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Annual Report and
Accounts 2024
Strategic Report
Becoming the customers' insurer of choice 1
The Group at a glance – our business model 2
Our investment story and strategy 3
Delivering for our customers 4
Our financial KPIs 7
Chair’s statement 8
Section 172(1) statement 9
CEO review 10
CFO review 13
CPO review 15
Market overview 19
Group financial performance 20
Operating reviews 34
Risk management 38
Sustainability 44
Non-financial and sustainability information statement 45
Task Force on Climate-related Financial Disclosures 58
Viability statement 74
Governance
Chair’s introduction 75
Board of Directors 77
Corporate Governance 82
Committee reports 101
Directors’ Remuneration report 115
Directors’ report 142
Financial Statements
Contents 147
Independent Auditor’s Report 148
Group accounting policies 156
Consolidated Financial Statements 168
Notes to the Consolidated Financial Statements 173
Parent Company accounting policies 230
Parent Company Financial Statements 231
Notes to the Parent Company Financial Statements 233
Other information
Shareholder information 236
Glossary and Appendices 238
Forward-looking statements disclaimer 254
Contact Information 255
Direct Line Group is one
ofthe UK’s leading
insurance companies.
Through our well-known
brands we offer a wide
range of general
insurance products
acrossmotor, home,
commercial, travel, pet
andrescue.
Whether our customers
choose tocome direct or
via a Price Comparison
Website, they can engage
with us digitally or on the
phone, whenever they
need us most.
Contents
Becoming
the customers’
insurer of choice
Becoming the customers’
insurer of choice means
prioritising their needsand
fostering trust through
exceptional service.
We strive to simplify the
insurance process, offering
easy-to-use solutions that
resonate with our customers’
unique situations.
1 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
One of the largest personal lines
insurersin theUK with two of the
mostrecognised brands and almost
9million customers.
We have strong brands and our
productsare sold direct to customers,
through price comparison websites
andvia ourpartners.
Almost 9 million in-force policies (ongoing
operations)
3,831k
2,461k
1,780k
755k
l
Motor
l
Home
l
Rescue
l
Commercial Direct
£3,732m premium written (ongoing
operations)
2,700m
637m
133m
262m
l
Motor
l
Home
l
Rescue
l
Commercial Direct
We have unique assets in Motor which allows us to provide better outcomes
tocustomers and tounderstand pricing, claims and customer behavioural trends.
We have a large insurer owned UK
repairnetwork
We operate through
23 sites
nationwide
Largest rescue brand owned by a UK
PersonalLines insurer
Green Flag now has over
60 roadside
patrol vehicles
supported by a national network of
3,000
specialists
2 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
The Group at a glance
In partnership with
Strong foundations with iconic brands and leading market positions
Unique assets in motor; large owned garage network and only UKMotor insurer with
in-house roadside rescue
Turnaround strategy with a focus on technical excellence to drive profitable growth
Capital generative business with a strong balance sheet
Target a payout ratio of ~60% of post tax operating profit with potential
foradditionalreturns
Our strategy
In 2024 we launched our turnaround strategy and targets with a focus on technical
excellence to drive profitable growth.
Our targets
Growth
Costs
Profit
Compound annual
growth rate (“CAGR”) of
At least
7%-10% £100m 13%
in Non-Motor gross written
premiums between 2023-26
gross cost savings by the end
of 2025 on a run-rate basis
net insurance margin
in 2026
3 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Our investment story and strategy
Target leading positions
inHome, Commercial
Directand Rescue
Achieve top quartile
technical excellence
acrossthe insurance
valuechain
Reduce cost base
Build a high
performance
culture
Rejoin front-runners
in Motor
Customers'
insurerofchoice
Doing fewer
things,better
The Group has made significant progress on its transformation plans.
Motor
Direct Line
launched
onPrice
Comparison
Websites
(“PCW”)
In December we delivered one of our
key objectives and launched Direct Line
Motor on Compare the Market.
We have developed three new online
products for the channel where the
majority of customers shop and buy
insurance: Essentials Online, Standard
Online and Premium Online.
These products are tailored specifically
to meet the needs of customers who
choose to buy insurance through
PCWsand are happy to service their
policiesonline.
Digital
Launched
newapps
We launched apps for our Churchill and
Direct Line Motor customers enabling
them to make those often-complicated
tasks simple.
Customers can: view motor policy
details and documents, make a change
to their policy, renew a policy, get a
quote, view existing quotes, start a claim
or get support via a Virtual Assistant
orWhatsApp.
With customers having Churchill and
Direct Line in their pocket, they can be
assured that whenever they need us,
we’re there.
Home
Significant
progress with
the re-platform
Significant progress made with the
re-platforming of our Home business
which is designed to enable new
product development, improve the
speed and accuracy of pricing and
underwriting and provide enhanced
claims handlingcapability.
The new platform is now live for Direct
Line, Churchill and Privilege new
business customers across all channels
and the transfer of existing customer
policies is also underway.
4 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Delivering for our customers
Rescue
Collaborating
withApple
andexpanded
patrolservice
Green Flag is the only UK
breakdown provider to offer rescue
services as part of Apple's Roadside
Assistance via satellite, providing
drivers with the reassurance that
help is at hand when they don't have
mobile reception or Wi-Fi access.
The expansion of our Green Flag
owned patrols continued at pace;
wehave expanded into new regions
with over 60 vehicles on the road
helping customers.
Costs
Progress against
cost saving target
We are implementing a new target
operating model and simplifying our
structure to reduce complexity and
drive greater efficiency.
We are investing in digital
distribution channels to improve
customer accessibility, streamline
our operations and enhance the
overall customer experience.
We are reducing technology costs
by removing legacy technology
systems and leveraging our
existingplatforms.
These initiatives underpin our
£100 millioncost saving target.
Claims
Delivering
bettercustomer
outcomes
We have a comprehensive
programme of initiatives in claims
which are beginning to take effect.
For example, we are settling large
bodily injury claims faster and
increasing the proportion of cars
repaired through our own repair
network of23 garages. We have also
strengthened our counter fraud
capabilities, resulting in a 21% saving
year on year.
In Home, we are helping customers
impacted by weather events, visiting
flooded homes within 48 hours
where safe to do so.
5 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Our
customers
Premiums
Managing
finances
Claims
Servicing
Our people and capabilities Costs
Investment and
other income
Reinvest in thebusiness Profit
Capital
Dividends
Our
shareholders
Managing risk
6 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Business model
Net insurance margin
1
– ongoing
operations
2
(%)
3.6%
(8.7)%
(0.9)%
2024
2023
2022
Operating return on tangible equity
1
(“Operating RoTE”) (%)
10.0%
(14.9)%
(2.7)%
2024
2023
2022
Operating profit/(loss) per share
1
– ongoing
operations
2
(pence)
9.8
(12.8)
(2.7)
2024
2023
2022
Profit/(loss) before tax
3
(£m)
218.4
277.4
(301.8)
2024
2023
2022
Solvency capital ratio (pre-dividend)
1,4,5
(%)
200%
192%
147%
2024
2023
2022
Changes to our KPIs in 2024
Our metrics are reviewed annually and updated
asappropriate to ensure they remain an effective
measure of delivery against our objectives.
For 2024, metrics have been reviewed and
appliedconsistently to enable effective year
onyearcomparisons.
Our non-financial KPIs continue to be key measures
ofperformance. Colleague engagement is disclosed
inthe Chief People Officer review, net promoter score
in the Customer section of Sustainability and emissions
are disclosed in the Planet section of Sustainability.
Customer complaints data is no longer reported.
Notes:
1. See glossary on pages 238 to 241 for definitions and
appendix A – Alternative performance measures on pages
242 to 245 for reconciliation to financial statement
lineitems.
2. Ongoing operations – the Group's ongoing operations
resultexcludes the results of the Brokered commercial
business, that it sold to RSA Insurance Limited in 2023, and
its Non-core businesses, announced at the Group's 2024
Capital Markets Day, and three run-off partnerships that
the Group completed its exit from in H1 2024. Relevant
prior-year data has been restated accordingly.
3. 2023 included a gain of £443.9 million from the disposal
ofthe Group's Brokered commercial business.
4. Estimates based on the Group’s Solvency II partial
internalmodel.
5. The full year 2023 solvency capital ratio has been
re-presented as explained in the Capital analysis section
ofthis report (post-dividend ratio previously reported in the
Group's 2023 Annual Report and Accounts as being 197%).
7 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Our financial key performance indicators
Capital returned to shareholders since IPO
£4.0bn
Dear Shareholders,
It has been a pivotal year in the Direct Line Group’s history,
andone in which the value and potential of our business and
brands have come into sharp focus.
In a highly competitive and dynamic market one of our top
priorities has been to return to profit. I have been impressed by
the resilience and tenacity of our colleagues, who have worked
to support a new and invigorated strategy and transformative
plan, which has delivered a solid financial and operational
performance. This has been an impressive team effort, achieved
by a relentless focus on continuously improving how we attract
and compete for customers within our risk appetite.
New management, strategy and performance
Adam Winslow joined the Group as CEO on 1 March 2024
andwas appointed to the Board as an Executive Director
on21March 2024. He undertook a comprehensive review
ofthebusiness and, after listening carefully to our investors,
customers and colleagues, established a new strategy,
designed to position Direct Line Group to become the
customers’ insurer of choice, and to set a clear path to
profitable growth.
Adam assembled a highly experienced executive team which
swiftly began to take the critical action necessary to turn the
business around with energy and determination. He and his
team adapted to the many and varied challenges leading the
turnaround with exemplary judgement, phenomenal levels
ofenergy and great connection with our people – all done
atremarkable pace. Adam’s vision and hard work have been
central to the considerable progress made in 2024 and I, and
my Board would like to thank him for that.
You will see in this Annual Report that we’ve made considerable
progress in delivering the new strategy and turnaround,
resulting in a Group operating profit
1
from ongoing operations
2
of £205 million and improved our Motor net insurance margin
1
.
A great deal of what was planned in 2024 isdue to come to
fruition in 2025, and the Board anticipates thepositive
momentum continuing.
With this positive progress, the Board was able to pay a small
dividend of two pence per share at Half Year. We are also
recommending a further five pence per share final dividend
with our full year results.
Takeover approaches
The Board takes its aim of maximising value for shareholders
very seriously. Early in the year, we received an indicative
proposal from Ageas to purchase the Company. After intensive
deliberation and consultation with investors, the Board
unanimously rejected this proposal, believing it to be uncertain,
unattractive and significantly undervaluing the future
prospects of the business.
In late November 2024, we received an approach from Aviva
plcwhich, again, the Board rejected on the grounds that it
undervalued the business. Aviva subsequently improved its
offer, and we announced on 23 December 2024 that we had
reached agreement on the terms of a recommended cash and
share offer. Based on the closing price of Aviva shares on 27
November 2024, that offer values each Direct Line share at 275
pence, and values the entire diluted share capital at
approximately £3.7 billion.
The Board firmly believes that the new strategy set out by
Adam would drive substantial value, and are confident in the
prospects that the Group would have as a standalone business.
However, the Board also believes that Aviva’s offer represents
an attractive proposition for our investors and recognises that
itprovides an accelerated path to returns, including significant
synergies and value upside potential in the combined group
ofcompanies. Therefore, following detailed consideration
andengagement with investors and other stakeholders, the
Board unanimously decided to recommend Aviva’s offer to
shareholders for approval. Aviva’s culture and values align
wellto those of Direct Line Group and were an important
consideration in the Board recommending the offer.
People
Having spoken to many of our colleagues over the past few
months, I have felt the huge sense of pride that they have in
thework they do to support customers, and in the progress
wehave made. They really care about our customers and
beingbrilliant for them every day.
I know that working with uncertainty isn’t easy, and I commend
and thank them all the more for their continued support and
professionalism during this period.
8 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Chair’s statement
Customers
During the year, we continued to put our customers at the
heart of our decisions and aspired to excellence through all
stages of the customer journey. One area of particular focus
hasbeen on delivering good customer outcomes under the
Consumer Duty. The regulations are outcome based and the
Financial Conduct Authority ("FCA") has been clear that they
expect firms to keep developing and improving. In order to
enhance the Board’s continued oversight of the Consumer
Duty, the Customer & Sustainability Committee has been
givena strengthened role.
Board
In addition to Adam Winslow, we were delighted to welcome
our new CFO, Jane Poole, to the Board as an Executive Director
on 10 October 2024. Jane has made a meaningful impact
inthefew months since her appointment, progressing the
transformation of our Finance function, enhancing our financial
strategies and playing a central role in the negotiations with
Aviva. We were also pleased to welcome Carol Hagh to the
Board as a Non-Executive Director on 1 April 2024. I am
gratefulto all of my Board colleagues for their unstinting
support and hard work, both in supporting the management
team in resetting the Group’s strategy and in starting the
transformation of the business, and in diligently discharging
their roles during the detailed discussions leading up to our
recommendation of the Aviva offer.
It has been a privilege to serve as a member of your Board
since2017 and as Chair since 2020. I am extremely proud
ofeverything our people have achieved in building our
outstanding brands, transforming our businesses and
supporting our customers. I am certain they will continue to
excel, either in an independent Direct Line Group or as part of
the Aviva Group. I would also like to thank all our stakeholders
for their continuing support and wish them every success
inthefuture.
Danuta Gray
Chair of the Board
Agreement for the acquisition
ofDirect Line Group by Aviva
– As announced on 23 December 2024, the Boards
ofDirect Line Insurance Group plc ("Direct Line")
and Aviva plc ("Aviva") reached agreement on the
terms of a recommended cash and share offer for
Direct Line.
