
–
(536.8)
270.3
Insurance/reinsurance finance expenses/
income
–
–
–
–
–
Total amounts recognised in comprehensive
income
807.1
–
807.1
(536.8)
–
(536.8)
270.3
Cash flows:
Premium received/paid
(640.9)
(640.9)
143.1
143.1
(497.8)
Total cash flows
(640.9)
(640.9)
143.1
143.1
(497.8)
Insurance/reinsurance contract assets as at 31
December 2024
5.7
–
5.7
–
–
–
5.7
Insurance/reinsurance contract liabilities as at
31 December 2024
(151.1)
–
(151.1)
(485.0)
–
(485.0)
(636.1)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024
(145.4)
–
(145.4)
(485.0)
–
(485.0)
(630.4)
214 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
19.3 Insurance and reinsurance contract assets and liabilities - claims development tables
The tables below illustrate how estimates of cumulative claims have developed over time on a gross and net of reinsurance basis.
Each table shows how the Group’s estimates of total claims for each underwriting year have developed over time and reconciles
the cumulative claims to the amount included in the statement of financial position. For accident years prior to 2015, the
information is aggregated into one row.
Gross insurance liabilities
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
Accident year
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Estimate of ultimate gross
claims costs:
At end of accident year
2,135.9
2,169.8 2,226.8
2,337.6 2,085.7
1,786.5
1,912.8
2,283.2 2,755.0
3,328.3
One year later
(57.4)
(95.8)
(142.6)
(129.6)
(72.0)
(79.4)
(5.7)
132.9
166.1
Two years later
(131.5)
(63.9)
(108.8)
(48.7)
(43.5)
(13.8)
(34.7)
47.0
Three years later
(58.5)
(89.5)
(38.0)
(6.0)
3.7
35.9
(3.6)
Four years later
(28.7)
(42.9)
(20.4)
25.5
14.1
(63.6)
Five years later
(21.9)
(13.5)
1.5
23.8
13.1
Six years later
1.0
(12.0)
21.6
(42.5)
Seven years later
22.4
9.2
2.8
Eight years later
(18.2)
7.0
Nine years later
(21.1)
Current estimate of cumulative
claims
1,822.0
1,868.4
1,942.9
2,160.1
2,001.1
1,665.6
1,868.8
2,463.1
2,921.1
3,328.3
Cumulative payments to date
(1,757.5) (1,806.4) (1,868.2) (2,071.3) (1,845.6)
(1,518.5) (1,584.3)
(1,970.1) (1,992.3) (1,759.0)
64.5
62.0
74.7
88.8
155.5
147.1
284.5
493.0
928.8 1,569.3 3,868.2
2014 and prior
1,606.4
Claims handling provision
125.1
Adjustment for non-financial
risk
305.3
Effect of discounting
(1,832.5)
Other LIC
37.2
Gross liability for incurred claims included in the
statement of financial position
4,109.7
Net insurance contract liabilities
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
Accident year
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Estimate of ultimate net claims
costs:
At end of accident year
1,920.1
1,934.4
2,012.0
2,141.0
1,922.8
1,623.6
1,758.1
2,184.2
2,241.9 2,002.9
One year later
(79.5)
(31.4)
(95.9)
(82.2)
(37.2)
(54.0)
2.4
168.1
(30.0)
Two years later
(63.4)
(47.2)
(61.4)
(20.7)
(40.7)
(39.2)
(13.0)
33.8
Three years later
(29.4)
(43.4)
(17.7)
(24.0)
(4.5)
50.0
(9.9)
Four years later
(21.8)
(15.2)
(27.5)
7.3
11.6
(15.3)
Five years later
(22.8)
(10.1)
(9.4)
24.1
11.2
Six years later
(1.8)
(11.6)
9.5
3.6
Seven years later
1.3
(3.8)
2.8
Eight years later
(3.6)
9.0
Nine years later
2.3
Current estimate of cumulative
claims
1,701.4
1,780.7
1,812.4
2,049.1
1,863.2
1,565.1
1,737.6
2,386.1
2,211.9 2,002.9
Cumulative payments to date
(1,687.6) (1,753.8) (1,780.1) (1,995.3) (1,786.9) (1,464.0) (1,542.3) (1,966.3)
(1,575.1)
(1,117.7)
13.8
26.9
32.3
53.8
76.3
101.1
195.3
419.8
636.8
885.2 2,441.4
2014 and prior
793.1
Claims handling provision
89.3
Adjustment for non-financial
risk
148.9
Effect of discounting
(900.0)
Due from reinsurers
(265.1)
Net liability for incurred claims included in the
statement of financial position
2,307.6
215 | Direct Line Group Annual Report and Accounts 2024
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19. Insurance contract assets and liabilities - gross and reinsurance continued
19.4 Significant judgements, estimates and assumptions
This note gives details of the significant judgements made in applying IFRS 17, explaining the inputs, assumptions, methods
and estimation techniques used to measure insurance, participating investment and reinsurance contracts.
Accounting policy (C) sets out the critical accounting judgements and the material accounting estimates that are considered
particularly susceptible to changes in estimates and assumptions. This note provides further detail of how these are applied
in the context of IFRS 17.
Significant judgements, estimates and assumptions associated with measuring insurance products and
associated reinsurance are outlined below.
Fulfilment cash flows comprise:
– estimates of future cash flows;
– an adjustment (discount rate) to reflect the time value of money and the financial risks related to future cash flows, to the extent
that the financial risks are not included in the estimates of future cash flows; and
– a risk adjustment.
Estimates of future cash flows
In estimating future cash flows, the Group will incorporate, in an unbiased way, all reasonable and supportable information that
is available without undue cost or effort at the reporting date. This information includes both internal and external historical data
about claims and other experience, updated to reflect current expectations of future events. The estimates of future cash flows will
reflect the Group's view of current conditions at the reporting date, ensuring the estimates of any relevant market variables are
consistent with observable market prices. However, these cash flows are inherently uncertain in size, timing and are based on
probability-weighted average expectations. The Group applies the PAA to simplify the measurement of insurance contracts.
Claims
The Group makes provision for the full cost of outstanding claims from its general insurance business at the statement of financial
position date, including claims estimated to have been incurred but not yet reported at that date and associated claims handling
costs. Outstanding claims provisions net of related reinsurance recoveries at 31 December 2024 amounted to £2,307.6 million (2023:
£2,734.9 million).
Claims reserves are assessed separately for large and attritional claims, typically using standard actuarial methods of projection
such as the Chain Ladder and Bornhuetter-Furguson methods. Key sources of estimation uncertainty include those arising from
the selection of specific methods as well as assumptions for claims frequency and severity through the review of historical claims
and emerging trends. The Group factors the probability-weighted expected value outcome from the range of possible outcomes
in assessing claim liabilities, taking account of all the uncertainties involved.
The corresponding amount recoverable from reinsurance contracts held is calculated on an equivalent basis, with similar
estimation uncertainty, as discussed in policy note (J). A credit exposure exists with respect to reinsurance contracts held, to the
extent that any reinsurer is unable to meet its obligations.
Bodily injury claims
The most common method of settling bodily injury claims is by a lump sum. When this includes an element of indemnity for
recurring costs, such as loss of earnings or ongoing medical care, the settlement calculations apply the statutory discount rate
(known as the Ogden discount rate) to reflect the fact that payment is made on a one-off basis rather than periodically over time.
The current Ogden discount rate is 0.5%.
The Ogden discount rate for England and Wales has increased from minus 0.25% on 11 January 2025. For Scotland and Northern
Ireland, the bodily injury discount rate increased on 24 September 2024 to 0.5% from minus 0.75% and minus 1.5%, respectively.
The impact of potential future changes in the discount rate is shown in note 1.3.1. Since 2021, we have reduced the level of Motor
reinsurance purchased, resulting in higher net reserves for accident years 2021 to 2024.
If the claimant prefers, large bodily injury claims can be settled using a PPO. This is an alternative way to provide an indemnity for
recurring costs, making regular payments, usually for the rest of the claimant’s life. These claims are reserved for using a discount
rate, which is progressively unwound over time. As it is likely to take time to establish whether a claimant will prefer a PPO or
a lump sum, until a settlement method is agreed we make assumptions about the likelihood that claimants will opt for a PPO.
This is known as the PPO propensity.
At 31 December 2024, the real discount rate for PPOs is 1.5% (2023: 0.7%), the combination of cash flow weighted inflation and
discounting of 3.7% (2023: 3.9%), which allows for higher short-term ASHE 6115 inflation before reverting to a long term trend of 3.5%,
and a yield curve based discount rate of 5.2% (2023: 4.6%).
The table in note 19.4 to the financial statements provides an analysis of outstanding PPO claims provisions on a discounted and
an undiscounted basis at 31 December 2024 and 31 December 2023 and further details on sources of estimation uncertainty.
Details of sensitivity analysis to the discount rate applied to PPO claims are shown in note 1.3.1.
216 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
The table below analyses the outstanding PPO claims provisions on a discounted and an undiscounted basis at 31 December 2024
and 31 December 2023. These represent the total cost of PPOs rather than any costs in excess of purely Ogden-based settlements.
Discounted
Undiscounted
Discounted
Undiscounted
2024
2024
2023
2023
At 31 December
£m
£m
£m
£m
Gross claims
Approved PPO claims provisions
506.6
1,592.5
542.6
1,603.4
Anticipated PPOs
151.1
458.9
112.5
300.7
Total
657.7
2,051.4
655.1
1,904.1
Reinsurance
Approved PPO claims provisions
(297.0)
(939.8)
(300.1)
(905.2)
Anticipated PPOs
(98.6)
(308.1)
(79.7)
(228.8)
Total
(395.6)
(1,247.9)
(379.8)
(1,134.0)
Net of reinsurance
Approved PPO claims provisions
209.6
652.7
242.5
698.2
Anticipated PPOs
52.5
150.8
32.8
71.9
Total
262.1
803.5
275.3
770.1
The provisions for PPOs have been categorised as either claims which have already been determined by the courts as PPOs
(approved PPO claims provisions) or those expected to settle as PPOs in the future (anticipated PPOs). The Group has estimated
the likelihood of large bodily injury claims settling as PPOs. The anticipated PPOs in the table above are based on historically
observed propensities adjusted for the assumed Ogden discount rate.
In the majority of cases, the inflation agreed in the settlement is the Annual Survey of Hours and Earnings SOC 6115 inflation
published by the Office for National Statistics, for which the long-term cashflow-weighted average rate is assumed to be 3.7%
(2023: 3.9%). The Group has estimated a cashflow-weighted average rate of interest used for the calculation of present values as 5.2%
(2023: 4.6%), which results in a real discount rate of 1.5% (2023: 0.7%). The Group will continue to review the inflation and discount
rates used to calculate these insurance reserves.
Claims inflation
The assessment of claims inflation, and the underlying drivers of claims inflation, remains a key consideration in deriving the
reserves. Claims inflation is correlated with price inflation but there are several individual factors that are considered in addition, for
example the salary of care workers, the price of used cars, judicial costs and repair costs. A range of general and specific scenarios
for excess inflation has been considered in the reserving process. A range of data types and methods are used with historical
comparators to assess the underlying position separate from the timing effects to mitigate the uncertainty.
Climate change
Changes in the climate can impact both frequency and severity of losses, particularly for windstorm and flood events. The impact
on reserves is only seen when major loss events occur.
Discount rates
The Group determines the risk-free discount rate using Solvency II risk-free rates sourced from the Bank of England. This results
in alignment between IFRS 17 and Solvency II and ensures consistency with the Bank of England credit risk premiums used in the
illiquidity premium calculations.
The Group has selected to apply the 'bottom up' approach to determine discount rates which requires the use of the risk free rate
curves and adding the illiquidity premium.
The illiquidity premium is determined by using a fundamental spread approach by deducting the risk-free rate and credit risk
premium from corresponding corporate bond reference portfolios. For non-PPOs, the reference portfolio is A-rated bonds with
terms of 1 to 3 years and for PPOs, the reference portfolio is BBB-rated bonds with a remaining term of 15 or more years.
Judgement is applied when determining the illiquidity premium with respect to allowances for past and future trends, considering
changes in the economic environment. Generally, the illiquidity premium is expected to be stable over time however, assessment
of the illiquidity premium assumption is reviewed periodically and adjusted where required.
Yield curves used to discount PPO and Non-PPO cash flows
As at 31 December 2024
Spot rate
1 year
3 year
15 year
PPOs
5.7
5.4
5.4
Non-PPOs
5
4.7
4.7
As at 31 December 2023
Spot rate
1 year
3 year
15 year
PPOs
6.1
5.1
4.8
Non-PPOs
4.9
3.9
3.6
217 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
19. Insurance contract assets and liabilities - gross and reinsurance continued
19.4 Significant judgements, estimates and assumptions continued
Risk adjustment
The Group estimates the probability distribution of the expected present value of the future cash flows from the contracts at each
reporting date and calculates the risk adjustment for non-financial risk as the excess of the value at risk at the target confidence
level over the expected present value of the future cash flows allowing for the associated risks over all future years. The target
confidence level is the 75th percentile for the liability for incurred claims (2023: 75th percentile). The risk adjustment is derived using
the reserve risk distribution calculated in the internal economic capital model and consequently, is subject to model and parameter
uncertainty.
Group diversification benefit is not considered at the individual insurance undertaking entity level but is considered in determining
the confidence level at a consolidated level for disclosure purposes. A sensitivity which demonstrates the impact of the confidence
level being at the 70th and 80th percentile on profit before tax is included in the note 1.3.1.
20. Tax assets and liabilities
This note analyses tax assets and liabilities that appear in the statement of financial position and explains movements in these
balances in the year.
The aggregate current and deferred tax relating to items that are credited to equity is £2.3 million (2023: £0.3 million).
The table below analyses the major deferred tax assets and liabilities recognised by the Group and movements thereon:
Provisions and
other
temporary
differences
Retirement
benefit
obligations
Depreciation
in excess of
capital
allowances
Share-
based
payments
Transitional
adjustments
on adoption
of IFRS 9
Transitional
adjustments
on adoption
of IFRS 17
Total
£m
£m
£m
£m
£m
£m
£m
At 1 January 2023
4.6
(0.4)
(9.0)
1.8
65.4
26.6
89.0
(Charge)/credit to the statement of profit or loss
(2.9)
0.1
2.0
0.9
(6.3)
(26.6)
(32.8)
Credit direct to equity
–
–
–
0.3
–
–
0.3
At 31 December 2023
1.7
(0.3)
(7.0)
3.0
59.1
–
56.5
Credit/(charge) to the statement of profit or loss
2.1
0.3
(2.8)
1.7
(6.6)
–
(5.3)
Credit/(charge) to other comprehensive income
–
(0.2)
–
–
–
–
(0.2)
Credit direct to equity
–
–
–
2.0
–
–
2.0
At 31 December 2024
3.8
(0.2)
(9.8)
6.7
52.5
–
53.0
As at 31 December 2024, the Group has an unrecognised deferred tax asset of £0.2 million (2023: £0.1 million) in relation to capital
losses, of which £nil (2023: £nil) relates to realised losses and £0.2 million (2023: £0.1 million) related to unrealised losses.
