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Direct Line CEO Adam Winslow faces a difficult balancing act on Thursday.
In addition to presenting the insurer’s annual financial results, he must present his roadmap to transform the business and defend arguments to defend himself against new takeover bids from Belgian rival Ageas.
You will only have had three weeks to put all this together.
Winslow’s strategy is expected to include cost-cutting measures and plans to digitize the business.
Direct Line was the UK’s first phone insurer, but it has failed to keep up with technology and doesn’t even have an app.
Back in the day: Direct Line was the UK’s first phone insurer, but it has failed to keep up with technology and doesn’t even have an app
This may be Winslow’s first port of call. Fortunately for him, there is at least good news. Direct Line is expected to announce it has returned to profit in 2023, earning around £320m, according to Refinitiv estimates.
In 2022, it lost £45m after being hit by a combination of severe winter weather claims (such as burst pipes) and a fall in the value of its commercial property investments.
This led the company to cancel its final dividend. Within weeks he split from CEO Penny James. The tumultuous year continued as he was forced to pay out around £30m to customers who were charged more than they should have been to renew their home and car insurance policies.
The general view in the City is that the company’s decision to sell its commercial insurance unit for £520m has shored up its balance sheet and put it in a better position – although, ironically, this has probably also made it more attractive to the bidder Ageas.
However, investors are unlikely to see much cash on the way just yet.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “There is still a long way to go if Direct Line is to return a stable dividend and restore investor confidence.”
Ageas’ first bid, made in January, was for £3.1bn, which was quickly rejected by Direct Line’s board just two days before Winslow took the helm.
Another offer, which was only 3 percent higher, was rejected last week. Ageas has until March 27 to submit a final firm offer.
He might as well be waiting for Winslow to lay out his strategy before taking action. Direct Line’s share price has fallen from a recent high of 225p to around 208p, indicating that investors think a takeover is less likely to happen.
Analysts believe a price of 263p would be needed, rather than Ageas’ previous 237p.
The Mail on Sunday understands the Belgian insurer was in London courting shareholders last week.
Panmure Gordon’s Abid Hussain said it should focus on improving margins, as rival Admiral has done, as well as identifying “growth paths”.