Annual Report and

Accounts 2024

Strategic Report

Becoming the customers' insurer of choice 1

The Group at a glance – our business model 2

Our investment story and strategy 3

Delivering for our customers 4

Our financial KPIs 7

Chair’s statement 8

Section 172(1) statement 9

CEO review 10

CFO review 13

CPO review 15

Market overview 19

Group financial performance 20

Operating reviews 34

Risk management 38

Sustainability 44

Non-financial and sustainability information statement 45

Task Force on Climate-related Financial Disclosures 58

Viability statement 74

Governance

Chair’s introduction 75

Board of Directors 77

Corporate Governance 82

Committee reports 101

Directors’ Remuneration report 115

Directors’ report 142

Financial Statements

Contents 147

Independent Auditor’s Report 148

Group accounting policies 156

Consolidated Financial Statements 168

Notes to the Consolidated Financial Statements 173

Parent Company accounting policies 230

Parent Company Financial Statements 231

Notes to the Parent Company Financial Statements 233

Other information

Shareholder information 236

Glossary and Appendices 238

Forward-looking statements disclaimer 254

Contact Information 255

Direct Line Group is one

ofthe UK’s leading

insurance companies.

Through our well-known

brands we offer a wide

range of general

insurance products

acrossmotor, home,

commercial, travel, pet

andrescue.

Whether our customers

choose tocome direct or

via a Price Comparison

Website, they can engage

with us digitally or on the

phone, whenever they

need us most.

Contents

Becoming

the customers’

insurer of choice

Becoming the customers’

insurer of choice means

prioritising their needsand

fostering trust through

exceptional service.

We strive to simplify the

insurance process, offering

easy-to-use solutions that

resonate with our customers’

unique situations.

1 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

One of the largest personal lines

insurersin theUK with two of the

mostrecognised brands and almost

9million customers.

We have strong brands and our

productsare sold direct to customers,

through price comparison websites

andvia ourpartners.

Almost 9 million in-force policies (ongoing

operations)

3,831k

2,461k

1,780k

755k

Motor

Home

Rescue

Commercial Direct

£3,732m premium written (ongoing

operations)

2,700m

637m

133m

262m

Motor

Home

Rescue

Commercial Direct

We have unique assets in Motor which allows us to provide better outcomes

tocustomers and tounderstand pricing, claims and customer behavioural trends.

We have a large insurer owned UK

repairnetwork

We operate through

23 sites

nationwide

Largest rescue brand owned by a UK

PersonalLines insurer

Green Flag now has over

60 roadside

patrol vehicles

supported by a national network of

3,000

specialists

2 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

The Group at a glance

In partnership with

Strong foundations with iconic brands and leading market positions

Unique assets in motor; large owned garage network and only UKMotor insurer with

in-house roadside rescue

Turnaround strategy with a focus on technical excellence to drive profitable growth

Capital generative business with a strong balance sheet

Target a payout ratio of ~60% of post tax operating profit with potential

foradditionalreturns

Our strategy

In 2024 we launched our turnaround strategy and targets with a focus on technical

excellence to drive profitable growth.

Our targets

Growth

Costs

Profit

Compound annual

growth rate (“CAGR”) of

At least

7%-10% £100m 13%

in Non-Motor gross written

premiums between 2023-26

gross cost savings by the end

of 2025 on a run-rate basis

net insurance margin

in 2026

3 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Our investment story and strategy

Target leading positions

inHome, Commercial

Directand Rescue

Achieve top quartile

technical excellence

acrossthe insurance

valuechain

Reduce cost base

Build a high

performance

culture

Rejoin front-runners

in Motor

Customers'

insurerofchoice

Doing fewer

things,better

The Group has made significant progress on its transformation plans.

Motor

Direct Line

launched

onPrice

Comparison

Websites

(“PCW”)

In December we delivered one of our

key objectives and launched Direct Line

Motor on Compare the Market.

We have developed three new online

products for the channel where the

majority of customers shop and buy

insurance: Essentials Online, Standard

Online and Premium Online.

These products are tailored specifically

to meet the needs of customers who

choose to buy insurance through

PCWsand are happy to service their

policiesonline.

Digital

Launched

newapps

We launched apps for our Churchill and

Direct Line Motor customers enabling

them to make those often-complicated

tasks simple.

Customers can: view motor policy

details and documents, make a change

to their policy, renew a policy, get a

quote, view existing quotes, start a claim

or get support via a Virtual Assistant

orWhatsApp.

With customers having Churchill and

Direct Line in their pocket, they can be

assured that whenever they need us,

we’re there.

