REG - Direct Line Ins Grp - PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2024
04/03/2025 07:15
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RNS Number : 1831Z Direct Line Insurance Group PLC 04 March 2025
DIRECT LINE INSURANCE GROUP PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024
DELIVERING ON THE TURNAROUND
4 March 2025
Gross written premium and associated fees(1,2) Net insurance margin(1,2) Solvency capital ratio(1,3,4) -
pre-final dividend
£3,732 million 3.6% 200%
25.3% increase on 2023 12.3pts increase on 2023 5.0 pence per share final dividend
ADAM WINSLOW, CEO OF DIRECT LINE GROUP, COMMENTED:
"Our 2024 financial results demonstrate the significant progress we have made,
so far, in transforming the business. The turnround strategy, launched in
July, has made a marked difference to the company's performance, and we have
good momentum across all our business lines.
During the year we launched three new Direct Line branded motor insurance
products on the largest price comparison website, Green Flag signed two new
agreements, our Home business re-platformed, we further improved our pricing
and underwriting capabilities, initiated a new operational structure to become
a more efficient and effective organisation and overhauled our claims function
in service of better customer and indemnity outcomes.
We also delivered a £395 million increase in ongoing operating profit and 12
point improvement in our net insurance margin compared to the prior year.
Motor returned to profitability during 2024, and we made material progress on
our cost agenda by actioning £50m of run rate cost savings, with the full
benefit expected in 2025.
During the year, we improved our reinsurance protection to reduce future
earnings volatility and further diversified our asset portfolio whilst
ensuring it closely matches liabilities and carried out an independent
third-party reserve review. We remain confident in our ability to deliver at
least £100 million of gross run-rate savings by the end of 2025 and 13% net
insurance margin in 2026.
Our 2024 results and robust balance sheet with a pre-final dividend solvency
ratio of 200% has enabled the Board to recommend a final dividend of five
pence per share.
For 2025, we remain focused on delivering the turnaround at pace, leveraging
our strong market position and operational efficiencies, to become the
customers' insurer of choice.
Our colleagues deserve considerable recognition for showing an unwavering
commitment to delivering brilliant customer outcomes everyday particularly
during the first year of our turnaround plan."
Results summary
FY 2024 FY 2023 Change
£m £m
Gross written premium and associated fees(1) - ongoing operations(2) 3,731.9 2,977.6 25.3%
Insurance service result - ongoing operations(2) 104.6 (212.0) £316.6m
Net insurance margin(1) - ongoing operations(2) 3.6% (8.7%) 12.3pts
Ongoing operating profit/(loss)(1) - ongoing operations(2) 205.0 (189.9) £394.9m
Profit before tax 218.4 277.4 (£59.0m)
Operating return on tangible equity(1) 10.0% (14.9%) 24.9pts
Basic earnings per share (pence) 11.2 15.9 (4.7) pence
Dividends per share - total (pence) 7.0 4.0 3.0 pence
2024 2023 Change
In-force policies(1) - ongoing operations (thousands)(1,2) 8,827 9,339 (5.5%)
Solvency capital ratio(1,3,4) - post dividends 195% 188% 7pts
Solvency capital ratio(1,3,4) - pre-final dividend 200% 192% 8pts
Financial highlights
- 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-final 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.
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 Compare the Market.
- 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 are 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 2025(5). 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.
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 billion(6).
- 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.
For further information, please contact
DHRUV GAHLAUT ROGER LOWRY
CHIEF STRATEGY AND INVESTOR RELATIONS OFFICER DIRECTOR OF CORPORATE AFFAIRS
Mobile: +44 (0)7385 481177 Mobile: +44 (0)7881 553155
Notes:
1. See glossary for definitions and Appendix A - Alternative Performance
Measures for reconciliation of operating return on tangible equity.
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 for definitions and Appendix B - Management view
statements of profit or loss, claims development tables on a discounted basis,
expenses, average premiums, gross written premium and associated fees and
in-force policies.
3. Estimates based on the Group's Solvency II partial internal model.
4. The full year 2023 solvency capital ratio has been re-presented as
explained in the Capital analysis section of this report (previously reported
in the Group's full year 2023 preliminary results and Annual Report and
Accounts as being 197%).
5. 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.
6. 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.
CEO REVIEW
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 cent(3) 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 basis(4) 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.
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.
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 Price Comparison Website 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.
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 for definitions and Appendix A - Alternative Performance
Measures for reconciliation of operating return on tangible equity.
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 for definitions and Appendix B - Management view
statements of profit or loss, claims development tables on a discounted basis,
expenses, average premiums, gross written premium and associated fees and
in-force policies.
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.
CFO REVIEW
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.
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 basis(1).
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 fees(2,3), a £395 million improvement in
ongoing operating profit(2,3) and 10% growth in tangible net asset value(1).
These results provide a strong foundation from which to be able to deliver on
our strategic ambition of achieving 13% net insurance margin(2,4) in 2026.
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. 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.
2. See glossary for definitions and Appendix A - Alternative Performance
Measures for reconciliation of operating return on tangible equity.
3. 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 for definitions and Appendix B - Management view
statements of profit or loss, claims development tables on a discounted basis,
expenses, average premiums, gross written premium and associated fees and
in-force policies.
4. Net insurance margin for ongoing operations, normalised for event
weather.