Deferred tax assets have been recognised in respect of IFRS 9 transitional tax adjustments and other temporary differences
because it is probable that these assets will be recovered, with the exception of unrecognised capital losses where recovery is
uncertain as it is dependent on realising future capital gains. The deferred tax asset in respect of IFRS 9 transitional tax adjustments
is being relieved for tax over 10 years from the adoption of IFRS 9 on 1 January 2023 and will therefore be recovered over the next
8 years. Other deferred tax assets will be recovered over a period of 1 to 11 years.
Recovery of deferred tax assets is dependent on future taxable profits, which are expected to arise in future years. Probability of
recovery has been assessed based on the Group’s forecasts for the next 4 years, and it is assumed that sufficient profits will continue
to be realised in subsequent years for offset of the remaining future tax deductions.
21. Prepayments, accrued income and other assets
2024
2023
£m
£m
restated1
Prepayments1
61.0
58.5
Accrued income from contracts with customers and other assets1
42.6
43.0
Total
103.6
101.5
Note:
1.
The 2023 balance has been restated to correct the classification of accrued income, which was previously misclassified as prepayments.
This reclassification has no impact on the total balance.
22. Fair value
Basis for determining fair value hierarchy
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. There were no changes in valuation techniques during the year.
For disclosure purposes, fair value measurements are classified as level 1, 2 or 3 based on the degree to which fair value is observable.
218 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
Level 1 financial assets are measured in whole or in part by reference to published quotes in an active market. In an active market
quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory
agency and those prices represent actual and regularly occurring market transactions on an arm's-length basis.
Level 2 financial assets and liabilities are measured using a valuation technique based on assumptions that are supported by prices
from observable current market transactions.
Level 3 financial assets are measured using a valuation technique that includes inputs that are unobservable.
Financial instruments classified as level 2 include:
– debt securities for which pricing is obtained via pricing services, but where prices have not been determined in an active market;
– financial instruments with fair values based on broker quotes or instruments that are valued using the Group's own models
whereby the majority of assumptions are market-observable;
– derivatives valued using broker quotes or appropriate valuation models. Model inputs include a range of factors which are
deemed to be observable, including current market and contractual prices for underlying instruments, period to maturity,
correlations, yield curves and volatility of underlying instruments; and
– quoted equity investments that the Group holds for which prices are available, but where the market transactions upon which
those prices are based are not considered to be regularly occurring.
Financial instruments classified as level 3 due to unobservable inputs include:
– investment properties are measured at fair value derived from valuation work carried out at the statement of financial position
date by independent property valuers. The valuation conforms to international valuation standards. The fair value was
determined using a methodology based on recent market transactions for similar properties, which have been adjusted for the
specific characteristics of each property within the portfolio.
– debt securities which do not trade on active markets are valued using discounted cash flow models designed to appropriately
reflect the credit and illiquidity of these instruments. The key unobservable input elements from the discount rate used across
private debt securities is the credit spread which is based on the credit quality of the assets and the illiquidity premium;
– infrastructure debt, commercial real estate debt and other loans are loans which do not trade on active markets. Valuations are
derived from external asset managers’ credit assessment and pricing models. These aim to take into account movements in
broader credit spreads and are aligned to varying degrees with external credit rating equivalents; and
– equity fund partnerships are valued as the proportion of the Group’s holding in the net asset value of the partnership based on
external valuation reports prepared by a third-party fund manager using International Private Equity and Venture Capital
Valuation Guidelines. Fair values of investments held by the partnerships that are not quoted in an active market are determined
primarily using discounted cash flow models. Unobservable inputs include projected cashflows, and the liquidity and credit and
risk premium are incorporated within the discount rate.
Carrying value and fair value of financial instruments
The carrying amounts of financial assets and liabilities are set out in the following table:
Carrying value
Level 1
Level 2
Level 3
Fair value
At 31 December 2024
£m
£m
£m
£m
£m
Assets held at fair value through profit or loss:
Investment property
287.6
–
–
287.6
287.6
Derivative assets
19.1
–
19.1
–
19.1
Debt securities
3,937.9
746.0
3,190.4
1.5
3,937.9
Listed equity investments
–
–
–
–
–
Unlisted equity investments
0.7
–
–
0.7
0.7
Assets held at fair value through other comprehensive income:
Equity investments
19.4
–
–
19.4
19.4
Assets held at amortised cost:
Debt securities
55.7
–
16.3
34.5
50.8
Infrastructure debt
188.7
–
–
190.5
190.5
Commercial real estate loans
135.5
–
–
134.8
134.8
Other loans
5.4
–
–
5.4
5.4
Total
4,650.0
746.0
3,225.8
674.4
4,646.2
Liabilities held at fair value through profit or loss:
Derivative liabilities
38.7
–
38.7
–
38.7
Other financial liabilities:
Subordinated liabilities
259.1
–
229.0
–
229.0
Total
297.8
–
267.7
–
267.7
219 | Direct Line Group Annual Report and Accounts 2024
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22. Fair value continued
Carrying value
Level 1
Level 2
Level 3
Fair value
At 31 December 2023
£m
£m
£m
£m
£m
Assets held at fair value through profit or loss:
Investment property
277.1
–
–
277.1
277.1
Derivative assets
27.4
–
27.4
–
27.4
Debt securities
3,238.1
680.8
2,555.8
1.5
3,238.1
Listed equity investments
0.1
–
0.1
–
0.1
Unlisted equity investments
0.7
–
–
0.7
0.7
Assets held at fair value through other comprehensive income:
Equity investments
18.9
–
–
18.9
18.9
Assets held at amortised cost:
Debt securities
70.6
–
16.2
49.4
65.6
Infrastructure debt
214.2
–
–
213.9
213.9
Commercial real estate loans
145.9
–
–
145.4
145.4
Other loans
3.1
–
–
3.1
3.1
Total
3,996.1
680.8
2,599.5
710.0
3,990.3
Liabilities held at fair value through profit or loss:
Derivative liabilities
15.4
–
15.4
–
15.4
Other financial liabilities:
Subordinated liabilities
258.8
–
212.8
–
212.8
Total
274.2
–
228.2
–
228.2
Differences arise between carrying value and fair value where the measurement basis of the asset or liability is not fair value (for
example; assets and liabilities carried at amortised cost). Fair values of the following assets and liabilities approximate their carrying
values:
– cash and cash equivalents;
– borrowings; and
– trade and other payables, including insurance payables.
The movements in assets held at fair value and classified as level 3 in the fair value hierarchy relate to investment property and
unquoted equity investments. Investment property is analysed in note 18 along with further details on the Group's valuation
approach. A summary of realised and unrealised gains or losses in relation to investment property at fair value are presented
in note 4.
There were no changes in the categorisation of assets between levels 1, 2 and 3 for assets and liabilities held by the Group since
31 December 2023.
The significant unobservable inputs used in the fair value measurements categorised within Level 3 of the fair value hierarchy, as at
31 December 2024 and 2023 are shown below:
Fair value
£m
Valuation
technique
Unobservable
input
Range
(weighted average)
2024
2023
2024
2023
Investment property1
287.6
277.1
Income
capitalisation
Equivalent yield
5.00% – 13.50%
(average 6.17%)
4.50% – 7.96%
(average 5.77%)
Estimated rental value
per square foot
£7.50 – £35.00
(average £19.85)
£7.00 – £35.00
(average £16.38)
Debt securities
34.5
49.4
Discounted
cash flow
Credit spread
80.87 – 190.02
(average 126.83)
65.44 – 272.02
(average 143.24)
Infrastructure debt
190.5
213.9
Credit
assessment
and pricing
models
Credit spread
SONIA + 0.88% -
2.98% (average
SONIA + 1.33%)
SONIA + 0.88% -
2.98% (average
SONIA + 1.36%)
Commercial real estate
loans
134.8
145.4
Credit
assessment
and pricing
models
Credit spread
SONIA + 230bps –
325bps (average
SONIA +270bps)
SONIA + 230bps –
525bps (average
SONIA +284bps)
Note:
1.
The methodology of valuation reflects commercial property held within U K Insurance Limited.
220 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
The table below analyses the movement in assets carried at fair value classified as level 3 in the fair value hierarchy.
Investment
property
Unquoted
equity
investments
held at FVOCI
Unquoted
equity
investments
held at FVTPL
£m
£m
£m
At 1 January 2024
277.1
18.9
0.7
Additions
3.9
2.5
–
Increase in fair value in the period
6.6
1.6
–
Disposals
–
(3.6)
–
At 31 December 2024
287.6
19.4
0.7
23. Financial instruments
This note analyses the Group's financial instruments by type and amounts arising from expected credit losses.
2024
2023
£m
£m
Debt securities measured at fair value through profit or loss
Corporate
3,161.0
2,530.8
Supranational
17.9
25.6
Local government
13.0
0.9
Sovereign
746.0
680.8
Total
3,937.9
3,238.1
Debt securities measured at amortised cost
Corporate
55.7
70.6
Total
55.7
70.6
Total debt securities
3,993.6
3,308.7
Of which:
Fixed interest rate1
3,992.8
3,307.5
Floating interest rate
0.8
1.2
Loans and receivables measured at amortised cost
Infrastructure debt
188.7
214.2
Commercial real estate loans
135.5
145.9
Other loans
5.4
3.1
Total loans and receivables
329.6
363.2
Equity investments measured at fair value through other comprehensive income
Interest in unconsolidated structured entities
19.4
18.9
Total
19.4
18.9
Equity investments measured at fair value through profit or loss
Unquoted equity investments
0.7
0.7
Quoted equity investments
–
0.1
Total equity investments
20.1
19.7
Total
4,343.3
3,691.6
Note:
1.
The Group swaps a fixed interest rate for a floating rate of interest on its US dollar and Euro corporate debt securities by entering into interest rate
derivatives. The hedged amount at 31 December 2024 was £227.1 million (2023: £419.4 million).
Within the analysis of debt securities above are bank debt securities at 31 December 2024 of £1,135.0 million (2023: £973.7 million)
that can be further analysed as: secured £4.2 million (2023: £11.1 million); unsecured £935.4 million (2023: £770.6 million); and
subordinated £195.4 million (2023: £192.0 million).
Financial instruments measured at amortised cost
The Group has a portfolio of financial investments measured at amortised cost, primarily comprising infrastructure debt and
commercial real estate loans (total 31 December 2024: £329.6 million; 31 December 2023: £363.2 million). During the year the effect
of changes in assessing the ECL relating to financial investments amounted to £0.1 million (2023: £0.9 million).
The Group has a small portfolio of debt securities measured at amortised cost (31 December 2024: £55.7 million; 31 December
2023: £70.6 million). During the year the effect of changes in assessing the ECL on these securities amounted to £0.4 million
(2023: £0.2million).
221 | Direct Line Group Annual Report and Accounts 2024
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23. Financial instruments continued
Unconsolidated structured entities
The Group invests in structured entities, being insurtech-focused equity fund partnerships, whose primary activity is to invest in
unquoted insurtech entities. These structured entities are not consolidated where the Group has determined it does not have control.
On initial recognition the Group made an irrevocable election to classify these equity investments as FVOCI given the instruments
are strategic in nature, and are not held for trading.
The insurtech-focused equity investments are valued based on external valuation reports received from a third-party fund manager
using International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines. Fair values for investments that are not quoted
in an active market are determined primarily using discounted cash flow models. Unobservable inputs, such as projected
cashflows, and the liquidity and credit and risk premium incorporated within the discount rate are regularly reviewed.
The maximum loss that the Group is exposed to at the period end date, before consideration of mitigating actions, is the carrying
value. Once the Group has disposed of its partnership interest, it ceases to be exposed to any risk from that partnership. The Group
has committed to further funding of £10.2 million which may increase the maximum loss exposure in future.
The Group's holdings in the partnerships are less than 20% and as such the net asset value of the structured entities is significantly
higher than the carrying value of the Groups asset.
Amounts arising from ECL: financial investments measured at amortised cost
The table below shows the gross carrying value of financial investments and ECL in stages 1 to 3:
Gross carrying
amount
ECL allowance
Carrying
amount
Carrying
amount
Carrying
amount
2024
2024
2024
31 Dec 2023
1 Jan 2023
£m
£m
£m
£m
£m
Stage 1
375.7
(1.5)
374.3
415.5
509.6
Stage 2
5.9
(0.5)
5.4
12.6
17.9
Stage 3
13.3
(7.7)
5.6
5.7
7.0
Total
394.9
(9.7)
385.3
433.8
534.5
The following table shows the Group's updated ECL allowances for financial investments measured at amortised cost should there
be a three-notch downgrade. This reflects an immediate downgrade on the issuers' current credit ratings. The key driver of such a
scenario could be a change in the economic outlook which could impact the portfolio as a whole, or a response to an unexpected
negative event, for a specific company or industry.
ECL
3-notch
immediate
downgrade
ECL
3-notch
immediate
downgrade
2024
2024
2023
2023
£m
£m
£m
£m
Infrastructure debt
(1.0)
(3.8)
(16.6)
(19.2)
Commercial real estate loans
(7.8)
(11.3)
(7.7)
(10.5)
Debt securities held at amortised cost
(0.3)
(1.7)
(0.8)
(2.7)
Other loans
(0.6)
(0.5)
(0.4)
(0.4)
Total
(9.7)
(17.3)
(25.5)
(32.8)
Derivative financial instruments
The table below shows the carrying values of the Group's derivative financial assets and liabilities.
2024
2023
£m
£m
Derivative assets
At fair value through profit or loss:
Foreign exchange contracts (forwards)
14.9
27.1
Interest rate swaps
4.2
0.3
Designated as hedging instruments:
Foreign exchange contracts (forwards)1
–
–
Total
19.1
27.4
Derivative liabilities
At fair value through profit or loss:
Foreign exchange contracts (forwards)
36.4
8.2
Interest rate swaps
2.3
6.9
Designated as hedging instruments:
Foreign exchange contracts (forwards)1
–
0.3
Total
38.7
15.4
Note:
1.
Foreign exchange contracts (forwards) are designated as cash flow hedges in relation to supplier payments.
222 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
24. Retirement benefit obligations
Defined contribution scheme
The pension charge in respect of the defined contribution scheme for the year ended 31 December 2024 was £30.6 million
(2023: £28.7 million).
Defined benefit scheme
The Group's defined benefit pension scheme was closed in 2003, although the Group remains the sponsoring employer for
obligations to current and deferred pensioners based on qualifying years' service and final salaries. The defined benefit scheme is
legally separated from the Group with a trustee who is required by law to act in the interests of the scheme and of all the relevant
stakeholders. The trustee of the pension scheme is responsible for the investment policy with regard to the assets of the scheme.
The weighted average duration of the defined benefit obligations at 31 December 2024 is 15 years (2023: 16 years) using
accounting assumptions.
