Direct Line Group (DLG) has reported its preliminary full-year 2022 results, its first financial statement since CEO Penny James stepped down in January.
Among the headline figures reported, it was revealed that its group operating profit from ongoing operations plummeted to £32.1 million from £590.3 million for FY 2021. DLG stated that the result reflects a volatile operating environment amid elevated motor claims inflation, higher-than-expected weather event claims, new regulatory changes and challenging investment markets.
The group’s total operating profit saw a similar drop, decreasing from £581.8 million for FY2021 to £20.6 million for FY 2022.
|
|
FY 2022 (£million) |
FY 2021 (£million) |
% Change (decrease) |
|---|---|---|---|
|
In-force policies - ongoing operations (thousands) |
9,689 |
10,014 |
(3.2%) |
|
Of which: direct own brands (thousands) 7,245 7,529 (3.8%) |
7,245 |
7,529 |
(3.8%) |
|
Adjusted gross written premium - ongoing operations |
2,974 |
3,072.7 |
(3.2%) |
|
Of which: direct own brands |
2,087.1 |
2,207.6 |
(5.5%) |
DLG noted that claims inflation was most acute in motor, where severity inflation of around 14% was above the levels assumed in the group’s pricing. This, in addition to supply chain disruption causing third-party claims delays, led to a motor combined operating ratio (COR) of 114.7%, compared to 92.4% in 2021.
The group highlighted that in its other businesses, pricing kept pace with claims inflation and CORs were broadly in line with expectations, when normalised for weather. However, 2022 saw the highest weather event costs since the group listed over a decade ago with £149 million of claims, well above the 2022 £73 million budget assumption.
DLG’s COR for ongoing operations was 105.8% and 103.3% when normalised for weather. Meanwhile, the group’s total COR including run-off partnerships was 106.0%.
In line with the expectation previously disclosed, DLG highlighted that it is not proposing a final dividend for 2022, resulting in a total dividend for 2022 of 7.6 pence per share
Acting CEO of DLG, Jon Greenwood commented on the results, highlighting that 2022 was a “tough year” for the group.
“Motor and home market conditions were challenging,” he said, “with high claims inflation and regulatory reforms creating substantial headwinds for the business, and we did not navigate these challenges as effectively as we would have wished. Exceptional weather and difficult investment markets also significantly impacted our results.”
He added that DLG has taken pricing actions that will support the restoration of margins in motor and mitigate the impact of further claims inflation. The group has also accelerated a range of other actions including deploying additional resources in motor.
"Since the year end we have taken action to begin to rebuild the resilience of our balance sheet, and we have further self-help options available, as well as organic capital generation to enhance our solvency ratio during 2023,” he said. “Whilst our 2022 performance was disappointing, the fundamentals of our business remain strong and we are now fully focused on rebuilding our margins, further improving our capital strength and generating attractive sustainable returns for shareholders."
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