GROUP FINANCIAL PERFORMANCE
2024 2023 Change
Ongoing operations(1,2)
In-force policies (thousands)(1) 8,827 9,339 (5.5%)
Motor 3,831 4,181 (8.4%)
Non-Motor 4,996 5,158 (3.1%)
FY 2024 FY 2023 Change
Notes £m £m £m
Ongoing operations(1,2)
Gross written premium and associated fees(1) 3,731.9 2,977.6 25.3%
Motor 2,700.0 2,047.8 31.8%
Non-Motor 1,031.9 929.8 11.0%
Net insurance revenue(1) 2,857.1 2,422.6 17.9%
Insurance service result - ongoing operations(1) 104.6 (212.0) 316.6
Motor 19.3 (331.6) 350.9
Non-Motor 85.3 119.6 (34.3)
Net insurance margin(1) 3.6% (8.7%) 12.3pts
Combined operating ratio(1) 96.4% 108.7% 12.3pts
Net insurance claims ratio(1) 69.9% 82.1% 12.2pts
Net acquisition costs ratio(1) 6.3% 6.8% 0.5pts
Net expense ratio(1) 20.2% 19.8% (0.4pts)
Normalised net insurance margin(1) 3.0% (10.0%) 13.0pts
Investment income 200.3 139.1 44.0%
Unwind of discounting of claims(1,3) (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
Motor 107.0 (319.6) 426.6
Non-Motor 98.0 129.7 (31.7)
Current-year operating profit/(loss)(1) 208.2 (45.4) 253.6
Prior-year reserves development (3.2) (144.5) 141.3
Other investment movements(4) 111.9 98.9 13.1%
Restructuring and one-off costs (118.1) (59.5) (58.6)
Brokered commercial business, Non-core and Run-off 39.7 (1.5) 41.2
Other finance costs 6 (15.4) (14.5) (6.2%)
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) 9 11.2 15.9 (4.7)
Diluted earnings per share (pence) 9 11.1 15.7 (4.6)
Operating earnings/(loss) per share (pence)(1,3) 9.8 (12.8) 22.6
Return on equity 11 7.0% 10.6% (3.6pts)
Operating return on tangible equity(1,3) 10.0% (14.9%) 24.9pts
Investments metrics
Investment income yield(1,3) 4.1% 3.5% 0.6pts
2024 2023 Change
Capital and returns metrics
Dividend per share - final ordinary (pence) 5.0 4.0 1.0
Dividend per share - total ordinary (pence) 7.0 4.0 3.0
Net asset value per share (pence) 10 164.3 158.0 4.0%
Tangible net asset value per share (pence)(1) 10 104.7 95.6 9.5%
Solvency capital ratio - post-dividends(1,5,6) 195% 188% 7pts
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 1 (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 policies(1) and gross written premium and associated fees(1)
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 premium growth. 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 costs(1) (179.3) (165.9)
Staff costs(5) (225.2) (185.1)
IT and other operating expenses(7,8) (104.4) (93.2)
Insurance levies (104.1) (79.1)
Depreciation, amortisation and impairment of intangible and fixed assets(9) (143.6) (122.9)
Operating expenses (577.3) (480.3)
Total expenses - ongoing operations(1,2) (756.6) (646.2)
Total expenses - Non-core and Run-off(1) (45.2) (54.2)
Total expenses - Brokered commercial business(1) (105.3) (207.5)
Total expenses (907.1) (907.9)
Net acquisition costs ratio(1) - ongoing operations(2) 6.3% 6.8%
Net acquisition costs ratio(1) - total Group 7.5% 9.3%
Net expense ratio(1) - ongoing operations(2) 20.2% 19.8%
Net expense ratio(1) - total Group 21.6% 19.7%
Investment result and unwind of discount rate(1)
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%.
Ongoing operations(1,2) 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 claims(1,3) (98.9) (116.5)
Finance income and expenses in operating profit(1) 101.4 22.6
FY 2024 FY 2023
Investment income yield (total Group)(1,3) 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
Note £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 business(1) 36.2 27.6
Operating profit/(loss)¹- Non-core and Run-off(1) 3.5 (29.1)
Operating profit/(loss)¹ - total Group 244.7 (191.4)
Restructuring and one-off costs(1) (118.1) (59.5)
Net fair value gains 37.1 124.4
Net insurance finance income - effect of change in yield curve(1) 89.2 (25.5)
Interest expense on funds withheld liabilities (14.4) -
Other finance costs 6 (15.4) (14.5)
(Loss)/gain on disposal of business 7 (4.7) 443.9
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) 9 11.2 15.9
Operating return on tangible equity(1,3) 10.0% (14.9%)
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 gains(1,2)
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 equity (1,3)
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 . The
calculation of earnings per share is presented in note 9, while the
calculation of operating earnings/(loss) per share is presented in Appendix A.
Notes:
1. See glossary 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 for definitions and Appendix B - Management view
statements of profit or loss, claims development tables on a discounted basis,
expenses, average premiums, gross written premium and associated fees and
in-force policies.
3. See Appendix A - Alternative Performance Measures for reconciliation 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 Capital analysis section 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).
Segmental Report
Motor
31 Dec 30 Sep 30 Jun 31 Mar 31 Dec
2024
2024
2024
2024
2023
In-force policies(2) (thousands) 3,831 3,933 3,979 4,072 4,181
Of which:
Own brands(1) 2,927 3,048 3,119 3,235 3,373
Partnerships 904 885 860 837 808
FY 2024 FY 2023 Change
£m £m
Gross written premium 2,700.0 2,047.8 31.8%
Own brands(1) 1,554.9 1,601.3 (2.9%)
Partnerships 1,145.1 446.5 156.5%
Operating profit/(loss) 107.0 (319.6) 426.6
Profit/(loss) before other finance costs 207.0 (274.4) 175.4%
Net insurance margin(2) 1.0% (21.1%) 22.1pt
Net insurance claims ratio(2) 74.9% 95.5% 20.6pts
Current-year attritional net insurance claims ratio(2) 76.0% 86.7% 10.7pts
Prior-year reserves development ratio(2) (1.1%) 8.8% 9.9pts
Net acquisition costs ratio(2) 4.6% 5.7% 1.1pts
Net expense ratio(2) 19.5% 19.9% 0.4pts
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.
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 premiums(1,4)
£ 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
Own brands 530 470 524 521 536 541 537
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 brand(1) 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.
