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(Alliance News) - Direct Line Insurance Group PLC on Thursday announced plans to save GBP100 million and boost insurance margins, as it looks to stymie the unwanted advance of Belgium's Ageas SA.
Newly installed Chief Executive Adam Winslow said there is a "substantial opportunity to reduce our total cost base and significantly improve operational efficiency through reducing operational complexity and technology costs."
Winslow, who joined the Bromley, England-based motor and home insurer from Aviva PLC, made no comment on the Ageas approach as he delivered his first set of results.
Direct Line has rejected two proposals from Ageas, the latest valuing the company at 237 pence per share.
Shares in Direct Line rose 1.1% to 213.80p each in London on Thursday morning.
Direct Line described the Ageas proposal as "uncertain" and "unattractive", and said it "significantly undervalues" Direct Line and its future prospects.
Winslow, who took up his new role at the start of the month, acknowledged Direct Line needs to "significantly improve" its performance as he set a new insurance margin target of 13% by 2026. It had previously targeted 10% "over time".
Winslow, who plans to complete a strategic review by July, said the firm had a "strong platform to build from" with some of the "most recognisable brands in the market."
"We believe that Motor has turned a corner, and with business outside Motor performing well during 2023, we expect overall performance to improve in 2024," he added.
"We believe that through a combination of quick wins, alongside medium-term strategic opportunities, we can deliver a net insurance margin of 13% in 2026."
Winslow continued: "I have transformed legacy businesses before and understand what it takes to win in general insurance."
The CEO said Direct Line would incur non-recurring costs of up to GBP165 million in total by 2025 to implement the cost savings.
In 2023, Direct Line reported a pretax profit of GBP277.4 million, swinging from a loss of GBP301.8 million the year prior. Its operating loss widened to GBP189.5 million from GBP6.4 million.
Gross written premium and associated fees climbed 27% to GBP3.11 billion from GBP2.44 billion, with 46% growth in the second half.
The post-dividend solvency ratio rose to 197% from 147% the year prior.
The dividend was nearly halved to 4.0p per share from 7.6p.
Direct Line said the dividend payment should not be regarded as a resumption of regular dividends, and that it will provide an update alongside the strategic review.
In 2023, Direct Line said its net insurance margin of minus 8.3% was impacted by the continued earn-through of motor policies written during 2022 and the first half of 2023.
Motor policies written since August are estimated to be in line with the group's ambition of a net insurance margin of above 10%, the company said.
Direct Line said trading has been positive in the first two months of 2024 with premium growth across all segments.
By Jeremy Cutler, Alliance News reporter
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