The table below sets out the principal assumptions used in determining the defined benefit scheme obligations:
2024
2023
%
%
Rate of increase in pension payment
2.5
2.5
Rate of increase in deferred pensions
2.6
2.5
Discount rate
5.2
4.5
Inflation rate
3.1
3.1
No assumption has been made for salary growth as there are no obligations in the scheme that are linked to future increases
in salaries.
Post-retirement mortality assumptions
2024
2023
Life expectancy at age 60 now:
Males
86.8
87.0
Females
88.9
89.0
Life expectancy at age 60 in 20 years' time:
Males
88.3
88.9
Females
90.3
90.8
The table below analyses the fair value of the scheme assets by type of asset.
2024
2023
£m
£m
Insurance policies1
46.7
51.8
Index-linked bonds
0.5
0.5
Government bonds
0.3
0.3
Defined contribution section funds2
1.0
1.4
Other
0.5
1.7
Total
49.0
55.7
Notes:
1.
Insurance policies are valued at the present value of the related obligations.
2.
The defined contribution section funds relate to members in that section who have a defined benefit underpin that exceeds the value of the
defined contribution funds. The investments are largely in a diversified growth fund. The corresponding liability is included in the defined benefit
scheme obligation (see the movement in net pension surplus table below).
The majority of debt instruments held directly or through the liquidity fund have quoted prices in active markets.
223 | Direct Line Group Annual Report and Accounts 2024
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24. Retirement benefit obligations continued
Movement in net pension surplus
Fair value of
defined benefit
scheme assets
Present value of
defined benefit
scheme
obligations
Net pension
surplus
£m
£m
£m
At 1 January 2023
53.4
(51.8)
1.6
Statement of Profit or Loss:
Net interest income/(cost)1
2.5
(2.4)
0.1
Administration costs
(0.5)
–
(0.5)
Statement of Comprehensive Income:
Remeasurement gains
Return on plan assets excluding amounts included in the net interest on the
defined benefit asset
2.7
–
2.7
Actuarial losses on defined benefit scheme
Experience losses
–
(1.3)
(1.3)
Gains from change in demographic assumptions
–
0.4
0.4
Losses from change in financial assumptions
–
(1.7)
(1.7)
Benefits paid
(2.4)
2.4
–
At 31 December 2023
55.7
(54.4)
1.3
Statement of Profit or Loss:
Net interest income/(cost)1
2.4
(2.4)
–
Administration costs
(1.1)
–
(1.1)
Statement of Comprehensive Income:
Remeasurement gains
Return on plan assets excluding amounts included in the net interest on the
defined benefit asset
(5.2)
–
(5.2)
Actuarial gains on defined benefit scheme
Experience gains
–
0.1
0.1
Gains from change in demographic assumptions
–
0.3
0.3
Gains from change in financial assumptions
–
5.4
5.4
Benefits paid
(2.8)
2.8
–
At 31 December 2024
49.0
(48.2)
0.8
Note:
1.
The net interest income/(cost) in the statement of profit or loss has been included under other operating expenses.
The table below details the history of the scheme for the current and prior years:
2024
2023
2022
2021
2020
£m
£m
£m
£m
£m
Present value of defined benefit scheme obligations
(48.2)
(54.4)
(51.8)
(96.1)
(98.7)
Fair value of defined benefit scheme assets
49.0
55.7
53.4
108.2
107.7
Net pension surplus
0.8
1.3
1.6
12.1
9.0
Experience gains/(losses) on scheme liabilities
0.1
(1.3)
0.3
(5.8)
2.4
Return on plan assets excluding amounts included in the net
interest on the defined benefit asset
(5.2)
2.7
(53.3)
2.2
9.0
224 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
Sensitivity analysis
The sensitivity analysis has been calculated by valuing the pension scheme liabilities using the amended assumptions shown
in the table below and keeping the remaining assumptions the same as disclosed in the table above, except in the case of
the inflation sensitivity where other assumptions that depend on assumed inflation have also been amended correspondingly.
The pension cost has been determined allowing for the estimated impact on the scheme's assets. Following the purchase of the
insurance policy to cover the benefits of the defined benefit section members, the scheme’s asset and liabilities move by the same
amount in respect of these members, hence has no impact on pension cost. The selection of these movements to illustrate the
sensitivity of the defined benefit obligation to key assumptions should be viewed as illustrative, rather than providing a view
on the likely size of any change.
Impact on present value
of defined benefit
scheme obligations
2024
2023
£m
£m
Discount rate
1.0% increase in discount rate (2023: 1.0% increase in discount rate)
(6.0)
(7.4)
1.0% decrease in discount rate (2023: 1.0% decrease in discount rate)
7.0
8.7
Inflation rate
1.0% increase in inflation rate (2023: 1.0% increase in inflation rate)
2.4
2.7
1.0% decrease in inflation rate (2023: 1.0% decrease in inflation rate)
(2.3)
(2.7)
Life expectancy
1-year increase in life expectancy
1.1
2.4
1-year decrease in life expectancy
(1.1)
(2.4)
DL Insurance Services Limited, as the Principal Employer of the Direct Line Group Hybrid Scheme and the only Employer in
relation to the Scheme, gave written notice to the Trustee of the Scheme that the Scheme is to commence winding-up with effect
on and from 30 December 2024. This action has removed the requirement to obtain technical provisions funding valuations
in relation to the Scheme.
Once the winding-up of the Scheme has been completed, it is expected that the Group will have no further defined
benefit obligations.
At the date of signing these financial statements, no contributions are expected to be payable in 2025 (2024: £nil).
25. Cash and cash equivalents and borrowings
This note provides detail of the Group's cash position as disclosed in the consolidated cash flow statement.
2024
2023
£m
£m
Cash at bank and in hand
101.3
148.0
Short term deposits with credit institutions1
1,054.7
1,624.2
Cash and cash equivalents
1,156.0
1,772.2
Bank overdrafts2
(66.8)
(82.4)
Cash and cash equivalents and borrowings
1,089.2
1,689.8
Notes:
1.
This represents money market funds.
2.
Bank overdrafts represent short-term timing differences between transactions posted in the records of the Group and transactions flowing
through the accounts at the bank.
The effective interest rate on short-term deposits with credit institutions for the year ended 31 December 2024 was 5.26% (2023:
4.57%) and average maturity was 10 days (2023: 10 days).
Of the total amount of short-term deposits with credit institutions of £1,054.7 million (2023: £1,624.2 million), £298.1 million (2023:
£241.8 million) is invested within money market funds under the 100% quota share reinsurance treaty for the Brokered commercial
business, which is operated on a funds withheld basis and is retained as security against the reinsurer's obligations.
225 | Direct Line Group Annual Report and Accounts 2024
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26. Assets held for sale
This note analyses the Group's assets held for sale.
2024
2023
£m
£m
Property, plant and equipment
12.2
13.9
Total assets held for sale
12.2
13.9
The Group has been able to reduce the number of office sites it needs by changing the way it uses its premises so that they support
collaboration, training and teamwork rather than being an everyday place of work for most people.
Assets held for sale at 31 December 2024 and 31 December 2023 relate to an office site in Leeds (including retail space within the
property) that is no longer required.
A net impairment loss of £1.8 million (2023: £5.1 million) is included within operating expenses (as part of restructuring and one-off
costs) for the write down of the carrying value of properties to their held for sale values.
27. Share capital
This note gives details of Direct Line Insurance Group plc's ordinary share capital.
Issued and fully paid: equity shares
2024
2023
Number of
shares
Share capital
Capital
redemption
reserve
Number of
shares
Share capital
Capital
redemption
reserve
Ordinary Shares of 10 10/11 pence each1
millions
£m
£m
millions
£m
£m
At 1 January and 31 December
1,311.4
143.1
6.9
1,311.4
143.1
6.9
Notes:
1.
The shares have full voting, dividend and capital distribution rights (including on wind-up) attached to them; these do not confer any rights of
redemption.
Additional information including the number of shares authorised for issue is available in the Directors' Report which starts
on page 142.
Employee trust shares
The Group satisfies share-based payments under the Group's share plans primarily through shares purchased in the market
and held by employee share trusts.
At 31 December 2024, 10,431,842 Ordinary Shares (2023: 13,688,971 Ordinary Shares) were owned by the employee share trusts at
a cost of £19.5 million (2023: £29.9 million). These Ordinary Shares are carried at cost and at 31 December 2024 had a market value
of £26.6 million (2023: £24.9 million).
28. Other reserves
This note analyses the Group's other reserves.
Capital reserves
2024
2023
£m
£m
Capital contribution reserve
100.0
100.0
Capital redemption reserve
1,356.9
1,356.9
Total
1,456.9
1,456.9
Capital contribution reserves arose on the cancellation of a debt payable to a shareholder.
Capital redemption reserves of £1,350.0 million arose on the reduction of nominal value of each share in issue with a corresponding
transfer to capital redemption reserve with the remainder arising when shares repurchased through buybacks were cancelled.
No further additions were made in 2024 (2023: nil).
226 | Direct Line Group Annual Report and Accounts 2024
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Notes to the financial statements continued
29. Tier 1 notes
The carrying amount of Tier 1 notes at 31 December was:
2024
2023
£m
£m
Tier 1 notes
346.5
346.5
On 7 December 2017, the Group issued £350 million of fixed rate perpetual Tier 1 notes with a coupon rate of 4.75% per annum.
The Group has an optional redemption date of 7 December 2027. If the notes are not repaid on that date, a fixed rate of interest per
annum will be reset. The notes are direct, unsecured and subordinated obligations of the issuer ranking pari passu and without any
preference amongst themselves.
The Tier 1 notes are treated as a separate category within equity and the coupon payments are recognised outside of the profit after
tax result and directly in shareholders' equity.
The Group has the option to cancel the coupon payment. Cancellation becomes mandatory if the Solvency condition1 is not met
at the time of, or following, coupon payment; there is non-compliance with the SCR or the minimum capital requirement; the
Group has insufficient distributable reserves; or the relevant regulator requires the coupon payment to be cancelled.
Note:
1.
All payments shall be conditional upon the Group being solvent at the time of payment and immediately after payment. The issuer will be solvent
if (i) it is able to pay its debts owed to senior creditors as they fall due and (ii) its assets exceed its liabilities.
30. Subordinated liabilities
The carrying amount of subordinated liabilities at 31 December was:
2024
2023
£m
£m
Subordinated Tier 2 notes
259.1
258.8
On 5 June 2020, the Group issued subordinated Tier 2 notes at a fixed rate of 4.0%. The notes have a redemption date of 5 June 2032
and may be redeemed at the option of the Group commencing on 5 December 2031 until the maturity date.
The notes are unsecured and subordinated obligations of the Group and rank pari passu and without any preference among
themselves. In the event of a winding-up or of bankruptcy, they are to be repaid only after the claims of all other senior creditors
have been met and will rank at least pari passu with the claims of holders of other Tier 2 capital.
The Group has the option, in certain circumstances, to defer interest payments on the notes but to date has not exercised this right.
31. Provisions
Movement in provisions during the year
Restructuring
Other1
Total
£m
£m
£m
At 1 January 2024
29.5
1.3
30.8
Additional provision
11.2
2.3
13.5
Utilisation of provision
(23.3)
–
(23.3)
Released to the Statement of Profit or Loss
(5.2)
(0.2)
(5.4)
At 31 December 2024
12.2
3.4
15.6
Note:
1.
Other includes a number of individually immaterial provisions.
None of the above amounts are due to be settled outside of 12 months (2023: £nil).
Restructuring costs include several programmes across the Group, such as office site closures, staff restructuring and an impairment
charge. There are no material uncertainties regarding the timings, amounts or assumptions used.
32. Trade and other payables
This note analyses the Group's trade and other payables at the end of the year:
2024
2023
£m
£m
Accruals
161.6
141.6
Trade creditors
0.8
2.2
Other taxes
7.4
12.3
Other creditors
1.2
1.1
Deferred income
7.9
6.4
Total
178.9
163.6
227 | Direct Line Group Annual Report and Accounts 2024
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33. Commitments and contingent liabilities
The Group did not have any material commitments and contingent liabilities at 31 December 2024 (2023: none).
The PRA has given notice of its intention to investigate the miscalculation identified within the Group’s audited Solvency II own
funds for the year ended 2023, as announced on 23 August 2024. The process is at an early stage and the outcome is uncertain. No
provision has been recognised in the financial statements on grounds of likelihood and it is not practicable, at this time, to reliably
estimate any financial penalty or other regulatory action. The Group is cooperating fully with the PRA.
Commitments to unconsolidated structured entities are detailed in note 23.
34. Notes to the consolidated cash flow statement
This note gives further detail behind the figures in the statement of cash flows
2024
2023
Notes
£m
£m
Profit for the year
162.5
222.9
Adjustments for:
Net Investment return excluding investment fees
4
(281.1)
(312.3)
Finance costs
8
15.3
14.5
Net defined benefit pension scheme expense
24
0.4
0.4
Equity-settled share-based payment charge
14.6
13.9
Tax Charge
10
55.8
54.5
Depreciation and amortisation charge
139.5
123.5
Impairment of intangible assets
15
23.1
5.4
Impairment on assets held for sale
26
1.8
5.1
Loss on disposal of property, plant and equipment and ROU assets
0.6
4.1
Transaction costs paid on disposal of business
–
(25.1)
Loss/(profit) on disposal of business
9
4.7
(443.9)
Operating cash flows before movements in working capital
137.2
(337.0)
Movements in working capital:
Net increase in reinsurance contract assets1
(456.2)
(271.2)
Net (increase)/decrease in insurance contract assets1
(0.3)
11.9
Net increase in reinsurance contract liabilities
432.9
102.7
Net (decrease)/increase in insurance contract liabilities
(151.9)
613.0
Net increase/(decrease) in other receivables
13.5
(0.6)
Net (increase)/decrease in accrued income and other assets
(2.2)
3.2
Net (decrease)/increase in trade and other payables
(4.0)
10.0
Cash (used in)/generated from operations before investment of insurance assets
(31.0)
132.0
Interest received
208.2
176.7
Rental income received from investment property
4
17.4
16.1
Purchase of investment property
18
(3.8)
(0.5)
Proceeds on disposal/maturity of financial investments measured through profit or loss
1,131.0
1,062.4
Proceeds from maturity of debt securities measured at amortised cost
15.2
26.5
Advances made for commercial real estate loans
(24.2)
(5.4)
Repayments of infrastructure debt and commercial real estate loans
60.5
81.8
Proceeds from equity investments
3.2
–
Purchase of equity investments
(2.5)
(3.0)
Purchase of financial investments measured at fair value through profit or loss
(1,749.6)
(1,049.0)
Advances for other loans
(2.5)
(1.1)
Cash (used in)/generated from investment of insurance assets
(347.1)
304.4
Note:
1.
2023 cashflows have been re-presented to show Impairment provision movements on non-performance reinsurance contracts within Net increase
in reinsurance contract assets.