Non-Motor
31 Dec 30 Sep 30 Jun 31 Mar 31 Dec
2024
2024
2024
2024
2023
In-force policies(2) (thousands) 4,996 5,042 5,086 5,107 5,158
Home 2,461 2,464 2,466 2,450 2,444
Rescue 1,780 1,821 1,867 1,904 1,965
Commercial Direct 755 757 753 753 749
Of which: Own brands 3,469 3,507 3,521 3,510 3,503
FY 2024 FY 2023 Change
£m £m
Gross written premium and associated fees(2) 1,031.9 929.8 11.0%
Home 636.8 551.5 15.5%
Rescue 132.8 137.3 (3.3%)
Commercial Direct 262.3 241.0 8.8%
Of which: Own brands 831.3 734.9 13.1%
Operating profit² 98.0 129.7 (24.4%)
Profit before other finance costs 110.4 156.9 (29.6%)
Net insurance margin(2) 8.9% 14.0% (5.1pts)
Net insurance claims ratio(2) 59.8% 57.5% (2.3pts)
Current-year attritional net insurance claims ratio(2) 52.8% 53.7% 0.9pts
Prior-year reserves development ratio(2) 2.5% 0.7% (1.8pts)
Event weather ratio(2) 4.5% 3.1% (1.4pts)
Net acquisition costs ratio(2) 9.7% 8.9% (0.8pts)
Net expense ratio(2) 21.6% 19.6% (2.0pts)
Normalised net insurance margin(2) 7.0% 10.2% (3.2pts)
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.
Home average premiums(1)
£ FY 2024 FY 2023 Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023
New business 259 206 278 266 255 238 212
Renewal 278 249 287 284 276 261 259
Own brands 274 242 286 281 272 257 249
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 attritional net insurance 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.
Brokered commercial business(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-off(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).
Notes:
1. Own brands include Motor in-force policies under the Direct Line,
Churchill, Darwin, Privilege and By Miles brands and Home in-force policies
under the Direct Line, Churchill and Privilege brands.
2. See glossary for definitions and Appendix B - Management view statements
of profit or loss, claims development tables on a discounted basis, expenses,
average premiums, gross written premium and associated fees and in-force
policies.
3. Source: ABI motor premium tracker as at Q2 2024.
4. Average premium figures quoted relate to Motor own brands excluding the
By Miles brand.
Cash flow
Note 2024 2023
£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 15 (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 15 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 operations(1).
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.
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 position(1)
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 dividend(1) 200% 192%
Solvency capital ratio post dividends(1) 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%).
Movement in capital surplus(1)
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 capital(2) - 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 analysis(1)
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 ratio(1)
At 31 December 2024 2023
Deterioration of small bodily injury motor claims equivalent to that (5pts) (5pts)
experienced in 2008/09
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 rate(2) (11pts) (15pts)
100 bps increase in credit spreads(3,4) (6pts) (6pts)
100 bps decrease in interest rates with no change in the PPO discount rate(3) (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.
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(1)
The following table splits the Group's eligible own funds by tier on a
Solvency II basis.
At 31 December 2024 2023
£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(1)
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(2) 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).
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 Fixed or floating
securities
Assets under management(1)
At 31 December 2024 2023
£m £m
Investment-grade credit(2) 2,869.6 2,288.1
High yield 302.7 281.2
Investment grade private placements 55.7 70.6
Credit 3,228.0 2,639.9
Sovereign(2) 746.0 681.2
Total debt securities 3,974.0 3,321.1
Infrastructure debt 188.7 214.2
Commercial real estate loans 135.5 145.9
Other loans 5.4 3.1
Cash and cash equivalents(3) 791.1 1,448.0
Investment property 287.6 277.1
Equity investments(4) 20.1 19.7
Total assets under management 5,402.4 5,429.1
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 and unquoted shares and
insurtech-focused equity fund partnerships. The insurtech-focused equity fund
partnerships are valued based on external valuation reports received from a
third-party fund manager.
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 - ongoing operations 207.5 146.3
Investment fees - ongoing operations (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 3 235.2 178.6
Net fair value gains/(losses) 3 37.1 124.4
Total investment income recognised through the statement of profit or loss 3 272.3 303.0
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
Note 2024 2023
£m £m
Net assets(1) 10 2,137.9 2,058.2
Goodwill and other intangible assets 10 (776.3) (818.6)
Tangible net assets 10 1,361.6 1,239.6
Closing number of Ordinary Shares (millions) 10 1,301.0 1,297.7
Net asset value per share (pence) 10 164.3 158.6
Tangible net asset value per share (pence) 10 104.7 95.5
Note:
1. See glossary for definitions.
Net assets at 31 December 2024 increased by £79.7 million to £2,138 million
(31 December 2023: £2,058 million), partially offset by 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%)
following increases in retained earnings.
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 ratio(1) 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.
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 strengthening), 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)
Non-Motor (488.3) (20.9) (509.2) (483.2) (22.4) (505.6)
Total ongoing operations(1) (2,150.1) (98.7) (2,248.8) (2,118.1) (102.3) (2,220.4)
Brokered commercial business(1,2) 26.8 (10.8) 16.0 (354.7) (18.5) (373.2)
Non-core and Run-off(1) (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)
Note:
1. See glossary for definitions and Appendix B - Management view statements
of profit or loss, claims development tables on a discounted basis, expenses,
average premiums, gross written premium and associated fees and in-force
policies for reconciliation to financial statement line items.
2. 2024 balances reflects 12 months of the Royal & Sun Alliance
Insurance Limited quota share reinsurance compared with three months in 2023
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(1,2) Increase/(decrease) in profit before tax and equity net of reinsurance(1,2)
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 87.0 95.0 38.5 39.0
of present values of 100 basis points
Impact of a decrease in the ILP of the discount rate used in the calculation (115.1) (127.8) (51.4) (52.1)
of present values of 100 basis points
Discount curve - other claims
Impact of an increase in the ILP of the discount rate used in the calculation 65.1 55.9 41.3 37.2
of present values of 100 basis points
Impact of a decrease in the ILP of the discount rate used in the calculation (68.3) (58.6) (43.2) (38.9)
of present values of 100 basis points
Ogden discount rate
Impact of the Group reserving at a discount rate of 1.5% compared to 0.5% 143.6 105.1 57.7 48.1
(2023: 0.75% compared to minus 0.25%)
Impact of the Group reserving at a discount rate of minus 0.5% compared to (204.9) (220.6) (73.8) (97.0)
0.5% (2023: minus 1.25% compared to minus 0.25%)
Claims inflation
Impact of a decrease in claims inflation by 200 basis points for two 129.7 112.8 73.9 71.7
consecutive years
Impact of an increase in claims inflation by 200 basis points for two (131.7) (114.6) (75.0) (72.8)
consecutive years
Risk adjustment (restated)
Impact of a risk adjustment at the 70th percentile compared to the booked risk 52.3 52.3 26.9 28.9
adjustment at the 75th percentile
Impact of a risk adjustment at the 80th percentile compared to the booked risk (61.4) (60.5) (30.2) (33.9)
adjustment at the 75th percentile
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 Annual Report and Accounts.