– The transaction values each Direct Line share at 275
pence and values the entire diluted share capital
ofthe Group at approximately £3.7 billion
1
.
– The transaction is subject to certain regulatory
approvals, including from the Prudential
Regulation Authority ("PRA") and the Financial
Conduct Authority ("FCA") as well as review by
theCompetition and Markets Authority ("CMA").
– Direct Line shareholder meetings are scheduled to
be held on 10 March and the transaction, subject to
regulatory clearances, is expected to become
effective mid-2025.
Note
1. Based on the closing price of Aviva shares of 489.3 pence
on 27 November 2024 (being the last closing share price
before the commencement of the Offer Period) and taking
into account the final dividend of 5 pence per share
announced today.
Notes:
1. See glossary on pages 238 to 241 for definitions and appendix A –
Alternative performance measures on pages 242 to 245 for
reconciliation to financial statement lineitems.
2. Ongoing operations – the Group's ongoing operations result excludes
the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced
at the Group's 2024 Capital Markets Day, and three run-off
partnerships that the Group completed its exit from in H1 2024.
Relevant prior-year data has been restated accordingly. See glossary
on pages 238 to 241 for definitions and Appendix B – Management
view statements of profit and loss, expenses, average premiums,
gross written premium and associated fees and in-force policies on
pages 246 to 253.
Section 172(1) statement
The Directors have acted in the way that they considered, in good faith, would be most likely to promote the success
of the Company for the benefit of its members as a whole and, in doing so, have had regard (amongst other matters)
to those matters set out in Section 172(1)(a) to (f) Companies Act 2006.
Please refer to pages 86 to 88 for our detailed statement, which describes how the interests of the Company’s key
stakeholders and the matters set out in Section 172(1)(a)-(f) Companies Act 2006 have been considered in Board
discussions and decision making.
9 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
“The turnround strategy, launched
in July has made a marked
difference to the company’s
performance, and we generated
good momentum across all our
business lines.”
Adam’s letter to shareholders
In 2024 we embarked on an ambitious mission to rapidly
transform Direct Line Group. Our focus on a new strategy,
delivering technical excellence, driving down cost and
embracing a high-performance culture has delivered a
turnaround in results. Despite difficult market conditions, 2024
ended with an operating profit significantly ahead of the
previous year.
Unlocking potential
I joined Direct Line Group in March 2024, just as the Board had
rejected a “highly opportunistic” proposal from Ageas SA/NV,
which they felt significantly undervalued the business and its
prospects. My focus was firmly on diagnosing the issues holding
back performance and demonstrating to our investors how we
could rapidly unlock the potential of the Group. I spent a lot of
time with our stakeholders to understand their frustration with
the ways the Group had lost its technical edge and
underperformed in recent years.
At our Capital Markets Day in July 2024, we laid out a new
strategy for the Group to address investors' concerns and
establish a roadmap to transform the business quickly. We laid
out targets for becoming the customers' insurer of choice and
delivering profitable growth with measurable targets across the
next three years. We have made solid progress to date and
started to deliver against many of the key initiatives rapidly.
We announced we would intensify our focus across our Motor
and Non-Motor segments. Prioritising driving value in core
disciplines has been beneficial, with all areas demonstrating
positive performance. Importantly, we’re also securing
consumer accolades, showing that we are providing products
and service that customers truly value. With two of the
strongest brands in personal lines insurance, Direct Line and
Churchill, and with Green Flag as the leading challenger in the
Rescue market, we have fantastic assets to build upon.
Financial progress
The business has delivered a net insurance margin of 3.6%
1,2
, a
12.3 point improvement on the previous year. We have a stated
aim to increase this to 13 per 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.
10 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
CEO review
Strategic and operational highlights
–
Direct Line Motor on Price Comparison Websites ("PCWs"): Successfully delivered on one of our key strategic
ambitions with the launch of three new Direct Line branded Motor products on the Compare the Market PCW.
– Motor pricing: Next generation pricing models implemented alongside four material new data enrichment sources.
–
Home re-platform: All own brands now live on the new technology platform which brings significant new pricing and
underwriting capability and supports simplification.
–
Rescue: Two new contracts signed, including a collaboration with Apple, becoming the only UK breakdown brand to
offer rescue services as part of Apple's Roadside Assistance via satellite. The own patrol fleet was further expanded to
over 60 vehicles across 6 regions (2023: 16 patrols across 2 regions).
– Commercial Direct: New risk models rolled out for Van and improvements made to Landlord online journeys.
–
Digital: New apps launched for Direct Line and Churchill Motor, with almost 300,000 downloads to date, enabling
customers to make policy changes with ease.
–
Cost saving programme: A series of initiatives aimed at simplifying the organisation is projected to deliver £50 million
gross cost savings in 2025, as part of our target to achieve run-rate gross savings of more than £100 million by the end
of 2025
4
. Our drive to create a leaner and more efficient operating model is well advanced, with consultations now
complete as part of a reduction of 550 roles.
–
Claims: A range of initiatives launched across Motor and Home, designed to deliver better outcomes for customers at
lower cost.
–
Travel: We have decided to close our annual multi-trip and single trip travel insurance products to focus on our core
markets in Motor, Home, Rescue and Commercial Direct.
Operational transformation
We have made considerable progress over the year. In Motor, in
July we announced that we would be putting our strongest
brand, Direct Line, on Price Comparison Websites ("PCWs"),
where 90 per cent of motorists purchase their insurance. Less
than six months later, in December 2024, we delivered on this
promise. We launched three new Direct Line branded motor
products on the biggest PCW in the UK
with an ambition to
return our overall Motor policy count to growth during 2025.
Our Motability partnership has also seen an increase in policy
count and we aim for it to continue to grow.
Beyond Motor, we outlined ambitious plans to grow our Home,
Rescue and Commercial Direct offerings. In Home we delivered
own brands premium growth of 18% and increased own brands
policies by 1.3%. Technology re-platforming is now largely
complete with Direct Line, Churchill and Privilege all trading on
a new platform.
In our Commercial Direct Insurance business, our strong
proposition in Landlord and our compelling SME offering
delivered 8.8% gross written premium growth and strong
customer retention. We stayed disciplined on the bottom line
in Van and our earned loss ratios were within our target range.
Our Rescue business made significant strategic progress in
2024. We grew our ‘owned patrol’ network to over 60 vehicles,
covering 28% of the UK market, supported nationally by a
network of independent providers. These owned patrols helped
customers, and also generated over £600,000 in additional
roadside revenue.
Technical innovation will remain a key focus across the Group
as we seek to drive home a competitive advantage. We signed
a contract with Apple for Green Flag to become the first UK
breakdown provider to offer rescue services through Apple’s
Roadside Assistance via satellite capability. This allows us to
reach people who might otherwise not get help because they
don’t have mobile phone reception or Wi-Fi access.
We launched two new apps, for Direct Line and Churchill,
meeting the needs of customers who increasingly want to
engage with us digitally. We will keep our focus on aiming to
build seamless customer journeys, letting people self-serve,
simplifying the claims process and making our products more
accessible. We aim to expand AI solutions to reduce cost and
increase the speed of service to meet the evolving needs of
policyholders.
In Claims we’re improving the service we provide customers
while unlocking savings across our operations. We’re settling
bodily injury claims much more proactively, reducing the
number of cars we write off and using our network of owned
repair centres to control costs. Effective claims management
also relies on excellent counter fraud capabilities, and we
delivered a 21% increase in cost savings after introducing data
analytics and voice analysis profiling.
Effective risk management
As a general insurer, the environmental factors impacting the
Group’s performance are major UK floods, windstorms, freeze
events and subsidence. We believe we are appropriately
reserved against those perils. During the year, we acquired
climate scenario modelling capability to support our
assessment of the impact climate change could have on our
underwriting and investment portfolio. This also helps us better
understand the opportunities that may arise from the transition
to a lower-carbon economy.
11 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
When implementing the strategy outlined at the Capital
Markets Day, we ensured that we set out to embed enhanced
risk controls within the business. For example, new pricing and
risk models enable us to be more agile, allowing for more
frequent rating and risk model updates. This renewed focus on
risk management procedures, monitoring emerging threats
and tightening control environments helps protect profitability
and reduces the likelihood of unexpected impacts on our Group.
Cultural transformation
We have recruited an entirely new Executive Committee of
high calibre, experienced leaders, with a track record of delivery.
This new leadership team have made great strides in
transforming the culture of the business, and our colleagues
have embraced the opportunity to grow and operate with a
high-performance mindset.
Transforming a business is not easy, and we’ve had to make
tough decisions about people and capital expenditure. We are
simplifying our management structure in line with our aim of
being a more efficient organisation with clearer accountability.
Over the last year we have made the necessary changes to
succeed in what is an incredibly competitive industry.
Throughout it all, our talented colleagues have consistently
demonstrated their resilience, energy and commitment. They
take immense pride in our brands and want to be brilliant for
our customers every day.
Navigating headwinds
In 2024, the insurance industry continued to grapple with
significant trading headwinds. Inflation drove up the cost of
claims, particularly in Home and Motor, where repair and
replacement costs have surged in recent years. Economic
uncertainty and the ongoing pressures from the cost-of-living
crisis have created an increasingly competitive market, with
insurers facing challenges in balancing affordable premiums
while maintaining profitability. These factors meant we needed
to adopt innovative approaches to underwriting, pricing, and
risk management.
Looking forward
2024 was a landmark year for Direct Line Group, with the Board
recommending a cash and share offer for the purchase of
Direct Line Group by Aviva plc. On 10 March 2025 Direct Line
Group’s shareholders will vote on the transaction.
The potential acquisition by Aviva, which remains subject to
shareholder and regulatory approval, reflects the attractiveness
of the Group, and we believe indicates the significant strength
of our brands and products, the trust of our customers, talent of
our people and the scale of the future opportunity. In the
meantime, we remain an independent business focused on
transforming our organisation, so we are better equipped to
serve our customers with exceptional products and services.
While we need to plan appropriately for this potential takeover,
we need to make sure we don’t take our foot off the accelerator
when it comes to delivering business change.
I am filled with immense pride in what this business has
achieved since I joined. The passion and dedication of our
colleagues, with an unwavering commitment to delivering
brilliant customer outcomes, is unparalleled. Our mission goes
beyond policies and claims: we help safeguard communities,
support the vulnerable and allow our customers to face the
future with confidence.
We are set to embrace the opportunities of tomorrow thanks to
the hard work and dedication of all those at Direct Line Group.
Adam Winslow
Chief Executive Officer
Notes:
1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
tofinancial statement lineitems.
2. Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that
the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary on pages 238 to 241 for
definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
3. Net insurance margin for ongoing operations, normalised for event weather.
4. The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,
commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.
5. Estimates based on the Group’s Solvency II partial internal model.
12 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
“I was delighted to join the Group
asCFO at such an important time
andlead our financial strategy as
weaim togrow, to deliver on our
commitments to serve millions of
customers, and tocreate long-term
sustainable shareholder value.”
Gross written premium and
associatedfees
1,2
£3,732m
2023: £2,978m
Ongoing
2
operating profit
1
£205m
2023: £190m loss
Ongoing
2
net insurance margin
1
3.6%
2023: minus 8.7%
2024 has been a year of significant transition for our Group. I
was delighted to join the Group as CFO at such an important
time and lead our financial strategy as we aim to grow, to
deliver on our commitments to serve millions of customers, and
to create long-term sustainable shareholder value.
Against a challenging external environment, we have
embarked on a bold reset strategy, to focus on improving
business performance, enhance financial strength, and embed
a robust culture of accountability and control.
Financial highlights
This report outlines the financial results for the year. 2024
performance illustrates the early stages of our turnaround
andprovides a strong foundation upon which to build as
weaccelerate delivery of our strategy. Our key financial
highlightswere:
– 25% growth in gross written premiums and associated fees.
Strong growth of 32% in Motor including Motability and 11%
inNon-Motor, above our 7% to 10% compound annual growth
rate ("CAGR") target.
– £395 million increase in ongoing operating profit, largely due
to the turnaround in Motor profitability, alongside a strong
result in Non-Motor.
– Net insurance margin of 3.6% for ongoing operations, a 12.3pt
improvement versus prior year, demonstrating disciplined
underwriting.
– Investment income was £200 million (2023: £139 million), as
we continued to benefit from higher rates with a Group net
investment yield of 4.1%.
– Group profit before tax was £218 million, £59 million lower
than previous year which included a gain of £444 million
from the sale of the Brokered commercial business.
– Tangible net asset value growth of 10% to £1,362 million and
net asset value grew by 4% to £2,138 million.
– Strong solvency capital ratio (pre dividend) of 200% and the
Board has recommended a final dividend of 5.0 pence per
share. The Group generated 20pts of capital during the year
supporting the strong balance sheet.
Further information is set out in the Group financial
performance section onpage20.
Driving business performance
It is critical, at this stage of our turnaround, that we focus on
supporting strategic execution and driving improved business
performance. To achieve this, our Finance team are driving a
step change in performance focus by providing improved
management information to the commercial teams and
prioritising financial performance. We aim to do this while
maintaining excellent cost control, operating more efficiently
and focusing on our ambition of achieving at least £100 million
of gross cost savings by end of 2025 on a run-rate annualised
basis
3
.
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
1,2
, a £395 million improvement in ongoing
operating profit
1,2
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
1,4
in 2026.