228 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the financial statements continued
The table below details changes in liabilities arising from the Group's financing activities:
Leases
Subordinated liabilities
2024
2023
2024
2023
£m
£m
£m
£m
At 1 January
106.1
81.6
258.8
258.6
Interest paid on subordinated liabilities
–
–
(10.4)
(10.4)
Lease repayments
(17.1)
(14.6)
–
–
Financing cash flows
(17.1)
(14.6)
(10.4)
(10.4)
Additions from acquisition of business
–
0.8
–
–
Additions/disposals of leases
20.1
34.5
–
–
Interest on lease liabilities
4.6
3.8
–
–
Amortisation of arrangement costs and discount on issue of subordinated
liabilities
–
–
0.3
0.2
Accrued interest expense on subordinated liabilities
–
–
10.4
10.4
Other changes
24.7
39.1
10.7
10.6
At 31 December
113.7
106.1
259.1
258.8
35. Related undertakings
The principal subsidiary undertakings of the Group, over which it exercises 100% voting power, are shown below. Their capital
consists of Ordinary Shares which are unlisted. All subsidiaries (a full list of which is included in note 2 of the Parent Company's
financial statements) are included in the Group's consolidated financial statements.
Name of subsidiary
Company
registration
number
Place of incorporation
and operation
Principal activity
DL Insurance Services Limited
3001989
United Kingdom
Management services
U K Insurance Limited
1179980
United Kingdom
General insurance
The Group did not acquire any subsidiaries in the year ended 31 December 2024, (31 December 2023: four subsidiary entities
acquired: By Miles Group Limited, By Miles Limited, By Miles Payment Services Limited and By Miles Technology Services Limited).
By Miles Payment Services Limited was dissolved on 1 October 2024, (31 December 2023: no subsidiaries disposed).
Transactions between the Group's subsidiary undertakings, which are related parties, have been eliminated on consolidation and
accordingly are not disclosed.
Subject to the preceding sentence, there were no sales or purchases of products and services to or from related parties in the year
ended 31 December 2024 (2023: £nil).
Compensation of key management
2024
2023
£m
£m
Termination benefits
1.5
1.0
Short-term employee benefits
8.5
6.6
Post-employment benefits
0.2
0.2
Share-based payments
6.4
2.5
Total
16.6
10.3
For the purposes of IAS 24 'Related party disclosures', key management personnel comprise the Directors and Non-Executive
Directors and the members of the Executive Committee.
36 Post balance sheet events
No events have occurred since the reporting date that materially impact these financial statements.
229 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
(A) Basis of preparation
Direct Line Insurance Group plc, registered in England and Wales (company number 02280426), is the ultimate parent company
of the Group. The principal activity of the Company is managing its investments in subsidiaries, providing loans to those
subsidiaries, raising funds for the Group and the receipt and payment of dividends.
The address of the Company's registered office is Churchill Court, Westmoreland Road, Bromley, BR1 1DP.
The Company's financial statements are prepared on the historical cost basis except for derivative financial instruments, which are
measured at fair value.
In accordance with the exemption permitted under section 408 of the Companies Act 2006, the Company's Statement of Profit
or Loss and related notes have not been presented in these separate financial statements.
The Company's financial statements are prepared in accordance with FRS 101 'Reduced Disclosure Framework'.
The Company has taken advantage of the following FRS 101 disclosure exemptions:
– FRS 101.8 (d): the requirements of IFRS 7 'Financial Instruments: Disclosures' to make disclosures about financial instruments;
– FRS 101.8 (e): the disclosure requirements of IFRS 13 'Fair Value Measurement';
– FRS 101.8 (g): the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 111, and 134 to 136 of IAS 1 ‘Presentation of Financial
Statements’ to produce a cash flow statement and to make an explicit and unreserved statement of compliance with IFRSs,
additional comparative information and capital management information;
– FRS 101.8 (h): the requirements of IAS 7 'Statements of Cash Flows' to produce a cash flow statement and related notes;
– FRS 101.8 (i): the requirements of paragraphs 30 and 31 of IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'
to include a list of new IFRSs that have been issued but that have yet to be applied; and
– FRS 101.8 (k): the requirements of IAS 24 'Related Party Disclosures' to disclose related party transactions entered into between
two or more members of a group, provided that any subsidiary which is party to a transaction is wholly owned by such a member.
Adoption of new and revised standards
Full details of the new and revised standards adopted by the Company are set out in note (A) to the consolidated financial
statements.
(B) Investment in subsidiaries
Investments in subsidiaries are stated at cost less any impairment.
(C) Subsidiaries exemption from audit by parent guarantee
The following subsidiaries incorporated in the United Kingdom, are exempt from the requirements relating to the audit of
individual accounts, under s479A-479C of the Companies Act 2006. The parental guarantee is provided by Direct Line Insurance
Group plc.
– Direct Line Group Limited (Registered number: 02811437)
– Finsure Premium Finance Limited (Registered number: 01670887)
– Green Flag Holdings Limited (Registered number: 03577191)
230 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Parent Company Accounting Policies
2024
2023
Re-presented
Notes
£m
£m
Non-current assets
Investment in subsidiary undertakings
2
3,460.9
3,445.2
Other receivables
3
18.0
16.9
Total non-current assets
3,478.9
3,462.1
Current assets
Other receivables
3
6.8
6.5
Current tax assets
4
11.4
14.1
Derivative financial instruments
5
–
0.3
Cash and cash equivalents
6
177.3
118.8
Total current assets
195.5
139.7
Total assets
3,674.4
3,601.8
Equity
Shareholders' equity
2,810.5
2,693.6
Tier 1 notes
8
346.5
346.5
Total equity
3,157.0
3,040.1
Non-current liabilities
Subordinated liabilities
9
259.1
258.8
Total non-current liabilities
259.1
258.8
Current liabilities
Borrowings
6
257.5
301.7
Derivative financial instruments
5
–
0.3
Deferred tax liabilities
4
0.8
0.9
Total current liabilities
258.3
302.9
Total liabilities
517.4
561.7
Total equity and liabilities
3,674.4
3,601.8
Prior period comparatives have been re-presented to be based on classification rather than on liquidity.
The attached notes on pages 233 to 235 form an integral part of these separate financial statements.
The profit for the year net of tax was £213.5 million (2023: £21.2 million). There were no other components of recognised income
or expense in either period and, consequently, no statement of other comprehensive income has been presented.
The financial statements were approved by the Board of Directors and authorised for issue on 3 March 2025.
They were signed on its behalf by:
Jane Poole
Chief Financial Officer
Direct Line Insurance Group plc
Registration No. 02280426
231 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Parent Company Statement of Financial Position
For the year ended 31 December 2024
Share
capital
(note 7)
Capital
reserves
(note 7)
Share-
based
payment
reserve
Retained
earnings
Shareholders
equity
Tier 1 notes
(note 8)
Total equity
£m
£m
£m
£m
£m
£m
£m
Balance at 1 January 2023
143.1
1,456.9
1.1
1,094.6
2,695.7
346.5
3,042.2
Profit for the year
–
–
–
21.2
21.2
–
21.2
Total comprehensive income for the year
–
–
–
21.2
21.2
–
21.2
Dividends and appropriations paid
(note 10)
–
–
–
(16.6)
(16.6)
–
(16.6)
Credit to equity for equity-settled share-based
payments
–
–
12.6
–
12.6
–
12.6
Shares distributed by employee trusts
–
–
(19.3)
–
(19.3)
–
(19.3)
Total transactions with equity holders
–
–
(6.7)
(16.6)
(23.3)
–
(23.3)
Balance at 31 December 2023
143.1
1,456.9
(5.6)
1,099.2
2,693.6
346.5
3,040.1
Profit for the year
–
–
–
213.5
213.5
–
213.5
Total comprehensive income for the year
–
–
–
213.5
213.5
–
213.5
Dividends and appropriations paid
(note 10)
–
–
–
(94.8)
(94.8)
–
(94.8)
Credit to equity for equity-settled share-based
payments
–
–
15.8
–
15.8
–
15.8
Shares distributed by employee trusts
–
–
(17.6)
–
(17.6)
–
(17.6)
Total transactions with equity holders
–
–
(1.8)
(94.8)
(96.6)
–
(96.6)
Balance at 31 December 2024
143.1
1,456.9
(7.4)
1,217.9
2,810.5
346.5
3,157.0
The attached notes on pages 233 to 235 form an integral part of these separate financial statements.
232 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Parent Company Statement of Changes in Equity
As at 31 December 2024
1. Risk management
The risks faced by the Company, arising from its investment in subsidiaries, are considered to be the same as those in the
operations of the Group. Details of the key risks and the steps taken to manage them are disclosed in note 1 to the consolidated
financial statements. The Company also holds, on behalf of its subsidiaries, designated hedging instruments which relate to foreign
currency supplier payments.
2. Investment in subsidiary undertakings
2024
2023
£m
£m
At 1 January
3,445.2
3,332.6
Additional investment in subsidiary undertakings
15.7
112.6
At 31 December
3,460.9
3,445.2
The subsidiary undertakings of the Company are set out in the table below. Their capital consists of Ordinary Shares which are
unlisted. In all cases, the Company owns 100% of the Ordinary Shares, either directly or through its ownership of other subsidiaries,
and exercises full control over their decision making.
Name of subsidiary
Company
registration
number
Place of incorporation
and operation
Principal activity
Directly held by the Company:
Direct Line Group Limited1
02811437
United Kingdom
Intermediate holding company6
DL Insurance Services Limited1
03001989
United Kingdom
Management services
Finsure Premium Finance Limited1
01670887
United Kingdom
Non-trading company6
Inter Group Insurance Services Limited1
02762848
United Kingdom
Dormant5
UK Assistance Accident Repair Centres Limited1
02568507
United Kingdom
Motor vehicle repair services
UK Assistance Limited1
02857232
United Kingdom
Dormant5
U K Insurance Business Solutions Limited1
05196274
United Kingdom
Insurance intermediary services
U K Insurance Limited2,3
01179980
United Kingdom
General insurance
Indirectly held by the Company:
Brolly UK Technology Limited1
10134039
United Kingdom
Dormant5
By Miles Group Ltd1
12270837
United Kingdom
Intermediate holding company
By Miles Ltd1
09498559
United Kingdom
Business support services
By Miles Payment Services Ltd
12190473
United Kingdom
Dissolved7
By Miles Technology Services Ltd1
12189384
United Kingdom
Software development
Churchill Insurance Company Limited1
02258947
United Kingdom
General insurance
Direct Line Insurance Limited1
01810801
United Kingdom
Dormant5
DL Support Services India Private Limited4
See
footnote 4
India
Support and operational
services
DLG Legal Services Limited2
08302561
United Kingdom
Legal services
DLG Pension Trustee Limited1
08911044
United Kingdom
Dormant5
Farmweb Limited1
03207393
United Kingdom
Dormant5
Green Flag Group Limited2
02622895
United Kingdom
Intermediate holding company
Green Flag Holdings Limited1
03577191
United Kingdom
Intermediate holding company6
Green Flag Limited2
01003081
United Kingdom
Breakdown recovery services
Intergroup Assistance Services Limited1
03315786
United Kingdom
Dormant5
National Breakdown Recovery Club Limited1
02479300
United Kingdom
Dormant5
Nationwide Breakdown Recovery Services Limited1
01316805
United Kingdom
Dormant5
The National Insurance and Guarantee Corporation
Limited1
00042133
United Kingdom
Dormant5
UKI Life Assurance Services Limited1
03034263
United Kingdom
Dormant5
Notes:
1.
Registered office at: Churchill Court, Westmoreland Road, Bromley, BR1 1DP.
2.
Registered office at: The Wharf, Neville Street, Leeds, LS1 4AZ.
3.
U K Insurance Limited is registered as a foreign company in the Republic of South Africa and had a branch in Ireland (deauthorised February 2025).
4. Registered office at: Max House, Level 5, Okhla Industrial Estate Phase-III, New Delhi, 110020, India. Company registration number:
U74140DL2014FTC265567.
5.
These entities have not been audited, in accordance with the exemptions available for dormant entities under section 480 of the Companies Act 2006.
6.
These entities have not been audited, in accordance with the exemptions available for subsidiaries under section 479A of the Companies Act 2006.
7.
By Miles Payment Services Ltd was dissolved on 1 October 2024.
233 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the Parent Company Financial Statements
At 31 December 2024, the carrying amount of the Company’s net assets of £3,157.0 million (2023 £3,040.1 million) exceeded the
Group’s market capitalisation of £2,386.1 million (2023: £2,902.1million). The Group has performed an impairment test in line with the
requirements of IAS 36 ‘Impairment of Assets’ and concluded that no impairments were required to any of the Company’s
investments in its subsidiaries.
The recoverable amounts of each investment were based on the higher of the value-in-use test, using the strategic plan, and the
fair value which was deemed to be equal to the subsidiaries’ net asset values. For each investment in subsidiary the recoverable
amount was greater than the carrying value of the cost of investment resulting in no impairment required for the year ended
31 December 2024 (2023: £nil).
3. Other receivables
2024
2023
£m
£m
Loans to subsidiary undertakings1
18.0
16.9
Trade receivables due from subsidiary undertakings
5.7
6.0
Other debtors
1.1
0.5
Total²
24.8
23.4
Notes:
1.
Loans to subsidiary undertakings are not expected to be settled within 12 months and as such are classified as non-current. Loan balances are held
at their recoverable amount
2.
Trade receivables due from subsidiary undertakings and Other debtors are classified as current.
4. Tax assets and liabilities
2024
2023
£m
£m
Per Statement of Financial Position:
Current tax assets
11.4
14.1
Deferred tax liabilities
(0.8)
(0.9)
The deferred tax liability is in respect of temporary differences in Tier 1 notes.
5. Financial instruments
This note shows the carrying values of the Company's derivative financial assets and liabilities1.
Notional
amount
Fair value
Notional
amount
Fair value
2024
2024
2023
2023
£m
£m
£m
£m
Derivative assets
Designated as hedging instruments:
Foreign exchange contracts (forwards)2
24.0
–
14.5
0.3
Total
24.0
–
14.5
0.3
Derivative liabilities
Designated as hedging instruments:
Foreign exchange contracts (forwards)2
24.0
–
14.5
0.3
Total
24.0
–
14.5
0.3
Notes:
1.
The derivative assets and liabilities are both classified as level 2 within the Group's fair value hierarchy set out in note 23 of the consolidated
financial statements.
2.
The foreign exchange cash flow hedges have been entered into on behalf of the Group's subsidiary companies.
234 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Notes to the Parent Company Financial Statements continued
6. Cash and cash equivalents and borrowings
This note provides detail of the Company's cash position.
Cash and cash equivalents
2024
2023
£m
£m
Cash at bank and in hand
–
0.3
Short-term deposits with credit institutions1
177.3
118.5
Total
177.3
118.8
Note:
1.
This represents money market funds.
Borrowings
2024
2023
£m
£m
Loans from fellow subsidiaries within the Group1
257.5
301.7
Note:
1.