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 composition of this between the various taxes borne and
collected by the Group is shown below.
Total taxes borne
2024
At 31 December £m
Current-year Corporation Tax credit 55.0
Irrecoverable Value Added Tax incurred on overheads 83.2
Irrecoverable Value Added Tax embedded within claims spend 286.7
Employers' National Insurance contributions 52.1
Other taxes 10.7
Total 487.7
Total taxes collected
2024
At 31 December £m
Insurance Premium Tax 392.1
Value Added Tax 32.7
Employees' Pay As You Earn and National Insurance contributions 119.6
Total 544.4
Jane Poole
Chief Financial Officer
Principal risks and uncertainties
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 risks Risk commentary
Insurance risk is the risk arising from insurance obligations, in relation to Key drivers of the outlook for Insurance risk include reserve, underwriting,
the perils covered and the processes used in the conduct of business. It takes distribution, pricing and reinsurance risks. Issues relating to claims
account of the uncertainty related to the Group's existing insurance and inflation, ongoing Motor insurance affordability concerns resulting in the
reinsurance obligations as well as to new business expected to be written. It creation of the Motor Insurance Task Force, motor market premium softening and
includes the risk of loss, or of adverse change in the value of insurance the uncertainty in economic environment, with elevated geopolitical tensions,
liabilities, resulting from: have been key areas of focus for the Group in 2024.
Claims trends have been significantly impacted by persistent claims inflation
- fluctuations in the timing, frequency and severity of insured events, and and large claims, particularly in the motor market, contributing to
in the timing and amount of claim settlements; and uncertainty in claims reserving and pricing in 2024 and beyond. This
notwithstanding, our reserving processes reflect improved insight in claims
- significant uncertainty of pricing and provisioning assumptions related to experience and inflation trends resulting from extensive work undertaken
extreme or exceptional events (for example catastrophe risk). 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 is the risk of loss resulting from fluctuations in the level and Key drivers of market risk are the sensitivity of the values of our assets and
in the volatility of market prices of assets, liabilities and financial investments to changes in credit spreads, our exposure to losses as a result
instruments. 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.
Operational risk is the risk of loss due to inadequate or failed internal Our approach is to manage our operational risks proactively, to mitigate
processes or systems, including from human error or from external events. potential customer harm, regulatory or legal censure, financial, reputational,
Risks relating to this category include, technology and infrastructure, or environmental, social, governance ("ESG") impacts. This is principally
change, cyber, operational disruption, financial reporting, and procurement achieved through robust control, and the Group is continuing to strengthen
and outsourcing. 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.
Conduct and regulatory and compliance risk: The risk of failing to deliver The Group sees its obligations to deliver good customer outcomes as a priority
good customer outcomes and/or failing to deliver on our regulatory area of focus.
commitments.
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.
Credit risk: The risk of loss resulting from default in obligations due from, The Group monitors its key counterparties, specifically the security of the
and/or changes in the credit standing of, issuers of securities, issuers within its investment portfolio and that of its reinsurance
counterparties or any debtors to which the Group is exposed. 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.
Strategic risk: The risk of direct or indirect adverse effects resulting from Strategic risk is influenced by internal and external developments, including
strategies not being optimally chosen, implemented or adapted to changing the potential impacts of the cost of living, regulatory change, changing
conditions. 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.
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 in place 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 TCFD section of the Group's Annual Report
and Accounts.
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
Accounting policies
Corporate information
Direct Line Insurance Group plc 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.
(A) Basis of preparation
The financial information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards ("IFRSs") as adopted by the UK.
The accounting policies applied in this preliminary announcement are
consistent with those set out in the Group's 2023 annual financial statements
with the exception of new accounting standards which were effective for
periods beginning on or after 1 January 2024. The nature and effect of these
changes are disclosed in note (C). The financial information set out in the
announcement does not constitute the Company's statutory accounts for the
years ended 31 December 2024 or 2023. These accounts were signed on 3 March
2025 and are expected to be published in March 2025 and delivered to the
Registrar of Companies following the Annual General Meeting to be held on
14 May 2025. The independent Auditor's report on the Group accounts for the
year ended 31 December 2024 was signed on 3 March 2025, is unqualified, does
not draw attention to any matters by way of emphasis and does not include a
statement under S498(2) or (3) of the Companies Act 2006. This audit opinion
excludes disclosures surrounding capital adequacy calculated under the
Solvency II regime as these are outside of the audit scope.
(B) 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.
(C) Adoption of new and revised standards
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.
(D) Accounting policies and developments
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.
'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.
(E) Critical accounting judgements and key sources of estimation uncertainty
Full details of the critical accounting judgements and sources of estimation
uncertainty used in applying the Group's accounting policies are outlined on
pages 190 to 193 of the Annual Report and Accounts 2023.
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 judgment in relation
to combination of direct and reinsurance contracts with Motability as follows:
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.
Additionally, the following areas are no longer considered significant:
- PAA eligibility
- Onerous contracts
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.
