PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2024

DIRECT LINE INSURANCE GROUP PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024

DELIVERING ON THE TURNAROUND

4 March 2025

ADAM WINSLOW, CEO OF DIRECT LINE GROUP, COMMENTED:

"Our 2024 financial results demonstrate the significant progress we have made, so far, in transforming the business. The turnround strategy, launched in July, has made a marked difference to the company's performance, and we have good momentum across all our business lines.

During the year we launched three new Direct Line branded motor insurance products on the largest price comparison website, Green Flag signed two new agreements, our Home business re-platformed, we further improved our pricing and underwriting capabilities, initiated a new operational structure to become a more efficient and effective organisation and overhauled our claims function in service of better customer and indemnity outcomes.

We also delivered a £395 million increase in ongoing operating profit and 12 point improvement in our net insurance margin compared to the prior year. Motor returned to profitability during 2024, and we made material progress on our cost agenda by actioning £50m of run rate cost savings, with the full benefit expected in 2025.

During the year, we improved our reinsurance protection to reduce future earnings volatility and further diversified our asset portfolio whilst ensuring it closely matches liabilities and carried out an independent third-party reserve review. We remain confident in our ability to deliver at least £100 million of gross run-rate savings by the end of 2025 and 13% net insurance margin in 2026.

Our 2024 results and robust balance sheet with a pre-final dividend solvency ratio of 200% has enabled the Board to recommend a final dividend of five pence per share.

For 2025, we remain focused on delivering the turnaround at pace, leveraging our strong market position and operational efficiencies, to become the customers' insurer of choice.

Our colleagues deserve considerable recognition for showing an unwavering commitment to delivering brilliant customer outcomes everyday particularly during the first year of our turnaround plan."

Results summary

 Financial highlights

Strategic and operational highlights

Agreement for the acquisition of Direct Line Group by Aviva

Notes:

1. See glossary for definitions and Appendix A - Alternative Performance Measures for reconciliation of operating return on tangible equity.

2. Ongoing operations - the Group's ongoing operations result excludes the results of the Brokered commercial business that it sold to RSA Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary for definitions and Appendix B - Management view statements of profit or loss, claims development tables on a discounted basis, expenses, average premiums, gross written premium and associated fees and in-force policies.

3. Estimates based on the Group's Solvency II partial internal model.

4. The full year 2023 solvency capital ratio has been re-presented as explained in the Capital analysis section of this report (previously reported in the Group's full year 2023 preliminary results and Annual Report and Accounts as being 197%).

5. The Group's total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs, commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.

6. Based on the closing price of Aviva shares of 489.3 pence on 27 November 2024 (being the last closing share price before the commencement of the Offer Period) and taking into account the final dividend of 5 pence per share announced today.

CEO REVIEW

In 2024 we embarked on an ambitious mission to rapidly transform Direct Line Group. Our focus on a new strategy, delivering technical excellence, driving down cost and embracing a high-performance culture has delivered a turnaround in results. Despite difficult market conditions, 2024 ended with an operating profit significantly ahead of the previous year.

Unlocking potential

I joined Direct Line Group in March 2024, just as the Board had rejected a "highly opportunistic" proposal from Ageas SA/NV, which they felt significantly undervalued the business and its prospects. My focus was firmly on diagnosing the issues holding back performance and demonstrating to our investors how we could rapidly unlock the potential of the Group. I spent a lot of time with our stakeholders to understand their frustration with the ways the Group had lost its technical edge and underperformed in recent years.

At our Capital Markets Day in July 2024, we laid out a new strategy for the Group to address investors' concerns and establish a roadmap to transform the business quickly. We laid out targets for becoming the customers' insurer of choice and delivering profitable growth with measurable targets across the next three years. We have made solid progress to date and started to deliver against many of the key initiatives rapidly.

We announced we would intensify our focus across our Motor and Non-Motor segments. Prioritising driving value in core disciplines has been beneficial, with all areas demonstrating positive performance. Importantly, we're also securing consumer accolades, showing that we are providing products and service that customers truly value. With two of the strongest brands in personal lines insurance, Direct Line and Churchill, and with Green Flag as the leading challenger in the Rescue market, we have fantastic assets to build upon.

Financial progress

The business has delivered a net insurance margin of 3.6%1,2, a 12.3 point improvement on the previous year. We have a stated aim to increase this to 13 per cent3 in 2026. We are well on our way to delivering a significant reduction in our cost base, to narrow the gap with our competitors, targeting at least £100 million of gross cost savings by end of 2025 on a run-rate annualised basis4 and we have maintained a strong pre-final dividend solvency capital ratio at 200%5, a good platform from which to help the Group withstand headwinds.

With this positive progress, the Board was able to pay a small dividend of two pence per share at Half Year. We are also recommending a further five pence per share final dividend with our full year results.

Operational transformation

We have made considerable progress over the year. In Motor, in July we announced that we would be putting our strongest brand, Direct Line, on Price Comparison Websites ("PCWs"), where 90 per cent of motorists purchase their insurance. Less than six months later, in December 2024, we delivered on this promise. We launched three new Direct Line branded motor products on the biggest Price Comparison Website in the UK with an ambition to return our overall Motor policy count to growth during 2025. Our Motability partnership has also seen an increase in policy count and we aim for it to continue to grow.

Beyond Motor, we outlined ambitious plans to grow our Home, Rescue and Commercial Direct offerings. In Home we delivered own brands premium growth of 18% and increased own brands policies by 1.3%. Technology re-platforming is now largely complete with Direct Line, Churchill and Privilege all trading on a new platform.

In our Commercial Direct Insurance business, our strong proposition in Landlord and our compelling SME offering delivered 8.8% gross written premium growth and strong customer retention. We stayed disciplined on the bottom line in Van and our earned loss ratios were within our target range.

Our Rescue business made significant strategic progress in 2024. We grew our 'owned patrol' network to over 60 vehicles, covering 28% of the UK market, supported nationally by a network of independent providers. These owned patrols helped customers, and also generated over £600,000 in additional roadside revenue.

Technical innovation will remain a key focus across the Group as we seek to drive home a competitive advantage. We signed a contract with Apple for Green Flag to become the first UK breakdown provider to offer rescue services through Apple's Roadside Assistance via satellite capability. This allows us to reach people who might otherwise not get help because they don't have mobile phone reception or Wi-Fi access.

We launched two new apps, for Direct Line and Churchill, meeting the needs of customers who increasingly want to engage with us digitally. We will keep our focus on aiming to build seamless customer journeys, letting people self-serve, simplifying the claims process and making our products more accessible. We aim to expand AI solutions to reduce cost and increase the speed of service to meet the evolving needs of policyholders.

In Claims we're improving the service we provide customers while unlocking savings across our operations. We're settling bodily injury claims much more proactively, reducing the number of cars we write off and using our network of owned repair centres to control costs. Effective claims management also relies on excellent counter fraud capabilities, and we delivered a 21% increase in cost savings after introducing data analytics and voice analysis profiling.

Effective risk management

As a general insurer, the environmental factors impacting the Group's performance are major UK floods, windstorms, freeze events and subsidence. We believe we are appropriately reserved against those perils. During the year, we acquired climate scenario modelling capability to support our assessment of the impact climate change could have on our underwriting and investment portfolio. This also helps us better understand the opportunities that may arise from the transition to a lower-carbon economy.

