Direct Line Insurance Group Plc (Direct Line Group or DLG) has disclosed a recent miscalculation in its audited Solvency II own funds for the year ended 2023, identified during preparations for its upcoming half-year results.
The error stemmed from the treatment of the group’s whole account quota share reinsurance arrangement, which began on January 1, 2023. Specifically, the miscalculation occurred in the translation of reinsurance debtors between IFRS and Solvency II own funds. Importantly, the issue does not affect DLG’s IFRS figures.
After correcting the error, the Bromley-headquartered insurer’s solvency capital ratio (post-dividend) at the end of 2023 was revised to 188%, a reduction from the previously reported 197%. DLG’s risk appetite range was 140% to 180%.
Meanwhile, the group estimates its solvency capital ratio at June 30 this year to be approximately 200%, supported by solid capital generation in the first half of 2024, driven by operating earnings, one-off partnership benefits, and market movements.
In response to the discovery, DLG has taken steps to reinforce the control environment in the specific area where the miscalculation occurred.
In May, chief executive Adam Winslow said: “We have seen a positive start to 2024 trading, with double-digit gross written premium growth in our motor, home, and commercial businesses and overall growth for ongoing operations of 15%. Claims trends and motor margins continue to develop in line with our expectations.
“We have announced a number of significant hires over the last few weeks. I am confident that with the new leadership team in place, we can deliver run-rate annualised cost savings of at least £100 million by the end of 2025 and a net insurance margin, normalised for weather, of 13% in 2026.”
The company, which will be welcoming three new leadership team members in October, will release its half-year results on September 4.
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