Consolidated Statement of Profit or Loss
For the year ended 31 December 2024
2024 2023
Notes £m £m
Insurance revenue 2 4,567.0 3,601.7
Insurance service expenses 2 (4,185.0) (3,806.3)
Net expense from reinsurance contracts held(1) 2 (259.6) (46.8)
Insurance service result 2 122.4 (251.4)
Total interest income calculated using effective interest rate method 3 226.6 171.8
Other interest and similar income 3 17.4 16.1
Investment fees 3 (8.8) (9.3)
Net investment income 3 235.2 178.6
Total net fair value gains on financial assets held at fair value through 3 30.3 127.0
profit or loss
Net fair value gains/(losses) on investment property 3 6.6 (1.9)
Net credit impairment gains/(losses) on financial investments 3 0.2 (0.7)
Investment return 3 272.3 303.0
Net finance expenses from insurance contracts issued 3 (21.0) (193.8)
Net finance (expenses)/income from reinsurance contracts held 3 (20.2) 28.0
Investment return and net insurance finance result 3 231.1 137.2
Other operating income 20.3 21.8
Other operating expenses 4 (135.3) (59.6)
Other finance costs 6 (15.4) (14.5)
(Loss)/gain on disposal of business 7 (4.7) 443.9
Profit before tax 218.4 277.4
Tax charge(2) (55.8) (54.5)
Profit for the year attributable to the owners of the Company 162.6 222.9
Earnings per share:
Basic (pence) 9 11.2 15.9
Diluted (pence) 9 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 form an integral part of these consolidated financial
statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2024
2024 2023
£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 0.6 0.1
Fair value gain on equity investments measured at fair value through other 1.2 3.3
comprehensive income
Realised gain/(loss) on equity investments measured at fair value through 0.4 (0.6)
other comprehensive income
Tax relating to items that will not be reclassified (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 164.8 225.5
Company
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated Statement of Financial Position
As at 31 December 2024
2024 2023
Notes: £m £m
Assets
Goodwill and other intangible assets 776.3 818.6
Property, plant and equipment 92.7 91.6
Right-of-use assets 101.0 96.1
Investment property 287.6 277.1
Insurance contract assets 12 5.7 5.4
Reinsurance contract assets 12 1,802.1 1,346.0
Deferred tax assets 53.0 56.5
Current tax assets 19.9 82.8
Other receivables 21.8 35.2
Prepayments, accrued income and other assets 103.6 101.5
Derivative financial instruments 19.1 27.4
Retirement benefit asset 0.8 1.3
Financial investments 14 4,343.3 3,691.6
Cash and cash equivalents 15 1,156.0 1,772.2
Assets held for sale 12.2 13.9
Total assets 8,795.1 8,417.2
Equity
Shareholders' equity 2,137.9 2,058.2
Tier 1 notes 17 346.5 346.5
Total equity 2,484.4 2,404.7
Liabilities
Subordinated liabilities 18 259.1 258.8
Insurance contract liabilities 12 5,086.9 5,238.8
Reinsurance contract liabilities 12 549.5 116.6
Borrowings 15 66.8 82.4
Derivative financial instruments 38.7 15.4
Provisions 15.6 30.8
Trade and other payables 178.9 163.6
Lease liabilities 113.7 106.1
Current tax liabilities 1.5 -
Total liabilities 6,310.7 6,012.5
Total equity and liabilities 8,795.1 8,417.2
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2024
Share capital (note 16) Employee trust shares Capital reserves Equity investments revaluation reserve Foreign exchange translation reserve Retained earnings Shareholders' equity Tier 1 notes 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 8) - - - - - (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 8) - - - - - (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 form an integral part of these consolidated financial
statements.
Consolidated Cash Flow Statement
For the year ended 31 December 2024
2024 2023
Notes: £m £m
Cash (used in)/generated from operating activities before investment of (31.0) 132.0
insurance assets
Cash (used in)/generated from investment of insurance assets (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 (93.2) (124.1)
Purchases of property, plant and equipment (13.3) (18.9)
Proceeds on disposals of assets held for sale - 21.9
Proceeds from disposal of business 7 - 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 8 (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 1,689.8 938.4
Cash and cash equivalents at the end of the year 1,089.2 1,689.8
The accompanying notes form an integral part of these consolidated financial
statements.
Notes to the Consolidated Financial Statements
1. 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.
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 segment(3) at 31 December 2024.
Motor Non-Motor Total Group - ongoing operations(1) Brokered commercial business(1) Non-core and Run-off(1) Restructuring and one-off costs(1,2) 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 for definitions.
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.
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 segment(4) at 31 December 2023 (restated).
Motor Non-Motor Total Group - ongoing operations(2) Brokered commercial business(1) Non-core and Run-off(2) Restructuring and one-off costs(3) 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 in note 1)
2. See glossary for definitions.
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.
2. 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 expenses(1) (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 expenses(2) 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 (31
December 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.
3. 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.
2024 2023
£m £m
Amounts recognised in profit or loss
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 30.3 127.0
profit or loss
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 1.6 2.7
other comprehensive income
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 contracts(1) (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 swaps(1) 6.5 (0.9)
Total gains/(losses) on foreign exchange hedging and interest rate hedging 6.5 (6.4)
instruments
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.
4. 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.
5. 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 2, in
the insurance service result, as part of other directly attributable expenses.
6. 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 0.3 0.2
adjustment of subordinated liabilities
Interest expense on lease liabilities 4.6 3.8
Total 15.4 14.5
7. (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.
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
8. 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(1) 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
9. 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 1,300.6 1,299.0
earnings per share (millions)
Effect of dilutive potential of share options and contingently issuable shares 19.5 17.3
(millions)(1)
Weighted average number of Ordinary Shares for the purpose of diluted earnings 1,320.1 1,316.3
per share (millions)
Basic earnings per share (pence) 11.2 15.9
Diluted earnings per share (pence) 11.1 15.7
10. Net asset value per share and net tangible asset value per share
Net 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 assets(1) (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.
11. 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%
12. 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.
12.1 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 operations(1) Brokered commercial business(1) Non-core and Run-off(1) 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 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
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 operations(1) Brokered commercial business(1) Non-core and Run-off(1) Total Group
£m £m £m £m £m £m
2024
Insurance contracts 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 liabilities (3,338.8) (927.6) (4,266.4) (718.5) (96.3) (5,081.2)
2023
Insurance contracts 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 liabilities (3,305.9) (892.7) (4,198.6) (866.0) (168.8) (5,233.4)
Motor Non-Motor Total Group - ongoing operations(1) Brokered commercial business(1) Non-core and Run-off(1) 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 for definitions.
12.2 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 2 4,567.0 3,601.7
Insurance service expenses 2 (3,952.0) (3,514.0)
Insurance finance expense 3 (21.0) (193.8)
Premiums received 12.2.2 (4,386.0) (3,758.9)
Claims and expenses paid, including investment component 12.2.1 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.