Home

Significant

progress with

the re-platform

Significant progress made with the

re-platforming of our Home business

which is designed to enable new

product development, improve the

speed and accuracy of pricing and

underwriting and provide enhanced

claims handlingcapability.

The new platform is now live for Direct

Line, Churchill and Privilege new

business customers across all channels

and the transfer of existing customer

policies is also underway.

4 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Delivering for our customers

Rescue

Collaborating

withApple

andexpanded

patrolservice

Green Flag is the only UK

breakdown provider to offer rescue

services as part of Apple's Roadside

Assistance via satellite, providing

drivers with the reassurance that

help is at hand when they don't have

mobile reception or Wi-Fi access.

The expansion of our Green Flag

owned patrols continued at pace;

wehave expanded into new regions

with over 60 vehicles on the road

helping customers.

Costs

Progress against

cost saving target

We are implementing a new target

operating model and simplifying our

structure to reduce complexity and

drive greater efficiency.

We are investing in digital

distribution channels to improve

customer accessibility, streamline

our operations and enhance the

overall customer experience.

We are reducing technology costs

by removing legacy technology

systems and leveraging our

existingplatforms.

These initiatives underpin our

£100 millioncost saving target.

Claims

Delivering

bettercustomer

outcomes

We have a comprehensive

programme of initiatives in claims

which are beginning to take effect.

For example, we are settling large

bodily injury claims faster and

increasing the proportion of cars

repaired through our own repair

network of23 garages. We have also

strengthened our counter fraud

capabilities, resulting in a 21% saving

year on year.

In Home, we are helping customers

impacted by weather events, visiting

flooded homes within 48 hours

where safe to do so.

5 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Our

customers

Premiums

Managing

finances

Claims

Servicing

Our people and capabilities Costs

Investment and

other income

Reinvest in thebusiness Profit

Capital

Dividends

Our

shareholders

Managing risk

6 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Business model

Net insurance margin

– ongoing

operations

(%)

3.6%

(8.7)%

(0.9)%

2024

2023

2022

Operating return on tangible equity

(“Operating RoTE”) (%)

10.0%

(14.9)%

(2.7)%

2024

2023

2022

Operating profit/(loss) per share

– ongoing

operations

(pence)

9.8

(12.8)

(2.7)

2024

2023

2022

Profit/(loss) before tax

(£m)

218.4

277.4

(301.8)

2024

2023

2022

Solvency capital ratio (pre-dividend)

1,4,5

(%)

200%

192%

147%

2024

2023

2022

Changes to our KPIs in 2024

Our metrics are reviewed annually and updated

asappropriate to ensure they remain an effective

measure of delivery against our objectives.

For 2024, metrics have been reviewed and

appliedconsistently to enable effective year

onyearcomparisons.

Our non-financial KPIs continue to be key measures

ofperformance. Colleague engagement is disclosed

inthe Chief People Officer review, net promoter score

in the Customer section of Sustainability and emissions

are disclosed in the Planet section of Sustainability.

Customer complaints data is no longer reported.

Notes:

1. See glossary on pages 238 to 241 for definitions and

appendix A – Alternative performance measures on pages

242 to 245 for reconciliation to financial statement

lineitems.

2. Ongoing operations – the Group's ongoing operations

resultexcludes the results of the Brokered commercial

business, that it sold to RSA Insurance Limited in 2023, and

its Non-core businesses, announced at the Group's 2024

Capital Markets Day, and three run-off partnerships that

the Group completed its exit from in H1 2024. Relevant

prior-year data has been restated accordingly.

3. 2023 included a gain of £443.9 million from the disposal

ofthe Group's Brokered commercial business.

4. Estimates based on the Group’s Solvency II partial

internalmodel.

5. The full year 2023 solvency capital ratio has been

re-presented as explained in the Capital analysis section

ofthis report (post-dividend ratio previously reported in the

Group's 2023 Annual Report and Accounts as being 197%).

7 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Our financial key performance indicators

Capital returned to shareholders since IPO

£4.0bn

Dear Shareholders,

It has been a pivotal year in the Direct Line Group’s history,

andone in which the value and potential of our business and

brands have come into sharp focus.

In a highly competitive and dynamic market one of our top

priorities has been to return to profit. I have been impressed by

the resilience and tenacity of our colleagues, who have worked

to support a new and invigorated strategy and transformative

plan, which has delivered a solid financial and operational

performance. This has been an impressive team effort, achieved

by a relentless focus on continuously improving how we attract

and compete for customers within our risk appetite.