13 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
CFO review
Strengthening financial resilience
Ensuring long-term financial strength is a key priority,
positioning us well for sustainable growth and enhanced
shareholder value opportunities. I have reviewed our balance
sheet, acted to assure balance sheet strength and remain
focused on prudent capital management. By leveraging
targeted financial strategies, we aim to further optimise capital
allocation, enhance efficiency, and help drive long-term
performance.
– Capital allocation framework: During 2024, we introduced a
more rigorous capital allocation framework to help us
prioritise investments in the most profitable and strategically
aligned opportunities.
– Investments: Our investment portfolio is already well
diversified, and optimised in line with our approach to asset
and liability management. During the year we reinvested
cash back into investment grade credit and introduced index
linked gilts, which are capital light, to match our PPO
liabilities and further diversify whilst generating good yields.
– Reinsurance programme: At the end of 2024 we
implemented a comprehensive reinsurance programme
designed to reduce earnings volatility, strengthen our
balance sheet, and support our long-term financial health. In
our January renewals we optimised cost and risk: in Motor we
now have unlimited cover above £5 million; in property we
increased our catastrophe cover limit in line with our
exposure to cover a 1 in 200 year loss event; while retention is
unchanged at £100 million.
– Reserve strength is a key underpin to balance sheet strength
and the setting of best estimate liabilities is a key accounting
judgment in the Group’s financial statements. Alongside the
independent re-projections performed by our auditors, the
Board annually commissions an independent review of our
claims reserves. These alongside Audit Committee challenge
to our internal actuarial analysis on reserves, provides us with
additional comfort that our best estimate liabilities are within
a reasonable range.
Embedding a culture of accountability and
control
We enhanced our financial control framework and assurance,
delivering greater oversight, control and proactive risk
management. This will help to improve long-term stability.
– Governance enhancements: A comprehensive overhaul of
our governance structures is progressing and aims to
strengthen accountability at all levels and to ensure rigorous
oversight and effective decision making.
– Financial control: We enhanced our financial control
framework and controls assurance, delivering greater
oversight, control, and proactive risk management.
– Focus on risk awareness: We proactively identify and address
emerging risks, positioning the organisation to respond
effectively to an evolving landscape.
– Cultural transformation: A strong and engaged workforce
underpins our ability to achieve sustainable growth. By
embedding a sense of accountability and ownership, we are
empowering teams to deliver results and drive the
company’s turnaround strategy.
Outlook
As we continue our turnaround journey, our financial strategy
remains focused on our clear objectives of delivering profitable
growth, enhancing operational efficiency, and reinforcing our
financial resilience. Whilst we have made significant progress,
we recognise there is more work to do to achieve our long-term
ambitions. I am confident that the disciplined execution of our
strategy can deliver lasting value for our customers, colleagues,
and shareholders.
Jane Poole
Chief Financial Officer
Notes:
1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation
tofinancial statement lineitems.
2. Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships
thatthe Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary on pages 238 to 241 for
definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
3. The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,
commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.
4. Net insurance margin for ongoing operations, normalised for event weather.
14 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
“At Direct Line Group we are a team
oftalented individuals, in a place
thatempowers us to be the best
wecanbe to drive high performance.”
Colleague engagement
72
UK average: 72
Engagement survey response rate
82%
UK average: 75%
Jane's letter to the shareholders
At Direct Line Group we are a team of talented colleagues, in
aplace that empowers us to be the best we can be. We believe
that by working together, we can achieve great things.
Inspiring, challenging and supporting each other to aim higher
to continually improve our performance and set new standards.
We take accountability for our work. We strive to be brilliant
for customers every day and deliver great outcomes for them.
We celebrate difference and value diverse perspectives, ideas
and opinions.
In 2024, we have been focused on continuing to support and
encourage colleagues to build on their skills and experience to
do the best work of their career and make their full contribution
to becoming a high performing business.
Driving high performance culture
We have continued the emphasis around high performance,
giving greater clarity to colleagues on what this looks like, what
they need to deliver and how to deliver it, through setting clear
objectives and building our managers' capability to have better
performance and development conversations. We have
communicated this change to provide colleagues with clarity,
fairness and transparency.
We continue to conduct multiple engagement surveys
throughout the year to seek feedback from our colleagues on
how they are feeling so that we can make actionable change.
InSeptember 2024, we were proud to receive an Engagement
score of 72, which was a growth of 3% when compared to our
previous survey in February 2024, and is in line with the average
engagement across the UK.
Strengthening our Leadership Capability
In 2024, we appointed a new Executive team. To accelerate the
development of the team, we commenced a 12-month group
development programme partnering with an external team
performance coach. The programme involves a combination
ofindividual and group coaching, building strong alignment
ofgoals and performance standards, establishing effective
team practices, and ultimately aims to ensure groups are
performing at their best, both individually and collectively.
Alongside this, we placed a key focus on the development
of our senior leaders, including externally facilitated,
psychometric leadership assessments followed by the launch
ofa bespoke programme designed to accelerate our high
performance culture supported by an external coach.
There is strong evidence to suggest our recruitment and
development approach is adding value, with our September
2024 employee engagement survey having reported a
significant 10 percentage point increase in confidence in our
senior leadership team since the survey in February 2024.
Rewarding Colleagues
In April 2024, all eligible colleagues (excluding senior
management) received at least a 5% pay rise, with our
minimum salary rising by 7% to £23,400 a year, in line with the
Living Wage Foundation’s National Real Living Wage (as set
in October 2023 for roles outside of London). This was 5% above
the Government’s statutory National Living Wage, effective
1 April 2024, for those aged 21 and over. From April 2024, all
colleagues became eligible either for incentives or our annual
incentive scheme.
15 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Chief People Officer review
A diverse and inclusive business
We know that to succeed as a high performing business
weneed our workforce to be truly representative of our
customers and society. Diverse perspectives, ideas and opinions
lead to more insight, innovation and better decision making.
And we know that being diverse is not enough, we also need
tobe inclusive, so everyone feels free to be themselves and
beable to succeed in their careers.
We believe that delivering change requires both policies and
targets and a change in mindsets so we undertake activity
todeliver both. Some examples include:
– Targeting ambitious new representation targets by 2027
andincluding them in their annual objectives.
– Using inclusive hiring principles, which include the use
ofrecruitment tools, such as language decoders for job
adverts and panel-basedinterviewing.
– Building a stronger pipeline of diverse talent, especially
inareas where the jobs of the future are, because we want
tofuture-proof our activity. This includes work experience,
mentoring and skills building programmes that target
lessadvantaged communities for our Ignite
apprenticeshipprogrammes.
– Developing our partnerships with The Diversity Trust, Race
Equality Matters and Spear and maintaining our relationship
with Parenting Mental Health. The intention of these
partnerships is to support external communities whilst
alsodriving greater equity, inclusivity andactive allyship
acrossthe Group.
– We also partner with the Business Disability Forum, who
have supported us this year in auditing our guidance on
working with vulnerable customers, and with the ABI who,
through their active DEI network, provide benchmarking
opportunities and learning on industry best practice.
– Learning from our Diversity Network Alliance ("DNA") which
comprises seven employee networks which are a key driver
of diversity and inclusion across our business. They focus on
the following areas: Belief, Life (families and carers), LGBTQ+,
Neurodiversity and Disability, REACH (race, ethnicity and
cultural heritage), Social Mobility and Thrive (gender).
We feel confident that all of these things are contributing
tousbecoming a more diverse and inclusive business.
Finally, I wanted to add what a pleasure it has been joining
theGroup. I have been so impressed by the talent across the
organisation, the commitment to deliver against our strategy
and the strong sense of a high performance culture that we are
building. I am looking forward to spending more time with the
teams, across our different locations over the coming months.
Jane Storm
Chief People Officer
Note:
1. Senior leadership is defined as ExCo and their Direct Reports, where
our definition of ExCo-1 is direct reports of the approved list when
they meet all the following criteria:
– must be at a certain reward level and therefore not support staff;
– not a fixed term contractor covering maternity or medical leave; and
– not on garden leave.
Senior Leadership
1
female representation
Increasing the diversity of our senior leadership is an ongoing
target for the Group. In 2024 we made an intentional move
toensure Diversity Equity & Inclusion ("DE&I") is considered
through allpeople and business decisions. In 2024 we have
made progress towards our 2027 target of women comprising
40% of Senior Leadership, particularly at ExCo level.
Senior leadership
1
female representation
asat31 December 2024
41.7%
40.0%
34.2%
43.5%
35.4%
Board
ExCo
ExCo-1
ExCo-2
Senior
Leadership
Senior Leadership ethnic minority
andBlackrepresentation
We recognise that we need to do more to ensure equitable
representation across our organisation, particularly for ethnic
minorities, and have set targets to achieve representation in
Senior Leadership roles of 16% ethnic minorities, including 4%
Black representation, by the end of 2027. Weare accelerating
programmes to improve inclusivity across the employee
lifecycle, increasing the retention and promotion of colleagues
from ethnic minority backgrounds. We have strengthened our
succession plans, including high potential talent from under-
represented groups and will review these annually. To facilitate
colleague progression, we invested in access to WeQual, the
world’s leading development network for women leaders and
INvolve Emerging Leaders’ programmes for under-represented
communities.
Ethnic minority representation
inSenior Leadership
1
8.3%
12.5%
12.1%
2024
2023
2022
Black representation in Senior
Leadership
1
0.0%
0.0%
1.5%
2024
2023
2022
16 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Gender diversity
1
of our Board
As of 31December 2024
41.7%
58.3%
l
Women (5)
l
Men (7)
Gender diversity
1
of Senior Leadership
As of 31December 2024
35.4%
64.6%
l
Women (17)
l
Men (31)
Gender diversity of Senior Leadership defined as
Executive Committee and direct reports, excluding
those in support or administrative roles
Gender diversity
1
of all employees
As of 31December 2024
44.2%
55.8%
l
Women (3,966)
l
Men (5,009)
Ethnicity of all employees
As of 31December 2024
l
11.7%
Asian (1,053)
l
3.1%
Black (282)
l
2.1%
Mixed (188)
l
1.4%
Other (126)
l
73.2%
White (6,566)
l
6.1%
Prefer not to Say (544)
l
2.4%
Not Specified (216)
Gender pay gap
1
In 2024, our mean gap widened by 1.1 percentage points
and our median gap by 1.7 percentage points. Our pay gap
isnow broadly in line with peers when compared with the
broader financial and insurance services sector but we want
tosee that gap close. We are comfortable that we do not pay
people differently because of their gender and believe that
theway to reduce the gap in the medium to long term is
tocontinue with our work to seek to address the
disproportionate representation of women at senior levels and
in certain areas of our business. The figures used for the gender
pay gap reporting are reflective of the snapshot at 5 April 2024,
which this year has been impacted by a lower proportion of
women in senior leadership roles across the Group at that time.
Since this time, good progress has been made in enhancing
women in senior leadership roles. A further influence in the
paygap relates to our accident repair centres, an area that is
heavily resourced by men and where pay levels are at a market
premium compared to other positions within our lower bands
due to the external recruitment market, resulting in them
being positioned in our top two pay quartiles.
Our 2024 gender pay gap showed:
Gender pay gap
Mean Median
2024 22.2 % 25.1 %
2023 21.1 % 23.4 %
2022 19.3 % 20.3 %
Gender bonus gap
Mean Median
2024 56.3 % 43.6 %
2023 53.8 % 43.8 %
2022 46.7 % 45.4 %
% of employees receiving bonus
Men Women
2024 77.2 % 71.2 %
2023 84.2 % 87.3 %
2022 83.1 % 82.6 %
Note:
1. Gender diversity refers to Legal Sex.
17 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Ethnicity pay gap
2
This is the fourth year that we are voluntarily disclosing
ourethnicity pay gap. As with the gender pay gap, we are
comfortable that we do not pay people differently because of
their ethnicity and believe that the way to reduce the gap in the
medium to long term is to continue with our work to address
the disproportionate representation of ethnic minority
colleagues at certain levels and in certain areas of our business.
We are proud that 91% of colleagues have disclosed their
ethnicity with us, as we continue to encourage more colleagues
to share, the numbers we report in the future may change
asaresult. It is important to note that when pay gap data is
represented by a smaller number of colleagues, it can vary
significantly due to changes in the make up of our colleagues
during the year. Our pay gap for all ethnic minorities remains
low and has narrowed in 2024.
Ethnicity pay gap
2024 2024 2023 2023
Mean Median Mean Median
Ethnic minority
(overall) -0.8 % 11.0 % 1.0 % 12.7 %
Asian -6.6 % 8.9 % -2.7 % 14.1 %
Black 16.8 % 19.7 % 12.2 % 17.8 %
Mixed 3.2 % 9.0 % 3.2 % 8.2 %
Other -0.3 % -4.9 % 2.9 % -0.2 %
Ethnicity bonus gap
2024 2024 2023 2023
Mean Median Mean Median
Ethnic minority
(overall) 27.2 % 4.1 % 28.7 % 20.4 %
Asian 29.4 % 0.0 % 29.2 % 20.5 %
Black 42.4 % 16.3 % 40.6 % 24.5 %
Mixed 21.7 % 3.4 % 22.3 % 15.3 %
Other -3.3 % 12.6 % 16.9 % 10.1 %
% of employees receiving bonus
2024 2023
White 77.4% 88.0%
Ethnic minority (overall) 63.5% 78.5%
Asian 64.0% 77.7%
Black 53.4% 74.1%
Mixed 69.4% 78.6%
Other 72.8% 89.6%
Notes:
1. Gender pay gap shows the difference in average pay between women and men. This is different to equal pay, which is women and men receiving
the same pay for work of equal value. Our reporting is based on a snapshot date of 5 April 2024.