12.2.1 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 recoveries 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(1) (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 recoveries 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(1) (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)
12.2.2 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)
13. 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.
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
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. A summary of realised and unrealised gains or losses in relation
to investment property at fair value are presented in note 3.
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 Valuation Unobservable Range
£m
technique
input
(weighted average)
2024 2023 2024 2023
Investment property(1) 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.
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
14. 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 rate(1) 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
Notes:
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).
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 expected credit loss: 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.
15. 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
Short term deposits with credit institutions¹ 1,054.7 1,624.2
Cash at bank and in hand 101.3 148.0
Cash and cash equivalents 1,156.0 1,772.2
Bank overdrafts(2) (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.
16. 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 each(1) 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
Note:
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.
17. 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 condition(1) 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.
18. 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.
Statutory accounts information
The Annual Report & Accounts 2023 were signed on 21 March 2024 and were
delivered to the Registrar of Companies following the Annual General Meeting
held on 8 May 2024. The Annual Report & Accounts 2023 is available at:
https://www.directlinegroup.co.uk/esef/2023/index.xhtml
At the time of the publishing of these Preliminary Results for 2024 the Annual
Report & Accounts 2024 had not been published. Once published, the Annual
Report & Accounts 2024 will be available on the Group's website at
www.directlinegroup.co.uk/en/investors.html
GLOSSARY
Term Definition and explanation
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.
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.
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.
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.
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.
Claims frequency The number of claims divided by the number of policies per year.
Combined operating The sum of the net insurance claims, net acquisition costs and net expense
ratios. The ratio measures the amount of claims costs, acquisition and
ratio 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 Alternative Performance Measures.)
Current-year attritional The loss ratio for the current accident year, excluding the movement of claims
reserves relating to previous accident years and claims relating to major
net insurance claims ratio weather events. (See - Alternative Performance Measures.)
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 Alternative
Performance Measures.)
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.
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 3 Insurance finance result.)
Financial leverage ratio Tier 1 notes and financial debt (subordinated Tier 2 notes) as a percentage of
total capital employed.
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.
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 The investment return, excluding funds withheld interest income divided by the
average AUM (excluding funds withheld assets). The average AUM derives from
yield the period's opening and closing balances for the total Group. (See
Alternative Performance Measures.)
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 The investment return divided by the average AUM (excluding funds withheld
assets). The average AUM (excluding fund withheld assets) derives from the
yield period's opening and closing balances. (See Alternative Performance Measures.)
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
Alternative Performance Measures.)
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 Alternative Performance Measures.)
Net insurance claims ratio The ratio of net insurance contract claims divided by net insurance contract
revenue. (See Alternative Performance Measures.)
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 Alternative Performance Measures.)
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).
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 Alternative Performance Measures.)
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 Alternative Performance
Measures.)
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% (2023: 23.5%). (See Alternative Performance Measures.)
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
Appendix B - Expenses)
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.
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 Alternative Performance Measures.)
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.
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.
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 Alternative Performance Measures.)
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 Alternative Performance Measures.)
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 Alternative Performance Measures.)
Forward-looking statements disclaimer
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.
APPENDIX A - ALTERNATIVE PERFORMANCE MEASURES
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 this report in understanding the activity taking place across the
Group. These APMs are contained within the main narrative sections of this
document, outside of 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 and
reconciled to the most directly reconcilable line items in the financial
statements and notes. Note 1 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 .
Group APM Closest equivalent IFRS measure Definition and/or reconciliation Rationale for APM
Combined operating ratio Insurance service result Combined operating ratio is defined in the glossary and reconciled in This is a measure of underwriting profitability and excludes non-insurance
Appendix B. 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 Net insurance claims Current-year attritional claims ratio is defined in the glossary and is Expresses claims performance in the current accident year in relation to net
reconciled to the net insurance claims ratio in Appendix B. insurance revenue.
insurance claims ratio
Event weather ratio Net insurance claims Event weather ratio is defined in the glossary and is reconciled to the net Expresses claims performance with respect to weather events experienced in
insurance claims ratio in Appendix B. relation to net insurance revenue.
Gross written premium and associated fees Insurance revenue Gross written premium and associated fees is defined in the glossary and The IFRS 17 profit or loss account disclosures reflect revenue earned from
reconciled in Appendix B. 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 and is reconciled in Expresses a relationship between the investment income and the associated
Appendix A. opening and closing assets adjusted for portfolio hedging instruments.
Investment return yield Investment return Investment return yield is defined in the glossary and is reconciled in Expresses a relationship between the investment return and the associated
Appendix A. 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 and reconciled in Expresses acquisition costs in relation to net insurance contract revenue.
Appendix B.
Net expense ratio Other directly attributable expenses Net expense ratio is defined in the glossary and reconciled in Appendix B. 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 and reconciled in Expresses claims performance in relation to net insurance revenue.
Appendix B.
Net insurance margin ("NIM") Insurance service result Net insurance margin is defined in the glossary and reconciled in Appendix This is a measure of underwriting profitability and excludes non-insurance
B. 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 Net insurance margin and normalised net insurance margin are defined in the This is a measure of underwriting profitability excluding the variances of
glossary and reconciled in Appendix B. event 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.
Ongoing operations (see also Brokered commercial business, Non-core businesses Multiple - rationale for APM Ongoing operations, Brokered commercial business, Non-core businesses and The Group's ongoing operations result excludes the results of the Brokered
and Run-off partnerships) Run-off partnerships are defined in the glossary and reconciled in Appendix commercial business, that it sold to RSA Insurance Limited in 2023, and its
B. 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 and This is a measure of profitability. A three-year cumulative operating earnings
reconciled in Appendix A. 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 and reconciled in Appendix B. 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 and is This shows performance against a measure of equity that is more easily
reconciled in Appendix A. comparable to that of other companies.
Other operating expenses Other directly attributable expenses Operating expenses are defined in the glossary and reconciled in Appendix B. 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 and is Expresses claims performance relating to the movement in prior-year reserves
reconciled to the net insurance claims ratio in Appendix B. in relation to net insurance revenue.