When implementing the strategy outlined at the Capital Markets Day, we ensured that we set out to embed enhanced risk controls within the business. For example, new pricing and risk models enable us to be more agile, allowing for more frequent rating and risk model updates. This renewed focus on risk management procedures, monitoring emerging threats and tightening control environments helps protect profitability and reduces the likelihood of unexpected impacts on our Group.

Cultural transformation

We have recruited an entirely new Executive Committee of high calibre, experienced leaders, with a track record of delivery. This new leadership team have made great strides in transforming the culture of the business, and our colleagues have embraced the opportunity to grow and operate with a high-performance mindset.

Transforming a business is not easy, and we've had to make tough decisions about people and capital expenditure. We are simplifying our management structure in line with our aim of being a more efficient organisation with clearer accountability.

Over the last year we have made the necessary changes to succeed in what is an incredibly competitive industry. Throughout it all, our talented colleagues have consistently demonstrated their resilience, energy and commitment. They take immense pride in our brands and want to be brilliant for our customers every day.

Navigating headwinds

In 2024, the insurance industry continued to grapple with significant trading headwinds. Inflation drove up the cost of claims, particularly in Home and Motor, where repair and replacement costs have surged in recent years. Economic uncertainty and the ongoing pressures from the cost-of-living crisis have created an increasingly competitive market, with insurers facing challenges in balancing affordable premiums while maintaining profitability. These factors meant we needed to adopt innovative approaches to underwriting, pricing, and risk management.

Looking forward

2024 was a landmark year for Direct Line Group, with the Board recommending a cash and share offer for the purchase of Direct Line Group by Aviva plc. On 10 March 2025 Direct Line Group's shareholders will vote on the transaction.

The potential acquisition by Aviva, which remains subject to shareholder and regulatory approval, reflects the attractiveness of the Group, and we believe indicates the significant strength of our brands and products, the trust of our customers, talent of our people and the scale of the future opportunity. In the meantime, we remain an independent business focused on transforming our organisation, so we are better equipped to serve our customers with exceptional products and services. While we need to plan appropriately for this potential takeover, we need to make sure we don't take our foot off the accelerator when it comes to delivering business change.

I am filled with immense pride in what this business has achieved since I joined. The passion and dedication of our colleagues, with an unwavering commitment to delivering brilliant customer outcomes, is unparalleled. Our mission goes beyond policies and claims: we help safeguard communities, support the vulnerable and allow our customers to face the future with confidence.

We are set to embrace the opportunities of tomorrow thanks to the hard work and dedication of all those at Direct Line Group.

ADAM WINSLOW

CHIEF EXECUTIVE OFFICER

Notes:

1. See glossary for definitions and Appendix A - Alternative Performance Measures for reconciliation of operating return on tangible equity.

2. Ongoing operations - the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary for definitions and Appendix B - Management view statements of profit or loss, claims development tables on a discounted basis, expenses, average premiums, gross written premium and associated fees and in-force policies.

3. Net insurance margin for ongoing operations, normalised for event weather.

4. The Group's total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs, commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.

5. Estimates based on the Group's Solvency II partial internal model.

CFO REVIEW

2024 has been a year of significant transition for our Group. I was delighted to join the Group as CFO at such an important time and lead our financial strategy as we aim to grow, to deliver on our commitments to serve millions of customers, and to create long-term sustainable shareholder value.

Against a challenging external environment, we have embarked on a bold reset strategy, to focus on improving business performance, enhance financial strength, and embed a robust culture of accountability and control.

Driving business performance

It is critical, at this stage of our turnaround, that we focus on supporting strategic execution and driving improved business performance. To achieve this, our Finance team are driving a step change in performance focus by providing improved management information to the commercial teams and prioritising financial performance. We aim to do this while maintaining excellent cost control, operating more efficiently and focusing on our ambition of achieving at least £100 million of gross cost savings by end of 2025 on a run-rate annualised basis1.

In 2024, we focused on strengthening our performance in core segments, leveraging our strategic advantages, and investing in key areas of growth. Our results highlight early stages of recovery as we delivered 25% growth in gross written premiums and associated fees2,3, a £395 million improvement in ongoing operating profit2,3 and 10% growth in tangible net asset value1. These results provide a strong foundation from which to be able to deliver on our strategic ambition of achieving 13% net insurance margin2,4 in 2026.

Strengthening financial resilience

Ensuring long term financial strength is a key priority, positioning us well for sustainable growth and enhanced shareholder value opportunities. I have reviewed our balance sheet, acted to assure balance sheet strength and remain focused on prudent capital management. By leveraging targeted financial strategies, we aim to further optimise capital allocation, enhance efficiency, and help drive long term performance.

Embedding a culture of accountability and control

We enhanced our financial control framework and assurance, delivering greater oversight, control and proactive risk management. This will help to improve long-term stability.

Outlook

As we continue our turnaround journey, our financial strategy remains focused on our clear objectives of delivering profitable growth, enhancing operational efficiency, and reinforcing our financial resilience. Whilst we have made significant progress, we recognise there is more work to do to achieve our long-term ambitions. I am confident that the disciplined execution of our strategy can deliver lasting value for our customers, colleagues, and shareholders.

JANE POOLE

CHIEF FINANCIAL OFFICER

Notes:

1. The Group's total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs, commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.

2. See glossary for definitions and Appendix A - Alternative Performance Measures for reconciliation of operating return on tangible equity.

3. Ongoing operations - the Group's ongoing operations result excludes the results of the Brokered commercial business that it sold to RSA Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary for definitions and Appendix B - Management view statements of profit or loss, claims development tables on a discounted basis, expenses, average premiums, gross written premium and associated fees and in-force policies.

4. Net insurance margin for ongoing operations, normalised for event weather.

GROUP FINANCIAL PERFORMANCE

 2024 performance

Profit from ongoing operations increased by £395 million to £205 million driven by a turnaround in Motor earnings which increased by £427 million. Non-Motor delivered a profit of £98 million.

The Group has excluded the results of the Brokered commercial business, three run-off partnerships and its Other personal lines products from its ongoing results. Results relating to ongoing operations are referenced in Appendix B to the report and in the financial statements, note 1 (Segmental information) has also been amended to reflect the change. The insurance service result from ongoing operations was a profit of £105 million (FY 2023: £212 million loss) and for the Group, as a whole, it was a profit of £126 million (FY 2023: £227 million loss).

The Group profit before tax was £218 million, £59 million lower than prior year, which included £444 million from the sale of the Brokered commercial business in 2023.

In-force policies1 and gross written premium and associated fees1

In-force policies from ongoing operations were 8.8 million, 5.5% lower than at the end of 2023. The largest reduction was in Motor where own brand policies were 13.2% lower as we focused on disciplined underwriting which more than offset growth in the Motability partnership. Non-Motor in-force policies were 3.1% lower than the end of 2023, mainly due to Rescue. Commercial Direct grew 0.8% and Home own brands grew 1.3%.

