As troubled insurer ditches dividend after another profit warning… Direct Line boss Penny James forced to step down
- James agreed with board to leave immediately, after nearly four years in job
- The 53-year-old’s sudden departure follows turbulent year for insurer
- Chief commercial officer Jon Greenwood has become acting chief executive
Direct Line has parted ways with its chief executive Penny James – just two weeks after it issued a profit warning and ditched its dividend.
James agreed with the board to leave the FTSE 250 insurance giant immediately, after nearly four years in the top job.
Jon Greenwood, the chief commercial officer, has become acting chief executive until a replacement is found.
‘It has been a privilege to lead Direct Line Group for nearly four years,’ said James. ‘While the business was impacted by significant headwinds at the end of 2022, the group has continued to make strategic progress.’
James is the first FTSE 350 chief executive to leave this year and the decision is a hammer blow for the representation of women on the City’s top two stock indices.
The 53-year-old’s sudden departure follows a turbulent year for the insurer that culminated on January 11 with a warning it had been caught out by a surge in claims for burst pipes and damages caused by the freezing conditions that have gripped Britain.
The profit alert forced Direct Line to axe its final dividend for the year, something that rattled investors.
The insurer had previously caused alarm with a profit warning last July, as spiralling inflation in used car prices and other costs pushed up the size of its payouts.
Since last month’s warning, pressure has grown on James as speculation mounted about her future among investors and in the City. She is likely to have come under further strain this week after the rival insurer Aviva revealed that it had not been unduly hurt by last month’s cold snap.
Although James has stood down immediately she will be paid her £817,000 salary for her 12 months’ notice period unless she starts a new job.
She will also be eligible for pension contributions and benefits, which in 2021 had amounted to £74,000 and £36,000 respectively. Her departure was ‘open to interpretation on whether she was jumped or was pushed,’ said Russ Mould, analyst at AJ Bell.
‘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,’ he said.
It also comes two weeks after James said she was ‘feeling very positive about the future prospects’, in a last-ditch attempt to reassure investors, in an interview in The Sunday Times. She said she was ‘determined’ to prove that there were ‘not fundamental issues with the business’.
‘I have to lead 10,000 people and tell them 2022 was not a great year but now go out and prove to people that this business is a stronger business than when I started and will deliver in the future,’ said James.
Despite this attempt to inspire confidence, after seeing the firm’s value tank, shareholders were not likely to have been satiated without a senior boss’s head on the chopping block, City experts said. Direct Line has also been touted in the City as a takeover target after its share price has been pummelled over the past year. Potential suitors are thought to include insurance titan Aviva.
Shares are languishing at a decade low and dipped 2.8 per cent, or 5p, to 173.8p yesterday.
The insurer behind Churchill and Green Flag brands was set up by industry guru Peter Wood in 1985.
It revolutionised the market by selling insurance over the phone.
It was bought by RBS in 2003 and floated in 2014, a condition insisted upon by Brussels after the bank received £45billion in UK state aid to prop it up during the financial crisis.