All loans from fellow Group subsidiaries are repayable by 31 December 2024 and automatically extend by a year on 1 January 2025. Interest is
charged at the bank of England base rate plus 1%.
7. Share capital, capital reserves and distributable reserves
Full details of the share capital and capital reserves of the Company are set out in notes 27 and 28 to the consolidated financial
statements.
Of the Company's total equity, £1,217.9 million (2023: £1,099.2 million), being the total of its retained earnings, is considered to be
distributable reserves.
8. Tier 1 notes
Full details of the Tier 1 notes of the Company are set out in note 29 to the consolidated financial statements.
9. Subordinated liabilities
2024
2023
£m
£m
Subordinated Tier 2 notes
259.1
258.8
Full details of the Company's subordinated Tier 2 notes are set out in note 30 to the consolidated financial statements.
The aggregate fair value of subordinated guaranteed dated notes at 31 December 2024 was £229.0 million (2023: £212.8 million).
10. Dividends
Full details of the dividends paid and proposed by the Company are set out in note 11 to the consolidated financial statements.
11. Share-based payments
Full details of share-based compensation plans are provided in note 6 to the consolidated financial statements. The Company
is the sponsoring entity and the employees of a subsidiary are the participants of the schemes.
12. Employees, Directors and key management remuneration
The Company has no employees. The Directors and key management of the Group and the Company are the same. The aggregate
emoluments of the Directors are set out in note 6 to the consolidated financial statements, the compensation for key management
is set out in note 35 to the consolidated financial statements and the remuneration and pension benefits payable in respect of the
highest-paid Director are included in the Directors' Remuneration Report in the Governance section of the Annual Report and
Accounts.
235 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Annual General Meeting
The 2025 AGM will be held at Riverbank House, 2 Swan Lane,
London, EC4R 3AD on Wednesday 14 May 2025, starting at
10:30 am. All shareholders will receive a separate notice
convening the AGM. This will explain the resolutions to be put
to the meeting.
The Articles of Association of the Company and the letters
of appointment of the Executive Directors, the Chair and the
Non-Executive Directors will be available at the venue for the
annual general meeting (Riverbank House, as referred to in
the paragraph above).
Market
The Company has a listing on the UK Listing Authority's Official
List. The Company's Ordinary Shares (EPIC: DLG) are admitted
to trading on the London Stock Exchange.
Share ownership
Share capital
You can find details of the Company's share capital in note 27
to the consolidated financial statements.
Dividends
The Company pays its dividends in sterling to shareholders
registered on its register of members at the relevant record
date.
Shareholders can arrange to receive their cash dividend
payments in a bank or building society account by completing
a dividend mandate form. This is available from the Company's
registrar, Computershare Investor Services Plc ("Registrar"), in
the UK. You can find the Registrar's contact details on page 255.
Alternatively, shareholders can access their shareholdings
online and download a dividend mandate form from the
Investor Centre. You can find details of this below.
Dividend Reinvestment Plan
The Company offers a Dividend Reinvestment Plan.
This enables shareholders to use their cash dividends to buy
the Company's Ordinary Shares in the market. You can find
more details on the Company's website.
Shareholder enquiries
Shareholders with queries about anything relating to their
shares can contact our Registrar.
Shareholders should notify the Registrar of any change in
shareholding details, such as their address, as soon as possible.
Shareholders can access their current shareholding details
online at www.investorcentre.co.uk/directline. Investor Centre is
a free-to-use, secure, self-service website that enables
shareholders to manage their holdings online. The website
allows shareholders to:
– check their holdings;
– update their records, including address and direct credit
details;
– access all their securities in one portfolio by setting up
a personal account;
– vote online; and
– register to receive electronic shareholder communications.
To access information, the website requires shareholders to
quote their shareholder reference number. Shareholders can
find this number on their share certificates.
Corporate website
The Group's corporate website is www.directlinegroup.co.uk.
It contains useful information for the Company's investors and
shareholders. For example, it includes press releases, details
of forthcoming events, essential shareholder information,
a dividend history, a financial calendar, and details of the
Company's AGM. A microsite containing documents relevant to
the recommended offer by Aviva plc for Direct Line Insurance
Group plc can be found on the corporate website. You can also
subscribe to email news alerts.
Shareholder warning
Fraudsters use persuasive and high-pressure tactics to lure
investors into scams. They may offer to sell shares that prove to
be worthless or non-existent, or they can offer to buy shares at
an inflated price in return for you paying upfront. They promise
high profits. However, if you buy or sell shares in this way, you
will probably lose your money.
236 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Shareholder information
How to avoid share fraud
– Remember that FCA-authorised firms are unlikely to contact
you unexpectedly offering to buy or sell shares.
– Do not converse with them. Note the name of the person and
firm contacting you, then end the call.
– To see if the person and firm contacting you are authorised
by the FCA, check the Financial Services Register at
www.fca.org.uk/register.
– Beware of fraudsters claiming to be from an authorised firm;
copying its website; or giving you false contact details.
– If you want to phone the caller back, use the firm's contact
details listed on the Financial Services Register at
www.fca.org.uk/register.
– If the firm does not have contact details on the Register
or they tell you the details are out of date, call the FCA
on 0800 111 6768.
– Search the list of unauthorised firms to avoid at
www.fca.org.uk/consumers/unauthorised-firms-individuals.
– Remember that if you buy or sell shares from an
unauthorised firm, you cannot access the Financial
Ombudsman Service or Financial Services Compensation
Scheme.
– Get independent financial and professional advice before
handing over any money.
– If it sounds too good to be true, it probably is.
Report a scam
If fraudsters approach you, tell the FCA using the share fraud
reporting form at www.fca.org.uk/consumers/report-scam-
unauthorised-firm. You can also find out more about
investment scams on the same web page.
You can call the FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters, call Action
Fraud on 0300 123 2040.
Tips on protecting your shares
– Keep all your certificates in a safe place. Alternatively, consider
holding your shares in the UK's electronic registration and
settlement system for equity, called CREST, or via a nominee.
– Keep correspondence from the Registrar that shows your
shareholder reference number in a safe place, and shred
unwanted correspondence.
– Inform the Registrar as soon as you change your address.
– If you receive a letter from the Registrar regarding a
change of address and you have not recently moved, contact
them immediately.
– Find out when your dividends are paid and contact the
Registrar if you do not receive them.
– Consider having your dividends paid direct into your bank
account. You will need to complete a dividend mandate form
and send it to the Registrar. This reduces the risk of cheques
being stolen or lost in the post.
– If you change your bank account, inform the Registrar of your
new account details immediately.
– If you are buying or selling shares, only deal with brokers
registered in the UK or in your country of residence.
– Be aware that the Company will never call you
concerning investments.
Electronic communications and voting
The Group produces various communications. Shareholders
can view these online, download them, or receive paper copies
by contacting the Registrar.
Shareholders, who register their email address with our
Registrar, or at the Investor Centre, can receive emails with
news on events, such as the AGM. They can also receive
shareholder communications electronically, such as the Annual
Report and Accounts and Notice of Meeting.
Dealing facilities
Shareholders who wish to buy, sell or transfer their shares may
do so through a stockbroker or a high street bank; or through
the Registrar's share-dealing facility.
You can call or email the Registrar regarding its share-dealing
facility using this contact information:
– for telephone sales, call +44 (0)370 703 0084 between 8.00
am and 6.00 pm, Monday to Friday, excluding public holidays,
and
– for internet sales, go to www.investorcentre.co.uk/directline.
You will need your shareholder reference number, as shown
on your share certificate, or your welcome letter from
the Chair.
Dividend tax allowance
The dividend tax-free allowance is £500 across an individual's
entire share portfolio for the tax years 2024 to 2025 and beyond.
Above these amounts, individuals will pay tax on their dividend
income. The rate of this tax depends on their income tax
bracket and personal circumstances. The Company will
continue providing registered shareholders with a confirmation
of the dividends paid. Shareholders should include this with
any other dividend income they receive when calculating
and reporting total dividend income received to HMRC. The
shareholder is responsible for including all dividend income
when calculating tax requirements. If you have any tax queries,
please contact your financial adviser.
237 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Actuarial best estimate
("ABE")
The probability-weighted average of all future claims and cost scenarios. It is calculated using
historical data, actuarial methods and judgement. A best estimate of reserves will therefore
normally include no margin for optimism or, conversely, caution.
Acquisition costs
Costs that arise from activities of selling, underwriting and starting a group of contracts that are
directly attributable to the portfolio of contracts to which the group belongs.
Annual Incentive Plan
("AIP")
This incentivises the performance of Executive Directors and employees over a one-year
operating cycle. It focuses on the short- to medium-term elements of the Group's strategic aims.
Assets under management
("AUM")
This represents all assets managed or administered by or on behalf of the Group, including those
assets managed by third parties.
Association of British
Insurers ("ABI")
The trade body that represents the insurance and long-term savings industry in the UK.
ASHE index
The Annual Survey of Hours and Earnings ("ASHE") provides information about the levels,
distribution and make-up of earnings and paid hours worked for employees in all industries and
occupations. The ASHE tables contain estimates of earnings for employees by sex and full-time or
part-time status.
Bootstrapping
A statistical sampling technique used to estimate reserve variability around the Actuarial Best
Estimate. Results produced from bootstrapping historical data are used to set and inform the risk
margin incorporated in the Liability for Incurred Claims.
Brokered commercial
business ("NIG")
The Brokered commercial insurance business of U K Insurance Limited which it was announced
on 6 September 2023 was being sold to Royal & Sun Alliance Insurance Limited. The Group has
retained the back book of the business written and earned prior to 1 October 2023 (the "Risk
Transfer Date"). Business written and earned on and subsequent to the Risk Transfer Date is
subject to a quota share arrangement between the two companies.
The term Brokered commercial business does not meet the criteria of a discontinued operation
as defined under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' and has
not been accounted for as such.
Buy-As-You-Earn Plan
The HM Revenue & Customs approved Buy-As-You-Earn Share Incentive Plan gives all employees
the opportunity to become shareholders in the Company.
Capital
The funds invested in the Group, including funds invested by shareholders and Tier 1 notes. In
addition, the subordinated liabilities in the Group's statement of financial position are classified as
Tier 2 capital for Solvency II purposes.
Carbon/operational
emissions:
Scope 1
Scope 2
Scope 3
Scope 1 – covers direct emissions from owned or controlled sources, including fuels used in office
buildings, accident repair centres and owned vehicles.
Scope 2 – covers indirect emissions from the generation of purchased electricity, steam, heating
and cooling for office buildings and accident repair centres.
Scope 3 – includes all other indirect emissions that occur in the Group's value chain,such as from
purchased goods and services.
Claims frequency
The number of claims divided by the number of policies per year.
Clawback
The Group's ability to claim repayment of paid amounts both cash and equity-settled share-
based payments.
Combined operating
ratio
The sum of the net insurance claims, net acquisition costs and net expense ratios. The ratio
measures the amount of claims costs, acquisition and operating expenses, compared to net
insurance revenue. A ratio of less than 100% indicates profitable underwriting. The ratio and the
comparative are calculated on an IFRS 17 basis and are not comparable to combined operating
ratios that were calculated on an IFRS 4 'Insurance Contracts' basis published previously. (See
appendix A – Alternative performance measures on pages 242 to 245.)
Current-year attritional
net insurance claims ratio
The loss ratio for the current accident year, excluding the movement of claims reserves relating
to previous accident years and claims relating to major weather events. See appendix A –
Alternative performance measures on pages 242 to 245)
Deferred Annual
Incentive Plan ("DAIP")
For Executive Directors and certain members of senior management, at least 40% of the AIP
award is deferred into shares typically vesting three years after grant. The remainder of the award
is paid in cash following year end.
Employee Representative
Body ("ERB")
The forum that represents all employees, including when there is a legal requirement to consult
employees.
Effect of change in yield
curve
Reflects the effect of changes in discounting, due to movements in the PRA risk-free yield curve
and ASHE index, on claims previously recognised.
Event weather ratio
The loss ratio for claims relating to major weather events. (See page 60 - Alternative Performance
Measures.) (See appendix A – Alternative performance measures on pages 242 to 245.)
Events not in data
("ENIDs")
Events not in data allow for short- and long-term risks not reflected in other actuarial inputs,
including uncertainties in relation to the actuarial best estimate.
Term
Definition and explanation
238 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Glossary and Appendices
Fair value through profit or
loss ("FVTPL")
A financial asset or liability where at each Statement of Financial Position date the asset or
liability is remeasured to fair value and any movement in that fair value is taken directly to the
Statement of Profit or Loss.
Fair value gains/(losses)
Includes fair value gains/(losses) on financial assets held at FVTPL, fair value gains/(losses) on
investment property and net expected credit losses on financial investments. (See note 4
Insurance finance result.)
Financial leverage ratio
Tier 1 notes and financial debt (subordinated Tier 2 notes) as a percentage of total capital
employed.
Financial Reporting
Council
The UK's regulator for the accounting, audit and actuarial professions, promoting transparency
and integrity in business.
Gross written premium
and associated fees
The total premiums from insurance contracts that were incepted during the period including the
impact of a contractual change to Green Flag premium such that a portion of income that was
historically included in gross written premium is included in service fee income.
Gross written premium is included for the Motability contract for the following six months at the
commencement of each six month pricing period.
Incremental borrowing
rate ("IBR")
The rate of interest that a lessee would have to pay to borrow, over a similar term and security,
the funds necessary to obtain an asset of a similar value to the ROU asset in a similar economic
environment.
In-force policies
The number of policies on a given date that are active and against which the Group will pay,
following a valid insurance claim.
Investment income
yield
The investment return, excluding funds withheld interest income divided by the average AUM
(excluding funds withheld assets). The average AUM derives from the period’s opening and
closing balances for the total Group. (See appendix A – Alternative performance measures on
pages 242 to 245.)
Investment return
Total investment return recognised through the Statement of Profit or Loss, earned from the
investment portfolio, including investment fees, fair value gains and losses and impairments.
Investment return
yield
The investment return divided by the average AUM (excluding funds withheld assets). The
average AUM (excluding fund withheld assets) derives from the period’s opening and closing
balances. (See appendix A – Alternative performance measures on pages 242 to 245.)
Long-Term Incentive
Plan ("LTIP")
Awards made as nil-cost options or conditional share awards, which vest to the extent that
performance conditions are satisfied after a period of at least three years.
Malus
An arrangement that permits unvested remuneration awards to be reduced or forfeited, when
the Company considers it appropriate.
Minimum capital
requirement ("MCR")
The minimum amount of capital that an insurer needs to hold to cover its risks under the
Solvency II regulatory framework, as amended by the PRA's 2024 reforms. If an insurer's capital
falls below the MCR then authorisation will be withdrawn by the regulator unless the insurer is
able to meet the MCR within a short period of time.
Net acquisition costs ratio
The ratio of acquisition costs divided by net insurance contract revenue. (See appendix A –
Alternative performance measures on pages 242 to 245.)
Net asset value
The difference between the Group's total assets and total liabilities, calculated by subtracting
total liabilities (including Tier 1 notes) from total assets.