Gross written premiums and associated fees for ongoing operations grew by 25.3% to £3,732 million driven by strong growth in Motor and Non-Motor. The 31.8% growth in Motor was supported by the Motability partnership, where we had a full year of premium in 2024 compared to only seven months during 2023, and higher own brand average premiums. Non-Motor achieved growth of 11.0%, ahead of the CAGR target of 7% to 10%, due to double-digit premium growth in Home and 8.8% growth in Commercial Direct.

Insurance service result

The net insurance margin for ongoing operations was 3.6%, 12.3pts better than 2023, primarily due to a significant improvement in Motor, particularly in the second half of 2024 following repricing action. The Non-Motor net insurance margin remained strong at 8.9%.

The net insurance claims ratio for ongoing operations was 69.9%, an improvement of 12.2pts compared with 2023 due to significant improvement in both the current year attritional claims ratio and the prior year reserves development ratio. The changes to the Ogden discount rate for large bodily injury claims resulted in a £41 million reserve release for the Group, of which £36 million related to ongoing operations.

The current year attritional claims ratio improved by 6.7pts as the pricing actions taken in Motor began to earn through while the prior year reserves development ratio improved by 5.9pts.

Weather event related claims in Non-Motor were £43 million (FY 2023: £27 million). Our assumption for the full year 2024 was £62 million. In addition, the Group experienced approximately £10 million of non-event weather above expectation in the first half of 2024.

The prior-year reserves development ratio was an immaterial strengthening of 0.1% (FY 2023: 6.0% strengthening). Motor saw positive development in prior year claims, following the changes to the Ogden discount rate for large bodily injury claims, which was more than offset by prior year strengthening in Non-Motor.

The net acquisition costs ratio for ongoing operations improved by 0.5pts to 6.3% as higher acquisition costs were more than offset by premium growth. The net expense ratio for ongoing operations was broadly stable at 20.2% (FY 2023: 19.8%) as the full year of Motability costs alongside higher depreciation and amortisation charges and general inflation were largely offset by premium growth.

Expenses in insurance service result

Operating expenses for ongoing operations were £577 million, an increase of £97 million compared with FY 2023. Controllable costs increased by £51m in line with growth from Motability and expected inflation, resulting in a broadly stable net expense ratio of 20.2% (2023: 19.8%).

 Investment result and unwind of discount rate1

Net investment income from ongoing operations increased to £200 million (FY 2023: £139 million) primarily driven by interest rates remaining high following an environment of global interest rates rising during 2023, and a phased reinvestment back into investment grade credit more aligned with the Group's benchmark weighting, resulting in an investment income yield of 4.1%.

Finance income and expenses in operating profit also benefited from a decrease in expenses related to the unwind of the discounting of claims.

Reconciliation of operating profit/(loss) to basic earnings per share

 Restructuring and one-off costs

The Group incurred £118 million of restructuring and one-off costs during 2024 (2023: £60 million), which were a result of several items including cost out and control initiatives, non-cash impairments, as well as work carried out in relation to the takeover approach from Ageas NV and the offer from Aviva plc.

Net fair value gains1,2

Net fair value gains in the period were £37 million (2023: £124 million), reflecting a further tightening of credit spreads and interest rate movements year-on-year and the pull to par on the Group's credit holdings.

Net insurance finance income - effect of change in yield curve

Net insurance finance income of £89 million (2023: £26 million expense) reflects the gross and reinsurance effect of changes in the yield curve and the ASHE index on the discounting of previously recognised PPO claims.

Other finance costs

Other finance costs were £15 million (2023: £15 million) and relate to interest payable on the Group's £260 million (nominal) subordinated debt due in 2032.

Profit before tax

Profit before tax reduced by £59 million to £218 million (2023: £277 million) primarily due to the effect of the sale of the Brokered commercial business in 2023 which generated £444 million.

Effective corporation tax rate

The Effective Tax Rate ("ETR") for 2024 was 25.5% (2023: 19.6%), which was slightly higher than the standard UK corporation tax rate of 25.0% (2023: 23.5%). This was driven primarily by disallowable expenses, partly offset by tax relief for coupon payments on the Group's Tier 1 notes, which are accounted for as a distribution, together with a prior-year credit. This is higher than the effective tax rate for 2023 which reflected the offset of capital losses brought forward which had not previously been recognised in deferred tax.

 Operating return on tangible equity 1,3

The operating return on tangible equity increased by 24.9pts to 10.0% (2023: minus 14.9%) due primarily to the increase in the Group's operating profit from ongoing operations.

Earnings per share

The basic earnings per share in 2024 was 11.2 pence (2023: 15.9 pence). Diluted earnings per share in 2024 was 11.1 pence (2023: 15.7 pence), mainly reflecting a reduction in the Group's post-tax profit for the calculation of earnings per share in 2024 as improvements to operating profit were offset by the non-repeat of the gain on the sale of the Group's Brokered commercial business experienced in 2023. Operating earnings per share was 9.8 pence (2023: 12.8 pence loss).

The financial performance of the Group is discussed in detail . The calculation of earnings per share is presented in note 9, while the calculation of operating earnings/(loss) per share is presented in Appendix A.

Notes:

1. See glossary for definitions.

2. Ongoing operations - the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary for definitions and Appendix B - Management view statements of profit or loss, claims development tables on a discounted basis, expenses, average premiums, gross written premium and associated fees and in-force policies.

3. See Appendix A - Alternative Performance Measures for reconciliation of insurance finance costs, operating return on tangible equity, operating earnings/(loss) per share and investment income yield.

4. Other investment movements relate to net fair value gains/(losses), the effect of the change in the yield curve and interest expense on funds withheld liabilities.

5. Estimates based on the Group's Solvency II partial internal model.

6. The full year 2023 solvency capital ratio has been re-presented as explained in the Capital analysis section of this report (previously reported in the Group's full year 2023 preliminary results and Annual Report and Accounts as being 197%).

7. Staff costs and other operating expenses attributable to claims handling activities are allocated to the cost of insurance claims.

8. IT and other operating expenses include professional fees and property costs.

9. Includes right-of-use ("ROU") assets and property, plant and equipment. For the year ended 31 December 2024, there were no impairment charges which relate solely to own occupied freehold property (2023: no impairments).

Segmental Report

Motor

During 2024, Motor's return to profitability was delivered by two key factors. Firstly, the pricing and underwriting actions taken during 2023 continued to earn through and secondly, a return to favourable prior year reserve development. Alongside a higher investment result, this delivered a £427 million increase in operating profit to £107 million.

2024 was a transitional year for Motor earnings given the net insurance margin was a positive 4.9% in the second half of the year, compared with negative 3.0% in the first half which was impacted by the below target margin business written during the first half of 2023.

In-force policies and gross written premium and associated fees

Motor premiums grew by 31.8% compared to 2023 driven by the Group's partnership with Motability, where we had a full year of premium in 2024 compared to only seven months during 2023. Our partnership with Motability, accounts for around 41% of Motor gross written premiums, is developing well and delivered 14% growth in policy count during 2024.

Motor average premiums1,4

Overall the motor market remained challenging in the second half of 2024 and we continued to trade with discipline. This resulted in a further reduction in our own brand policy count, which for 2024 was down 13.2%. The reduction in policy count was partly offset by an increase in average premiums, which were in line with market, leading to a 2.9% reduction in our own brand1 gross written premiums and associated fees. Retention across own brands improved during the year while we also delivered 3% policy count growth in the PCW channel.