Tangible equity Equity Tangible equity is defined in the glossary and is reconciled in Appendix A. 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 assets per share is defined in the glossary and reconciled in This shows the equity excluding Tier 1 notes and intangible assets per share
note 10. for comparability with companies which have not acquired businesses or
capitalised intangible assets.
Investment income and return yields(1)
FY 2024 FY 2023
Notes(2) £m £m
Investment income 3 244.0 187.9
Less: Funds withheld interest (13.8) 0.0
Investment fees 3 (8.8) (9.3)
Realised and unrealised gains 3 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 asset 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 14 4,343.3 3,691.6
Closing cash and cash equivalents (excluding funds withheld asset) 15 857.9 1,530.4
Closing borrowings 15 (66.8) (82.4)
Closing derivative (liability)/asset (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)(4) 5,415.8 5,172.0
Investment income yield(1) 4.1% 3.5%
Investment return yield(1) 4.8% 5.9%
Notes:
1. See glossary for definitions.
2. See notes to the consolidated financial statements.
3. See Assets under management table, footnote 1 .
4. Mean average of opening and closing balances.
Operating return on tangible equity(1)
2024 2023
£m £m
Operating profit/(loss) - ongoing operations(1,2) 205.0 (189.9)
Other finance costs(1) (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 (43.3) 51.9
rate of 23.5%)
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 equity(3) 1,300.6 1,131.4
Operating return on tangible equity(1) 10.0% (14.9%)
Notes:
1. See glossary for definitions.
2. See the Management view statement of profit or loss tables in Appendix B
for reconciliations of operating profit/(loss) to profit/(loss) before tax.
3. Mean average of opening and closing balances.
Operating earnings/(loss) per share
2024 2023
£m £m
Operating profit/(loss) - ongoing operations(1) 205.0 (189.9)
Other finance costs(1) (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 (43.3) 51.9
rate of 23.5%)
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 19.5 17.3
(millions)
Weighted average number of Ordinary Shares for the purpose of operating 1,320.1 1,316.3
earnings per share (millions)
Operating earnings/(loss) per share 9.8 (12.8)
Notes:
1. See the Management view statement of profit or loss tables in Appendix B
for reconciliations of operating profit/(loss) to profit/(loss) before tax.
2. See glossary 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 operations(1) (156.3) (161.5)
Brokered commercial business(1) (25.9) (24.4)
Non-core and Run-off(1) (3.4) (3.9)
Effect of change in yield curve(1) 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 claims(1) 69.6 49.5
Of which:
Ongoing operations(1) 57.4 45.0
Brokered commercial business(1) 11.9 4.3
Non-core and Run-off(1) 0.3 0.2
Effect of change in yield curve(1) (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 claims(1) (116.0) (140.3)
Of which:
Ongoing operations(1) (98.9) (116.5)
Brokered commercial business(1) (14.0) (20.1)
Non-core and Run-off(1) (3.1) (3.7)
Effect of change in yield curve(1) 89.2 (25.5)
Interest expense on funds withheld liabilities (14.4) -
Net insurance finance expense (41.2) (165.8)
Note:
1. See glossary for definitions.
APPENDIX B - MANAGEMENT VIEW STATEMENTS OF PROFIT OR LOSS, EXPENSES, AVERAGE
PREMIUMS, GROSS WRITTEN PREMIUM AND ASSOCIATED FEES AND IN-FORCE POLICIES
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 operations(1) Brokered commercial business(1) Non-core and Run-off(1) 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 1 2,739.0 1,020.9 3,759.9 620.4 186.7 4,567.0
Expenses from reinsurance contracts held 1 (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 (2,209.8) (571.8) (2,781.6) (364.9) (127.4) (3,273.9)
attributable claims income
Amounts recoverable from/(payable on) reinsurers 1 781.0 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 (460.1) (296.5) (756.6) (105.3) (45.2) (907.1)
Insurance service result 1 19.3 85.3 104.6 15.0 6.8 126.4
Investment income 168.0 32.3 200.3 33.6 1.3 235.2
Unwind of discounting of claims(1) (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 107.0 98.0 205.0 36.2 3.5 244.7
Net fair value gains(2) 3 37.1
Effect of change in yield curve(1) 89.2
Interest expense on fund withheld liabilities (14.4)
Restructuring and one-off costs(1,2) 1 (118.1)
Other finance costs 6 (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 operations(1) Total Group
Net insurance margin(1) 1.0% 8.9% 3.6% 4.0%
Combined operating ratio(1) 99.0% 91.1% 96.4% 96.1%
Net expense ratio(1) 19.5% 21.6% 20.2% 21.6%
Net acquisition costs ratio(1) 4.6% 9.7% 6.3% 7.5%
Net insurance claims ratio(1) 74.9% 59.8% 69.9% 67.0%
- current-year attritional(1) 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 ratio(1) N/A (1.9%) (0.6%) (0.6%)
Net acquisition costs ratio(1) N/A 0.0% 0.0% 0.0%
Net insurance margin normalised for event weather(1) N/A 7.0% 3.0% 3.4%
Additional data to support key performance indicators - year ended
31 December 2024
Motor Non-Motor Total Group - ongoing operations(1) 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 profit(1) - year ended 31 December 2024
Total Group - ongoing operations(1)
£m
Operating profit 205.0
Effect of:
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 for definitions and appendix A - Alternative Performance
Measures for reconciliation.
2. Restructuring and one-off costs include £4.0 million expenses included
in the Group insurance service result as disclosed in note 1.
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.