Net expense ratio
The ratio of operating expenses divided by net insurance contract revenue. (See appendix A –
Alternative performance measures on pages 242 to 245.)
Net insurance claims ratio
The ratio of net insurance contract claims divided by net insurance contract revenue.
(See appendix A – Alternative performance measures on pages 242 to 245.)
Net insurance margin
The ratio of insurance service result divided by net insurance contract revenues. The normalised
net insurance margin adjusts net insurance claims and acquisition costs for event weather.
(See appendix A – Alternative performance measures on pages 242 to 245.)
Net insurance revenue
The total insurance contract revenue (consisting of gross written premium and associated fees,
instalment income and movement in liability for remaining coverage) less expenses from
reinsurance contracts held (consisting of reinsurance premium paid and movement in asset for
remaining coverage).
Net promoter score
("NPS")
This is an index that measures the willingness of customers to recommend products or services
to others. It is used to gauge customers' overall experience with a product or service, and
customers' loyalty to a brand.
Term
Definition and explanation
239 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Non-core businesses
The Group has excluded the results of Other personal lines products, including three
partnerships that were previously disclosed as being exited, from its ongoing operations and has
restated all relevant comparatives across this review. Other personal lines is made up of Pet,
Travel, Creditor and Select, our insurance targeted at Mid- to high-net worth customers. Pet is the
largest product within Other personal lines. As announced at the Group’s Capital Markets Day in
July 2024, the decision was taken to pause investment in these products. Other personal lines
represented around £130 million of gross written premium and associated fees in 2023.
Ogden discount rate
The discount rate set by the Lord Chancellor and used by courts to calculate lump sum awards in
bodily injury cases.
Ongoing operations
The Group's ongoing operations include Motor and Non-Motor (comprising: Home, Commercial
Direct and Rescue) segments and excludes the Brokered commercial business, Non-core and
Run-off businesses. Please also refer to Brokered commercial business, Non-core businesses and
Run-off partnerships.
The use of the term ongoing operations is not considered equivalent to continuing operations as
defined under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' as the
Brokered commercial business and Run-off partnerships do not meet the criteria of discontinued
operations and have not been accounted for as such. (See appendix A – Alternative performance
measures on pages 242 to 245.)
Operating earnings/(loss)
per share
The operating earnings attributable to the owners of the Company. Operating profit from
ongoing operations is adjusted to include other finance costs and coupon payments in respect of
Tier 1 notes and is divided by the weighted average of Ordinary Shares outstanding in the
relevant financial period, excluding Ordinary Shares held by as employee trust shares, adjusted
for the dilutive potential Ordinary Shares. The Group's Long-term Incentive Plan outcomes are
partly based on this metric.
Operating profit
The pre-tax profit that the Group’s activities generate, including insurance and investment
activity, but excluding fair value gains/(losses), change in yield curve, other finance costs,
restructuring and one-off costs and (loss)/gain on disposal of business which are not considered
by the Group to be operating costs/income. The Group uses an adjusted operating profit in its
operating RoTE and operating earnings/(loss) per share calculations, where Other finance costs
and Coupon payments in respect of Tier 1 notes (charged directly to equity in the Group's
financial statements) are added to operating profit, in line with the Group's view of calculations
from a management view perspective. Normalised operating profit is operating profit adjusted
for event weather. Current-year operating profit is calculated using the operating profit
adjusted for prior-year reserve movements. (See appendix A – Alternative performance measures
on pages 242 to 245.)
Operating return on
tangible equity ("RoTE")
This is adjusted operating profit from ongoing operations divided by the Group’s average
shareholders’ equity less goodwill and other intangible assets. Operating profit after tax is
adjusted to include other finance costs and the Tier 1 coupon payments. It is stated after charging
tax using the UK standard rate of 25.0% (2023: 23.5%). (See appendix A – Alternative performance
measures on pages 242 to 245.)
Other finance costs
The cost of servicing the Group's external borrowings and including the interest on right-of-use
assets.
Other operating expenses
These are the expenses relating to business activities excluding restructuring and one-off costs
and those included within the insurance service result. (See See Appendix B - Expenses, on page
251.)
Own Risk and Solvency
Assessment ("ORSA")
A forward-looking assessment of the Group's risks and associated capital requirements, over the
business planning period.
Periodical payment order
("PPO")
These are claims payments as awarded under the Courts Act 2003. PPOs are used to settle
certain large personal injury claims. They generally provide a lump-sum award plus inflation-
linked annual payments to claimants who require long-term care.
Prudential Regulation
Authority ("PRA")
The PRA is a part of the Bank of England. It is responsible for regulating and supervising insurers
and financial institutions in the UK.
PRA risk-free yield curve
Schedules of risk-free interest rates in a number of currencies produced by the Bank of England.
These rates are used to calculate the present value of the expected future costs of honouring
insurance companies' obligations to policyholders.
Prior-year reserves
development ratio
The loss ratio relating to the movement of claims reserves relating to previous accident years.
(See appendix A – Alternative performance measures on pages 242 to 245.)
Restructuring and one-off
costs
Restructuring costs are costs incurred in respect of those business activities which have a
material effect on the nature and focus of the Group's operations. One-off costs are costs that are
non-recurring in nature.
Return on equity
This is calculated by dividing the (loss)/profit attributable to the owners of the Company after
deduction of the Tier 1 coupon payments by average shareholders' equity for the period.
Term
Definition and explanation
240 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Run-off partnerships
The Group has exited three partnerships which will reduce its exposure to low margin packaged
bank accounts so it may redeploy capital to potentially higher return segments. The Run-off
partnerships relate to a Rescue partnership with NatWest Group that expired in December 2022
and Travel partnerships with NatWest Group and Nationwide Building Society which expired in
the first half of 2024. Although the Nationwide partnership contract ended during H1 2024,
upgrades on existing policies will continue to be underwritten by the Group until 30 April 2025.
The term Run-off partnerships does not meet the criteria of a discontinued operation as defined
under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' and has not been
accounted for as such.
Science-Based Targets
("SBT")
Science-Based Targets are a set of goals developed by a business to provide it with a clear route
to reduce greenhouse gas emissions. An emissions reduction target is defined as "science-based"
if it is developed in line with the scale of reductions required to curb a global temperature rise to
well below 2°C above pre-industrial levels and ideally to limit to a 1.5°C rise.
Solvency capital ratio
The ratio of Solvency II own funds to the solvency capital requirement.
Solvency capital
requirement ("SCR")
The SCR is the amount of capital the regulator requires an insurer to hold to meet the
requirements under the Solvency II regulatory framework, as amended by the PRA's 2024
reforms. The Group uses a partial internal model to determine the SCR.
Tangible equity
This shows the equity excluding Tier 1 notes and intangible assets (for comparability with
companies which have not acquired businesses or capitalised intangible assets) (See appendix A
– Alternative performance measures on pages 242 to 245.)
Tangible net assets per
share
This shows the amount of tangible equity allocated to each ordinary share (for comparability with
companies which have not acquired businesses or capitalised intangible assets). (See appendix A
– Alternative performance measures on pages 242 to 245.)
Task Force on Climate-
related Financial
Disclosure ("TCFD")
Established by the Financial Stability Board, the TCFD developed a set of disclosure
recommendations on the risks and opportunities presented by climate change. The TCFD aims
to improve and increase climate-related disclosure by organisations and promotes the provision
of clear, comprehensive and high-quality information.
Total Shareholder
Return ("TSR")
Compares share price movement with reinvested dividends as a percentage of the
share price.
Unwind of discounting of
claims
Comprises insurance finance income and expenses arising from the release of the effect of
discounting as projected cash flows move one period closer. The discount unwind is calculated
every quarter on opening reserves on a period-to-period basis. (See appendix A – Alternative
performance measures on pages 242 to 245.)
Term
Definition and explanation
241 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Appendix A – Alternative performance measures (unaudited)
The Group has identified Alternative Performance Measures ("APMs") in accordance with the European Securities and Markets
Authority's published Guidelines. The Group uses APMs to improve comparability of information between reporting periods and
reporting segments, by adjusting for either uncontrollable or one-off costs which impact the IFRS measures, to aid the user of the
annual report and accounts in understanding the activity taking place across the Group. These APMs are contained within the
main narrative sections of this document, outside the financial statements and notes, and may not necessarily have standardised
meanings for ease of comparability across peer organisations.
Further information is presented below, defined in the glossary on pages 238 to 241 and reconciled to the most directly reconcilable
line items in the financial statements and notes. Note 2 on page 189 of the consolidated financial statements presents a
reconciliation of the Group's business activities on a segmental basis to the consolidated statement of profit or loss. All note
references in the table below are to the notes to the consolidated financial statements on pages 173 to 229.
Combined
operating ratio
Insurance
service result
Combined operating ratio is defined in
the glossary on pages 238 to 241 and
reconciled in appendix B on pages 246
to 249.
This is a measure of underwriting profitability and
excludes non-insurance income, whereby a ratio of
less than 100% represents an underwriting profit
and a ratio of more than 100% represents an
underwriting loss.
Current-year
attritional
insurance claims
ratio
Net insurance
claims
Current-year attritional loss ratio is
defined in the glossary on pages 238 to
241 and is reconciled to the loss ratio
(discussed below) on pages 246 to 249.
Expresses claims performance in the current
accident year in relation to net insurance revenue.
Event weather
ratio
Net insurance
claims
Event weather ratio is defined in the
glossary on pages 238 to 241 and is
reconciled to the loss ratio (discussed
below) on pages 246 to 249.
Expresses claims performance with respect to
weather events experienced in relation to net
insurance revenue.
Gross written
premium and
associated fees
Insurance
revenue
Gross written premium and associate
fees is defined in the glossary on pages
238 to 241 and reconciled appendix B
on pages 246 to 249.
The IFRS 17 profit or loss account disclosures reflect
revenue earned from service provided, compared
to a premium written basis under IFRS 4. The
Group will continue to provide detail on trading
volumes on a written basis as an alternative
performance measure.
Investment
income yield
Investment
income
Investment income yield is defined in
the glossary on pages 238 to 241 and is
reconciled on page 244.
Expresses a relationship between the investment
income and the associated opening and closing
assets adjusted for portfolio hedging instruments.
Investment
return yield
Investment
return
Investment return yield is defined in
the glossary on pages 238 to 241 and is
reconciled on page 244.
Expresses a relationship between the investment
return and the associated opening and closing
assets adjusted for portfolio hedging instruments.
Net acquisition
costs ratio
Other directly
attributable
expenses
Net acquisition costs ratio is defined in
the glossary on pages 238 to 241 and is
reconciled in appendix B on pages 246
to 249.
Expresses acquisition costs in relation to net
insurance contract revenue.
Net expense ratio Other directly
attributable
expenses
Net expense ratio is defined in the
glossary on pages 238 to 241 and is
reconciled in appendix B on pages 246
to 249.
Expresses underwriting and policy expenses in
relation to net insurance revenue. Note that
restructuring and one-off costs are not considered
as underwriting costs and are not included in
expense ratio calculations.
Net insurance
claims ratio
Net insurance
claims
Net insurance claims ratio is defined in
the glossary on pages 238 to 241 and is
reconciled in appendix B on pages 246
to 249.
Expresses claims performance in relation to net
insurance revenue.
Net insurance
margin ("NIM")
Insurance
service result
Net insurance margin is defined in the
glossary on pages 238 to 241 and is
reconciled in Appendix B on pages 246
to 249.
This is a measure of underwriting profitability and
excludes non-insurance income. A ratio greater
than 0% represents an underwriting profit and a
ratio of less than 0% represents an underwriting
loss.
Normalised net
insurance
margin
Insurance
service result
Normalised net insurance margin is
defined in the glossary on pages 238 to
241 and reconciled in appendix B on
pages 246 to 249.
This is a measure of underwriting profitability
excluding the variances of actual weather from our
assumptions. It also excludes non insurance
income. A ratio greater than 0% represents an
underwriting profit and a ratio of less than 0%
represents an underwriting loss.
Group APM
Closest equivalent
IFRS measure
Definition and/or reconciliation
Rationale for APM
242 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Ongoing
operations (see
also Brokered
commercial
business, Non-
core businesses
and Run-off
partnerships)
Multiple -
rationale for
APM
Ongoing operations, Brokered
commercial business and run-off
partnerships are defined in the
glossary on pages 238 to 241 and
reconciled in appendix B on pages 246
to 249.
The Group's ongoing operations result excludes the
results of the Brokered commercial business, that it
sold to RSA Insurance Limited in 2023, and its Non-
core businesses, announced at the Group's 2024
Capital Markets Day, and three Run-off
partnerships that the Group completed its exit
from in H1 2024.
The purpose of this is to give the reader a clearer
view of the Group's ongoing activities and activities
that it is seeking to exit from.
Operating
earnings/(loss)
per share
Diluted
earnings per
share
Operating earnings/(loss) per share is
defined in the glossary on pages 238 to
241 and reconciled on page 244.
This is a measure of profitability. A three-year
cumulative operating earnings per share (the sum
of the amounts for the three years starting with the
year that the award is made) is used in long-term
incentive plan ("LTIP") calculations.
Operating profit
Profit before
tax
Operating profit is defined in the
glossary on pages 238 to 241 and
reconciled in note 2 on page 189.
This shows the underlying performance (before tax
and excluding net fair value gains/(losses), effect of
the change in the yield curve in insurance finance
expenses, finance costs, gains on disposal of
businesses and restructuring and one-off costs) of
the business activities.
Operating return
on tangible
equity
Return on
equity
Operating return on tangible equity is
defined in the glossary on pages 238 to
241 and is reconciled on page 244.
This shows performance against a measure of
equity that is more easily comparable to that of
other companies.
Other operating
expenses
Other directly
attributable
expenses
Other operating expenses is defined in
the glossary on pages 238 to 241 and
reconciled in Appendix B on pages 246
to 249.
This shows the expenses relating to business
activities excluding restructuring and one-off costs
and those included within the insurance service
result.
Prior-year
reserves
development
ratio
Net insurance
claims
Prior-year reserves development ratio
is defined in the glossary on pages 238
to 241 and is reconciled to the net
insurance claims ratio in Appendix B
on pages 246 to 249.
Expresses claims performance relating to the
movement in prior-year reserves in relation to net
insurance revenue.
Tangible equity
Equity
Tangible equity is defined in the
glossary on pages 238 to 241 and is
reconciled in note 13 on page 199.
This shows the equity excluding Tier 1 notes and
intangible assets for comparability with companies
which have not acquired businesses or capitalised
intangible assets.
Tangible net
asset value per
share
Net asset value
per share
Tangible net asset value per share is
defined in the glossary on pages 238 to
241 and reconciled in note 13 on
page 199.
This shows the equity excluding Tier 1 notes and
intangible assets per share for comparability with
companies which have not acquired businesses or
capitalised intangible assets.