Underwriting

The current-year attritional net insurance claims ratio improved by 10.7pts to 76.0% reflecting the benefit from the pricing actions taken during 2023 and 2024 and claims inflation tracking in line with expectations of high single digits. Prior-year reserves saw a release of £21 million compared with a reserve strengthening of £138 million in 2023.

Net insurance margin and operating profit/(loss)

The combination of an improved current-year attritional net insurance claims ratio, and prior year development ratio, delivered a 22.1pt improvement in the net insurance margin to 1.0%, (2023: minus 21.1%). The insurance service result was a profit of £19 million and operating profit was £107 million due to higher investment income.

Profit before other finance costs

Profit before other finance costs improved to a profit of £207 million from a loss of £274 million in 2023 due to the factors described above together with positive movements from changes in the yield curve.

Non-Motor

Non-Motor delivered a solid result, with double-digit gross written premium growth, a net insurance margin of 8.9% (7.0% when normalised for event weather) and operating profit of £98 million.

In-force policies and gross written premium and associated fees

Non-Motor delivered gross written premium growth of 11.0% during 2024, which is ahead of our target of 7% to 10% CAGR announced at the Capital Markets Day in July 2024. Growth was supported by a double digit increase of 15.5% in Home and 8.8% in Commercial Direct while Rescue premiums were 3.3% lower.

Home own brands returned to policy count growth in 2024 as competitiveness improved due to significant premium inflation in the market, particularly in the first half. Strong retention and a 13% increase in average premiums delivered own brand gross premium growth of 17.5% year-on-year. Home partnerships premium increased by 9.7% during the year.

Home average premiums1

In Commercial Direct, gross written premium grew 8.8% compared to the prior year driven by growth in Landlord and small-to-medium enterprises ("SME") while Van was broadly stable. Policy count was 0.8% higher as we continued to target growth in the attractive Landlord and SME markets, more than offsetting a reduction in Van policies, where we increased average premiums to take into account elevated levels of inflation. Overall, retention was stable across the Commercial Direct book.

In Rescue, policy count was 9.4% lower largely due to partnerships while gross written premium and associated fees was 3.3% lower than prior year, largely due to lower linked premiums, where we sell a Rescue policy alongside a Motor policy.

Underwriting

The insurance service result was £85 million (2023: £120 million).

The net insurance claims ratio was 59.8%, 2.3pts higher than prior year, with the increase largely driven by higher weather-related claims and prior year strengthening. Weather event-related claims in Home and Commercial were £43 million, £16 million higher than prior year. The 2025 event weather claims assumption is £70 million (2024: £62 million).

The current-year attritional net insurance claims ratio was 52.8%, 0.9pts lower than prior year. The prior-year claims development ratio was 2.5%, mainly reflecting strengthening in assumptions for subsidence and escape of water claims from older years.

Net insurance margin and operating profit

The net insurance margin was 8.9% or 7.0% when normalised for event weather, 3.2pts lower than prior year. However, underlying margins were strong adjusting for the attritional weather and prior year movements.

Operating profit was £98 million or £79 million normalised for event weather.

Profit before other finance costs

Profit before other finance costs reduced to £110 million from a profit of £157 million at 2023 due to the factors described above alongside a small reduction in benefits received from changes in the yield curve.

Brokered commercial business2

The Group has excluded the results of the Brokered commercial business from its ongoing results and has restated all relevant comparatives across this review. The Group agreed the transfer of the Group's Brokered commercial lines insurance business and associated partnerships to Royal & Sun Alliance Insurance Limited with effect from 1 October 2023 through a combination of quota share reinsurance and a form of renewal rights transfer. As a result, the economic effect of the Brokered commercial insurance business moved to Royal & Sun Alliance Insurance Limited and the back book of policies has remained with the Group.

For 2024, gross written premium and associated fees were £437 million (2023: £666 million). The operating profit relating to the Brokered commercial business in 2024 was £36 million (2023: £28 million). The formal separation and operational transfers started in the second quarter of 2024, with subsequent transfers of outstanding elements of the overall Brokered commercial insurance business following.

Non-core and Run-off2

The Group has excluded the results of Other personal lines products, including three partnerships that were previously disclosed as being exited, from its ongoing operations and has restated all relevant comparatives across this review. Other personal lines is made up of Pet, Travel, Creditor and Select, our insurance targeted at mid- to high-net worth customers. Pet is the largest product within Other personal lines. As announced at the Group's Capital Markets Day in July 2024, the decision was taken to pause investment in these products. Other personal lines represented around £130 million of gross written premium and associated fees in 2023.

Three partnerships in Travel and Rescue have now been exited and will reduce the Group's exposure to low margin insurance products packaged with bank accounts so it can redeploy capital to segments with higher return opportunities. The two Travel partnerships were with NatWest Group and Nationwide Building Society and expired during the first half of 2024. although upgrades on existing Nationwide Building Society policies will continue to be underwritten by the Group until April 2025. The Rescue partnership was with NatWest Group and expired during the second half of 2022.

Gross written premium and associated fees were £178 million (2023: £279 million). The operating profit relating to Non-core and Run-off was £4 million (2023: £29 million loss).

Notes:

1. Own brands include Motor in-force policies under the Direct Line, Churchill, Darwin, Privilege and By Miles brands and Home in-force policies under the Direct Line, Churchill and Privilege brands.

2. See glossary for definitions and Appendix B - Management view statements of profit or loss, claims development tables on a discounted basis, expenses, average premiums, gross written premium and associated fees and in-force policies.

3. Source: ABI motor premium tracker as at Q2 2024.

4. Average premium figures quoted relate to Motor own brands excluding the By Miles brand.

Cash flow

The cash that the Group used in operating activities (£365 million), investing activities (£107 million) and financing activities (£130 million) resulted in a net decrease in cash and cash equivalents of £601 million to £1,089 million (2023: £751 million increase to £1,690 million).

Net cash used in operating activities of £365 million is largely as a result of cash used in investment of insurance assets of £347 million (2023: £304 million cash generated). The Group has considerable assets under management and during the period purchases of debt securities held at fair value through profit or loss ("FVTPL") exceeded disposals and maturities. The Group had an operating cash inflow before movements in working capital of £137 million (2023: outflow £337 million), due to the improvement in the insurance service result. After taking into account movements in working capital, taxes and cash flow hedges, the Group's cash outflow before investment of insurance assets was £31 million (2023: inflow £132 million).

Net cash used in investing activities of £107 million primarily reflected the Group's continuing investment in its major IT programmes (2024: £93 million, 2023: £124 million) while the net cash generated from investing activities in the period ended 31 December 2023 primarily reflected net proceeds from the sale of the Brokered commercial business of £470 million.

Net cash used in financing activities of £130 million included £95 million in dividends and Tier 1 capital coupon payments (2023: £17 million in Tier 1 capital coupon payments) and £13 million (2023: £11 million) in lease principal payments.

The levels of cash and other highly liquid sources of funding that the Group holds to cover its claims and other cash flow obligations are continually monitored with the objective of ensuring that the levels remain within the Group's risk appetite.

