Direct Line Group has amazing people, a passion for great customer service and leading brands. It is especially exciting to be part of a business that is putting in place a transformation programme that is firmly focused on laying the foundations for our future success. There have been many highlights this year, and I am thrilled that in the midst of significant business change, a highly competitive market and an evolving regulatory backdrop, we have delivered another good set of financial results, with improved quality, demonstrating our discipline and the value of our business model. Overall, I’m pleased with our progress against the strategic and financial targets we set out at our Capital Markets Day in November.
Profit before tax was down 12.2% to £509.7 million (2018 restated: £580.5 million). The impact of benign weather in 2019 was more than offset by lower reserve releases, in part Ogden discount rate-related, non-repeat of investment and property gains and restructuring and one-off costs in 2019.
Return on tangible equity was 20.8%, ahead of our 15% hurdle.
See page 15 See pages 59 to 71 See page 75
– Data analytics and digital capability power our counterfraud capability meaning we can pin-point fraud cases and control claims costs
Total claims reserve increase / (decrease) 15.9 1.0 16.9 (50.6) (4.2) (54.8)
Notes: 1. Revenue from vehicle recovery and repair services includes salvage income previously reported in other income. Comparative data for the year ended 31 December 2018 has been re-presented accordingly.
2. Other income includes mainly fee income from insurance intermediary services.
Depreciation and amortisation5,6 10 78.8 91.9 Total operating expenses before restructuring and one-off costs 693.7 718.2
The investment income yield for 2019 reduced to 2.4% (2018: 2.5%). The net investment income yield was higher at 2.1% (2018: 2.0%) as a result of decreased hedging costs. In 2020, the Group expects a net investment income yield around 2.0%.
Net assets at 31 December 2019 increased to £2,643.6 million (31 December 2018 restated: £2,558.2 million) and tangible net assets decreased to £1,941.1 million (31 December 2018 restated: £1,991.4 million) reflecting the 2019 retained profit and, increases in available-for-sale reserves. This was offset by additional expenditure on intangible assets as the Group continued to invest in the business.
The PPO sensitivity above is calculated on the basis of a change in the internal discount rate used for the actuarial best estimate reserves as at 31 December 2019. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.
– Motor reinsurance to protect against a single claim or an accumulation of large claims which renews on 1 January. The retained deductible is at an indexed level of £1 million per claim, providing a substantial level of protection against large motor bodily injury claims. This programme was renewed on 1 January 2020.
– Launched our new travel system and migrated our RBS and NatWest customers onto the new platform which provides an end-to-end digital solution for over 1.6 million customers. It is fully optimised for tablet and mobile, provides online medical screening and self-service upgrades and is fully automated for certain claims.
Overview In 2019, total Home and own brand policy counts fell slightly as the Group maintained underwriting discipline in a competitive market.
Home own brand risk-adjusted prices increased by 2.0% driven by new business, while pricing actions improved risk mix by 2.7% giving a small reduction in average premium1 of 0.7%.
When taking out home insurance most customers hope they will not have to use it and it’s normally during distressing situations that they find out the value of that purchase. The flooding in Lincolnshire in 2019 was that moment of truth for many of our customers, when we needed to help get their lives back on track. In the village of Wainfleet All Saints a state of emergency was declared, several hundred properties had to be evacuated and access to many others became impossible.
Total gross written premium increased by 3.5% with direct own brands increasing by 8.3%.
Direct Line for Business continued to roll out its range of innovative propositions for small and micro businesses, including the launch of its Tradesperson insurance products. Its ongoing national marketing campaign enhanced awareness of both its traditional product offering and its newer micro business tailored propositions.
The current-year attritional loss ratio in Commercial improved by 1.2 percentage points to 65.6% as risk selection remained the priority. Prior-year reserve releases were £14.4 million lower at £65.0 million. This was primarily due to lower general liability reserve releases on older accident years. 2019’s result included a £1.0 million strengthening of prior-year reserves as a result of the change in the Ogden discount rate to minus 0.25% from an assumed rate of 0.0% (2018: £3.5 million release).