Group APM
Closest equivalent
IFRS measure
Definition and/or reconciliation
Rationale for APM
243 | Direct Line Group Annual Report and Accounts 2024
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Investment income and return yields1
FY 2024
FY 2023
Notes2
£m
£m
Investment income
4
244.0
187.9
Less: Funds withheld interest
(13.8)
0.0
Investment fees
4
(8.8)
(9.3)
Realised and unrealised gains
4
37.1
124.4
Adjusted total investment return
258.5
303.0
Opening investment property
277.1
278.5
Opening financial investments
3,691.6
3,696.4
Opening cash and cash equivalents (excluding funds withheld asset)
1,530.4
1,003.6
Opening borrowings
(82.4)
(65.2)
Opening derivatives asset3
12.4
1.6
Opening assets under management (excluding funds withheld asset)
5,429.1
4,914.9
Closing investment property
287.6
277.1
Closing financial investments
23
4,343.3
3,691.6
Closing cash and cash equivalents (excluding funds withheld asset)3
857.9
1,530.4
Closing borrowings
25
(66.8)
(82.4)
Closing derivative (liability)/asset4
(19.6)
12.4
Closing assets under management (excluding funds withheld asset)
5,402.4
5,429.1
Average assets under management (excluding funds withheld asset)5
5,415.8
5,172.0
Investment income yield1
4.1%
3.5%
Investment return yield1
4.8%
5.9%
Notes:
1.
See glossary on pages 238 to 241 for definitions.
2.
See notes to the consolidated financial statements.
3.
Excludes cash withheld under funds withheld arrangement, see note (J).
4. See page 29 (Investment holdings).
5.
Mean average of opening and closing balances.
Operating return on tangible equity1
2024
2023
£m
£m
Operating profit/(loss) - ongoing operations
205.0
(189.9)
Other finance costs
(15.4)
(14.5)
Coupon payments in respect of Tier 1 notes
(16.6)
(16.6)
Adjusted operating profit/(loss) - ongoing operations before tax
173.0
(221.0)
Tax (charge)/credit (2024 UK standard tax rate of 25.0%, 2023 UK standard tax rate of 23.5%)
(43.3)
51.9
Adjusted operating profit/(loss) - ongoing operations after tax
129.7
(169.1)
Opening shareholders' equity
2,058.2
1,845.3
Opening goodwill and other intangible assets
(818.6)
(822.2)
Opening shareholders' tangible equity
1,239.6
1,023.1
Closing shareholders' equity
2,137.9
2,058.2
Closing goodwill and other intangible assets
(776.3)
(818.6)
Closing shareholders' tangible equity
1,361.6
1,239.6
Average shareholders' tangible equity2
1,300.6
1,131.4
Operating return on tangible equity
10.0%
(14.9%)
Notes:
1.
See glossary on pages 238 to 241 for definitions.
2.
Mean average of opening and closing balances.
244 | Direct Line Group Annual Report and Accounts 2024
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Operating earnings/(loss) per share1
2024
2023
£m
£m
Operating profit/(loss) - ongoing operations
205.0
(189.9)
Other finance costs
(15.4)
(14.5)
Coupon payments in respect of Tier 1 notes
(16.6)
(16.6)
Adjusted operating profit/(loss) - ongoing operations before tax
173.0
(221.0)
Tax (charge)/credit/(2024 UK standard tax rate of 25.0%, 2023 UK standard tax rate of 23.5%)
(43.3)
51.9
Adjusted profit/(loss) for the year attributable to the owners of the Company
129.7
(169.1)
Weighted average total shares (number of Ordinary Shares (millions))
1,311.4
1,311.4
Weighted average of Share Trust owned shares (millions)
(10.8)
(12.4)
Weighted average number of Ordinary Shares in issue (millions)
1,300.6
1,299.0
Effect of dilutive potential of share options and contingently issuable shares (millions)
19.5
17.3
Weighted average number of Ordinary Shares for the purpose of operating earnings per share
(millions)
1,320.1
1,316.3
Operating earnings/(loss) per share
9.8
(12.8)
Note:
1.
See glossary on pages 238 to 241 for definitions.
Insurance and reinsurance finance expenses
2024
2023
£m
£m
Insurance finance expense from insurance contracts issued:
Unwind of discounting of claims
(185.6)
(189.8)
Of which:
Ongoing operations1
(156.3)
(161.5)
Brokered commercial business1
(25.9)
(24.4)
Non-core and Run-off1
(3.4)
(3.9)
Effect of change in yield curve1
164.6
(4.0)
Insurance finance expense from insurance contracts issued
(21.0)
(193.8)
Reinsurance finance expense from insurance contracts issued:
Unwind of discounting of claims1
69.6
49.5
Of which:
Ongoing operations1
57.4
45.0
Brokered commercial business1
11.9
4.3
Non-core and Run-off1
0.3
0.2
Effect of change in yield curve1
(75.4)
(21.5)
Interest expense on funds withheld liabilities
(14.4)
–
Reinsurance finance expense from insurance contracts issued
(20.2)
28.0
Net insurance finance expense:
Unwind of discounting of claims1
(116.0)
(140.3)
Of which:
Ongoing operations1
(98.9)
(116.5)
Brokered commercial business1
(14.0)
(20.1)
Non-core and Run-off1
(3.1)
(3.7)
Effect of change in yield curve1
89.2
(25.5)
Interest expense on funds withheld liabilities
(14.4)
–
Net insurance finance expense
(41.2)
(165.8)
Note:
1.
See glossary on pages 238 to 241 for definitions.
245 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Appendix B – Management view statements of profit or loss, claims development tables, expenses,
average premiums, gross written premium and associated fees and in-force policies (unaudited)
Management view Statement of Profit or Loss – year ended 31 December 2024
The table below analyses the Group’s management view results by reportable segment for the year ended 31 December 2024
Motor
Non-Motor
Total Group -
ongoing
operations1
Brokered
commercial
business1
Non-core
and Run-off1
Total Group
Notes
£m
£m
£m
£m
£m
£m
Gross written premium and associated fees
2,700.1
1,031.6
3,731.7
436.9
178.4
4,347.0
Instalment income
69.9
26.9
96.8
1.9
–
98.7
Movement in liability for remaining coverage
(31.0)
(37.6)
(68.6)
181.6
8.3
121.3
Insurance revenue
3
2,739.0
1,020.9
3,759.9
620.4
186.7
4,567.0
Expenses from reinsurance contracts held
3
(830.8)
(72.0)
(902.8)
(532.4)
(4.4)
(1,439.6)
Net insurance revenue
1,908.2
948.9
2,857.1
88.0
182.3
3,127.4
Incurred claims - including losses from onerous
contracts and other directly attributable claims
income
(2,209.8)
(571.8)
(2,781.6)
(364.9)
(127.4) (3,273.9)
Amounts recoverable from/(payable on) reinsurers
3
781.0
4.7
785.7
397.2
(2.9)
1,180.0
Net insurance claims
(1,428.8)
(567.1)
(1,995.9)
32.3
(130.3) (2,093.9)
Of which:
Prior-year reserves development
20.5
(23.7)
(3.2)
(2.3)
10.0
4.5
Acquisition costs
(87.3)
(92.0)
(179.3)
(47.7)
(6.0)
(233.0)
Operating expenses
(372.8)
(204.5)
(577.3)
(57.6)
(39.2)
(674.1)
Other directly attributable expenses
3
(460.1)
(296.5)
(756.6)
(105.3)
(45.2)
(907.1)
Insurance service result
3
19.3
85.3
104.6
15.0
6.8
126.4
Investment income
4
168.0
32.3
200.3
33.6
1.3
235.2
Unwind of discounting of claims1
4
(78.9)
(20.0)
(98.9)
(14.0)
(3.1)
(116.0)
Other operating income and expenses
(1.4)
0.4
(1.0)
1.6
(1.5)
(0.9)
Operating profit/(loss)
107.0
98.0
205.0
36.2
3.5
244.7
Net fair value gains2
4
37.1
Effect of change in yield curve1
89.2
Interest expense on fund withheld liabilities
(14.4)
Restructuring and one-off costs1,2
4
(118.1)
Other finance costs
8
(15.4)
(Loss)/gain on disposal of business
(4.7)
Profit before tax
218.4
Key performance indicators – year ended 31 December 2024
Motor
Non-Motor
Total Group -
ongoing
operations1
Total Group
Net insurance margin1
1.0%
8.9%
3.6%
4.0%
Combined operating ratio1
99.0%
91.1%
96.4%
96.1%
Net expense ratio1
19.5%
21.6%
20.2%
21.6%
Net acquisition costs ratio1
4.6%
9.7%
6.3%
7.5%
Net insurance claims ratio1
74.9%
59.8%
69.9%
67.0%
– current-year attritional1
76.0%
52.8%
68.3%
65.7%
– prior-year reserves development
(1.1%)
2.5%
0.1%
(0.1%)
– major weather events
N/A
4.5%
1.5%
1.4%
Effect of weather
Net insurance claims ratio1
N/A
(1.9%)
(0.6%)
(0.6%)
Net acquisition costs ratio1
N/A
0.0%
0.0%
0.0%
Net insurance margin normalised for event weather1
N/A
7.0%
3.0%
3.4%
246 | Direct Line Group Annual Report and Accounts 2024
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Additional data to support key performance indicators – year ended 31 December 2024
Motor
Non-Motor
Total Group -
ongoing
operations1
Total Group
£m
£m
£m
£m
Net insurance claims
(1,428.8)
(567.1)
(1,995.9)
(2,093.9)
Attritional net insurance claims
(1,449.3)
(500.3)
(1,949.6)
(2,055.3)
Prior-year reserves development
20.5
(23.7)
(3.2)
4.5
Major weather events
N/A
(43.1)
(43.1)
(43.1)
Normalised operating profit1 – year ended 31 December 2024
Total Group
- ongoing
operations1
£m
Operating profit
205.0
Effect of:
Ogden discount rate
–
Normalised weather - claims
(19.2)
Normalised weather - profit share
–
Normalised operating profit
185.8
Prior-year adjustments
Prior-year reserves development
(3.2)
Prior-year normalised operating loss
(3.2)
Current-year normalised operating profit
189.0
Current-year normalised operating profit ratio
102%
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
2.
Restructuring and one-off costs include £4.0 million expenses included in the Group insurance service result as disclosed in note 4.
247 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Management view Statement of Profit or Loss – year ended 31 December 2023
The table below analyses the Group’s management view results by reportable segment for the year ended 31 December
2023 (restated).
Motor
Non-Motor
Total Group -
ongoing
operations1
Brokered
commercial
business1
Non-core
and Run-off1
Total Group
Notes
£m
£m
£m
£m
£m
£m
Gross written premium and associated fees
2,047.8
929.8
2,977.6
665.8
278.5
3,921.9
Instalment income
66.1
24.8
90.9
1.9
—
92.8
Movement in liability for remaining coverage
(308.5)
(35.4)
(343.9)
(66.9)
(2.2)
(413.0)
Insurance revenue
3
1,805.4
919.2
2,724.6
600.8
276.3
3,601.7
Expenses from reinsurance contracts held
3
(240.5)
(61.5)
(302.0)
(163.4)
(4.8)
(470.2)
Net insurance revenue
1,564.9
857.7
2,422.6
437.4
271.5
3,131.5
Incurred claims - including losses from onerous
contracts and other directly attributable claims
income
(1,743.5)
(524.1)
(2,267.6)
(356.8)
(249.2)
(2,873.6)
Amounts recoverable from reinsurers
3
248.7
30.5
279.2
140.8
3.4
423.4
Net insurance claims
(1,494.8)
(493.6)
(1,988.4)
(216.0)
(245.8)
(2,450.2)
Of which:
Prior-year reserves development
(138.4)
(6.1)
(144.5)
32.2
(11.8)
(124.1)
Acquisition costs
(89.6)
(76.3)
(165.9)
(116.3)
(10.1)
(292.3)
Operating expenses
(312.1)
(168.2)
(480.3)
(91.2)
(44.1)
(615.6)
Other directly attributable expenses
3
(401.7)
(244.5)
(646.2)
(207.5)
(54.2)
(907.9)
Insurance service result
3
(331.6)
119.6
(212.0)
13.9
(28.5)
(226.6)
Investment income
4
107.7
31.4
139.1
35.2
4.3
178.6
Unwind of discounting of claims
4
(94.3)
(22.2)
(116.5)
(20.1)
(3.7)
(140.3)
Other operating income and expenses
(1.4)
0.9
(0.5)
(1.4)
(1.2)
(3.1)
Operating (loss)/profit
(319.6)
129.7
(189.9)
27.6
(29.1)
(191.4)
Net fair value gains2
4
124.4
Effect of change in yield curve
(25.5)
Restructuring and one-off costs1,2
4
(59.5)
Other finance costs
8
(14.5)
Gain on disposal of business
443.9
Profit before tax
277.4
Key performance indicators – year ended 31 December 2023
Motor
Non-Motor
Total Group -
ongoing
operations1
Total Group
Net insurance margin1
(21.1%)
14.0%
(8.7%)
(7.2%)
Combined operating ratio1
121.1%
86.0%
108.7%
107.2%
Net expense ratio1
19.9%
19.6%
19.8%
19.7%
Net acquisition costs ratio1
5.7%
8.9%
6.8%
9.3%
Net insurance claims ratio1
95.5%
57.5%
82.1%
78.2%
– current-year attritional1
86.7%
53.7%
75.0%
73.3%
– prior-year reserves development
8.8%
0.7%
6.0%
4.0%
– major weather events
N/A
3.1%
1.1%
0.9%
Effect of weather
Net insurance claims ratio1
N/A
(3.8%)
(1.3%)
(1.6%)
Net acquisition cost ratio
N/A
0.0%
0.0%
0.0%
Net insurance margin normalised for event weather1
N/A
10.2%
(10.0%)
(8.8%)
248 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Additional data to support key performance indicators – year ended 31 December 2023
Motor
Non-Motor
Total Group -
ongoing
operations1
Total Group
£m
£m
£m
£m
Net insurance claims
(1,494.8)
(493.6)
(1,988.4)
(2,450.2)
Attritional net insurance claims
(1,356.4)
(460.8)
(1,817.2)
(2,297.9)
Prior-year reserves development
(138.4)
(6.1)
(144.5)
(124.1)
Major weather events
N/A
(26.7)
(26.7)
(28.2)
Normalised operating profit3 – year ended 31 December 2023
Total Group -
ongoing
operations1
£m
Operating loss
(189.9)
Effect of:
Normalised weather - claims
(32.7)
Normalised weather - profit share
–
Normalised operating loss
(222.6)
Prior-year adjustments
Prior-year reserves development
(144.5)
Ogden discount rate
–
Prior-year normalised operating loss
(144.5)
Current-year normalised operating loss
(78.1)
Current-year normalised operating loss ratio
35%
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
2.
Restructuring and one-off costs include £24.8 million expenses included in the Group insurance service result as disclosed in note 4.
249 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Insurance and reinsurance contract assets and liabilities – claims development tables (discounted PPO basis)
The claims development tables disclosed in note 19.3 have been re-presented on an undiscounted PPO basis, this is more in line
with how the Group manages its insurance and reinsurance contract assets and liabilities.