Balance sheet management

Capital management and dividend policy

The Group aims to manage its capital efficiently and generate long-term sustainable value for shareholders, while balancing operational, regulatory, rating agency and policyholder requirements.

The Group aims to pay a regular dividend of around 60% of operating profit after tax for ongoing operations1.

Where the Board believes that the Group has capital which is expected to be surplus to the Group's requirements for a prolonged period, it intends to return any surplus to shareholders.

The Group has a solvency risk appetite of 140% of the Group's solvency capital requirement ("SCR"). In normal circumstances, the Board expects that a solvency coverage ratio of around 180% is appropriate and will take this into account when considering the potential for additional returns, alongside expectations for future capital requirements and other relevant factors. In the short-term, the Group expects to maintain a solvency coverage ratio above this level.

In the normal course of events the Board will consider whether or not it is appropriate to distribute any surplus capital to shareholders once a year, alongside the full year results.

The Group expects that one third of the annual dividend will generally be paid in the third quarter as an interim dividend, with the remaining regular dividend paid as a final dividend in the second quarter of the following year. The Company may consider a special dividend and/or a repurchase of its own shares to distribute surplus capital to shareholders.

The Board may revise the dividend policy from time to time.

The Board has reviewed the progress the Group has made in turning around the business and, based on the Group's strong solvency coverage ratio and underlying capital generation over the last 12 months, has concluded it is appropriate to recommend to shareholders at the annual general meeting a final dividend of 5.0 pence per share (£65 million).

Subject to shareholders approving the dividend at the annual general meeting on 14 May 2025, the dividend is scheduled to be paid on 19 May 2025 to shareholders on the register on 4 April 2025. The ex-dividend date will be 3 April 2025.

Note:

1. Operating profit from ongoing operations after finance costs, coupon payments in respect of Tier 1 notes and tax at the standard rate.

Capital analysis

The Group is regulated under Solvency II requirements, as modified by the PRA's 2024 reforms, by the PRA on both a Group basis and for the Group's principal underwriter, U K Insurance Limited. In its results, the Group has estimated its Solvency II own funds, SCR and solvency capital ratio as at 31 December 2024.

Capital position1

At 31 December 2024, the Group held a Solvency II capital surplus of £1.11 billion above its regulatory capital requirements, which was equivalent to an estimated solvency capital ratio post dividends of 195%.

Note:

1. The full year 2023 solvency capital ratio has been re-presented as explained below (the post-dividend ratio previously reported in the Group's full year 2023 preliminary results and Annual Report and Accounts as being 197%).

During the Group's half year results preparation, a miscalculation was identified within the Group's audited Solvency II own funds for the year ended 2023. This miscalculation arose in the Solvency II treatment of the whole account quota share reinsurance arrangement (incepted 1 January 2023), and in particular the translation of the reinsurance debtors between IFRS and Solvency II own funds. This miscalculation had no impact on the IFRS figures.

Correcting for the miscalculation, the solvency capital ratio (post-dividend) at year end 2023 was 188%, which was above the Group's risk appetite range of 140% to 180% (the previously reported solvency capital ratio was 197%).

Movement in capital surplus1

Notes:

1. The full year 2023 movement in capital surplus has been re-presented as explained in the Capital position section of this report .

2. At 31 December 2024 and 31 December 2023 no ineligible Tier 3 capital arose as the Group's available Tier 3 capital was under the amount of Tier 3 capital permitted under the Solvency II regulations (15% of the Group's SCR). In FY 2023 there was a £0.03 billion reduction in ineligible Tier 3 capital as ineligible Tier 3 capital reported at FY 2023 reduced to £nil.

During 2024, the Group generated £0.34 billion of Solvency II capital from a combination of operating earnings, one-off benefits from partnerships and market movements. After a change to the solvency capital requirement of £0.03 billion, capital expenditure of £0.11 billion and dividends of £0.09 billion, the net surplus for the year increased by £0.11 billion to £1.11 billion.

Change in solvency capital requirement

During 2024, the Group's SCR increased by £0.03 billion to £1.16 billion, primarily due to updated exposure positions.

Scenario and sensitivity analysis1

The following table shows the impact on the Group's estimated solvency capital ratio in the event of the following scenarios as at 31 December 2024. The impacts on the Group's solvency capital ratio arise from movements in both the Group's SCR and own funds.

Notes:

1. Sensitivities are calculated on the assumption that full tax benefits can be realised.

2. The periodic payment order ("PPO") real discount rate is an actuarial judgement which is based on a range of factors including the economic outlook for wage inflation relative to the PRA discount rate curve. The sensitivity was previously labelled, "Increase in Solvency II inflation assumption for PPOs by 100 basis points". The underlying sensitivity and historic results remain the same.

3. The sensitivity has been updated to include assets that are accounted for at amortised cost. Previously only assets that were treated as FVTPL were included. The comparative period has been restated on a consistent basis.

4. Assumes no change to the SCR.

Limitations of sensitivity analysis

Own funds1

The following table splits the Group's eligible own funds by tier on a Solvency II basis.

Note:

1. Full year 2023 eligible own funds have been re-presented as explained in the Capital position section of this report.

During 2024, the Group's eligible own funds increased from £2.13 billion to £2.27 billion. Eligible Tier 1 capital after foreseeable distributions represents 87% of own funds and 170% of the estimated SCR. Tier 2 capital relates to the Group's £0.21 billion subordinated debt with no ineligible Tier 1 capital. The maximum amount of Restricted Tier 1 capital permitted as a proportion of total Tier 1 capital under the Solvency II regulations is 20%. Restricted Tier 1 capital relates solely to the Tier 1 notes issued in 2017.

The amount of Tier 2 and Tier 3 capital permitted under the Solvency II regulations is 50% of the Group's SCR and the amount of Tier 3 alone is 15% of the Group's SCR. The Group has no ineligible Tier 3 own funds.

Reconciliation of IFRS shareholders' equity to Solvency II eligible own funds1

Notes:

1. Full year 2023 eligible own funds have been re-presented as explained in the Capital position section of this report.

2. At 31 December 2024 and 31 December 2023 no ineligible Tier 3 capital arose as the Group's available Tier 3 capital was under the amount of Tier 3 capital permitted under the Solvency II regulations (15% of the Group's SCR).

Investment portfolio

Our investment strategy aims to deliver several objectives, which are summarised below:

The strategic asset allocation has continued to be regularly reviewed during 2024. Whilst the core outcome of the review reinforced investment grade credit as the largest asset class within the portfolio, it suggested some modest changes to other areas of the portfolio. Following the review, a phased approach during the year was adopted in reinvesting back into investment grade credit securities and reducing the Group's overweight position in cash. To assist with the matching exercise of the Group's PPO liabilities, effective from Q4, the Group diversified further by acquiring some index-linked sovereign.

Asset and liability management

The following table summarises the Group's high-level approach to asset and liability management.

 Assets under management1

Notes:

1. Excludes £298.1 million (2023: £241.8 million) which is invested within money market funds under the 100% quota share reinsurance treaty for the Brokered commercial business, which is operated on a funds withheld basis and is retained as security against the reinsurer's obligations.