Our risk appetite statements are documented in our policies and include: – monitoring whether the business remains within risk appetite, among other information, using key risk indicators; – deriving the key risk indicators from the risk appetite statements to drive and monitor risk-aware decisionmaking; – both qualitative and quantitative risk statements which are forward and backward-looking; and
Within this, the risk management process is a key element in the development and ongoing maintenance of an accurate risk profile. The objective of the risk management process is to identify, assess, manage and monitor the risks that the Group is exposed to. See our climate change document1 for specific information on how the business identifies and assesses the risks associated with climate change.
Within the risk management framework, Policies address specific risk areas and are aligned to the Group’s risk appetite. Policies, where appropriate, are supported by underlying Minimum Standards which interpret Policies into a set of risk and control requirements to be implemented across the Group. Note: 1. www.directlinegroup.co.uk/content/dam/dlg/corporate/
Changes to traditional insurance business models In the longer term (5 years+) potential disruption through the likes of major online retail organisations which have previously not been active in the insurance market and powerful new data sharing technologies, such as Open Banking and application programming interfaces (“API”), may create new and significant routes to market. We expect to see the lines between direct and intermediated distribution channels blend and blur – requiring new approaches to access the market. Our partnerships with Starling Bank, Tesla, and RBS and NatWest are helping us to develop new capabilities and provide new routes to market. Also connected technology and new ownership models may create demand for new types of insurance products to meet more specific needs, potentially combined with other services.
The Strategic report, on pages 1 to 73 sets out the Group’s financial performance, business environment, outlook and financial management strategies. It covers how the Group measures its regulatory and economic capital needs, and deploys capital. You can find discussion about the Group’s principal risks and risk management in this section including how the Group has addressed the potential effects of Brexit. Note 3 to the consolidated financial statements starts on page 169 and sets out financial disclosures relating to the Group’s principal risks. This covers insurance, market and credit risk, and the Group’s approach to monitoring, managing and mitigating exposures to these risks.
Section 172 considerations are embedded in decision making at Board level and throughout the Group. Issues, factors and stakeholders which the Directors have considered when discharging their duty under section 172(1) are detailed on pages 61 to 73, 88 to 89 and throughout this Annual Report.
The Corporate Governance report contains examples of how the Directors have engaged and have had regard to our stakeholders and the effect of doing so on principal decisions taken by the Company during the financial year.
Customer satisfaction Net promoter scores measure the willingness of customers to recommend our products and services. Driven by our customer pillars, our NPS scores are leading for any industry and have improved year-on-year. These scores drive real commercial benefits by helping us to attract and retain more customers, contributing to the one million new direct own brand policies we have added in the past five years.
We were one of the first ten companies to support the publication of our parental leave and flexible working policies on our external website. We are proud of our ‘My Life’ policies which includes up to 20 weeks full pay for co-parents on shared parental leave, as well as flexible working policies including up to 12 months unpaid lifestyle leave. While there is still progress to be made these policies embody our values and enable our people to bring all of themselves to work.
– Recycling coffee cups: Following the success of our recycling partnership with SimplyCups in Bromley we have introduced the scheme to our Doncaster, Leeds, Manchester and Birmingham sites. In Bromley alone we recycled around 130,000 cups in 2019, so we are recycling an average of 11,000 cups per month.
We have also achieved the following: – Recycling: In 2019 the Group recycled 98.2% of its total waste compared to 98% in 2018. Excluding our paper, which is 100% recycled, the Group recycled 97.7% of its overall waste in 2019 as compared to 82.5% in 2018.
The Carbon Disclosure Project is a globally recognised platform measuring reporting performance and in 2019 the Group received a CDP rating of B.