2. Ethnicity pay gap shows the difference in average pay between ethnic minorities, Asian, Black, Mixed, Other and White colleagues. This is different
to equal pay that is ethnic minority and White colleagues receiving the same pay for work of equal value. Our reporting is based on a snapshot date
of 5 April 2024 and 91% of colleagues that have shared their ethnicity with us.
18 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Motor premium and claims inflation
The UK motor market
1
continued to be affected by
challengingconditions, driven by the impact of elevated
inflation. The average cost of motor cover was £622, 15% higher
than 2023 although average premiums reduced during the
year and ended 1.3% lower year on year in the fourth quarter.
This is against a backdrop of total claims payouts that were
17%higher in 2024 compared to the previous year.
Claims inflation remained elevated in 2024, albeit lower
thanthe levels seen in 2023 as inflationary pressures began
tomoderate. Repair cost inflation remained above long term
averages driven by higher labour costs. The market observed
areduction in claims frequency during the year which is likely
to reflect changes to driving patterns, car safety and cost
oflivingpressures.
In February 2024, the Association of British Insurers (“ABI”)
published a 10-Point Roadmap to help combat the cost
ofmotor cover. The Roadmap outlined ten actions that the
industry, government or regulators could take, and areas where
improvements could be made to address the affordability
ofmotor insurance. The ABI believes the Government can help
combat high claims costs by addressing the skills and capacity
challenge in the vehicle repair sector, improving the UK's roads,
and delivering its road safety strategy.
During the year, the Government announced a cross-
government motor insurance taskforce, supported by industry
experts, to help drive down the costs of car insurance.
The Government announced changes to the discount rate used
by courts to decide how much insurer compensation personal
injury claimants should receive as a lump sum. In September
the discount rate for Scotland and Northern Ireland changed to
0.5% (previously minus 0.75%) and in January 2024, the discount
rate in England and Wales changed to 0.5% (previously
minus0.25%).
The Group focused on maintaining margins throughout the
year and growing its share of new business through the PCW
channel. In December the Group launched its Direct Line brand
on its first PCW, the channel where over 90% of customers
buytheir insurance.
Home premium and claims inflation
The UK household market
2
experienced strong premium
inflation in 2024, likely driven by a combination of claims
inflation and the impact of weather events.
The average price for a combined policy rose 16% to £395 which
led to an increase in the volume of consumers shopping in the
market, particularly in the first half of the year before prices
softened in the second half of the year.
The market experienced a number of weather events in
theyear, particularly in the fourth quarter where, according
tothe ABI, claims for damage to homes from adverse weather
reached £146 million.
Against this backdrop, the Group focused on maintaining
margins whilst growing own brand new business sales
yearonyear.
Climate change
A focus on climate remains, with particular emphasis placed
onhow firms are assessing and managing longer-term climate-
related risks. Increased importance is also being given to the
communication of plans that companies have in place to
support the transition to a low-carbon economy. This includes
the actions that are being taken to progress against emission
reduction targets and net zero aims. Furthermore, we continue
to expect an increase in regulatory focus on how firms are
managing climate-related financial risks, as well as how this is
reported, supported by developments in reporting frameworks
and disclosure requirements.
The Group continues to respond to climate change, and
wetake our responsibilities seriously in our assessment of
climate-related risks to our business. Our disclosure against
therecommendations of the Task Force on Climate-related
Financial Disclosures (“TCFD”) (see pages 58 to 71) sets out our
strategic response to climate change and reflects continued
action to further develop our understanding and management
of the associated risks and opportunities. The disclosure reports
on the progress we have made in the year against our carbon
emissions reduction targets, which were approved by the
Science Based Targets initiative (“SBTi”) in 2022.
Notes:
1. Based on ABI Q4 motor premiums and claims tracker.
2. Based on ABI Q4 household premiums and claims tracker.
19 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Market Overview
2024 2023 Change
Ongoing operations
1,2
In-force policies
1
(thousands) 8,827 9,339 (5.5%)
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%
Net insurance revenue
1
2,857.1
2,422.6
17.9%
Insurance service result
104.6
(212.0)
316.6
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
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)
(98.5%)
Brokered commercial business, Non-core and Run-off
39.7
(1.5)
41.2
Other finance costs
(15.4)
(14.5)
(6.2%)
(Loss)/gain on disposal of business
(4.7)
443.9
(101.1%)
Profit before tax
218.4 277.4 (59.0)
Tax charge
(55.8)
(54.5)
(1.3)
Profit for the year attributable to the owners of the Company
162.6
222.9
(60.3)
Performance metrics
Basic earnings per share (pence) 12
11.2
15.9 (4.7)
Diluted earnings per share (pence) 12
11.1
15.7 (4.6)
Operating earnings/(loss) per share (pence)
1,3
9.8
(12.8) 22.6
Return on equity
1
14 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 (pence)
5.0
4.0 25.0%
Dividend per share – total ordinary (pence)
7.0
4.0 75.0%
Net asset value per share (pence) 13
164.3
158.0 4.0%
Tangible net asset value per share(pence)
1
104.7
95.6 9.5%
Solvency capital ratio – post dividends
1,5,6
195% 188% 7pts
Notes:
1. See glossary on pages 238 to 241 for definitions.
2. Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that
the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly.
3. See appendix A – Alternative performance measures on pages 242 to 245 for reconciliation to financial statement line items.
4. Other investment movements relate to net fair value gains/(losses), the effect of the change in the yield curve and interest expense on funds
withheld liabilities.
5. Estimates based on the Group’s Solvency II partial internal model.
6. The full year 2023 solvency capital ratio has been re-presented as explained in the Capital analysis sub-section of the Group financial performance
section in this report (previously reported in the Group's full year 2023 preliminary results and Annual Report and Accounts as being 197%).
20 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Group financial performance
2024 performance
Profit from ongoing operations increased by £395 million to
£205 million driven by a turnaround in Motor earnings which
increased by £427 million. Non-Motor delivered a profit
of £98 million.
The Group has excluded the results of the Brokered commercial
business, three run-off partnerships and its Other personal lines
products from its ongoing results. Results relating to ongoing
operations are referenced in Appendix B tothe report and
inthe financial statements, note 2 (Segmental information)
hasalso been amended to reflect the change. Theinsurance
serviceresult from ongoing operations was a profit of £105
million (FY 2023: £212 million loss) and for the Group, as a whole,
it was a profit of £126 million (FY 2023: £227 million loss).
The Group profit before tax was £218 million, £59 million lower
than prior year, which included £444 million from the sale
ofthe Brokered commercial business in 2023.
In-force 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 higher premiums. The net expense ratio for ongoing
operations was broadly stable at 20.2% (FY 2023: 19.8%) as the
full year of Motability costs alongside higher depreciation and
amortisation charges and general inflation were largely offset
by premium growth.
Expenses in insurance service result
Operating expenses for ongoing operations were £577 million,
an increase of £97 million compared with FY 2023. Controllable
costs increased by £51m in line with growth from Motability and
expected inflation, resulting in a broadly stable net expense
ratio of 20.2% (2023: 19.8%).
FY 2024
FY 2023
£m £m
Commission expenses (121.2) (104.8)
Marketing (58.1) (61.1)
Acquisition expenses (179.3) (165.9)
Staff costs
7
(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 6.3% 6.8%
Net acquisition costs ratio
1
–
totalGroup 7.5% 9.3%
Net expense ratio
1
– ongoing
operations 20.2% 19.8%
Net expense ratio
1
– total Group 21.6% 19.7%
21 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Brokered commercial business
1,2
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
1,2
The Group has excluded the results of Other personal lines
products, including three partnerships that were previously
disclosed as being exited, from its ongoing operations and has
restated all relevant comparatives across this review. Other
personal lines is made up of Pet, Travel, Creditor and Select, our
insurance targeted at mid- to high-net worth customers. Pet is
the largest product within Other personal lines. As announced
at the Group’s Capital Markets Day in July 2024, the decision
was taken to pause investment in these products. Other
personal lines represented around £130 million of gross written
premium and associated fees in 2023.
Three partnerships in Travel and Rescue have now been exited
and will reduce the Group’s exposure to low margin insurance
products packaged with bank accounts so it can redeploy
capital to segments with higher return opportunities. The two
Travel partnerships were with NatWest Group and Nationwide
Building Society and expired during the first half of 2024,
although upgrades on existing Nationwide Building Society
policies will continue to be underwritten by the Group until
April 2025. The Rescue partnership was with NatWest Group
and expired during the second half of 2022.
Gross written premium and associated fees were £178 million
(2023: £279 million). The operating profit relating to Non-core
and Run-off was £4 million (2023: £29 million loss).
Investment result and unwind of discount 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%.
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 101.4 22.6
FY 2024 FY 2023
Investment income yield
(totalGroup)
1
4.1% 3.5%
Finance income and expenses in operating profit also benefited
from a decrease in expenses related to the unwind of the
discounting of claims.
Reconciliation of operating profit/(loss) to basic
earnings per share
FY 2024 FY 2023
£m £m
Motor 107.0 (319.6)
Non-Motor 98.0 129.7
Operating profit/(loss)¹ – ongoing
operations¹
205.0 (189.9)
Operating profit¹ - Brokered
commercial business
1
36.2 27.6
Operating loss
1
– Non-core and
Run-off1
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) –
(Loss)/gain on disposal of business (4.7) 443.9
Other finance costs (15.4) (14.5)
Tax charge (55.8) (54.5)
Profit for the year attributable to
the owners of the Company
162.6 222.9
Basic earnings per share (pence) 11.2 15.9
Operating return on tangible
equity
1,3
10.0% (14.9%)
22 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Restructuring and one-off costs
The Group incurred £118 million of restructuring and one-off
costs during 2024 (2023: £60 million), which were a result of
several items including cost out and control initiatives, non-
cash impairments, as well as work carried out in relation to the
takeover approach from Ageas NV and the offer from Aviva plc.
Net fair value 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
inthis and the Operating review sections. The calculation of
earnings per share is presented in note 12. The calculation of
operating earnings per share is presented in AppendixB.
Notes:
1. See glossary on pages 238 to 241 for definitions
2. Ongoing operations – the Group's ongoing operations result excludes
the results of the Brokered commercial business, that it sold to RSA
Insurance Limited in 2023, and its Non-core businesses, announced
at the Group's 2024 Capital Markets Day, and three run-off
partnerships that the Group completed its exit from in H1 2024.
Relevant prior-year data has been restated accordingly. See glossary
on pages 238 to 241 for definitions and Appendix B – Management
view statements of profit and loss, expenses, average premiums,
gross written premium and associated fees and in-force policies on
pages Appendix B – Management view statements of profit and loss,
expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
3. See appendix A – Alternative performance measures on pages 242 to
245 of insurance finance costs, operating return on tangible equity,
operating earnings/(loss) per share and investment income yield.
4. Other investment movements relate to net fair value gains/(losses),
the effect of the change in the yield curve and interest expense on
funds withheld liabilities.
5. Estimates based on the Group’s Solvency II partial internal model.
6. The full year 2023 solvency capital ratio has been re-presented as
explained in the Chief Financial Officer review of this report
(previously reported in the Group's full year 2023 preliminary results
and Annual Report and Accounts as being 197%).
7. Staff costs and other operating expenses attributable to claims
handling activities are allocated to the cost of insurance claims.
8. IT and other operating expenses include professional fees and
property costs.
9. Includes right-of-use ("ROU") assets and property, plant and
equipment. For the year ended 31December 2024, there were no
impairment charges which relate solely to own occupied freehold
property (2023: no impairments).
23 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Cash flow
2024 2023
Note
£m £m
Net cash (used in)/generated
from operating activities
(364.5) 404.9
Of which:
Operating cash flows
before movements in
working capital
137.2 (337.0)
Movements in working
capital
(168.2) 469.0
Tax received/(paid)
13.9 (30.9)
Cash flow hedges
(0.3) (0.6)
Cash (used in)/generated
from investment of
insurance assets
(347.1) 304.4
Net cash (used in)/generated
from investing activities
(106.5) 398.3
Net cash used in financing
activities
(129.6) (51.8)
Net (decrease)/increase in
cash and cash equivalents
25 (600.6) 751.4
Cash and cash equivalents at
the beginning of the year
1,689.8 938.4
Cash and cash equivalents
at the end of the year
25 1,089.2 1,689.8
The cash that the Group used in operating activities (£365
million), investing activities (£107 million) and financing
activities (£130 million) resulted in a net decrease in cash and
cash equivalents of £601 million to £1,089 million (2023: £751
million increase to £1,690 million).
Net cash used in operating activities of £365 million is largely
asa result of cash used in investment of insurance assets of
£347million (2023: £304million cash generated). The Group has
considerable assets under management and during the period
purchases of debt securities held at fair value through profit or
loss ("FVTPL") exceeded disposals and maturities. The Group
had an operating cash inflow before movements in working
capital of £137 million (2023: outflow £337 million), due to the
improvement in the insurance service result. After taking into
account movements in working capital, taxes and cash flow
hedges, the Group's cash outflow before investment of
insurance assets was £31 million (2023: inflow £132 million).
Net cash used in investing activities of £107 million primarily
reflected the Group's continuing investment in its major IT
programmes (2024: £93 million, 2023: £124 million) while the
net cash generated from investing activities in the period
ended 31 December 2023 primarily reflected net proceeds from
the sale of the Brokered commercial business of £470 million.
Net cash used in financing activities of £130 million included
£95 million in dividends and Tier 1 capital coupon payments
(2023: £17 million in Tier 1 capital coupon payments) and £13
million (2023: £11 million) in lease principal payments.