2. Asset allocation at 31 December 2024 includes investment portfolio derivatives, which have a mark-to-market liability value of £19.6 million which is split as assets of £19.6 million included in investment grade credit and of £nil included in sovereign debt (31 December 2023: mark-to-market asset value of £12.0 million and £0.4 million liability respectively). This excludes non-investment derivatives that have been used to hedge operational cash flows.

3. Net of bank overdrafts: includes cash at bank and in hand and money market funds.

4. Equity investments consist of quoted and unquoted shares and insurtech-focused equity fund partnerships. The insurtech-focused equity fund partnerships are valued based on external valuation reports received from a third-party fund manager.

At 31 December 2024, total assets under management of £5,402 million were 0.5% higher than at the start of the year. Total debt securities were £3,974 million (31 December 2023: £3,321 million), of which 2.2% were rated as 'AAA' and a further 63.1% were rated as 'AA' or 'A'. The average duration at 31 December 2024 of total debt securities was 2.5 years (31 December 2023: 2.1 years).

At 31 December 2024, total unrealised losses on investments held at FVTPL were £90 million (31 December 2023: £137 million unrealised losses).

Net investment income in operating profit for ongoing operations increased to £200 million (2023: £139 million) primarily driven by interest rates remaining high following an environment of global interest rates rising during the first half of 2023, and a phased reinvestment back into investment grade credit more aligned with the Group's benchmark weighting.

Fair value gains were £37 million (2023: £124 million), with a tightening of credit spreads and interest rates accounting for the majority of the movement.

Net asset value

Note:

1. See glossary for definitions.

Net assets at 31 December 2024 increased by £79.7 million to £2,138 million (31 December 2023: £2,058 million), partially offset by a reduction in own shares held by the Group, increasing the closing number of shares, resulting in tangible net assets per share increasing to 104.7 pence (31 December 2023: 95.5 pence).

Leverage

The Group's financial leverage reduced slightly to 22.1% (2023: 22.7%) following increases in retained earnings.

Note:

1. Total IFRS financial debt and Tier 1 notes as a percentage of total IFRS capital employed.

Credit ratings

Moody's Investors Service provides insurance financial-strength ratings for U K Insurance Limited, our principal underwriter. Moody's rate U K Insurance Limited as 'A2' for insurance financial strength (strong) and has been put on review for potential upgrade.

Reserving

 We make provision for the full cost of outstanding claims from the general insurance business at the statement of financial position date, including claims estimated to have been incurred but not yet reported at that date and associated claims handling costs. We consider the class of business, the length of time to notify a claim, the validity of the claim against a policy, and the claim value. Claims reserves could settle across a range of outcomes, and settlement certainty increases over time. However, for bodily injury claims the uncertainty is greater due to the length of time taken to settle these claims. The possibility of annuity payments for injured parties also increases this uncertainty.

The liability for incurred claims ("LIC") reserves are the combination of best estimate of liabilities ("BEL") and a risk adjustment, which is set around the 75th percentile on an ultimate basis and provides a margin on top of the BEL reflecting the uncertainty on a best estimate basis. The BEL is set on a discounted basis and includes an allowance for direct and indirect claims handling expenses, as well as events not in data ("ENIDs"), set by reference to various actuarial scenario assessments. ENIDs also consider other short- and long-term risks not reflected in the actuarial inputs, as well as the Corporate Actuarial Function's view on the uncertainties in relation to the BEL.

The most common method of settling bodily injury claims is by a lump sum. When this includes an element of indemnity for recurring costs, such as loss of earnings or ongoing medical care, the settlement calculations apply the statutory discount rate (known as the Ogden discount rate) to reflect the fact that payment is made on a one-off basis rather than periodically over time. The current Ogden discount rate is 0.5% for England and Wales and its equivalent is also 0.5% in Scotland and Northern Ireland.

The Ogden discount rate for England and Wales increased from minus 0.25% on 11 January 2025. The bodily injury discount rate increased in Scotland and Northern Ireland on 24 September 2024 from minus 0.75% and minus 1.5%, respectively. The impact of potential future changes in the discount rate is shown in the sensitivity table below. Since 2021, we have reduced the level of Motor reinsurance purchased, resulting in higher net reserves for accident years 2021 to 2024.

If the claimant prefers, large bodily injury claims can be settled using a PPO. This is an alternative way to provide an indemnity for recurring costs, making regular payments, usually for the rest of the claimant's life. As it is likely to take time to establish whether a claimant will prefer a PPO or a lump sum, until a settlement method is agreed we make assumptions about the likelihood that claimants will opt for a PPO. This is known as the PPO propensity.

At 31 December 2024, the real discount rate for PPOs is 1.5% (2023: 0.7%), the combination of cash flow weighted inflation and discounting of 3.7% (2023: 3.9%), which allows for increased short-term ASHE 6115 inflation of 6.5% over the next 12 months, followed by a number of years of heightened inflation before reverting to a long term assumption of 3.5%, and a yield curve based discount rate of 5.2% (2023: 4.6%).

The assessment of claims inflation, and the underlying drivers of claims inflation, remains a key consideration in deriving the reserves. Claims inflation is correlated with price inflation but there are several individual factors that are considered in addition, for example the salary of care workers, the price of used cars, judicial costs and repair costs. A range of general and specific scenarios for excess inflation has been considered in the reserving process.

The Group's prior-year reserves development (excluding restructuring and one-off costs) in 2024 was a reserve release of £5 million (2023: £124 million strengthening), driven by reserve releases in Motor and Non-core and Run-off, partially offset by reserve strengthening in Non-Motor and Brokered commercial.

Net liability for incurred claims

Note:

1. See glossary for definitions and Appendix B - Management view statements of profit or loss, claims development tables on a discounted basis, expenses, average premiums, gross written premium and associated fees and in-force policies for reconciliation to financial statement line items.

2. 2024 balances reflects 12 months of the Royal & Sun Alliance Insurance Limited quota share reinsurance compared with three months in 2023

Sensitivity analysis - changes in: the discount rate used in relation to PPOs and other claims, the assumed Ogden discount rate and claims inflation

The table below provides a sensitivity analysis of the potential net impact of a change in a single factor (for example the illiquidity premium ("ILP")) with all other assumptions left unchanged. Other potential risks beyond the ones described could have additional financial impacts on the Group.

The PPO sensitivity above is calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves as at 31 December 2024. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.

Notes:

1. These sensitivities exclude the impact of taxation.

2. These sensitivities reflect one-off impacts at the statement of financial position date and should not be interpreted as predictions.

3. The sensitivities relating to an increase or decrease in the discount rate used for PPOs illustrate a movement in the time value of money. The PPO sensitivity has been calculated on the direct impact of the change in the discount rate with all other factors remaining unchanged. The sensitivity is calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves as at 31 December 2024. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.

4. The sensitivities relating to an increase or decrease in the yield curve used to discount all reserves excluding PPOs illustrate a movement in the time value of money from the assumed level at the statement of financial position dates. The sensitivity has been calculated on the direct impact of the change in the discount curve with all other factors remaining unchanged.

5. Ogden discount rate sensitivity has been calculated on the direct impact of a permanent change in the discount rate in England and Wales with all other factors remaining unchanged.