Biography Gregor is Chair of the Audit Committee. The Board benefits from his wide-ranging experience of the financial services sector, and in particular, significant experience gained in the insurance and investment management sectors. His career and experiences at Ernst & Young and Lloyds, in particular, make him suitable to chair the Audit Committee.
Each Director has a duty to avoid conflicts of interest. They must declare any conflict of interest that could interfere with their ability to act in the Group’s best interests.
– NEDs’ attendance at ERB meetings to encourage effective engagement between employees and the Board. Further information on the Board’s interaction with the ERB is disclosed later in this report.
Induction Board training Annual general meeting minimum salaries across the Group from £18,000 to £19,000, dependent on contracted hours. These colleagues received a pay increase of approximately 5.6%.
The core elements of the governance framework are the: – Matters Reserved to the Board and the Board Committees’ Terms of Reference; – High Level Control and System of Governance Framework document; – Risk appetite statements, which are described on page 52; – Enterprise Risk Management Strategy and Framework, which is described on page 53; – Group policies, which address specific risk areas, are aligned to the Group’s risk appetite, and inform the business how it needs to conduct its activities to remain within risk appetite; and
– the Audit Committee reviewed the substantially final draft of the Annual Report & Accounts, before consideration by the Board.
The Directors acknowledge that any internal control system can manage, but not eliminate, the risk of not achieving business objectives. It can only provide reasonable, not absolute, assurance against material misstatement or financial loss.
External audit Deloitte LLP (“Deloitte”) has served as the Company’s Auditor since 2000. Before listing in 2012, the Group was audited by Deloitte as a division of RBS Group. The Committee is responsible for overseeing the External Auditor and agreeing the audit fee, as well as approving the scope of the External Auditor’s annual plan.
External Auditor tenure During the year, the Committee discussed the position on its external audit services contract and examined a number of options regarding the timing of tendering for the external audit, including the mandatory rotation of the Group’s audit firm. This took into account the reforms of the audit market by the Competition and Markets Authority and the EU, under which Deloitte can continue as the Company’s External Auditor until 31 December 2023. As Deloitte was appointed as Auditor to the Group in 2000 (when it was a subsidiary of The Royal Bank of Scotland Group plc), under the transitional provisions of the legislation the firm may not re-engage for the audit after 17 June 2023. The Committee considered whether it was appropriate to tender the external audit contract for the year ending 31 December 2020 and concluded it was not appropriate. The Committee also confirmed that it will continue to comply with the regulations governing auditor rotation.
There are no contractual obligations restricting the Group’s choice of External Auditor.
The Committee has closely monitored developments from the FCA and the Competition and Markets Authority’s work on pricing practices and will remain apprised of the review throughout 2020 as well as of the actions which are being undertaken with the aim of ensuring that the Group continues to maintain fair pricing principles. These actions broadly fall into three categories: governance and accountability; oversight (including data and management information); and vulnerable customers.
During the year, it was recommended that Fiona McBain be appointed as a member of the Audit Committee, Mark Gregory be appointed as a member of the Remuneration Committee and Penny James be appointed as a member of the Corporate Responsibility Committee. These changes took effect following the conclusion of the 2019 AGM.
– all portfolios in scope are now required to achieve an average MSCI ESG rating of at least ‘A’. Under the benchmarks employed, managers are typically able to allocate more investment towards issuers with a strong ESG rating compared to those with poor ratings.
Membership, attendance and responsibilities of the Committee, including the outcome of the annual effectiveness review can be found on pages 76 to 79, 82, 83 and 86 104 DIRECT LINE GROUP ANNUAL REPORT & ACCOUNTS 2019
– The Committee also considered arrangements for departing Directors and the mitigation of the costs of their departures. More information on the departing Directors appears in the Annual Report on Remuneration.
The Committee considers it important to monitor and assess internal pay relativities and takes these into account when determining Executive Director remuneration.