The levels of cash and other highly liquid sources of funding
that the Group holds to cover its claims and other cash flow
obligations are continually monitored with the objective of
ensuring that the levels remain within the Group’s risk appetite.
Balance sheet management
Capital management and dividend policy
The Group aims to manage its capital efficiently and generate
long-term sustainable value for shareholders, while balancing
operational, regulatory, rating agency andpolicyholder
requirements.
The Group aims to pay a regular dividend of around 60% of
operating profit after tax for ongoing 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.
24 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Capital analysis
The Group is regulated under Solvency II requirements, as
modified by the PRA's 2024 reforms, by the PRA on both a
Group basis and for the Group’s principal underwriter, U K
Insurance Limited. In its results, the Group has estimated its
Solvency II own funds, SCR and solvency capital ratio as at
31December 2024.
Capital 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%).
Capital Returns (£million)
595.2
401.3
149.1
52.0
91.1
299.7 301.3
99.0
52.0
91.1
195.5
100.0
100.0
50.1
2020 2021 2022 2023 2024
n
Ordinary dividends
n
Special dividends
n
Buyback programmes
Movement in capital surplus
1
(£bn)
1.00
0.24
0.10
(0.03)
(0.11)
(0.03)
(0.06)
1.11
Capital
surplus at 1
January
Capital
generation
excluding
market
movements
Market
movements
Change in
solvency
capital
requirement
Capital
expenditure
Interim
dividend
Final dividend
Capital
surplus at 31
December
25 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Movement in capital 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
experienced in 2008/09
(5pts) (5pts)
One-off catastrophe loss
equivalent to the 1990 storm
"Daria"
(8pts) (9pts)
One-off catastrophe loss based on
extensive flooding of the River
Thames
(7pts) (7pts)
100 bps increase in PPO real
discount 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.
26 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Limitations of sensitivity analysis
– Sensitivities are calculated by applying an instantaneous
change to specific assumptions whilst leaving others
unchanged.
– In reality, changes in the environment occur over time and
are often interrelated; the sensitivities provided do not
capture these interactions.
– The impact of a change in assumptions is often non-linear
and users of this information should not assume that
applying a linear calculation methodology will provide
accurate results.
– The sensitivities are based on a balance sheet at a specific
point in time. The result of a sensitivity analysis will also
change due to business performance and any active
management of assets and liabilities.
– Movements in economic variables are unlikely to follow the
nature of a parallel shift as described in many of the
sensitivities.
– In addition, the sensitivities assume economic variables move
in a similar manner across different currencies and countries,
which is unlikely to be true in reality.
– Our specific portfolio of assets and liabilities will not match
the composition of market indices exactly and using such
indices to estimate an impact on the balance sheet should be
used with caution.
Own funds
The following table splits the Group’s eligible own funds by tier
on a Solvency II basis.
2024 2023
At 31 December £bn £bn
Tier 1 capital before foreseeable
distributions 1.71 1.51
Foreseeable dividend (0.06) (0.05)
Tier 1 capital – unrestricted 1.65 1.46
Tier 1 capital – restricted 0.32 0.32
Eligible Tier 1 capital 1.97 1.78
Tier 2 capital – subordinated debt 0.21 0.22
Tier 3 capital – deferred tax 0.09 0.13
Total eligible own funds 2.27 2.13
Note:
1. Full year 2023 eligible own funds have been re-presented
asexplained in the Capital position section of this report.
During 2024, the Group’s eligible own funds increased from
£2.13 billion to £2.27 billion. Eligible Tier 1 capital after
foreseeable distributions represents 87% of own funds and 170%
of the estimated SCR. Tier 2 capital relates to the Group’s £0.21
billion subordinated debt with no ineligible Tier 1 capital.
Themaximum amount of Restricted Tier 1 capital permitted
asa proportion of total Tier 1 capital under the Solvency II
regulations is 20%. Restricted Tier 1 capital relates solely to the
Tier 1 notes issued in 2017.
The amount of Tier 2 and Tier 3 capital permitted under the
Solvency II regulations is 50% of the Group’s SCR and the
amount of Tier 3 alone is 15% of the Group's SCR. The Group has
no ineligible Tier 3 own funds.
Reconciliation of IFRS shareholders’ equity to Solvency
II eligible own funds
At 31 December
2024 2023
£bn £bn
Total shareholders’ equity 2.14 2.06
Goodwill and intangible assets (0.78) (0.82)
Change in valuation of technical
provisions
0.39 0.34
Other asset and liability
adjustments
(0.04) (0.07)
Foreseeable dividend (0.06) (0.05)
Tier 1 capital – unrestricted 1.65 1.46
Tier 1 capital – restricted 0.32 0.32
Eligible Tier 1 capital 1.97 1.78
Tier 2 capital – Tier 2 subordinated
debt
0.21 0.22
Tier 3 capital – deferred tax 0.09 0.13
Total eligible own funds 2.27 2.13
Notes:
1. Full year 2023 eligible own funds have been re-presented as
explained in the Capital position section of this report.
2. At 31December 2024 and 31December 2023 no ineligible Tier 3
capital arose as the Group's available Tier 3 capital was under the
amount of Tier 3 capital permitted under the Solvency II regulations
(15% of the Group’s SCR).
27 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Reconciliation of IFRS shareholders’ equity to Solvency II eligible own funds (£bn)
2.14
1.65
0.78
0.39
0.04
0.06
0.32
0.21
0.09
Total shareholders’
equity
Goodwill and
intangible assets
Change in
valuation of
technical
provisions
Other asset and
liability
adjustments
Foreseeable
dividend
Total own funds
n
Tier 1 capital unrestricted
n
Tier 1 capital restricted
n
Tier 2 capital – sub debt
n
Tier 3 capital – deferred tax
Investment portfolio
Our investment strategy aims to deliver several objectives, which are summarised below:
– to ensure there is sufficient liquidity available within the investment portfolio to meet stressed liquidity scenarios;
– to match PPOs and non-PPOs liabilities in an optimal manner; and
– to deliver a suitable risk-adjusted investment return commensurate with our risk appetite.
The strategic asset allocation has continued to be regularly reviewed during 2024. Whilst the core outcome of the review reinforced
investment grade credit as the largest asset class within the portfolio, it suggested some modest changes to other areas of the
portfolio. Following the review, a phased approach during the year was adopted in reinvesting back into investment grade credit
securities and reducing the Group's overweight position in cash. To assist with the matching exercise of the Group’s PPO liabilities,
effective from Q4, the Group diversified further by acquiring some index-linked sovereign.
Asset and liability management
The following table summarises the Group's high-level approach to asset and liability management.
Liabilities Assets Characteristics
More than 10 years, for example PPOs Property and infrastructure debt and index-
linked sovereign
Inflation linked or floating
Short and medium term - all other claims Investment-grade credit Fixed - key rate duration matched
Tier 1 equity Investment-grade credit Fixed
Tier 2 sub-debt Commercial real estate loans and cash Floating
Tier 2 sub-debt fixed Investment-grade credit and cash Fixed or floating
Surplus - tangible equity Investment-grade credit, short-term high
yield, cash and government debt securities
Fixed or floating
28 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
2.27
Asset allocation and benchmarks – U K Insurance Limited
The current strategic benchmarks for U K Insurance Limited are detailed in the following table:
Benchmark
Holding
Actual
Holding
Benchmark
Holding
Actual
Holding
2024 2024 2023 2023
Investment-grade credit 61.0 % 55.7 % 60.0 % 43.8 %
High yield 6.0 % 5.9 % 6.0 % 5.4 %
Investment-grade private placements 0.0 % 1.1 % 0.0 % 1.4 %
Credit 67.0 % 62.7 % 66.0 % 50.6 %
Sovereign 13.0 % 14.4 % 10.0 % 13.0 %
Total debt securities 80.0 % 77.1 % 76.0 % 63.6 %
Infrastructure debt 4.0 % 3.7 % 4.0 % 4.1 %
Commercial real estate loans 4.0 % 2.6 % 6.5 % 2.8 %
Other loans 0.0 % 0.1 % 0.0 % 0.1 %
Cash and cash equivalents 7.0 % 10.9 % 8.0 % 24.1 %
Investment property 5.0 % 5.6 % 5.5 % 5.3 %
Total investment holdings 100.0 % 100.0 % 100.0 % 100.0 %
With the Group ending 2023 in a stronger capital position, a phased approach has been adopted throughout 2024 in reducing
theoverweight holding in cash and reinvesting back into investment grade credit.
Investment holdings and yields
1
2024 2023
Holding Income Gross yield Holding Income Gross yield
(£m) (£m) (%) (£m) (£m) (%)
Investment-grade credit
2
2,869.6 79.5 3.1 % 2,288.1 51.1 2.2 %
High yield 302.7 20.0 6.8 % 281.2 16.5 5.9 %
Investment-grade private placements 55.7 1.8 2.9 % 70.6 2.8 3.3 %
Credit 3,228.0 101.3 3.5 % 2,639.9 70.4 2.6 %
Sovereign
2
746.0 28.5 4.0 % 681.2 8.5 1.4 %
Total debt securities 3,974.0 129.8 3.6 % 3,321.1 78.9 2.4 %
Infrastructure debt 188.7 14.7 7.3 % 214.2 14.8 6.6 %
Commercial real estate loans 135.5 10.0 7.1 % 145.9 12.9 7.5 %
Other loans 5.4 0.1 2.1 % 3.1 0.0 0.4 %
Cash and cash equivalents
3
791.1 58.2 5.2 % 1,448.0 65.2 5.5 %
Investment property 287.6 17.4 6.1 % 277.1 16.1 5.8 %
Equity investments
4
20.1 0.0 0.0 % 19.7 0.0 0.0 %
Investment fees – (8.8) – – (9.3) –
Total assets under management 5,402.4 221.4 4.1 % 5,429.1 178.6 3.5 %
Notes:
1. Excludes £298.1 million (2023: £241.8 million) which is invested within money market funds under the 100% quota share reinsurance treaty for the
Brokered commercial business, which is operated on a funds withheld basis and is retained as security against the reinsurer's obligations.
2. Asset allocation at 31December 2024 includes investment portfolio derivatives, which have a mark-to-market liability value of £19.6 million which
issplit as assets of £19.6 million included in investment grade credit and of £nil included in sovereign debt (31December 2023: mark-to-market
asset value of £12.0 million and £0.4 million liability respectively). This excludes non-investment derivatives that have been used to hedge
operational cash flows.
3. Net of bank overdrafts: includes cash at bank and in hand and money market funds.
4. Equity investments consist of quoted shares and insurtech-focused equity funds. The insurtech-focused equity funds are valued based on external
valuation reports received from a third-party fund manager.
29 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
At 31December 2024, total assets under management of
£5,402 million were 0.5% higher than at the start of the year.
Total debt securities were £3,974 million (31December 2023:
£3,321 million), of which 2.2% were rated as ‘AAA’ and a further
63.1% were rated as ‘AA’ or ‘A’. The average duration at
31December 2024 of total debt securities was 2.5 years
(31December 2023: 2.1 years).
At 31December 2024, total unrealised losses on investments
held at FVTPL were £90 million (31December 2023: £137 million
unrealised losses).
FY 2024 FY 2023
Note £m £m
Investment income 207.5 146.3
Investment fees (7.2) (7.2)
Net investment income in
operating profit – ongoing
operations 200.3 139.1
Net investment income –
Brokered commercial
business 33.6 35.2
Net investment income –
Non-core and Run-off 1.3 4.3
Net investment income –
total group 4 235.2 178.6
Net FV gains 6 37.1 124.4
Total investment income
recognised through the
statement of profit or loss 6 272.3 303.0
Net investment income in operating profit for ongoing
operations increased to £200 million (2023: £139 million)
primarily driven by interest rates remaining high following an
environment of global interest rates rising during the first half
of 2023, and a phased reinvestment back into investment grade
credit more aligned with the Group’s benchmark weighting.
Fair value gains were £37 million (2023: £124 million), with a
tightening of credit spreads and interest rates accounting for
the majority of the movement.
Net asset value
2024 2023
Note
£m £m
Net assets 13 2,137.9 2,058.2
Goodwill and other
intangible assets 13 (776.3) (818.6)
Tangible net assets 13 1,361.6 1,239.6
Closing number of Ordinary
Shares (millions) 13 1,301.0 1,297.7
Net asset value per share
(pence) 13 164.3 158.6
Tangible net asset value per
share (pence)
1
13 104.7 95.5
Note:
1. See glossary on pages 238 to 241 for definitions and Appendix A -
Alternative performance measures on pages 242 to 245.
Net assets at 31December 2024 increased by £80 million
to£2,138 million (31December 2023: £2,058 million) and a
reduction in own shares held by the Group, increasing the
closing number of shares, resulting in tangible net assets per
share increasing to 104.7 pence (31December 2023: 95.5 pence).
Leverage
The Group’s financial leverage reduced slightly to 22.1%
(2023: 22.7%).
2024 2023
£m £m
Shareholders’ equity 2,137.9 2,058.2
Tier 1 notes 346.5 346.5
Financial debt – subordinated debt 259.1 258.8
Total capital employed 2,743.5 2,663.5
Financial leverage 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.
30 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
The Ogden discount rate for England and Wales increased
from minus 0.25% on 11 January 2025. The bodily injury discount
rate increased in Scotland and Northern Ireland on 24
September 2024 from minus 0.75% and minus 1.5%,
respectively. The impact of potential future changes in the
discount rate is shown in the sensitivity table below. Since 2021,
we have reduced the level of Motor reinsurance purchased,
resulting in higher net reserves for accident years 2021 to 2024.