6. The risk adjustment sensitivities are with respect to the discounted risk adjustment at the statement of financial position dates, with the year-end 2023 sensitivities having been restated from an undiscounted basis as reported in the Group's Annual Report and Accounts.

Reinsurance

The objectives of the Group's reinsurance strategy are to reduce the volatility of earnings, facilitate effective capital management, and transfer risk outside the Group's risk appetite. This is achieved by transferring risk exposure through various reinsurance programmes with the material ones being:

 Tax management

The Board recognises that the Group has an important responsibility to manage its tax position effectively. The Board has delegated day-to-day management of taxes to the Chief Financial Officer and oversight is provided by the Audit Committee.

These arrangements are intended to ensure that the Group complies with applicable laws and regulations; meets its obligations as a contributor and a collector of taxes on behalf of the tax authorities; and manages its tax affairs efficiently, claiming reliefs and other incentives where appropriate.

Tax authorities

The Group has open and co-operative relationships with the tax authorities with which it deals in the countries where the Group operates, namely the UK, the Republic of Ireland, South Africa and India.

Tax policy and governance

The Group's tax policy has been reviewed and approved by the Audit Committee. The Group Tax function supports the Chief Financial Officer in ensuring the policy is adhered to at an operational level.

For more information please see our published Group Tax policy on the Group's website at:

www.directlinegroup.co.uk/en/sustainability/reports-policies-and-statements.html

Total tax contribution

The Group's direct and indirect tax contribution to the UK Exchequer is significantly higher than the UK corporation tax that the Group would ordinarily pay on its profits. The Group collects taxes relating to employees and customers on behalf of the UK Exchequer and other national governments. It also incurs a significant amount of irrecoverable value added tax relating to overheads and claims. Taxes borne and collected in other tax jurisdictions have not been included in this note as the amounts are minimal in the context of the wider UK Group.

During 2024, the sum of taxes either paid or collected across the Group was £1,032.1 million. The composition of this between the various taxes borne and collected by the Group is shown below.

Total taxes borne

Total taxes collected

 Principal risks and uncertainties

Our principal risks and uncertainties have been identified as those most likely to materially impact the Group's solvency capital. These risks and uncertainties have been assessed as events or circumstances that might threaten the Group's business model, future performance, solvency or liquidity and reputation. The principal risks presented here are not intended to be exhaustive but are consistent with those reported to the Risk Management Committee and Board Risk Committee for review and discussion.

 Emerging risks

Emerging risks are defined by the Group as newly developing or changing threats or opportunities, that are subject to a high degree of uncertainty but have the potential to materially impact the Group either in the short term, due to rapid risk emergence, or over the long term, through changing the risk landscape.

The Group has in place an emerging risks process in place to::

- identify, assess, and prioritise a wide range of potential emerging risks using both internal expertise and external intelligence sources; and

- mitigate the impact of emerging risks which could impact the delivery of the Plan.

Our process leverages subject matter expertise across the Group, external horizon scanning and external industry data. Emerging risks are regularly reviewed and reported to the Risk Management committees.

Environmental

The Group recognises that emerging environmental issues, such as climate change, pose material long-term financial risks to the Group. Environmental risks can manifest themselves through a range of existing financial and non-financial risks.

We continue to monitor these risks closely and to develop our climate change modelling capability. Further details on our risk management approach to climate change are included in the TCFD section of the Group's Annual Report and Accounts.

Social & Economic

Increasing economic pressures and generational shifts in consumer behaviour are expected to influence demand patterns. Persistent cost-of-living concerns, along with younger generations prioritising flexible, digital first solutions, may require the Group to innovate and adapt its product offerings in order to appropriately meet changing demands and needs.

Political

Due to heightened geopolitical tensions, there is a risk that measures are implemented by governments that decrease political stability, erode countries' relationships, and contribute to increasing protectionism. This could lead to multiple impacts including on investment performance and supply chains. The Group conducts ongoing analysis to monitor exposure to the developing geopolitical environment.

Technological

Technological advancements, including relating to autonomous vehicles and Artificial Intelligence applications are expected to transform the insurance landscape. The Group is closely monitoring these changes to assess their implications for underwriting, claims and regulatory compliance. The Group will continue to engage with industry bodies to help shape policies and understand potential impacts on the Group

Accounting policies

Corporate information

Direct Line Insurance Group plc is a public limited company registered in England and Wales, (company number 02280426). The address of the registered office is Churchill Court, Westmoreland Road, Bromley, BR1 1DP.

(A) Basis of preparation

The financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRSs") as adopted by the UK. The accounting policies applied in this preliminary announcement are consistent with those set out in the Group's 2023 annual financial statements with the exception of new accounting standards which were effective for periods beginning on or after 1 January 2024. The nature and effect of these changes are disclosed in note (C). The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2024 or 2023. These accounts were signed on 3 March 2025 and are expected to be published in March 2025 and delivered to the Registrar of Companies following the Annual General Meeting to be held on 14 May 2025. The independent Auditor's report on the Group accounts for the year ended 31 December 2024 was signed on 3 March 2025, is unqualified, does not draw attention to any matters by way of emphasis and does not include a statement under S498(2) or (3) of the Companies Act 2006. This audit opinion excludes disclosures surrounding capital adequacy calculated under the Solvency II regime as these are outside of the audit scope.

(B) Going concern

As a standalone business, the Directors believe that the Group and Company have sufficient financial resources to meet their financial needs, including managing a mature portfolio of insurance risk. The Directors believe the Group and Company are well positioned to manage its business risks successfully in the current economic climate. The Chief Financial Officer Review describes the Group's capital management strategy, including the capital actions taken to ensure the continued strength of the balance sheet. The Group's financial position is also covered in that section, including a commentary on cash and investment holdings, claims reserves and management of insurance liabilities, and the Group's financial leverage. This covers insurance, market, credit, liquidity and operational risk; and the Group's approach to monitoring, managing and mitigating exposures to these risks.

Having made due enquiries, the Directors believe they can reasonably expect that the Group and Company has adequate resources to continue in operational existence on a standalone basis for at least 12 months from 3 March 2025 (the date of approval of the consolidated financial statements). Accordingly, the Directors have adopted the going concern basis in preparing the consolidated financial statements.

Material uncertainty in relation to going concern

On 23 December 2024, the Boards of the Company and Aviva plc ("Aviva") reached an agreement pursuant to which Aviva agreed to purchase the entire share capital of the Company, subject to regulatory and shareholder approval. Although the Directors cannot be certain about the actions of Aviva should a deal complete, they consider that the ability of the Group to continue as a going concern should not be adversely affected by the transaction should it proceed. In making this assessment, they have considered many factors, including the strategic fit of Aviva for the Group as well as Aviva's record of executing transactions, including integrating a number of acquisitions, and of delivering profitable growth. While the Directors would expect Aviva to continue to deliver long term value from the Group's ongoing operations they note however, that it is beyond their control as to whether Aviva would undertake any restructuring of the Group's legal entities. Therefore, given the potential change in control, the Directors consider these conditions to constitute a material uncertainty (as defined under IAS 1) which may cast significant doubt over the Company's and therefore, the Group's ability to continue as a going concern. The Directors would not expect this to impact the continued operation of the Group's core insurance activities.