As part of the wider Committee oversight on all-employee pay matters, the Committee (following a detailed review) is delighted to confirm that the Group will apply an increase to the minimum salary level that is above the living wage foundation rate and a minimum salary increase of £500 to around 5,200 colleagues from April 2020 bringing the Group’s company-wide minimum salary to £19,500 for full-time colleagues on 37.5 hours. This is 8% above the Living Wage Foundation rate outside London, and 15% higher than the Government’s national minimum wage. We continue to want our employees to have ownership of the Group, as such, the Committee approved a grant of Free Shares to all employees in 2020 to recognise their invaluable contribution to the business and the desire to strengthen shareholder alignment across the Group.
Paul Geddes stood down as CEO and a member of the Board on 9 May 2019 and left the Group at the end of July 2019. Paul worked through his notice and was paid a pro-rated AIP bonus for the period to 31 July 2019. Following a review of Paul’s contribution and performance through his notice period, the Committee exercised its discretion and decided that Paul was a ‘good’ leaver for the purposes of the incentive schemes. Accordingly, his LTIP awards will be pro-rated until 31 July 2019. The continuing LTIP and DAIP awards will vest on their usual vesting dates. For LTIP awards issued after the AGM in 2017 any shares that vest will be subject to a further post vesting holding period of two years.
Notes: 1. Mark Gregory was appointed to the Remuneration Committee with effect from 9 May 2019. 2. Clare Thompson stepped down from the Board with effect from 9 May 2019.
8. Tim Harris was appointed to the Board on 1 October 2019 and also became employed on that date. 9. Paul Geddes stepped down from the Board on 9 May 2019. His remuneration for the purposes of this table has been pro-rated with
– To support the CEO transition and prepare for the next generation of senior leaders, we used our Senior Leadership Development Programme, to build strategic capability throughout 2019.
– Our high potential graduates have been provided with opportunities to move in the organisation and develop further, raising their profiles with our senior leaders via networking opportunities and building relationships further across the Group. We successfully recruited a further 28 graduates and 117 apprentices during 2019.
Diversity Ensure the Group is a diverse and inclusive place to work where differences are respected, valued and celebrated
Chief Executive Officer’s pay between 2012 and 2019 and historical performance of TSR The table below shows historical levels of the CEO’s pay between 2012 and 2019. It also shows vesting of annual and long-term incentive pay awards as a percentage of the maximum available opportunity. This is presented against the Company’s TSR since its shares began trading on the London Stock Exchange in October 2012, against the FTSE 350 Index (excluding investment trusts) over the same period. This peer group is the same used for measuring relative TSR under the LTIP.
SIP As the free shares held by Paul under the all-employee Share Incentive Plan (“SIP”) have been held for more than five years, Paul will be able to withdraw them from the SIP tax-free.
Notes: 1. Based on closing share price of £3.53 on the vesting date (29 March 2019). 2. Based on closing share price of £2.831 on the vesting date (30 August 2019).
Approval of Directors’ Remuneration Report (2019 AGM) 977,430,480 93.88% 63,723,957 6.12% 8,673,354 0.83% Approval of Directors’ Remuneration Policy (2017 AGM) 881,046,703 98.29% 15,349,348 1.71% 32,669,059 3.52%
The table below details buy-out awards made to Tim in October 2019 pursuant to Listing Rule 9.4.2 . These awards were made to the CFO in October 2019 as compensation for the forfeiture of legacy awards granted by his previous employer, Royal London. The normal vesting dates for the buy-out awards will be the same as for the original awards, but as his previous employer was a non-listed company, the original awards were granted in the form of units rather than shares. Therefore the value of the buy-out awards will be equivalent to 60% of the face value of the original awards. The buy-out awards will be in the form of nil-cost options and subject to normal malus and clawback provisions. The awards will accrue dividend equivalent shares until vesting, as per the terms of the legacy awards.