New management, strategy and performance

Adam Winslow joined the Group as CEO on 1 March 2024

andwas appointed to the Board as an Executive Director

on21March 2024. He undertook a comprehensive review

ofthebusiness and, after listening carefully to our investors,

customers and colleagues, established a new strategy,

designed to position Direct Line Group to become the

customers’ insurer of choice, and to set a clear path to

profitable growth.

Adam assembled a highly experienced executive team which

swiftly began to take the critical action necessary to turn the

business around with energy and determination. He and his

team adapted to the many and varied challenges leading the

turnaround with exemplary judgement, phenomenal levels

ofenergy and great connection with our people – all done

atremarkable pace. Adam’s vision and hard work have been

central to the considerable progress made in 2024 and I, and

my Board would like to thank him for that.

You will see in this Annual Report that we’ve made considerable

progress in delivering the new strategy and turnaround,

resulting in a Group operating profit

from ongoing operations

of £205 million and improved our Motor net insurance margin

A great deal of what was planned in 2024 isdue to come to

fruition in 2025, and the Board anticipates thepositive

momentum continuing.

With this positive progress, the Board was able to pay a small

dividend of two pence per share at Half Year. We are also

recommending a further five pence per share final dividend

with our full year results.

Takeover approaches

The Board takes its aim of maximising value for shareholders

very seriously. Early in the year, we received an indicative

proposal from Ageas to purchase the Company. After intensive

deliberation and consultation with investors, the Board

unanimously rejected this proposal, believing it to be uncertain,

unattractive and significantly undervaluing the future

prospects of the business.

In late November 2024, we received an approach from Aviva

plcwhich, again, the Board rejected on the grounds that it

undervalued the business. Aviva subsequently improved its

offer, and we announced on 23 December 2024 that we had

reached agreement on the terms of a recommended cash and

share offer. Based on the closing price of Aviva shares on 27

November 2024, that offer values each Direct Line share at 275

pence, and values the entire diluted share capital at

approximately £3.7 billion.

The Board firmly believes that the new strategy set out by

Adam would drive substantial value, and are confident in the

prospects that the Group would have as a standalone business.

However, the Board also believes that Aviva’s offer represents

an attractive proposition for our investors and recognises that

itprovides an accelerated path to returns, including significant

synergies and value upside potential in the combined group

ofcompanies. Therefore, following detailed consideration

andengagement with investors and other stakeholders, the

Board unanimously decided to recommend Aviva’s offer to

shareholders for approval. Aviva’s culture and values align

wellto those of Direct Line Group and were an important

consideration in the Board recommending the offer.

People

Having spoken to many of our colleagues over the past few

months, I have felt the huge sense of pride that they have in

thework they do to support customers, and in the progress

wehave made. They really care about our customers and

beingbrilliant for them every day.

I know that working with uncertainty isn’t easy, and I commend

and thank them all the more for their continued support and

professionalism during this period.

8 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Chair’s statement

Customers

During the year, we continued to put our customers at the

heart of our decisions and aspired to excellence through all

stages of the customer journey. One area of particular focus

hasbeen on delivering good customer outcomes under the

Consumer Duty. The regulations are outcome based and the

Financial Conduct Authority ("FCA") has been clear that they

expect firms to keep developing and improving. In order to

enhance the Board’s continued oversight of the Consumer

Duty, the Customer & Sustainability Committee has been

givena strengthened role.

Board

In addition to Adam Winslow, we were delighted to welcome

our new CFO, Jane Poole, to the Board as an Executive Director

on 10 October 2024. Jane has made a meaningful impact

inthefew months since her appointment, progressing the

transformation of our Finance function, enhancing our financial

strategies and playing a central role in the negotiations with

Aviva. We were also pleased to welcome Carol Hagh to the

Board as a Non-Executive Director on 1 April 2024. I am

gratefulto all of my Board colleagues for their unstinting

support and hard work, both in supporting the management

team in resetting the Group’s strategy and in starting the

transformation of the business, and in diligently discharging

their roles during the detailed discussions leading up to our

recommendation of the Aviva offer.

It has been a privilege to serve as a member of your Board

since2017 and as Chair since 2020. I am extremely proud

ofeverything our people have achieved in building our

outstanding brands, transforming our businesses and

supporting our customers. I am certain they will continue to

excel, either in an independent Direct Line Group or as part of

the Aviva Group. I would also like to thank all our stakeholders

for their continuing support and wish them every success

inthefuture.

Danuta Gray

Chair of the Board

Agreement for the acquisition

ofDirect Line Group by Aviva

– As announced on 23 December 2024, the Boards

ofDirect Line Insurance Group plc ("Direct Line")

and Aviva plc ("Aviva") reached agreement on the

terms of a recommended cash and share offer for

Direct Line.