If the claimant prefers, large bodily injury claims can be settled
using a PPO. This is an alternative way to provide an indemnity
for recurring costs, making regular payments, usually for the
rest of the claimant’s life. As it is likely to take time to establish
whether a claimant will prefer a PPO or a lump sum, until a
settlement method is agreed we make assumptions about the
likelihood that claimants will opt for a PPO. This is known as the
PPO propensity.
At 31 December 2024, the real discount rate for PPOs is 1.5%
(2023: 0.7%), the combination of cash flow weighted inflation
and discounting of 3.7% (2023: 3.9%), which allows for increased
short-term ASHE 6115 inflation of 6.5% over the next 12 months,
followed by a number of years of heightened inflation before
reverting to a long term assumption of 3.5%, and a yield curve
based discount rate of 5.2% (2023: 4.6%).
The assessment of claims inflation, and the underlying drivers of
claims inflation, remains a key consideration in deriving the
reserves. Claims inflation is correlated with price inflation but
there are several individual factors that are considered in
addition, for example the salary of care workers, the price of
used cars, judicial costs and repair costs. A range of general and
specific scenarios for excess inflation has been considered in
the reserving process.
The Group's prior-year reserves development (excluding
restructuring and one-off costs) in 2024 was a reserve release of
£5 million (2023: £124 million), driven by reserve releases in
Motor and Non-core and Run-off, partially offset by reserve
strengthening in Non-Motor and Brokered commercial.
Net liability for incurred claims
31 Dec 2024 31 Dec 2024 31 Dec 2024 31 Dec 2023 31 Dec 2023 31 Dec 2023
Estimate of
present value
cash flows
Risk
adjustment Total
Estimate of
present value
cash flows
Risk
adjustment Total
£m £m £m £m £m £m
Motor (1,661.8) (77.8) (1,739.6) (1,634.9) (79.9) (1,714.8)
Home (488.3) (20.9) (509.2) (483.2) (22.4) (505.6)
Total ongoing 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)
Run-off partnerships (72.1) (2.7) (74.8) (136.8) (4.5) (141.3)
Total (2,195.4) (112.2) (2,307.6) (2,609.6) (125.3) (2,734.9)
Notes:
1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245.
2. 2024 balances reflects 12 months of the Royal & Sun Alliance Insurance Limited quota-share reinsurance compared with three months in 2023.
31 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Sensitivity analysis – changes in: the discount rate used in relation to PPOs and other claims, the assumed
Ogden discount rate and claims inflation
The table below provides a sensitivity analysis of the potential net impact of a change in a single factor (for example the illiquidity
premium ("ILP")) with all other assumptions left unchanged. Other potential risks beyond the ones described could have additional
financial impacts on the Group.
Increase/(decrease) in profit
before tax and equity gross of
reinsurance
Increase/(decrease) in profit
before tax and equity net of
reinsurance
2024 2023 2024 2023
At 31 December
£m £m £m £m
Discount curve - PPOs
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points
87.0 95.0 38.5 39.0
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points
(115.1) (127.8) (51.4) (52.1)
Discount curve - other claims
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points
65.1 55.9 41.3 37.2
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points
(68.3) (58.6) (43.2) (38.9)
Ogden discount rate
Impact of the Group reserving at a discount rate of 1.5% compared to 0.5%
(2023: 0.75% compared to minus 0.25%)
143.6 105.1 57.7 48.1
Impact of the Group reserving at a discount rate of minus 0.5% compared
to 0.5% (2023: minus 1.25% compared to minus 0.25%)
(204.9) (220.6) (73.8) (97.0)
Claims inflation
Impact of a decrease in claims inflation by 200 basis points for two
consecutive years
129.7 112.8 73.9 71.7
Impact of an increase in claims inflation by 200 basis points for two
consecutive years
(131.7) (114.6) (75.0) (72.8)
Risk adjustment (restated)
Impact of a risk adjustment at the 70th percentile compared to the booked
risk adjustment at the 75th percentile
52.3 52.3 26.9 28.9
Impact of a risk adjustment at the 80th percentile compared to the booked
risk adjustment at the 75th percentile
(61.4) (60.5) (30.2) (33.9)
The PPO sensitivity above is calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves
asat 31December 2024. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance
bad debt assumptions.
Notes:
1. These sensitivities exclude the impact of taxation.
2. These sensitivities reflect one-off impacts at the statement of financial position date and should not be interpreted as predictions.
3. The sensitivities relating to an increase or decrease in the discount rate used for PPOs illustrate a movement in the time value of money. The PPO
sensitivity has been calculated on the direct impact of the change in the discount rate with all other factors remaining unchanged. The sensitivity is
calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves as at 31December 2024. It does not take into
account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.
4. The sensitivities relating to an increase or decrease in the yield curve used to discount all reserves excluding PPOs illustrate a movement in the
time value of money from the assumed level at the statement of financial position dates. The sensitivity has been calculated on the direct impact of
the change in the discount curve with all other factors remaining unchanged.
5. Ogden discount rate sensitivity has been calculated on the direct impact of a permanent change in the discount rate in England and Wales with
all other factors remaining unchanged.
6. The risk adjustment sensitivities are with respect to the discounted risk adjustment at the statement of financial position dates, with the year-end
2023 sensitivities having been restated from an undiscounted basis as reported in the Group's 2023 Annual Report and Accounts.
32 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Reinsurance
The objectives of the Group’s reinsurance strategy are to reduce
the volatility of earnings, facilitate effective capital
management, and transfer risk outside the Group’s risk
appetite. This is achieved by transferring risk exposure through
various reinsurance programmes with the material ones being:
– Catastrophe reinsurance to protect against an accumulation
of claims arising from a natural perils event. The retained
deductible is £100 million and cover is placed annually on 1
January up to a modelled 1-in-200 year loss event.
– Motor reinsurance to protect against a single claim or an
accumulation of large claims, which renews on 1 January. The
retained deductible is set at an indexed level of £5 million per
claim up to an unlimited amount.
– Motor excess of loss reinsurance for Motability Operations has
been renewed with effect from 1 October 2024. The retained
deductible is set at an indexed level of £5 million per claim up
to an unlimited amount. Motability policies are 80% quota
share reinsured.
– Following the Group's sale of its Brokered commercial
business to RSA Insurance Limited, quota share reinsurance
between the two parties incepted on 1 October 2023, on an
earned basis, covering 100% of all premiums earned and
claims incurred after this date.
– Whole account (excluding Motability) structured quota share
reinsurance with a 10% cessation, ceded on a funds-withheld
basis with inception on 1 January 2023 for a three-year term.
Tax management
The Board recognises that the Group has an important
responsibility to manage its tax position effectively. The Board
has delegated day-to-day management of taxes to the Chief
Financial Officer and oversight is provided by the Audit
Committee.
These arrangements are intended to ensure that the Group
complies with applicable laws and regulations; meets its
obligations as a contributor and a collector of taxes on behalf of
the tax authorities; and manages its tax affairs efficiently,
claiming reliefs and other incentives where appropriate.
Tax authorities
The Group has open and co-operative relationships with the tax
authorities with which it deals in the countries where the Group
operates, namely the UK, the Republic of Ireland, South Africa
and India.
Tax policy and governance
The Group’s tax policy has been reviewed and approved by the
Audit Committee. The Group Tax function supports the Chief
Financial Officer in ensuring the policy is adhered to at an
operational level.
For more information please see our published Group Tax
policy on the Group’s website at:
www.directlinegroup.co.uk/en/sustainability/reports-policies-
and-statements.html
Total tax contribution
The Group’s direct and indirect tax contribution to the UK
Exchequer is significantly higher than the UK corporation tax
that the Group would ordinarily pay on its profits. The Group
collects taxes relating to employees and customers on behalf of
the UK Exchequer and other national governments. It also
incurs a significant amount of irrecoverable value added tax
relating to overheads and claims. Taxes borne and collected in
other tax jurisdictions have not been included in this note as
the amounts are minimal in the context of the wider UK Group.
During 2024, the sum of taxes either paid or collected across
the Group was £1,032.1 million
The Group's 2024 tax contribution is detailed further on page 50
in Society in the Sustainability section.
Jane Poole
Chief Financial Officer
33 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Operating profit/
(loss)
£107m
2023: £(320)m
Gross written
premium
£2,700m
2023: £2,048m
In-force policies
(thousands)
3,831
2023: 4,181
Gross written premium by channel
24.3%
33.3%
42.4%
l
Direct
l
Price comparison websites
l
Partnerships
Performance summary
Operating profit of £107 million, an
increase of £427 million as the result
started to benefit from pricing and
underwriting actions taken during 2023.
Gross written premium grew by 31.8%.
In-force policies reduced by 8.4% as
wecontinued to focus on disciplined
underwriting. Direct own brand policy
count reduced by 13.2%.
During 2024, Motor's return to profitability was delivered by two
key factors. Firstly, the pricing and underwriting actions taken
during 2023 continued to earn through and secondly, a return
to favourable prior year reserve development. Alongside a
higher investment result, this delivered a £427 million increase
in operating profit to £107 million.
2024 was a transitional year for Motor earnings given the net
insurance margin was a positive 4.9% in the second half of the
year, compared with negative 3.0% in the first half which was
impacted by the below target margin business written during
the first half of 2023.
34 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Motor
Financial summary
2024 2023
£m £m
In-force policies
1
(thousands)
3,831
4,181
Of which:
Direct own brands
2
2,927
3,373
Partnerships
904
808
Gross written premium
1
2,700.0 2,047.8
Of which:
Direct own brands
2
1,554.9 1,601.3
Partnerships 1,145.1 446.5
Operating profit/(loss)
1
107.0 (319.6)
Profit/(loss) before other finance costs 207.0 (274.4)
Net insurance margin
1
1.0% (21.1%)
Net insurance claims ratio
1
74.9% 95.5%
Current-year attritional net insurance claims ratio
1
76.0% 86.7%
Prior-year reserves development ratio
1
(1.1%) 8.8%
Net acquisition costs ratio
1
4.6% 5.7%
Net expense ratio
1
19.5% 19.9%
In-force policies and gross written premium
andassociated fees
Motor premiums grew by 31.8% compared to 2023 driven by the
Group's partnership with Motability, where we had a full year of
premium in 2024 compared to only seven months during 2023.
Our partnership with Motability accounts for around 41% of
Motor gross written premiums, is developing well and delivered
14% growth in policy count during 2024.
Motor average premiums
2,3
£ FY 2024 FY 2023
New business 583 551
Renewal 508 441
Own brands 530 470
Overall the motor market remained challenging in the second
half of 2024 and we continued to trade with discipline. This
resulted in a further reduction in our own brand policy count,
which for 2024 was down 13.2%. The reduction in policy count
was partly offset by an increase in average premiums, which
were in line with market, leading to a 2.9% reduction in our own
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.
Notes:
1. See glossary on pages 238 to 241 for definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums,
gross written premium and associated fees and in-force policies on pages 246 to 253.
2. Direct own brands include in-force policies under the Direct Line, Churchill, Darwin, Privilege and By Miles brands.
3. Average premium figures quoted relate to Motor own brands excluding the By Miles brand.
35 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Operating profit
£98m
2023: £130m
Gross written
premium and
associated fees
£1,032m
2023: £930m
In-force policies
(own brands)
(thousands)
3,469
2023: 3,503
Gross written premium by product (£m)
637
133
262
In-force policies by product (thousands)
2,461
1,780
755
l
Home
l
Rescue
l
Commercial Direct
Performance summary
Operating profit reduced to £98 million,
primarily due to higher weather-related
claims and prior-year strengthening.
Total gross written premium grew 11.0%
to £1,032 million. Direct own brand gross
written premium grew 13.1% to £831 million.
Total in-force policies 3.1% lower at 5.0
million. Direct own brand policies were
1.0% lower at 3.5 million.
Non-Motor delivered a solid result, with double-digit gross
written premium growth, a net insurance margin of 8.9%
(7.0%when normalised for event weather) and operating profit
of £98million.
In-force policies and gross written premium
andassociated fees
Non-Motor delivered gross written premium growth of 11.0%
during 2024, which is ahead of our target of 7% to 10% CAGR
announced at the Capital Markets Day in July 2024. Growth was
supported by a double digit increase of 15.5% in Home and 8.8%
in Commercial Direct while Rescue premiums were 3.3% lower.
Home own brands returned to policy count growth in 2024 as
competitiveness improved due to significant premium inflation
in the market, particularly in the first half. Strong retention
anda 13% increase in average premiums delivered own brand
gross premium growth of 17.5% year-on-year. Home
partnerships premium increased by 9.7% during the year.
36 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Non-Motor
Financial summary
2024 2023
In-force policies
1
(thousands) 4,996
5,158
Home 2,461
2,444
Rescue 1,780
1,965
Commercial Direct 755
749
Of which: Own brands
2
3,469.0 3,503.0
Gross written premium and associated fees
1
1,031.9 929.8
Home
636.8 551.5
Rescue
132.8 137.3
Commercial Direct
262.3 241.0
Of which: Own brands
2
831.3 734.9
Operating profit
1
98.0 129.7
Profit before other finance costs 110.4 156.9
Net insurance margin
1
8.9% 14.0%
Net insurance claims ratio
1
59.8% 57.5%
Current-year attritional net insurance claims ratio
1
52.8% 53.7%
Prior-year reserves development ratio
1
2.5% 0.7%
Event weather ratio
1
4.5% 3.1%
Net acquisition costs ratio
1
9.7% 8.9%
Net expense ratio
1
21.6% 19.6%
Normalised net insurance margin
1
7.0% 10.2%
Home average premiums
£ FY 2024 FY 2023
New business 259 206
Renewal 278 249
Own brands 274 242
In Commercial Direct, gross written premium grew 8.8%
compared to the prior year driven by growth in Landlord and
small-to-medium enterprises ("SME") while Van was broadly
stable. Policy count was 0.8% higher as we continued to target
growth in the attractive Landlord and SME markets, more than
offsetting a reduction in Van policies, where we increased
average premiums to take into account elevated levels of
inflation. Overall, retention was stable across the Commercial
Direct book.