– Executive Directors receive a benefits package generally set by reference to market practice in companies of a similar size and complexity. Benefits currently provided include a company car, use of a car or car allowance, private medical insurance, life insurance, health screening, and income protection
– Not applicable 130 DIRECT LINE GROUP ANNUAL REPORT & ACCOUNTS 2019
Remuneration payments agreed before appointment to the Board The Committee reserves the right to make any remuneration payments and payments for loss of office (including, where relevant, exercising any discretions available to it connected with such payments) notwithstanding that they are not in line with the policy set out above where the terms of the payment were agreed (i) provided the terms of the payment were consistent with any shareholder-approved Directors’ remuneration policy in force at the time they were agreed; (ii) at a time when the relevant individual was not a Director of the Group and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company. For these purposes, ‘payments’ include pension arrangements and the Committee satisfying awards of variable remuneration. Relating to an award over shares, the terms of the payment are ‘agreed’ at the time the award is granted.
– Restricted Shares Plan (“RSP”) – RSP awards are used on a limited basis across the Group to help recruit and retain critical staff, and for talent management. Executive Directors do not receive grants under the RSP (with the exception of buyout awards which may be granted under the RSP).
Element Purpose and link to strategy Approach to setting fees and cap Other items
6. All such awards for external appointments, whether under the AIP, LTIP or otherwise, to compensate for awards forfeited on leaving their previous employer will be determined considering the commercial value of the amount forfeited, and the nature, time horizons and performance requirements of those awards. The Committee’s starting point will be to ensure that any awards being forfeited which remain subject to outstanding performance requirements (other than where substantially complete) are bought out with replacement requirements, and any awards with service requirements are bought out with similar terms. However, exceptionally, the Committee may relax those obligations where it considers it to be in the interests of shareholders and those factors are, in the Committee’s view, equally reflected in some other way, for example through a significant discount to the face value of the awards forfeited.
Any commitments made before promotion to the Board (except when made in connection with the appointment to the Board) can continue to be honoured under the policy, even if they are not consistent with the policy prevailing when the commitment is fulfilled.
Awards will vest on the normal vesting date (plus any applicable holding period, unless the Committee determines otherwise) subject to performance and, unless the Committee determines otherwise, time pro-rating. In exceptional circumstances, as determined by the Committee, for example, in the case of the participant’s death, awards may vest immediately
Considering shareholders’ views The Committee takes into account the approval levels of remuneration related matters at the AGM in determining whether the current Directors’ Remuneration Policy remains appropriate. Furthermore, we consulted with our largest shareholders and proxy voting agencies on the proposed changes to our Directors’ Remuneration Policy. In light of the positive feedback received, we did not make any changes to the proposals outlined in our consultation letter. We completed the consultation by providing a summary of the responses to some of the key queries we received.
Directors You can find the current Directors’ biographies on pages 76 to 78. All Directors will retire and be submitted for election or re-election at the 2020 AGM. This is in accordance with the Code and the Articles of Association of the Company, which govern appointing and replacing Directors.
Substantial shareholdings The table on page 141 shows the direct and indirect holdings of major shareholders in the Company’s ordinary issued share capital, as at 31 December 2019, as notified in accordance with the provisions of chapter 5 of the FCA’s Disclosure Guidance and Transparency Rules. It should be noted that these holdings may have changed since the Company was notified. However, notification of any change is not required until the next notifiable threshold is crossed. Information provided by the Company pursuant to the FCA’s Disclosure Guidance and Transparency Rules is publicly available via the regulatory information services and on the Company’s website.
Employee Engagement The Group values the involvement and engagement of its employees and continues to listen to employees’ views and opinions. Examples of how the Group has engaged with and has had regard to its employees interests and the effect this has had, including on the principal decisions taken by the Company and the Group throughout the financial year can be found in the Corporate Governance report which begins on page 74.
The Board reviewed and approved this report on 2 March 2020.
AUDIT REPORT V5.2 WWW.DIRECTLINEGROUP.CO.UK 147 5.2 Valuation of intangible assets Refer to page 94 (Audit Committee Report), page 161 (Accounting policies) and page 191 (Financial statements).
