Direct Line Insurance Group plc (DLG) has issued updates for its strategies ahead of its Capital Markets Day – with a noticeable about-turn on its approach to price comparison websites, and an exit from certain lines of business.
DLG announced that it is focusing on growth in the motor insurance sector by enhancing various elements of the insurance value chain, including pricing, underwriting, customer experience, claims, and distribution, it stated. Specific actions will be detailed in an upcoming presentation, being held later today.
One notable initiative, however, is the launch of Direct Line on price comparison websites (PCWs), where 90% of customers prefer to shop, it said. This move has been supported by a new leadership team with a history of driving growth through PCWs.
DLG noted that its strategy aims to re-establish its position among the leading motor insurers in the UK.
DLG also announced that its strategy outside the motor sector includes exiting certain lines of business. It will exit or cease investment in OEM affinity motor partnerships and certain personal lines businesses, including pet and travel insurance.
In the home insurance sector, the company will use its new platform capabilities and revamp its product suite to drive growth. In commercial direct, DLG is expanding its offerings into underserved segments. The rescue sector will see a shift in its operating model with the launch of a fleet of DLG’s own patrol vehicles.
The company explained that its growth ambitions are supported by a plan to reduce its cost base, targeting at least £100 million in gross run-rate cost savings by the end of 2025. The savings are expected to come from technology, operations and demand, and simplification.
Over 50 cost initiatives have been identified, with many already in progress. Details of these initiatives will be shared in its Capital Markets Day presentation.
The total cost to achieve these savings is projected to be around £165 million over 2024 and 2025, with a significant portion funded through existing capital expenditure plans.
DLG aims to achieve a 13% net insurance margin by 2026, with a refreshed strategy expected to deliver an additional 4 to 5 points of margin improvement through actions across pricing, claims, and costs.
The company expects its financial targets to support attractive returns for shareholders. The revised dividend policy will target a payout ratio of approximately 60% of post-tax operating profit for the regular dividend, with additional capital returns reviewed annually.
In the medium term, DLG is targeting a solvency ratio of around 180%. During the execution of the turnaround plan, a solvency ratio above this level is anticipated (2023: 197% solvency ratio).
The current focus is on enhancing business consistency and performance to drive profit and growth. Investments will be made in high-return organic opportunities, such as the cost-saving programme, with plans to restart regular dividends. The board will review the conditions for restarting the regular dividend on an ongoing basis.
CEO Adam Winslow (pictured above) highlighted DLG’s strategy and targets. “Since joining DLG just over four months ago I have rigorously reviewed our business, and listened carefully to investors, customers, and employees. This work has deepened my belief in our strong foundations and excellent potential. Putting our strongest brand, Direct Line, on price comparison websites, where 90% of consumers shop, means we will be shaking up the motor insurance market once again.”
Winslow also highlighted the broader ambitions of DLG beyond motor insurance, including growth plans in home, rescue, and commercial direct sectors.
“Our refreshed strategy will be delivered by our new executive team, who have significant expertise in our core markets. The strategy and targets set out today signal our ambition and intention to grow our business and deliver strong returns for our shareholders,” Winslow said.
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