In Rescue, policy count was 9.4% lower largely due to
partnerships while gross written premium and associated
feeswas 3.3% lower than prior year, largely due to lower
linkedpremiums, where we sell a Rescue policy alongside
aMotor policy.
Underwriting
The insurance service result was £85 million (2023: £120 million).
The net insurance claims ratio was 59.8%, 2.3pts higher
thanprior year, with the increase largely driven by higher
weather-related claims and prior year strengthening.
Weatherevent-related claims in Home and Commercial were
£43 million, £16 million higher than prior year. The 2025 event
weather claims assumption is £70 million (2024: £62 million.)
The current-year net insurance attritional claims ratio was
52.8%, 0.9pts lower than prior year. The prior-year claims
development ratio was 2.5%, mainly reflecting strengthening
inassumptions for subsidence and escape of water claims from
older years.
Net insurance margin and operating profit
The net insurance margin was 8.9% or 7.0% when normalised
for event weather, 3.2pts lower than prior year. However,
underlying margins were strong adjusting for the attritional
weather and prior year movements.
Operating profit was £98 million or £79 million normalised for
event weather.
Profit before other finance costs
Profit before other finance costs reduced to £110 million from a
profit of £157 million at 2023 due to the factors described above
alongside a small reduction in benefits received from changes
in the yield curve.
Notes:
1. Appendix B – Management view statements of profit and loss,
expenses, average premiums, gross written premium and associated
fees and in-force policies on pages 246 to 253.
2. Direct own brands include in-force policies under the Direct Line,
Churchill and Privilege brands.
37 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Our Risk Management Framework
The Risk Management Framework sets out, at a high level,
theGroup's approach to setting risk strategy, and managing
risks to the strategic objectives and day-to-day operations
ofthe business. The Risk Management Framework is designed
to manage the Group’s risk proactively and to enable dynamic
risk-based decision making.
This includes clear accountabilities and risk ownership
designed to ensure that we identify, manage, mitigate and
report on all key risks and controls, and is governed through
theGroup's three lines of defence model:
First line: Management is responsible for embedding risk
management into business as usual and change processes
whilst creating transparent reporting of risks and management
actions. The Chief Controls Office ("CCO") supports
Management and Senior Management Function ("SMF")
holders in discharging their responsibilities with respect to
riskand control.
Second line: Is responsible for the design of the Risk
Management Framework and oversight of its implementation
with the provision of proportionate oversight of key business
decisions and challenge of risks, events and management
actions throughout the Group.
Third line: Group Audit is responsible and accountable for
providing an independent and objective view of the adequacy
and effectiveness of the Group’s risk management, governance
and internal control framework.
Aligned to the three lines of defence model, the Risk
Management Framework articulates the high-level principles
and practices needed to achieve appropriate risk management
standards and the inter-relationships between components
ofthe Risk Management Framework.
The Risk Policies and Minimum Control Standards ("MCS")
arekey elements of the Risk Management Framework that
interpret risk management control objectives into a set of risk
and control requirements to be implemented across the Group.
The Group’s key controls are aligned to these control objectives
and are subject to regular assessment.
The Group uses a systematic approach for the assessment
ofrisks and the controls in place to mitigate risks, through
theRisk and Control Self-Assessment ("RCSA") process.
Theobjective of RCSA is to ensure that the Group understands
the risks to the achievement of its strategic objectives,
andtoprovide reasonable assurance over the effectiveness
ofmitigating controls, and to ensure an up to date and
consistent view of risks and controls.
Risk appetite
Our risk appetite statements define the opportunities and
associated level of risk the Group is prepared to accept to
achieve its business objectives. These statements, supported by
a suite of Key Risk Indicators ("KRIs"), support management in
making decisions aligned to the risk appetite of the Group. Risk
appetite statements are both qualitative and quantitative risk
statements and forward- and backward-looking. We review our
risk appetite statements and KRIs annually.
The Risk Appetite Framework is comprised of Overarching Risk
Appetite Statements, set out below, that are approved by the
Board annually, with risk appetite statements documented
inour Risk Policies.
Overarching risk objective
The Group recognises that its long-term sustainability
is dependent on having sufficient economic capital
tomeet its liabilities, therefore protecting customers,
its reputation and the integrity of its relationship with
policyholders and other stakeholders. As part of this,
itsappetite is for general insurance risk, focusing on
personal lines retail and small and medium-sized
enterprise insurance inthe United Kingdom. DLG has
appetite for non-insurance risks, as appropriate, to
enable and assist itto undertake its primary activity
ofinsurance.
Three strategic risk objectives
1. Maintain capital adequacy
The Group seeks to hold capital resources in the range
of 140% to 180% of the partial Internal Model Solvency
Capital Requirement ("SCR"). This is the buffer the
Group wishes to hold on top of its 1 in 200 regulatory
requirements, with a green threshold set at 155% of
SCR to provide an early warning indicator, but a target
of 180% of SCR consistent with its Dividend Policy.
2. Stable/efficient access to funding
andliquidity
The Group aims to meet both planned and
unexpected cash outflow requirements, including
those requirements that arise following a 1-in-200 year
insurance, market or credit risk event.
3. Maintain stakeholder confidence
The Group has no appetite for material risks resulting
in reputational damage, regulatory or legal censure,
poor customer outcomes, fines or prosecutions and
other types of non-budgeted operational risk losses
associated with the Group’s conduct and activities.
TheGroup’s objective is to maintain a robust and
proportionate internal control environment.
38 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Risk management
Managing risk in line with our strategy
Our management team, with oversight from the Board, is
responsible for developing our strategy. Our strategic planning
process aims to ensure we have developed clear objectives and
targets, and identified the actions needed to deliver them,
including the management of risks arising from the
strategicplan.
The Risk Strategy supports optimal business decision-making
through the proactive identification, assessment and
management of risks to the Group and its pursuit to be the
customers’ insurer of choice.
The Group recognises the need to ensure that:
– the Risk Strategy is aligned to the Group’s vision, purpose and
strategic objectives;
– risk and capital requirements are managed within the
Board’s risk appetite;
– the reputation of the Group is maintained;
– strong risk management capability is in place across the
business; and
– it drives for sustainable value for shareholders.
This is delivered by ensuring that:
– a robust, proportionate, proactive and forward-looking Risk
Management Framework is maintained to support the
business in achieving its strategic objectives;
– Risk Strategy aligns to the Group Strategy;
– risk management within the Group is a forward-looking
activity;
– strong risk behaviours and attitudes are exhibited across the
Group; and
– effective relationships are maintained with the Group’s
regulators.
Strategic
Objectives
Vision &
Business
model
Inherent
Risk
Insurance
Market
Credit
Liquidity
Operational
Conduct
Regulatory
Strategic
Group
“What the Group
istrying to achieve
as a Company”
“The risks (and
opportunities)
the Group’s
Objectives
expose it to”
The Group Enterprise Risk Management Framework
("ERMF")
1
st
Line of Defence 2
nd
Line of Defence 3
rd
Line of Defence
– Risk Policies &
Minimum Control
Standards
– Risk Appetites
– Risk & Control Self-
Assessment
– Monitoring &
Reporting
– Governance
– Business Processes
– Risk & Compliance
Function
– Set the
overarching ERMF
– Risk Management
Committee (RMC)
– Group Audit
Function
Internal Control Framework (ICF)
Control Environment
(Tone, Integrity, Values, Risk Culture,
RiskMaturity)
Internal Control Standards
(Structures, Policies, Standards,
Role&Responsibilities)
Control Activities
(Internal controls, Key Controls, Testing)
“How the Group manages those risks (and opportunities)”
Residual
Risk
Insurance
Market
Credit
Liquidity
Operational
Conduct
Regulatory
Strategic
Group
“The Backstop to protect
customers if the Group
getsitwrong”
39 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Capital
Our principal risks and uncertainties have been identified as those most likely to materially impact the Group's solvency capital.
These risks and uncertainties have been assessed as events or circumstances that might threaten the Group’s business model,
future performance, solvency or liquidity and reputation. The principal risks presented here are not intended to be exhaustive but
are consistent with those reported to the Risk Management Committee and Board Risk Committee for review and discussion.
Principal risk Description Risk commentary
Insurance Risk
Trend – stable
Insurance risk is the
risk arising from
insurance obligations,
in relation to the
perils covered and
the processes used in
the conduct of
business. It takes
account of the
uncertainty related to
the Group’s existing
insurance and
reinsurance
obligations as well as
to new business
expected to be
written. It includes
the risk of loss, or of
adverse change in
the value of insurance
liabilities, resulting
from:
– fluctuations in the
timing, frequency
and severity of
insured events, and
in the timing and
amount of claim
settlements; and
– significant
uncertainty of
pricing and
provisioning
assumptions
related to extreme
or exceptional
events (for
example
catastrophe risk).
Key drivers of the outlook for Insurance risk
include reserve, underwriting, distribution,
pricing and reinsurance risks. Issues relating to
claims inflation, ongoing Motor insurance
affordability concerns resulting in the creation of
the Motor Insurance Task Force, motor market
premium softening and the uncertainty in
economic environment, with elevated
geopolitical tensions, have been key areas of
focus for the Group in 2024.
Claims trends have been significantly impacted
by persistent claims inflation and large claims,
particularly in the motor market, contributing to
uncertainty in claims reserving and pricing in
2024 and beyond. This notwithstanding, our
reserving processes reflect improved insight in
claims experience and inflation trends resulting
from extensive work undertaken across the
business. In addition, the Group is continuing its
pricing and underwriting transformation
journey, targeting technical excellence in
support of best market practice in line with our
strategic objectives. This includes ongoing
monitoring of our underwriting risk profile
following the launch of the Direct Line for Motor
brand on price comparison websites in
December 2024.
Key risk themes relating to this category include
the macroeconomic environment, regulatory
and legislative environment, climate,
organisational resilience and agility, and a
softening motor market. We use scenario
testing to understand the potential financial
impacts of the key risks and we continue to
monitor them closely.
With respect to climate change, this
potentially poses significant risks to our
business in the longer term, particularly in
terms of weather-related perils. It could
impact the frequency and severity of events
such as floods, windstorms, freezes,
droughts, and subsidence, leading to more
extreme occurrences in the future. To
mitigate our exposure to these extreme
weather events, the Group employs
reinsurance arrangements and participates
in the Flood Re scheme. Additionally, we use
stress and scenario testing to quantify the
potential short and long term impacts of
climate change on our customers, business
model, and financial performance. These
stress tests particularly focus on the impact
on liabilities in the property (Home and
Commercial) lines of business.
Market Risk
Trend – stable
Market risk is the risk
of loss resulting from
fluctuations in the
level and in the
volatility of market
prices of assets,
liabilities and financial
instruments.
Key drivers of market risk are the sensitivity of
the values of our assets and investments to
changes in credit spreads, our exposure to losses
as a result of changes in interest rates, term
structure or volatility, and wider market volatility,
including the key risk themes of the impact
from the macroeconomic environment and
geopolitical landscape. In particular, the
worldwide and UK economic environment
remains uncertain with elevated geopolitical
tensions that could affect equity, credit and
property markets and lead to credit spread
increases, foreign exchange rate volatility and
the impact of interest rate changes.
Our Board has approved a strategic asset
allocation and investment strategy that
limits our exposure to individual asset classes
and illiquid investments. Technical provisions
are affected by changes in interest rates and
inflation, and in particular Periodic Payment
Orders as these are of longer duration. We
apply asset liability matching techniques to
partially mitigate these sources of risk. We
also use risk reduction techniques such as
hedging foreign currency exposures with
forward contracts.
40 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Principal risks and uncertainties
Principal risk Description Risk commentary
Credit Risk
Trend – stable
The risk of loss
resulting from default
in obligations due
from, and/or changes
in the credit standing
of, issuers of securities,
counterparties or any
debtors to which the
Group is exposed.
The Group monitors its key counterparties,
specifically the security of the issuers within its
investment portfolio and that of its reinsurance
counterparties.
To manage credit risk, we set credit limits for
each material counterparty and actively monitor
credit exposures, whilst also considering new
future exposures. With respect to reinsurance
counterparty credit risk, our exposures are
mainly held with reinsurers with high credit
ratings. Reinsurance is only purchased from
reinsurers that hold a credit rating of at least A–
for short tail reinsurance and the majority of
long tail reinsurance is to be purchased from
reinsurers rated A+ or above.
Exceptions to the above or strategic
reinsurance arrangements are assessed on a
case-by-case basis and follow clearly defined
internal credit risk processes.
Finally, we also have well defined criteria to
determine which customers and brokers are
offered and granted credit.
Operational Risk
Trend – stable
Operational risk is the
risk of loss due to
inadequate or failed
internal processes or
systems, including
from human error or
from external events.
Risks relating to this
category include,
technology and
infrastructure, change,
cyber, operational
disruption, financial
reporting, and
procurement and
outsourcing.