Motor Non-Motor Total Group - ongoing operations(1) Brokered commercial business(1) Non-core and Run-off(1) 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 1 1,805.4 919.2 2,724.6 600.8 276.3 3,601.7
Expenses from reinsurance contracts held 1 (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 (1,743.5) (524.1) (2,267.6) (356.8) (249.2) (2,873.6)
attributable claims income
Amounts recoverable from/(payable on) reinsurers 1 248.7 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 (401.7) (244.5) (646.2) (207.5) (54.2) (907.9)
Insurance service result 1 (331.6) 119.6 (212.0) 13.9 (28.5) (226.6)
Investment income 107.7 31.4 139.1 35.2 4.3 178.6
Unwind of discounting of claims(1) (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 gains(2) 3 124.4
Effect of change in yield curve (25.5)
Restructuring and one-off costs(1,2) 1 (59.5)
Other finance costs 6 (14.5)
(Loss)/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 operations(1) Total Group
Net insurance margin(1) (21.1%) 14.0% (8.7%) (7.2%)
Combined operating ratio(1) 121.1% 86.0% 108.7% 107.2%
Net expense ratio(1) 19.9% 19.6% 19.8% 19.7%
Net acquisition costs ratio(1) 5.7% 8.9% 6.8% 9.3%
Net insurance claims ratio(1) 95.5% 57.5% 82.1% 78.2%
- current-year attritional(1) 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 ratio(1) N/A (3.8%) (1.3%) (1.6%)
Net acquisition costs ratio(1) N/A 0.0% 0.0% 0.0%
Net insurance margin normalised for event weather(1) N/A 10.2% (10.0%) (8.8%)
Additional data to support key performance indicators - year ended
31 December 2023
Motor Non-Motor Total Group - ongoing operations(1) 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 loss(1) - year ended 31 December 2023
Total Group - ongoing operations(1)
£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)
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 for definitions and appendix A - Alternative Performance
Measures for reconciliation.
2. Restructuring and one-off costs include £24.8 million expenses included
in the Group insurance service result as disclosed in note 1.
Operating expenses - ongoing operations(1)
FY 2024 FY 2023
Insurance service result Other expenses Total expenses Insurance service result Other expenses 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 costs(2) (225.2) 0.7 (224.5) (185.1) (5.5) (190.6)
IT and other operating expenses(2,3) (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 assets(4) (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 operations (756.6) (18.8) (775.4) (646.2) (21.1) (667.3)
Total expenses - Brokered commercial business (105.3) 0.3 (105.0) (207.5) (1.8) (209.3)
Total expenses - Non-Core and Run-off(1) (45.2) (2.7) (47.9) (54.2) (2.0) (56.2)
Total expenses - Restructuring and one-off costs(1) 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 operations(1) 6.3% 6.8%
Net acquisition costs ratio - total Group(1) 7.5% 9.3%
Net expense ratio - ongoing operations(1) 20.2% 19.8%
Net expense ratio - total Group(1) 21.6% 19.7%
Notes:
1. See glossary for definitions and appendix A - Alternative Performance
Measures for reconciliation.
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 ("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).
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 brands(1) 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.
Gross written premium and associated fees
At FY 2024 FY 2023 Change from Dec 2023
£m £m
Own brands(1,2) 1,554.9 1,601.3 (2.9%)
Partnerships(3) 1,145.1 446.5 156.5%
Motor 2,700.0 2,047.8 31.8%
Own brands(1) 480.3 408.8 17.5%
Partnerships 156.5 142.7 9.7%
Home 636.8 551.5 15.5%
Rescue: Green Flag 88.7 85.1 4.2%
Rescue: Linked(4) 27.2 36.6 (25.7%)
Rescue: Partners and other(4) 16.9 15.6 8.3%
Rescue 132.8 137.3 (3.3%)
Commercial direct(1) 262.3 241.0 8.8%
Non-Motor 1,031.9 929.8 11.0%
Ongoing operations(5) 3,731.9 2,977.6 25.3%
Non-Core and Run-off(5) 178.3 278.5 (36.0%)
Of which: Run-off partnerships 60.8 150.1 (59.5%)
Brokered commercial insurance 436.9 665.8 (34.4%)
Total gross written premium and associated fees 4,347.1 3,921.9 10.8%
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 for definitions and appendix A - Alternative Performance
Measures for reconciliation.
In-force policies (thousands)
At 31 Dec 30 Sep 30 Jun 31 Mar 31 Dec Change from 31 Dec 2023
2024
2024
2024
2024
2023
Own brands(1) 2,927 3,048 3,119 3,235 3,373 (13.2) %
Partnerships(2) 904 885 860 837 808 11.9 %
Motor 3,831 3,933 3,979 4,072 4,181 (8.4) %
Own brands(1) 1,729 1,751 1,746 1,721 1,706 1.3 %
Partnerships 732 713 720 729 738 (0.8) %
Home 2,461 2,464 2,466 2,450 2,444 0.7 %
Rescue: Green Flag 985 999 1,022 1,036 1,048 (6.0) %
Rescue: Linked(3) 574 583 581 579 604 (5.0) %
Rescue: Partners and other(3) 221 239 264 289 313 (29.4) %
Rescue 1,780 1,821 1,867 1,904 1,965 (9.4) %
Commercial direct(1,4) 755 757 753 753 749 0.8 %
Non-Motor(4) 4,996 5,042 5,086 5,107 5,158 (3.1) %
Ongoing operations(4,5) 8,827 8,975 9,065 9,179 9,339 (5.5) %
Non-core and run-off(4,5) 256 307 376 1,020 2,431 (89.5) %
Of which: Run-off partnerships(4,5) 83 126 185 819 2,224 (96.3) %
Brokered commercial insurance(5) 174 243 272 281 286 (39.2) %
Total in-force policies(4) 9,257 9,525 9,713 10,480 12,056 (23.2) %
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
all periods, and 1,771,000 policies in Non-core and Run-off as of 31 March
2024, previously included in the Q1 Trading Update have been removed.
5. See glossary for definitions and appendix A - Alternative Performance
Measures for reconciliation.
ADDITIONAL INFORMATION
We confirm that to the best of our knowledge:
1. the financial statements within the Annual Report & Accounts, from
which the financial information within these Preliminary Results have been
extracted, are prepared in accordance with the International Financial
Reporting Standards, issued by the IASB as adopted by the UK and give a true
and fair view of the assets, liabilities, financial position and profit or
loss of the Group and the undertakings included in the consolidation taken as
a whole; and
2. the management report within these Preliminary Results includes a fair
review of the development and performance of the business and the position of
the Group, and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties
faced by the Group.
Signed on behalf of the Board
ADAM WINSLOW JANE POOLE
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
3 March 2025 3 March 2025
LEI: 213800FF2R23ALJQOP04
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