The Group audit team directly performed the audit work for all of the entities listed above, including the Parent Company.
– Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R (2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
11.1 Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and noncompliance with laws and regulations, we considered the following: – the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets; – the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was approved by the Board Risk Committee on 6 February 2020; – results of our enquiries of management, internal audit, and the Audit Committee about their own identification and assessment of the risks of irregularities; – any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to: – identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance – detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; – the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and 150 DIRECT LINE GROUP ANNUAL REPORT & ACCOUNTS 2019
Profit for the year – – – – – 419.9 419.9 – 419.9
Dividends and appropriations paid (note 14) – – – – – (420.7) (420.7) – (420.7) Shares acquired by employee trusts – (10.4) – – – – (10.4) – (10.4) Credit to equity for equity-settled share-based payments (note 36) – – – – – 18.4 18.4 – 18.4 Shares distributed by employee trusts – 15.4 – – – (15.4) – – – Tax on share-based payments – – – – – 0.6 0.6 – 0.6
162 DIRECT LINE GROUP aNNUAL REPORT & ACCOUNTS 2019 1.11 Right-of-use assets and lease liabilities
The amendments to IFRS 4 also require certain interim disclosures in relation to the fair value movements of financial assets as outlined below.
172 DIRECT LINE GROUP aNNUAL REPORT & ACCOUNTS 2019 3. Risk management continued 3.3.2 Market risk continued The strategic asset allocation within the investment portfolio is reviewed by the Investment Committee, which makes recommendations to the Board for its investment strategy approval. The Investment Committee determines policy and controls, covering such areas as risk, liquidity and performance. The Investment Committee meets at least three times a year to evaluate risk exposure, the current strategy, associated policies and investment guidelines and to consider investment recommendations submitted to it. Oversight of the implementation of decisions taken by the Investment Committee is via the First and Second Lines of Defence.
A limited exposure to currency risk also arises through the Group’s insurance and other contractual liabilities.
176 DIRECT LINE GROUP aNNUAL REPORT & ACCOUNTS 2019 3. Risk management continued 3.3.2 Market risk continued
4. The sensitivities set out above reflect one-off impacts at 31 December with the exception of the income statement interest rate sensitivity on financial investments and derivatives, which projects a movement in a full year’s interest charge as a result of the increase in the interest rate applied to these assets or liabilities on those positions held at 31 December.
180 DIRECT LINE GROUP aNNUAL REPORT & ACCOUNTS 2019 3. Risk management continued 3.3.5 Liquidity risk This is the risk of being unable to access cash from the sale of investments or other assets in order to settle financial obligations as they fall due.
182 DIRECT LINE GROUP aNNUAL REPORT & ACCOUNTS 2019 4. Segmental analysis continued No inter-segment transactions occurred in the year ended 31 December 2019 (2018: £nil). If any transaction were to occur, transfer prices between operating segments would be 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.
The table below analyses the Group’s revenue and results by reportable segment for the year ended 31 December 20181 (restated).
Reinsurance premium paid and payable: Premium payable (215.9) (223.5) Movement in reinsurance unearned premium reserve (1.8) 6.3 6. Investment return £m
Deferred taxation (note 13): Credit for the year (5.4) (4.6) (Over) / under provision in respect of prior year (5.6) 3.5
Tax charge for the year 89.8 108.5 Effective income tax rate 17.6% 18.7%
Note: 1. The right-of-use assets has been recognised in the current year due to the adoption of IFRS 16 ‘Leases’. For further details on the firsttime adoption of IFRS 16 ‘Leases’, see note 44.
