Direct Line boss Penny James forced to step down

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Distressed insurer scraps dividend after yet another profit warning…Direct Line boss Penny James forced to resign

Direct Line has parted ways with its CEO Penny James – just two weeks after it issued a profit warning and scrapped 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 the Direct Line Group for almost four years,” says James. “Although the company faced significant headwinds at the end of 2022, the group continued to make strategic progress.”

James is the first CEO of the FTSE 350 to leave this year and the decision is a blow to women’s representation in the city’s two largest stock indices.

The 53-year-old’s sudden departure follows a turbulent year for the insurer, which culminated on January 11 with a warning that it had been caught in a wave of claims for burst pipes and damage caused by the freezing cold that hit Britain. has its grip.

The profit warning forced Direct Line to drop its final dividend for the year, something that upset investors.

The insurer had already sounded the alarm with a profit warning last July, as rising inflation in used car prices and other expenses drove up the size of payouts.

Since last month’s warning, pressure on James has increased as speculation about her future has increased among investors and in the city. She’s likely come under further pressure this week after rival insurer Aviva revealed it hadn’t been too hurt by last month’s cold spell.

Although James immediately stepped down, she will receive her salary of £817,000 for her 12 months’ notice unless she starts a new job.

She is also eligible for pension contributions and benefits, which in 2021 were £74,000 and £36,000 respectively. Her departure was “open to interpretation as to whether she was jumped or pushed,” said Russ Mould, an analyst at AJ Bell.

“It wasn’t so much the decision to cut the dividend per se that James did, it was more what was behind it,” he said.

It also comes two weeks after James said in an interview in The Sunday Times that she was ‘very positive about the future’, in a last-ditch effort to reassure investors. She said she was “determined” to prove there were “no fundamental problems with the company.”

“I have to lead 10,000 people and tell them that 2022 was not a great year, but go out now and prove to people that this company is a stronger company than when I started and that it will deliver going forward,” said James.

Despite this attempt to inspire confidence, after seeing the company’s tank of value, shareholders probably weren’t satiated without a senior boss’s head on the chopping block, City experts said. Direct Line is also being touted as a takeover target in the City after its share price plummeted over the past year. Possible suitors are believed to be insurance titan Aviva.

Shares languished at a ten-year low, falling 2.8 percent, or 5 pence, to 173.8 pence yesterday.

The insurer behind the Churchill and Green Flag brands was founded in 1985 by industry guru Peter Wood.

It revolutionized the market by selling telephone insurance policies.

It was bought by RBS in 2003 and floated on the stock exchange in 2014, a condition Brussels pushed for after the bank received £45bn in UK state aid to prop it up through the financial crisis.