Notwithstanding this uncertainty, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the financial statements.

(C) Adoption of new and revised standards

The Group has adopted the following new amendments to IFRSs and IASs that became mandatorily effective for the Group for the first time from 1 January 2024. None of these amendments have a material impact upon the Group.

In January 2020, the IASB issued 'Classification of Liabilities as Current or Non-current (Amendments to IAS 1 'Presentation of Financial Statements')' which clarifies the requirements for classifying liabilities as current or non-current. More specifically these amendments:

In January 2020, the IASB issued 'Non-current liabilities with covenants' (Amendments to IAS 1)' which clarified how an entity classifies debt and other financial liabilities as current or non-current in particular circumstances.

On 22 September 2022, the IASB issued 'Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)', which adds subsequent measurement requirements for sale and leaseback transactions.

On 25 May 2023, the IASB issued 'Supplier Finance Arrangements (Amendments to IAS 7 'Statement of Cash Flows' and IFRS 7 'Financial Instruments: Disclosures')' to add disclosure requirements, and 'signposts' within existing disclosure requirements, that ask entities to provide qualitative and quantitative information about supplier finance arrangements.

(D) Accounting policies and developments

New IFRS standards and amendments that are issued but are not effective until after 31 December 2024 have not yet been adopted by the UK and have not been early adopted by the Group are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

The following amendments have been adopted by the UK and are effective from 1 January 2025.

The IASB issued amendments 'Lack of Exchangeability (Amendments to IAS 21 The Effect of Changes in Foreign Exchange Rates') that provide guidance to specify when a currency is exchangeable and how to determine the exchange rate when it is not. This amendment is not expected to have a significant impact on the Group's consolidated financial statements or the Company's financial statements.

The following amendments are effective from 1 January 2026 but are yet to be adopted by the UK.

'Amendments to IFRS 9 'Financial Instruments' and IFRS 7 Amendments to the Classification and Measurement of Financial Instruments' which provide further clarification and requirements for:

Annual improvements to IFRS Accounting Standards - Volume 11

The following new standards are effective from 1 January 2027 but are yet to be adopted by the UK for which the Group intends to undertake an assessment of the impact in 2025.

IFRS 18 'Presentation and Disclosures in Financial Statements' which aims to ensure that financial statements provide relevant information that faithfully represents an entity's assets, liabilities, equity, income, and expenses. The standard introduces new requirements for the presentation of the statement of profit or loss, including mandatory sub-totals, aggregation, disaggregation, and disclosures related to management-defined performance measures.

IFRS 19 'Subsidiaries without Public Accountability: Disclosures' specifies reduced disclosure requirements that an eligible entity is permitted to apply instead of the disclosure requirements in other IFRS accounting standards.

(E) Critical accounting judgements and key sources of estimation uncertainty

Full details of the critical accounting judgements and sources of estimation uncertainty used in applying the Group's accounting policies are outlined on pages 190 to 193 of the Annual Report and Accounts 2023.

The critical accounting judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2023, except for a new accounting judgment in relation to combination of direct and reinsurance contracts with Motability as follows:

Combination of insurance contracts

The Group exercises judgement in deciding whether a set of insurance and reinsurance contracts with the same or a related counterparty should be treated collectively. Specifically, the Group assesses whether the direct and reinsurance contracts with Motability should be considered a combined agreement or as separate contracts. Based on management's assessment, it was concluded that each contract should be treated on a standalone basis.

Additionally, the following areas are no longer considered significant:

There have been no significant changes in the basis upon which judgement and estimates have been determined, compared to that applied as at 31 December 2023.

Consolidated Statement of Profit or Loss

For the year ended 31 December 2024

Notes:

1. To improve presentation, the Group has opted to combine the net income and expense from reinsurance contracts held into a single item. Prior period amounts have been re-presented for comparability.

2. Tax on (loss)/gain on disposal of business is included in this figure.

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2024

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Financial Position

As at 31 December 2024

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2024

The accompanying notes form an integral part of these consolidated financial statements.

Consolidated Cash Flow Statement

For the year ended 31 December 2024

The accompanying notes form an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements

1. Segmental information

The chief operating decision maker, being the Chief Executive Officer, regularly reviews the operating results at the segmental level as described below and disclosed in the tables in this note to assess performance and make decisions about allocation of resources. During 2024, the Group redefined its operating segments following changes in management responsibilities and its decision to exit or stop investing in Non-core businesses. The redefined segments are detailed below. Data relating to previous periods has been re-presented to reflect these changes.

Ongoing Operations

Motor

This segment consists of personal Motor insurance together with the associated legal protection cover. The Group sells Motor insurance direct to customers through its own brands Direct Line, Churchill, Privilege, By Miles and Darwin, through price comparison websites ("PCWs") and through partnership brands, including the Group's partnership with Motability Operations, as well as via vehicle manufacturers.

Non-Motor

Non-Motor includes three primary businesses: Home insurance, Rescue products and Commercial insurance for small and micro-sized enterprises.

Non-ongoing operations

The Group has aggregated the results of the Brokered commercial business and the non-core and run-off businesses and excluded them from its ongoing results. All relevant comparatives have been restated and the segmental analysis has been amended to reflect the changes. Results relating to ongoing operations are clearly labelled. The profit/(loss) before restructuring and one-off costs relating to the Brokered commercial business and non-core and run-off businesses in 2024 was £33.9 million profit and £5.3 million profit (2023: £50.0 million profit and £25.0 million loss respectively).

Brokered commercial business

On 6 September 2023 the Group announced the sale of its Brokered commercial insurance business to Royal & Sun Alliance Insurance Limited ("RSAI"). Under the terms of the agreement, the Group has retained the back book of the business written and earned prior to 1 October 2023 (the "Risk Transfer Date"). Business written or earned on or subsequent to the Risk Transfer Date is subject to a quota share reinsurance arrangement between the two companies with RSAI as the reinsurer. The parties are working towards a Part VII transfer relating to the policies dealt with under the quota-share reinsurance arrangement, as envisaged in the agreements entered into on 6 September 2023.

Non-core and Run-off

Non-core and Run-off includes the following Other Personal Lines insurance: Travel and Pet, which are sold directly to customers through Direct Line and Churchill brands; Select, which targets mid- to high-net worth customers and is sold through Direct Line and partnership brands; and Creditor, which is closed to new business with renewal policies written under the UKI brands. The Group has now exited all Run-off Rescue and Travel partnerships.

Inter-segmental transactions

Where inter-segment transactions occur, transfer prices between operating segments are set on an arm's-length basis in a manner similar to transactions with third parties. Segment income, expenses and results will include those transfers between business segments which will then be eliminated on consolidation. Inter-segment revenue between segments was not material.

For each operating segment, there are no individual policyholders or customers that represent 10% or more of the Group's total revenue.

Restructuring and one-off costs

Restructuring costs are costs incurred in respect of those business activities which have a material effect on the nature and focus of the Group's operations. One-off costs are costs that are non-recurring in nature. These costs have not been allocated between business segments as they relate to the business as a whole.

Group results and assets and liabilities by segment

The table below analyses the Group's revenue and results by reportable segment for the year ended 31 December 2024, and the Group's assets and liabilities by reportable segment3 at 31 December 2024.