Troubled motor insurer Direct Line (DLG) has parted company with chief executive Penny James after a recent awful trading performance, when it cut its final dividend in a bid to restore its capital position. Jon Greenwood, the company’s chief commercial officer, steps up to acting chief executive while a replacement is found.
An accountant by training, Ms James is a long-serving insurance executive who originally joined Direct Line as chief financial officer in 2017 before taking the hot seat two years later. The job has largely been a thankless one as Direct Line has struggled to compete effectively with its bitter rival Admiral (ADM) since the company was spun out of the surviving wreckage of the Royal Bank of Scotland in 2013.
The impression that Direct Line was a fire sale asset when the bank was forced to radically downsize its balance sheet has lingered long after the event. Operationally, things have not gone much better and the company has consistently suffered with pricing and competition, as well as managing the basic insurance risks associated with icy winters.
The consequence of this is that the shares were consistently viewed as a long-term value trap, with only the high dividend yield as an attraction for income investors when interest rates were low. Once that was cut, so it appears was the chief executive.
Listen to Julian Hofmann discuss the dividend cut in our podcast
