Annual Report 2022

2022 Annual report Strategic Report Governance Section Financial Statements ESEF Reporting Package

Annual Report 2022

Our mission is to be brilliant for customers every day. Our vision is to create a world where insurance is personal, inclusive and a force for good. Our purpose is to help people carry on with their lives, giving them peace of mind now and in the future.

The Group's financial results fell below expectations in 2022 as we navigated a volatile trading environment, with heightened inflation and severe weather events. In response we are taking action to restore the Group's balance sheet and improve business performance.

Looking ahead we believe that our customer focus, powerful brands and claims expertise can drive long-term value for customers and shareholders.

Brilliant for customers every day

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Brilliant for customers every day

We reach customers wherever they shop and whatever their insurance needs. We want to be known for insurance excellence from point of sale through to resolving claims. By delivering easy, digital first journeys we make it simple for customers and are there for them when they need us.

We operate across four market segments, delivering value and great customer experiences.

Motor - We are one of Britain's leading personal motor insurers, represented though our well-known brands Direct Line, Churchill, Privilege and Darwin.
Home - We are one of Britain's leading personal home insurers, represented through our well-known brands Direct Line, Churchill and Privilege, and our valued partners¹.
Rescue and other personal lines - We are one of the leading providers of rescue, including through our Green Flag brand², travel and pet insurance in the UK³.
Commercial - We protect commercial businesses through our brands, NIG, Direct Line for Business and Churchill.

Notes: 1 © Ipsos 2023, Financial Research Survey (FRS), 6 months ended Jan 2023. 14,318 adults (aged 16+) surveyed across Great Britain with motor insurance, 13,942 with home insurance. Interviews were conducted online and via telephone, and weighted to reflect the overall profile of the adult population. Includes Direct Line, Churchill, Privilege, Darwin and partner brands: RBS, NatWest.

2 Mintel Vehicle Recovery report - September 2022

3. Mintel Pet Insurance report 2022

Motability Operations

Delivering an exceptional claims service

In September 2023, we're set to welcome over 600,000 new customers as part of our 10-year partnership with Motability Operations. We were chosen to partner with Motability Operations because of our excellent customer service record, our modern and innovative digital systems, and our ability to provide efficient vehicle repairs through an integrated, aligned and effectively managed supply chain. The partnership will help us to gain further insight into their fleet of modern vehicles and build additional scale to our expert claims management service.

CASE STUDY

Powerful brands

We have some of the strongest and most recognisable insurance brands in the UK. They enable customers to pick the cover that best suits them to protect their cars, homes, holidays, businesses and pets.

Churchill Essentials product

This year we launched a new Essentials motor product using our Churchill brand. Available only on price comparison websites, the product has been designed to meet the needs of customers looking for a comprehensive product, but does not include certain elements such as new car replacement, loss of keys and personal belongings that are typically part of a standard comprehensive product. It's an alternative for customers who may be looking for great value in a stripped-back motor insurance policy.

CASE STUDY

Reaching customers however it suits them

Whether customers access our products and services digitally, through a broker or on the phone, our aim is to provide peace of mind now and in the future. We offer insurance through the four main routes to market so customers can choose what works best for them.

Direct - Customers come to us direct because of our powerful brands and propositions which offer great value
Price comparison websites - We offer a variety of products across our brands on price comparison websites to meet different customer needs
Partnerships - We partner with a number of well-known brands to give more customers excellent insurance
Brokers - Using our established NIG broker network we meet a variety of specialist insurance needs for both large and small businesses

NatWest Group

Home contract extension

We extended our longstanding partnership with NatWest Group, continuing to provide home insurance to close to half a million of their customers until 2027. We were recognised for our ability to deliver excellent service and easy, digital first journeys, making use of a new platform that improves the experience for customers, pre-populating their data and introducing our home product to NatWest Group's banking app, giving them access to simple and flexible products.

CASE STUDY

Navigating a challenging year

Danuta Gray, Chair of the Board

Looking ahead to 2023

Jon Greenwood, Acting CEO

Our strategy

We're a force for good

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Building a sustainable future

In 2022, we continued to put in place sustainable initiatives to strengthen the business. We believe that by working sustainably we create value for all our stakeholders. To find out how our five pillar Sustainability Strategy aligns to the United Nations Sustainable Development Goals ("SDGs") click here.

