19 March 2020
For immediate release
DIRECT LINE INSURANCE GROUP PLC
UPDATE ON SHARE BUYBACK PROGRAMME
Direct Line Insurance Group plc ("DLG" or the "Group") provides an update on its solvency position and announces that it is suspending its share buyback programme as a result of the volatile conditions arising from the Covid-19 (coronavirus) pandemic.
Tim Harris, Chief Financial Officer of Direct Line Group, commented:
"Given the uncertainty as a result of Covid-19 we've taken the prudent decision to pause our share buybacks until the situation becomes clearer. The Direct Line Group capital position remains strong, and solvency has moved as expected in line with our sensitivity analysis1 following recent market movements. We hope to be able to resume the share buybacks in due course, but it's right we seek to preserve the Group's strong balance sheet during this period of heightened uncertainty."
The Group estimates a strong solvency capital ratio of 163% on 18 March 2020 after allowing for the mark to market effect of the recent deterioration in the financial markets on the Group's investment portfolio. It is also after the buybacks completed to date and the proposed payment of the final regular dividend of 14.4p per share.
Travel and Motor Claims
The Group anticipates claims trends across its diversified business lines to differ during the period affected by Covid-19. In particular:
- Within Motor the Group anticipates lower Motor claims frequency in the short term as the UK government increasingly advises against non-essential travel.
- Gross reported Travel claims related to Covid-19 had increased to £5 million on 15 March from around £1 million on 3 March. An increase in claims following further travel restrictions imposed by the Foreign & Commonwealth Office (FCO) is expected, although it is too early to estimate the potential impact. The Group has implemented measures to help mitigate this, including pausing new travel insurance sales and restricting cover for new travel bookings. The Group has reinsurance cover totalling £18.5 million for Travel claims.2
The £150 million buyback programme was launched alongside the Group's full year results and was designed to return surplus capital to shareholders and move the Group's solvency capital coverage ratio towards the middle of its solvency risk appetite range. To date approximately £29 million of shares have been purchased under the buyback programme.
The Company will be keeping the position under review to assess opportunities to undertake further share repurchase exercises in future, subject to prevailing market conditions.
The solvency sensitivity analysis as outlined in the 2019 Annual Report and Accounts, page 37.
DLG has travel insurance protection to mitigate the cost of an event over a 28 day period from £1m up to a limit of £10m, with one full reinstatement.
Current Mandate with Morgan Stanley
DLG has decided to terminate its current share repurchase mandate relating to buying back DLG's ordinary shares for a maximum consideration of up to £150 million that was announced on 4 March 2020 and commenced on 5 March 2020 (the "Current Mandate"). To date the company has bought back approximately £29 million of shares in the market under the Current Mandate.
The termination of the Current Mandate will take effect at the close of business today and no further share purchases will be carried out under the Current Mandate on the London Stock Exchange or any other exchange after then. The programme was previously expected to end by 31 July 2020.
The Group intends to update further with its first quarter trading update scheduled for 6 May 2020.
This announcement contains inside information for the purposes of article 7 of Regulation 596/2014 ("MAR"). The person responsible for arranging the release of this announcement on behalf of DLG is Tim Harris, Chief Financial Officer.
Director of Investor Relations
Telephone: +44 (0)7795 811 263