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Direct Line chief executive James steps down

Direct Line

Direct Line has seen its value plunge

Penny James has resigned as CEO of Direct Line Insurance group with immediate effect following a sharp decline in its value over the past year and erosion of its balance sheet.

Her departure comes two weeks after the company issued a fresh profit warning and scrapped its dividend.

Jon Greenwood, chief commercial officer, has been appointed acting chief executive until a permanent successor is found.

Ms James, who joined as CFO in late 2017 and became CEO in May 2019, will assist with the process of transition to ensure a smooth handover of responsibilities.

Shares in the company have plunged by 40% over the past year. This morning they were trading at 178.3p against a year high of 312.7p.

Danuta Gray, chair of Direct Line Group, thanked Ms James for overseeing “significant strategic progress, transforming the technology and capability across the business, accelerating the digitalisation of customer journeys and helping to set the company up for the future. 

“She also deserves great credit for the way she led the business through the pandemic, in a very challenging market, ensuring that we continued to serve our customers.”

The board will work with Mr Greenwood as he focuses on its priorities of “driving our performance and restoring balance sheet resilience, following the significant headwinds the business faced in recent months.”

Yesterday the company announced new strategic reinsurance arrangements, which are expected to increase the group’s year-end 2022 solvency capital ratio by around 6 percentage points, and we will continue to focus on rebuilding its capital position.

Ms James said: “It has been a privilege to lead Direct Line Group for nearly four years and to work with such an amazing group of colleagues. While the business was impacted by significant headwinds at the end of 2022, the group has continued to make strategic progress.  

“I am proud of what the business has delivered for customers, where our technology transformation has seen improved digital capability in our core business areas, setting the group up for the future. I wish Jon and the team every success and have no doubt they will build on the underlying strengths of the business.”

Market reaction

Russ Mould, investment director at AJ Bell, said: “You can’t walk away from the kind of stock market disaster served up by Direct Line this month without a senior executive carrying the can.

“Shareholders will have been looking for someone to take a bit of responsibility and chief executive Penny James has agreed with the board she will step down – the statement open to interpretation on whether she jumped or was pushed.

“It was not so much the decision to scrap the dividend in and of itself which did for James, it was more what lay behind it.

“Direct Line had been happily buying back its own shares less than a year ago and left its capital buffers too bare to cope with a period of extreme weather events in 2022, which while unusual shouldn’t have been enough to put Direct Line in such a perilous position.

“Where James probably warrants more sympathy is on the inflationary pressures which are continuing to bite across the whole industry. However, none of its major peers have found themselves in Direct Line’s predicament yet.

“Chief commercial officer Jon Greenwood stepping up as acting chief executive sounds exactly like what it is – a temporary move. Chair Danuta Gray will have to get the next appointment right if she’s to avoid coming under greater scrutiny herself.

“What happens next with dividends will also be in focus for investors – there has to be a risk of no dividend for 2023 either as the company looks to rebuild its capital position. Which would be truly lean times for a shareholder base who had got used to a generous stream of income.”

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