Our approach is to manage our operational
risksproactively, to mitigate potential customer
harm, regulatory or legal censure, financial,
reputational, or environmental, social,
governance ("ESG") impacts. This is principally
achieved through robust control, and the
Groupis continuing to strengthen its control
environment through various improvement
initiatives across the business.  This includes
implementation of a new Risk & Control Self-
Assessment process, facilitated by a new Chief
Controls Office function in the first line, ensuring
greater consistency in control assessment and
testing.  Material progress has been made
in2024, with further embedding to continue
into2025.
Technology and infrastructure risk is defined
asthe risk of loss resulting from inadequate
orfailed information technology processes
through strategy, design, build or run
components internally or externally provisioned.
This includes IT resilience and cyber security.
Changes to our technology environment follow
an industry standard service management
framework that provides risk assessment,
planning, testing and validation prior to
production with ongoing control and
performance monitoring.
Change risk is defined as the risk of failing to
manage the change portfolio and associated
change initiatives, within desired scope, time,
cost, quality and Group risk appetite, leading
toa failure to deliver strategic benefits, good
customer outcomes and possibly causing
business disruption. The Group’s Transformation
Management Office (“TMO”) is responsible for
implementing and embedding changes to
further mature our organisational change
portfolio management, delivery capability, and
associated control environment.
Cyber risk arises from inadequate internal and
external cyber security, where failures impact
the confidentiality, integrity and availability
ofour data. The Group’s Chief Information
Security Officer is responsible for ensuring the
appropriate cyber security policies and controls
are in place and operating effectively.
Operational disruption risk is the risk of
failing to deliver products and services at an
acceptable predefined level following
disruptive events. The Group’s Operational
Resilience Framework sets out requirements
for maintaining resilience which includes,
identifying Important Business Services
("IBS"), setting tolerances, and regularly
assessing the Group’s ability to remain
within these tolerances during disruptions.
The Group has planned mitigations in the
event of a disruptive event and monitors a
suite of IBSs. All IBSs undergo scenario
testing, as per regulatory guidelines, to
identify vulnerabilities and develop suitable
mitigations.
Financial reporting risk is defined as the risk
of material misstatement, misrepresentation
or untimely delivery of external or internal
financial information, including regulatory
financial information, resulting in
inappropriate movements in share price,
reputational damage, poor decision making/
planning in relation to finance,
tax,investment, strategy and capital, or
regulatory fines. During the Group's half year
results preparation, a miscalculation was
identified within the Group's audited
Solvency II Own Funds for the year ended
2023 as announced on 23 August 2024.
TheGroup has taken action to strengthen
the control environment in relation to
thespecific area where the miscalculation
occurred.
Procurement and outsourcing is the risk of
an outsourcing arrangement that is deemed
critical or material failing to deliver the
service provision in question to the expected
levels. The Group adheres to a defined
framework for the appointment and
management of suppliers, outsourcing
arrangements and Intra-Group relationships.
The Group manages its suppliers through
ongoing oversight and assurance.
41 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Principal risk Description Risk commentary
Conduct and
regulatory
compliance risk
Trend – stable
The risk of failing to
deliver good customer
outcomes and/or
failing to deliver on
our regulatory
commitments.
The Group sees its obligations to deliver good
customer outcomes as a priority area of focus.
Our approach is to act promptly to identify and
address the risk of failing to deliver good
customer outcomes.
The introduction of the Consumer Duty in July
2023 represented a significant shift in the FCA’s
expectations of firms and applies to all of the
Group’s regulated products. The FCA has been
clear that the Duty is not a “once and done”
exercise and firms must ensure they are
learning and improving continuously. The Board
approved the Annual Consumer Duty Report in
July 2024, which includes areas of focus to
deliver improvements on over the next 12
months, with work underway.
The outlook for regulatory compliance risk is
stable as financial institutions continue to
embed multiple regulatory changes, alongside
the challenging external environment referred
to in Strategic Risk and Insurance Risk. Further,
regulators are increasingly expecting financial
institutions to balance commercial and societal
outcomes in decision-making, as they seek to
meet the needs of different stakeholders (for
example, relating to climate change).
The FCA published two regulatory
requirements for Direct Line Group in 2023:
The FCA required the Group to undertake
past business reviews to
– review motor total loss claims settled
between 1 September 2017 and 17 August
2022 to identify policyholders who may
have received unfair settlements and
provide them with redress; and
– review renewal prices charged since
1January 2022, identify any that didn’t
comply with the rules relating to use
oftenure and provide redress.
Both reviews were materially complete by
the end of 2024. In January 2025, the FCA
confirmed that the voluntary requirements
("VREQs") in relation to both of these matters
had been satisfied and removed from the
Financial Services Register.
We have continued to engage with industry
bodies, regulators and HM Treasury
regarding the future regulatory framework
within the UK.
Strategic Risk
Trend – stable
The risk of direct or
indirect adverse
effects resulting from
strategies not being
optimally chosen,
implemented or
adapted to changing
conditions.
Strategic risk is influenced by internal and
external developments, including the potential
impacts of the cost of living, regulatory change,
changing trends for insurance products, the
potential for new and ongoing geopolitical
conflicts, and climate-related risks. These factors
continue to have an impact on the delivery
ofthe Group’s Strategy due to a high level
ofuncertainty in the market and changes
inconsumer behaviour and engagement
models.Delivery of our strategy is being
closelymonitored and managed with the
support of the Group’s Transformation
ManagementOffice.
The potential acquisition of DLG by Aviva
and subsequent integration activity
increases risks in the short to medium term,
including potential for impact to
management stretch, staff retention,
unplanned costs and process disruption.
These additional risks will be closely
monitored and managed by the Executive
team and Board through our regular and
project risk reporting processes.
42 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Emerging risks
Emerging risks are defined by the Group as newly developing
or changing threats or opportunities, that are subject to a high
degree of uncertainty but have the potential to materially
impact the Group either in the short term, due to rapid risk
emergence, or over the long term, through changing the
risklandscape.
The Group has in place an emerging risks process to:
– identify, assess, and prioritise a wide range of potential
emerging risks using both internal expertise and external
intelligence sources; and
– mitigate the impact of emerging risks which could impact
the delivery of the Plan.
Our process leverages subject matter expertise across the
Group, external horizon scanning and external industry data.
Emerging risks are regularly reviewed and reported to the Risk
Management committees.
Environmental
The Group recognises that emerging environmental issues,
such as climate change, pose material long-term financial risks
to the Group. Environmental risks can manifest themselves
through a range of existing financial and non-financial risks.
We continue to monitor these risks closely and to develop our
climate change modelling capability. Further details on our risk
management approach to climate change are included in the
Task Force on Climate-related Financial Disclosures ("TCFD")
section of the report starting on page 58.
Social & Economic
Increasing economic pressures and generational shifts in
consumer behaviour are expected to influence demand
patterns. Persistent cost-of-living concerns, along with younger
generations prioritising flexible, digital first solutions, may
require the Group to innovate and adapt its product offerings
inorder to appropriately meet changing demands and needs.
Political
Due to heightened geopolitical tensions, there is a risk that
measures are implemented by governments that decrease
political stability, erode countries’ relationships, and contribute
to increasing protectionism. This could lead to multiple impacts
including on investment performance and supply chains.
TheGroup conducts ongoing analysis to monitor exposure
tothe developing geopolitical environment.
Technological
Technological advancements, including relating to
autonomous vehicles and Artificial Intelligence applications are
expected to transform the insurance landscape. The Group is
closely monitoring these changes to assess their implications
for underwriting, claims and regulatory compliance. The Group
will continue to engage with industry bodies to help shape
policies and understand potential impacts on the Group.
43 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Direct Line Group believes that responsible business behaviour is the key not
onlytobeing a sustainable business but also a successful one. It supports our
visionofinsurance as a force for good in society and builds trust among the
Group'sstakeholders.
Ensuring a sustainable future for the Group means taking positive action
onenvironmental, social and governance issues. This includes fair treatment
ofcustomers and colleagues, transparency on climate-related risks, high
standards of conduct in business relationships and making a positive
contribution to UK society.
This section aims to provide the non-financial and sustainability information sought by investors and other stakeholders.
Itsetsout the practical ways in which legal requirements under the Companies Act and other measures, including
climate-related reporting, are carried out.
For more information on corporate governance, see the report on Pages 75 to 100.
To reflect the Group’s priorities as a responsible business, this section organises the
information under five pillars: Customers, People, Society, Planet and Governance.
Our vision
To create a world where insurance
is personal, inclusive and a force for good
Ambitions
Customers
Earn our customers’
trustby demonstrating
how we are acting
intheir interests
People
Encourage a culture that
celebrates difference
and empowers people
sothey can thrive
Society
Use our expertise
toimprove outcomes
forsociety and the
communities we serve
Planet
Protect our business
from the impact
ofclimate change and
give back more to the
planet than we take out
Governance
Look to the long term
forour stakeholders,
builda reputation for high
standards of business
conduct and develop
asustainable business
Priority areas
– Good customer
outcomes
– High service levels
– Inclusive and accessible
digital journeys
– Develop products that
offer better choice and
value for money
– High workplace
standards
– Fair outcomes for all
colleagues
– Invest in skills and
career development
– Increase representation
in our Senior
Leadership
– Improve employability
skills and access to
employment for under
represented young
people
– Colleague engagement
– Reduce operational
emissions
– Decarbonise
investment portfolio
– Manage climate-
related risks and
opportunities
– Engage and align
suppliers with
environmental aims
– Robust corporate
governance and effective
leadership
– Ethical and professional
conduct
– Responsible
procurement
– Responsible use of data
and technology
2024 actions
– Launched Churchill
and Direct Line apps
– Developed proposition
for Direct Line launch
on Price Comparison
Websites
– Rolled out new home
platform
– New target operating
model
– Improved skills
– Made some progress
against diversity targets
– Young people positively
impacted through
Community Fund
outreach programmes
– Colleagues engaged
inCommunity Fund
programmes
– Announced new
Community Fund
charity partners
– Further reduced
operational emissions
(Scope 1 + 2) by 3%
compared to 2023.
– Further reduced
commercial real estates
investment emissions
by 20% year on year.
– Increased supplier
sustainability weighting
to 10% in the
procurement process
– 99.5% of colleagues
trained on Business
Codeof Conduct and
associated standards
– Introduced new AI
responsibility framework
and risk assessments
– Over 95% of suppliers
paid on time (under
30days)
44 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Sustainability
This non-financial and sustainability information statement highlights information necessary for an understanding of the
Company’s development, performance, position and impact of its activity, information relating to environmental, employee, social,
respect for human rights, anti-corruption and anti-bribery matters.
Where possible, the following table states where additional information can be found that supports the requirements of sections
414CA and 414CB of the Companies Act 2006.
Reporting
Requirement
Annual Report Page
Relevant policies, statements and codes available
at directlinegroup.co.uk
Environment Sustainability 44 to 57
Environment Statement
Task Force on Climate-related Financial
Disclosures
58 to 71
Streamlined Energy and Carbon Reporting 72 to 73
Anti-bribery and
anti-corruption
Financial crime and anti-bribery and corruption 108
Prevention of Financial Crime Policy
Code of Business Conduct
Ethical Code for Suppliers 55
Ethical Code for Suppliers
Whistleblowing Policy
Employees People 15 to 18
48
Flexible Working Policy
Health & Safety Policy
Business model Group at a glance – our business model 2
Prompt Payment Code
Our investment story and strategy 3
Responsible Investment Policy
Delivering for our customers 4 to 5
Underwriting Standards
Tax Policy
Social and
community matters
Society 49 to 50
Board Diversity Policy
Nomination and Governance Committee report
– Diversity and inclusion
110 Data Privacy Policy
Corporate Website Privacy Notice
Human rights Human rights and modern slavery 55 and 112
Human Rights, Diversity and Inclusion Policy
Modern Slavery Statement
KPIs Our financial key performance indicators 7
Colleague engagement 15
Net Promoter Score 47
Operational emissions 53
Risk
management
Risk management 38 to 43
Principal risks and uncertainties 40 to 42
Emerging risks 43
The table below has been produced to comply with the requirements of section 414CB of the Companies Act 2006, as amended
bythe Companies (Strategic Report) (Climate-related Financial Disclosures) Regulations 2022. The information listed is
incorporated by cross-reference.
Reporting requirement Page Further information
(a) a description of the company's governance arrangements in relation to assessing and
managing climate-related risks and opportunities
58 to 59 Refer to Governance
(b) a description of how the company identifies, assesses, and manages climate-related risks
and opportunities
72 to 73
59
58 to 71
Refer to Risk Management
Refer to Management's role
Additional information available
throughout TCFD report
(c) a description of how processes for identifying, assessing, and managing climate-related
risks are integrated into the company’s overall risk management process
72 to 73 Refer to Risk Management
(d) a description of:
– (i) the principal climate-related risks and opportunities arising in connection with the
company’s operations; and
– (ii) the time periods by reference to which those risks and opportunities are assessed
69 Refer to table within Our
strategic response
(e) a description of the actual and potential impacts of the principal climate-related risks
andopportunities on the company’s business model and strategy
69 to 71 Refer to Our strategic response
(f) an analysis of the resilience of the company’s business model and strategy, taking into
account consideration of different climate-related scenarios
61 to 68 Refer to Scenario analysis
(g) a description of the targets used by the company to manage climate-related risks
andtorealise climate-related opportunities and of performance against those targets
70, 71 and 71
to 73
Refer to Science-Based Targets
(h) the key performance indicators used to assess progress against targets used to manage
climate-related risks and realise climate-related opportunities and a description of the
calculations on which those key performance indicators are based
71 to 73 Refer to Metrics and Targets
45 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements
Non-financial and sustainability
informationstatement