Direct Line Regulatory News (DLG)

Direct Line Insurance Group plc

8 April 2020

Direct Line Insurance Group plc provides an update on dividend payments, its solvency position, claims trends and operational response to Covid-19 (Coronavirus).

Dividends

Direct Line Group ('DLG' or the 'Group') notes the guidance in the Prudential Regulation Authority's (PRA) letter of 31 March, which requested that insurance companies remain prudent in their approach to dividends. In addition, it also notes the EIOPA1 statement of 2 April 2020 which urged insurers to temporarily suspend all discretionary dividend distributions and said that this suspension should be reviewed as the economic impact of Covid-19 starts to become clearer.

Notwithstanding the Group's strong capital position, in recognition of the regulatory guidance and heightened uncertainty in the macroeconomic environment, the Board has decided it will no longer be recommending to shareholders the final dividend for the year ended 31 December 2019. Acknowledging the importance of dividends to shareholders the Board will review this position alongside half year results and on an ongoing basis once it is possible to have a better understanding of the impacts of Covid-19 on customers and the business. Meanwhile, the resolution for the final dividend will be withdrawn from the Annual General Meeting.

Commenting on this decision Penny James, Group Chief Executive Officer, said:

"Covid-19 presents an unprecedented global challenge. For DLG, whilst our capital position remains strong and at the upper end of our risk appetite range, we note the letter from the PRA and the guidance to preserve the Group's strong balance sheet during this period of heightened uncertainty. It is too early to assess the impact of changes in customer behaviour that will arise given the broader consequences of Covid-19.

We know that dividend income from DLG is important to our investors and through them the people who may look to that income to support their pensions and savings, but we have taken the prudent and difficult decision to withdraw the full year 2019 dividend.

We understand that these are challenging times for everyone in the country and we will continue to make the decisions needed to protect the long-term interests of the Group for the good of our customers, our people and our investors."

Solvency

DLG continues to maintain strong solvency. At 31 March 2020 the Group's Solvency II coverage ratio (unaudited) was estimated to be towards the top of its 140% to 180% risk appetite range at 176%. In normal circumstances, the Group would be well placed to pay the final dividend, taking the Group's solvency to 161%.

Claims trends

Travel claims to date continue to develop reflecting international and domestic travel restrictions and isolation measures resulting from Covid-19. Travel gross reported incurred claims at 31 March 2020 totalled £22 million before reinsurance cover of around £18.5 million. Early signs across the rest of the Group indicate a reduction in claims, particularly in motor, as customers stay at home.

Operational response

The Group's priority remains its customers and colleagues at this difficult time and ensuring that it protects the long-term future of the business.

Operationally, the large majority of the Group's 11,000 people now work from home and will receive their usual pay, regardless of how their specific working practices may change during this period. All roles will be protected through to at least the autumn.

The Group also recognises its wider commitment to the nation at this time. We are continuing to run our 24/7 road rescue service and our Accident Repair Centres will operate on a reduced service to repair vehicles which are undrivable for customers who need their cars for essential services during this period. In addition, the Group has allocated £3.5 million to a Group Community Fund to be distributed by Registered Charities to support vulnerable people during this period.

DLG will provide a quarterly update on 6 May 2020 covering first quarter sales and an update on the financial and operational impacts of Covid-19.

https://www.directlinegroup.co.uk/en/investors/results-and-reports.html

For further information, please contact:

LEI: 213800FF2R23ALJQOP04

1European Insurance and Occupational Pensions Authority