Additions at cost – 0.1 (Decrease) / increase in fair value during the year (6.2) 12.7 Disposals (24.2) –
Life expectancy at age 60 now: Life expectancy at age 60 in 20 years’ time: Males 88.9 89.1
Inflation rate 0.25% increase in inflation rate – – 2.3 2.0 0.25% decrease in inflation rate – – (2.3) (2.0) Life expectancy 1-year increase in life expectancy 0.1 0.1 3.2 2.7 1-year decrease in life expectancy (0.1) (0.1) (3.2) (2.7)
The effective interest rate on short-term deposits with credit institutions for the year ended 31 December 2019 was 0.79% (2018: 0.58%) and average maturity was 10 days (2018: 10 days).
Notes: 1. Results for the year ended 31 December 2018 have been restated to reflect the fully retrospective adoption of IFRS 16 ‘Leases’, see note 44. 2. Included within the incurred but not reported claims provision as at 31 December 2018 was a £55 million net provision decrease (£175 million gross provision decrease) for an assumed change in the Ogden discount rate from minus 0.75% to 0%.
Restricted Shares Plan The purpose of the Restricted Shares Plan is to facilitate the wider participation in Group share-based awards to eligible employees. These awards can be granted in the form of a nil-cost option at any time during the year, generally have no performance criteria, and vest over periods ranging between one and three years from the date of the grant, subject to continued employment. During the year awards were made over 0.2 million Ordinary Shares (2018: 0.5 million Ordinary Shares) with an estimated fair value of £0.7 million (2018: £1.6 million) using the market value at the date of grant.
206 DIRECT LINE GROUP aNNUAL REPORT & ACCOUNTS 2019 38. Trade and other payables, including insurance payables £m
Interest paid on subordinated liabilities – – 23.1 23.1 – – Interest rate swap cash settlement – – – – (3.4) (5.8) Lease cash flows (19.8) (19.2) – – – – Interest on lease payments 6.7 6.7 – – – –
Impact on the consolidated statement of comprehensive income for the year ended 31 December 2018
The Company’s financial statements are prepared on the historical cost basis except for financial investments and derivative financial investments, which are measured at fair value.
Notes: 1. Registered office at: Churchill Court, Westmoreland Road, Bromley, BR1 1DP. 2. Registered office at: The Wharf, Neville Street, Leeds, LS1 4AZ. 3. U K Insurance Limited has a branch in the Republic of South Africa. 4. Registered office at: 22 Grenville Street, St Helier, JE4 8PX, Jersey. 5. Registered office at: ESC House, 155, 1st & 2nd Floor, Okhla Industrial Area Phase-3, New Delhi, 110020, India. Company registration number: U74140DL2014FTC265567. 6. Registered office at: 42 The Headrow, Leeds, LS1 8HZ. 7. These entities have not been audited in accordance with the exemptions available for dormant entities under section 480 of the
Companies Act 2006. 8. Under the Companies (Jersey) Law 1991, there is no requirement to file individual accounts and audit a private limited company.
Payables to third parties 1.0 1.7 13. Dividends Full details of the dividends paid and proposed by the Company are set out in note 14 to the consolidated financial statements.
– If you want to phone the caller back, use the firm’s contact details listed on the Financial Services Register at www.fca.org.uk/register.
For Executive Directors and certain members of senior management, at least 40% of the AIP award is deferred into shares typically vesting three years after grant. The remainder of the award is paid in cash following year-end.
The income earned from the investment portfolio, recognised through the income statement during the period divided by the average assets under management (“AUM”). This excludes unrealised and realised gains and losses, impairments and fair value adjustments. The average AUM derives from the period’s opening and closing balances for the total Group. (See page 225 alternative performance measures.)
The investment return divided by the average AUM. The average AUM derives from the period’s opening and closing balances. (See page 225 alternative performance measures.)
Notes: 1. See glossary on page 224 for definition. 2. Results for the year ended 31 December 2018 have been restated to reflect the fully retrospective adoption of IFRS 16 ‘Leases’, see note 44 on pages 210 and 211. 3. Mean average of opening and closing balances.
n n u a l R e p o rt & A