Direct Line Group (DLG) has identified and corrected a miscalculation related to its reinsurance arrangements, ahead of its forthcoming half-year results. The error originated from the treatment of the group’s whole account quota share reinsurance arrangement, which was implemented on January 1, 2023. The issue was specifically related to discrepancies in the translation of reinsurance debtors between IFRS and Solvency II own funds, but it does not impact the group’s IFRS figures.
Following the correction, DLG’s solvency capital ratio at the end of 2023 has been adjusted to 188%, down from the previously reported 197%. The company’s risk appetite range is between 140% and 180%.
For June 30, 2024, DLG estimates its solvency capital ratio to be around 200%, bolstered by robust capital generation during the first half of the year. This performance was supported by strong operating earnings, exceptional partnership benefits, and favorable market conditions.
In response to the error, DLG has strengthened its control measures in the affected area. CEO Adam Winslow commented in May on the positive start to 2024, highlighting a double-digit increase in gross written premiums across motor, home, and commercial sectors, with an overall growth of 15% in ongoing operations. Winslow also noted that claims trends and motor margins are progressing as expected.
The company has recently announced several significant new hires, and with the addition of three new leadership team members in October, DLG aims to achieve annualized cost savings of at least £100 million by the end of 2025 and a normalized net insurance margin of 13% by 2026.
DLG is scheduled to release its half-year results on September 4.