We stand for insurance excellence because positive customer outcomes mean we can grow our business
We stand for being a diverse and inclusive employer because attracting and retaining talented people powers our business forward
We stand for being rooted in our communities because when they flourish so does our business
We stand for a greener planet because we're all in it together, it's our responsibility and tackling climate change benefits our business, our people and society
We stand for a competitive and strong financial services sector because it's essential to being successful

Case Study - Community Fund 2022

Since the start of 2020, our Community Fund has helped over 300 charitable causes supporting over 200,000 families and individuals facing adversity, mental health challenges and food poverty. Building on these achievements and with so many of our colleagues feeling passionately about social mobility, we were delighted to focus our Community Fund in 2022 with a new ambition: To build a more inclusive and equitable Britain.

Partnering with three organisations; Envision, Springpod and Young Professionals, we have launched a programme of engagement, to use our expertise across the business to help equip younger people with key career skills.

Impact after taking part in the programme

93%
felt they understood how an insurance company operates
83%
felt more able to ask someone for a connection to build their professional network
74%
felt more confident to apply for jobs

CASE STUDY

Our response to climate change

Our mission is to protect our business from the impact of climate change and give back more to the planet than we take out.

There are three steps which guide our approach:

We disclose our carbon emissions because it's how we hold ourselves to account and helps us to find practical solutions to reduce our footprint. We have measured and disclosed our Scope 1 and 2 emissions since 2013, and in recent years made it clear how these emissions are split between our office sites and accident repair centres. We have also expanded the categories we report under Scope 3, including our Supply Chain, and for the second year running, our Homeworking emissions, recognising that more colleagues are working from home.

We are committed to the Race to Zero where companies set emission reduction targets in line with limiting global warming to 1.5 degrees. We have set ambitious Science-Based Targets via the Science Based Targets initiative ("SBTi") as we aim to become a Net Zero business by 2050. The most carbon intensive areas of our business - our accident repair centres, supply chain and investments - all have plans in place.

While we transition to Net Zero, we currently offset emissions under our direct control by investing in three carbon reduction projects around the world. While we transition to Net Zero, we currently offset our Scope 1 and 2 emissions as well as elements of our Scope 3 emissions under our direct control by partnering with Climate Impact Partners1 , an organisation that is dedicated to tackling climate change and improving lives by financing, developing and managing carbon reduction projects.

Our approved SBTi plans

In November 2022 we were delighted to become one of the first personal lines general insurers in the UK to get our Science-Based Targets approved by the SBTi, meaning we now have ambitious carbon reduction plans where we will publicly report on progress each year.

We have greater understanding of our carbon footprint. A proportion of our Scope 1 and 2 carbon emissions comes from our offices and accident repair centres, where we have the largest insurer owned garage network in the UK supporting motor customers.

We have five Science-Based Targets - one target covers our operational emissions and a further four targets cover our investment portfolio.

See our SBTi plans here.

How we create value

We have a number of strengths, from strong brands to rich data and expert claims skills, that are hard to replicate and provide real long-term value.

Diversified model

Our diversified model enables us to generate premiums from a range of brands, products and distribution channels.

Balanced investment portfolio

The premiums we collect from customers are invested in a diversified investment portfolio designed to meet our long-term claims commitments whilst also generating investment returns.

Accident repair centres

We own 22 accident repair centres, the largest network of any insurer, delivering lower repair costs and providing data-led insight, enabling us to react to emerging trends and helping inform pricing.

Claims management

We have a deep specialism in claims handling, including advanced fraud capabilities.

Cost control

We're focused on improving efficiency through greater use of digital processes across the business.

Capital management

We aim to manage capital efficiently and generate long-term sustainable returns for shareholders, while balancing operational, regulatory, rating agency, and policyholder requirements.

Proud of what we've achieved in 2022

Working in our agile model, a number of teams worked collaboratively to launch our Churchill Essentials product.

Bhanu Shekar Gutta, Software Engineer

The Neurodiversity and Disability network has gone from strength to strength this year, supporting our 350+ members with insight sessions and a new parents network.

Molly Welsh, Counter Fraud Intelligence Handler and Neurodiversity & Disability Network Co-lead

It was fantastic to mentor students with our Community Fund and give back to younger people starting on their career journeys.

Timon Pryce, Principal Pricing Analyst Developer

I'm proud to be part of a team that helped us to receive validated Science-Based Targets. Part of our plan involves replacing diesel in our trucks with the sustainable, hydrogenated vegetable oil.

Carrie Loftus, Sustainability Programme Manager

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2022 Annual Report Download TCFD section Sustainability

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ANNUAL REPORT AND ACCOUNTS 2022

Brilliant for customers every day