Gross insurance liabilities
Accident year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Estimate of ultimate gross claims
costs:
At end of accident year
2,066.5
2,124.8 2,178.0 2,280.7 2,059.9
1,767.3
1,905.5
2,252.1
2,721.5 3,229.4
One year later
(35.1)
(78.5)
(118.2)
(92.3)
(57.3)
(66.4)
(11.1)
157.9
134.9
Two years later
(113.2)
(52.7)
(93.7)
(38.8)
(37.5)
(28.7)
(29.9)
22.2
Three years later
(57.2)
(80.4)
(32.1)
(3.4)
(8.1)
36.7
(14.7)
Four years later
(20.5)
(39.8)
(18.2)
4.1
15.0
(63.6)
Five years later
(16.5)
(12.0)
(1.2)
20.9
5.4
Six years later
5.3
(18.6)
11.0
(33.1)
Seven years later
(5.9)
8.6
(8.6)
Eight years later
(16.6)
0.1
Nine years later
(6.2)
Current estimate of cumulative
claims
1,800.6
1,851.5
1,917.0
2,138.1
1,977.4
1,645.3 1,849.8 2,432.2 2,856.4 3,229.4
Cumulative payments to date
(1,757.5) (1,806.4) (1,868.2) (2,071.3) (1,845.6)
(1,518.5) (1,584.3) (1,970.1) (1,992.3) (1,759.0)
Gross liability recognised in the
statement of financial position
43.1
45.1
48.8
66.8
131.8
126.8
265.5
462.1
864.1 1,470.4 3,524.5
2014 and prior
556.2
Claims handling provision
125.1
Adjustment for non-financial risk
305.3
Effect of discounting
(438.7)
Other Liabilities for Incurred
Claims
37.2
Total
4,109.6
Net insurance contract liabilities
Accident year
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Total
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
Estimate of ultimate net claims
costs:
At end of accident year
1,912.3
1,931.8 2,009.2
2,137.8
1,921.4
1,622.7
1,761.1 2,180.7 2,237.7
1,985.7
One year later
(75.5)
(30.3)
(95.1)
(80.1)
(36.3)
(49.2)
(1.5)
170.5
(47.5)
Two years later
(61.9)
(46.7)
(60.2)
(20.0)
(36.9)
(42.6)
(12.6)
22.2
Three years later
(29.2)
(42.9)
(17.2)
(18.2)
(7.7)
48.3
(17.1)
Four years later
(21.0)
(14.8)
(26.8)
3.5
9.9
(22.4)
Five years later
(22.0)
(8.0)
(10.2)
20.8
3.0
Six years later
5.0
(13.2)
7.9
(2.1)
Seven years later
(5.2)
(4.9)
(2.6)
Eight years later
(7.4)
2.9
Nine years later
4.5
Current estimate of cumulative
claims
1,699.6
1,773.9 1,805.0 2,041.7
1,853.4
1,556.8
1,729.9 2,373.4
2,190.2
1,985.7
Cumulative payments to date
(1,687.6) (1,753.8) (1,780.1) (1,995.3) (1,786.9) (1,464.0) (1,542.3) (1,966.3)
(1,575.1)
(1,117.7)
Gross liability recognised in the
statement of financial position
12.0
20.1
24.9
46.4
66.5
92.8
187.6
407.1
615.1
868.0 2,340.5
2014 and prior
352.8
Claims handling provision
89.3
Adjustment for non-financial risk
148.9
Effect of discounting
(358.5)
Other Liabilities for incurred
claims
(265.1)
Total
2,307.9
250 | Direct Line Group Annual Report and Accounts 2024
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Operating expenses – ongoing operations1
FY 2024
FY 2023
Insurance
service result
Other
expenses
(note 5)
Total
expenses
Insurance
service result
Other
expenses
(note 5)
Total
expenses
£m
£m
£m
£m
£m
£m
Commission expenses
(121.2)
N/A
(121.2)
(104.8)
N/A
(104.8)
Marketing
(58.1)
N/A
(58.1)
(61.1)
N/A
(61.1)
Acquisition expenses
(179.3)
N/A
(179.3)
(165.9)
N/A
(165.9)
Staff costs2
(225.2)
0.7
(224.5)
(185.1)
(5.5)
(190.6)
IT and other operating expenses2,3
(104.4)
–
(104.4)
(93.2)
(5.3)
(98.5)
Insurance levies
(104.1)
N/A
(104.1)
(79.1)
N/A
(79.1)
Depreciation, amortisation and impairment of
intangible and fixed assets4
(143.6)
(19.5)
(163.1)
(122.9)
(10.3)
(133.2)
Other expenses
(577.3)
(18.8)
(596.1)
(480.3)
(21.1)
(501.4)
Total operating expenses - ongoing operations1
(756.6)
(18.8)
(775.4)
(646.2)
(21.1)
(667.3)
Total expenses - Brokered commercial business1
(105.3)
0.3
(105.0)
(207.5)
(1.8)
(209.3)
Total expenses - Non-Core and Run-off1
(45.2)
(2.7)
(47.9)
(54.2)
(2.0)
(56.2)
Total expenses – Restructuring and one-off costs1
N/A
N/A
(118.1)
N/A
N/A
(59.5)
Total expenses
(907.1)
(21.2)
(1,046.4)
(907.9)
(24.9)
(992.3)
Net acquisition costs ratio – ongoing operations1
6.3%
6.8%
Net acquisition costs ratio – total Group1
7.5%
9.3%
Net expense ratio - ongoing operations1
20.2%
19.8%
Net expense ratio - total Group1
21.6%
19.7%
Notes:
1.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
2.
Staff costs and other operating expenses attributable to claims handling activities are allocated to the cost of insurance claims.
3.
IT and other operating expenses include professional fees and property costs.
4. Includes right-of-use assets ("ROU") and property, plant and equipment. For the year ended 31 December 2024, there were no impairment charges
which relate solely to own occupied freehold property (2023: no impairments).
Motor and Home average premium (£)
£
FY 2024
FY 2023
Q4 2024
Q3 2024
Q2 2024
Q1 2024
Q4 2023
New business
583
551
592
557
588
599
594
Renewal
508
441
499
505
514
515
513
Motor own brands1
530
470
524
521
536
541
537
New business
259
206
278
266
255
238
212
Renewal
278
249
287
284
276
261
259
Home own brands
274
242
286
281
272
257
249
Note:
1.
Excluding the By Miles brand.
251 | Direct Line Group Annual Report and Accounts 2024
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Gross written premium and associated fees
FY 2024
FY 2023
£m
£m
Own brands1,2
1,554.9
1,601.3
Partnerships3
1,145.1
446.5
Motor
2,700.0
2,047.8
Own brands1
480.3
408.8
Partnerships
156.5
142.7
Home
636.8
551.5
Rescue: Green Flag
88.7
85.1
Rescue: Linked4
27.2
36.6
Rescue: Partners and other4
16.9
15.6
Rescue
132.8
137.3
Commercial direct1
262.3
241.0
Non-Motor
1,031.9
929.8
Ongoing operations5
3,731.9
2,977.6
Non-Core and Run-off5
178.3
278.5
Of which: Run-off partnerships
60.8
150.1
Brokered commercial insurance
436.9
665.8
Total gross written premium and associated fees
4,347.1
3,921.9
Notes:
1.
Own brands include gross written premium for Motor under the Direct Line, Churchill, Darwin, Privilege and By Miles brands, Home under the
Direct Line, Churchill and Privilege brands and Commercial Direct under the Direct Line for Business and Churchill brands.
2.
Gross written premiums for the By Miles brand which were previously reported within Motor partnerships have been reallocated to own brands.
There is no impact on in-force policies.
3.
Motor partnerships includes the Motability partnership, which started on 1 September 2023, and resulted in significant growth in the third quarter
of 2023. From 2024, the majority of Motability gross written premium is recognised twice a year on 1 April and 1 October.
4. A reclassification between Rescue Partners and other and Rescue Linked has been made to reflect how these businesses are managed.
5.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
to financial statement line items.
252 | Direct Line Group Annual Report and Accounts 2024
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In-force policies (thousands)
31 Dec
2024
31 Dec
2023
Own brands1
2,927
3,373
Partnerships2
904
808
Motor
3,831
4,181
Own brands1
1,729
1,706
Partnerships
732
738
Home
2,461
2,444
Rescue: Green Flag
985
1,048
Rescue: Linked3
574
604
Rescue: Partners and other3
221
313
Rescue
1,780
1,965
Commercial direct1,4
755
749
Non-Motor4
4,996
5,158
Ongoing operations4,5
8,827
9,339
Non-core and Run-off4,5
256
2,431
Of which: Run-off partnerships4,5
83
2,224
Brokered commercial insurance5
174
286
Total in-force policies4
9,257
12,056
Notes:
1.
Own brands include in-force policies Motor under the Direct Line, Churchill, Darwin, Privilege and By Miles brands. Home under the Direct Line,
Churchill and Privilege brands and Commercial Direct under the Direct Line for Business and Churchill brands.
2.
Motor partnerships includes the Motability partnership, which started on 1 September 2023, and resulted in significant growth in the third quarter
of 2023. From 2024, the majority of Motability gross written premium is recognised twice a year on 1 April and 1 October. As the Motability contract
is a fleet contract, customer numbers are used to allow a more representative presentation of the Group's in-force policies.
3.
A reclassification between Rescue Partners and other and Rescue Linked has been made to reflect how these businesses are managed.
4. Total in-force policies have been adjusted as follows: policies associated with borderaux business in Commercial Direct have been added across
both periods.
5.
See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation.
253 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
This Annual Report & Accounts has been prepared for, and
only for, the members of the Company as a body, and no
other persons. The Company, its Directors, employees, agents
or advisers do not accept responsibility to any other person
to whom this document is shown, or into whose hands it
may come, and any such responsibility or liability is
expressly disclaimed.
Certain information contained in this document, including any
information as to the Group's strategy, plans or future financial
or operating performance, constitutes "forward-looking
statements". These forward-looking statements may be
identified by the use of forward-looking terminology, including
the terms "aims", "ambition", "anticipates", "aspire", "believes",
"continue", "could", "ensures", "estimates", "expects", "guidance",
"intends", "may", "mission", "outlook", "over the medium term",
"plans", "predicts", "projects", "propositions", "seeks", "should",
"strategy", "targets", "vision", "will" or "would" or, in each case,
their negative or other variations or comparable terminology, or
by discussions of strategy, plans, objectives, goals, future events
or intentions. These forward-looking statements include all
matters that are not historical facts. They may appear in several
places throughout this document and include statements
regarding intentions, beliefs or current expectations, including
of the Directors, concerning, among other things: the Group's
results of operations, statement of financial position, financial
condition, prospects, growth, net insurance margin, insurance
service result, strategies, the industry in which the Group
operates and the Group's approach to climate-related matters.
Examples of forward-looking statements include financial
targets with respect to return on tangible equity, solvency
capital ratio, net insurance margin, combined operating ratio,
percentage targets for current-year contribution to operating
profit, prior-year reserve releases, cost reductions, reduction in
net expense ratio, investment income yield, net realised and
unrealised gains, capital expenditure and risk appetite range;
and targets, goals and plans relating to climate and the Group's
approach and strategy in connection with climate-related risks
and opportunities. By their nature, all forward-looking
statements involve risk and uncertainties because they relate to
events and depend on circumstances that may or may not
occur in the future and/or are beyond the Group's control and/
or they rely on assumptions that may or may not transpire to be
correct. Forward-looking statements are not guaranteeing
future performance.
The Group's actual results of operations, financial condition and
the development of the business sector in which the Group
operates may differ materially from those suggested by the
forward-looking statements contained in this document, for
example directly or indirectly as a result of, but not limited to:
– changes to law, regulation or regulatory approach following
any change in government;
– United Kingdom ("UK") domestic and global economic
business conditions, and changes of a geo-political and/or
macro-economic nature;
– the terms of the trading and other relationships from time to
time between the UK and the EU and between the UK and
other countries, and their implementation;
– the impact of the FCA's GIPP regulations and Consumer
Duty regulations and of responses by insurers, customers and
other third parties and of interpretations of such rules by any
relevant regulatory authority;
– market-related risks such as fluctuations in interest rates,
exchange rates and credit spreads, including those created
or exacerbated by the war in Ukraine following the Russian
invasion and/or conflict in the Middle East;
– the policies and actions and/or new principles, rules and/or
regulations, of regulatory authorities and bodies, and of
changes to, or changes to interpretations of, principles, rules
and/or regulations (including changes made directly or
indirectly as a result of Brexit or related to capital and
solvency requirements or related to the Ogden discount
rates) and of changes to law and/or understandings of law
and/or legal interpretation following the decisions and
judgements of courts;
– the impact of competition, currency changes, inflation and
deflation;
– the timing, impact and other uncertainties of future
acquisitions, disposals, partnership arrangements, joint
ventures or combinations within relevant industries; and
– the impact of tax and other legislation and other regulation
and of regulator expectations, requirements, interventions,
enforcements, fines and requirements and of court,
arbitration, regulatory or ombudsman decisions, judgements
and awards in the jurisdictions in which the Group and its
affiliates operate.
In addition, even if the Group's actual results of operations,
financial condition and the development of the business sector
in which the Group operates are consistent with any forward-
looking statements contained in this document, those results
or developments may not be indicative of results or
developments in subsequent periods.
The forward-looking statements contained in this document
reflect knowledge and information available as at the date of
preparation of this document. The Group and the Directors
expressly disclaim any obligation or undertaking to update or
revise publicly any forward-looking statements, whether
because of new information, future events or otherwise, unless
required to do so by applicable law or regulation. Nothing in
this document constitutes or should be construed as a profit
forecast or estimate for any period.
Neither the content of Direct Line Group's website nor the
content of any other website accessible from hyperlinks on the
Group's website is incorporated into, or forms part of, this
document.
254 | Direct Line Group Annual Report and Accounts 2024
Strategic Report / Governance / Financial statements
Forward-looking statements disclaimer
Registered office
Direct Line Insurance Group plc
Churchill Court
Westmoreland Road
Bromley
BR1 1DP
Registered in England and Wales No. 02280426
Company Secretary: Roger C Clifton
Website: www.directlinegroup.co.uk
Registrars
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
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BS99 6ZZ
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To find out more about Investor Centre, go to
www.investorcentre.co.uk/directline
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
Telephone: +44 (0)20 7311 1000
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Legal advisers
Allen Overy Shearman Sterling LLP (A&O Shearman)
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One Bunhill Row
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EC1Y 8YY
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Principal banker
NatWest Group plc
250 Bishopsgate
London
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Corporate brokers
Morgan Stanley & Co. International plc
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RBC Europe Ltd (trading as "RBC Capital Markets")
100 Bishopsgate
London
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Telephone: +44 (0)20 7653 4000
Website: www.rbccm.com
255 | Direct Line Group Annual Report and Accounts 2024
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Contact Information