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UK motor insurer Direct Line has poached Adam Winslow, a senior executive at rival Aviva, to be its new chief executive as it seeks to recover from a string of profit warnings amid spiralling inflation in claims costs.
The announcement comes a week ahead of Direct Line’s half-year earnings, seen as a key test of its progress. The FTSE 250 insurer said it had appointed Winslow, currently head of Aviva’s UK and Ireland general insurance business, effective in the first quarter of next year.
It has been a tough year for Direct Line that first warned on profits last summer as rising prices for car parts and second-hand cars, and other factors drove up the cost of payouts. The company scrapped its final dividend for the year as bad weather added to the pressure.
After the departure of Penny James from the top job in January, the group admitted it had “under-called inflation” and had been overly optimistic about the degree of price rises needed to offset this pressure.
Direct Line reported a combined operating ratio — a key measure of underwriting profitability that measures claims and expenses as a percentage of premiums — of 105.8 per cent last year for its ongoing operations. Anything above 100 per cent represents an underwriting loss.
Aviva’s UK general insurance business reported a 96.1 per cent combined operating ratio in 2022, worse than the previous year but still profitable.
As prices continue to rise, the key question for the group will be whether it can get through this period without having to raise capital.
Analysts at RBC Capital Markets said Winslow’s appointment was a “tangible positive step forward in aiding the share’s recovery” but added that “the long lead time before any ensuing revamp is announced, and until its results start materialising, might mean that some patience is still required from here still”.
Winslow, who has previously held roles at US insurer AIG and is also a non-executive director at Pool Re, the UK’s state-backed terrorism reinsurer, praised Direct Line’s “rich heritage and passion for serving its millions of customers”.
“I’m looking forward to working with my new colleagues to drive growth, deliver for customers and create long-term shareholder value,” he said.
Direct Line’s shares were modestly higher by late-morning trading in London.
Direct Line said Jon Greenwood, its acting chief executive, had chosen not to pursue the CEO role. Its chair Danuta Gray said Winslow “stood out for his strategic understanding of the sector, outstanding record of leading high performing businesses and his focus on driving operational excellence to consistently meet customer needs”.
Aviva said it had moved the chief executive of its Canadian business, Jason Storah, to fill the gap left by Winslow’s departure. Storah has almost 20 years of experience at the FTSE 100 insurance group.