– The transaction values each Direct Line share at 275

pence and values the entire diluted share capital

ofthe Group at approximately £3.7 billion

– The transaction is subject to certain regulatory

approvals, including from the Prudential

Regulation Authority ("PRA") and the Financial

Conduct Authority ("FCA") as well as review by

theCompetition and Markets Authority ("CMA").

– Direct Line shareholder meetings are scheduled to

be held on 10 March and the transaction, subject to

regulatory clearances, is expected to become

effective mid-2025.

Note

1. Based on the closing price of Aviva shares of 489.3 pence

on 27 November 2024 (being the last closing share price

before the commencement of the Offer Period) and taking

into account the final dividend of 5 pence per share

announced today.

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A –

Alternative performance measures on pages 242 to 245 for

reconciliation to financial statement lineitems.

2. Ongoing operations – the Group's ongoing operations result excludes

the results of the Brokered commercial business, that it sold to RSA

Insurance Limited in 2023, and its Non-core businesses, announced

at the Group's 2024 Capital Markets Day, and three run-off

partnerships that the Group completed its exit from in H1 2024.

Relevant prior-year data has been restated accordingly. See glossary

on pages 238 to 241 for definitions and Appendix B – Management

view statements of profit and loss, expenses, average premiums,

gross written premium and associated fees and in-force policies on

pages 246 to 253.

Section 172(1) statement

The Directors have acted in the way that they considered, in good faith, would be most likely to promote the success

of the Company for the benefit of its members as a whole and, in doing so, have had regard (amongst other matters)

to those matters set out in Section 172(1)(a) to (f) Companies Act 2006.

Please refer to pages 86 to 88 for our detailed statement, which describes how the interests of the Company’s key

stakeholders and the matters set out in Section 172(1)(a)-(f) Companies Act 2006 have been considered in Board

discussions and decision making.

9 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

“The turnround strategy, launched

in July has made a marked

difference to the company’s

performance, and we generated

good momentum across all our

business lines.”

Adam’s letter to shareholders

In 2024 we embarked on an ambitious mission to rapidly

transform Direct Line Group. Our focus on a new strategy,

delivering technical excellence, driving down cost and

embracing a high-performance culture has delivered a

turnaround in results. Despite difficult market conditions, 2024

ended with an operating profit significantly ahead of the

previous year.

Unlocking potential

I joined Direct Line Group in March 2024, just as the Board had

rejected a “highly opportunistic” proposal from Ageas SA/NV,

which they felt significantly undervalued the business and its

prospects. My focus was firmly on diagnosing the issues holding

back performance and demonstrating to our investors how we

could rapidly unlock the potential of the Group. I spent a lot of

time with our stakeholders to understand their frustration with

the ways the Group had lost its technical edge and

underperformed in recent years.

At our Capital Markets Day in July 2024, we laid out a new

strategy for the Group to address investors' concerns and

establish a roadmap to transform the business quickly. We laid

out targets for becoming the customers' insurer of choice and

delivering profitable growth with measurable targets across the

next three years. We have made solid progress to date and

started to deliver against many of the key initiatives rapidly.

We announced we would intensify our focus across our Motor

and Non-Motor segments. Prioritising driving value in core

disciplines has been beneficial, with all areas demonstrating

positive performance. Importantly, we’re also securing

consumer accolades, showing that we are providing products

and service that customers truly value. With two of the

strongest brands in personal lines insurance, Direct Line and

Churchill, and with Green Flag as the leading challenger in the

Rescue market, we have fantastic assets to build upon.

Financial progress

The business has delivered a net insurance margin of 3.6%

1,2

, a

12.3 point improvement on the previous year. We have a stated

aim to increase this to 13 per cent

in 2026. We are well on our

way to delivering a significant reduction in our cost base, to

narrow the gap with our competitors, targeting at least £100

million of gross cost savings by end of 2025 on a run-rate

annualised basis

and we have maintained a strong pre-final

dividend solvency capital ratio at 200%

, a good platform from

which to help the Group withstand headwinds.

10 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

CEO review

Strategic and operational highlights

–

Direct Line Motor on Price Comparison Websites ("PCWs"): Successfully delivered on one of our key strategic

ambitions with the launch of three new Direct Line branded Motor products on the Compare the Market PCW.

– Motor pricing: Next generation pricing models implemented alongside four material new data enrichment sources.

–

Home re-platform: All own brands now live on the new technology platform which brings significant new pricing and

underwriting capability and supports simplification.

–

Rescue: Two new contracts signed, including a collaboration with Apple, becoming the only UK breakdown brand to

offer rescue services as part of Apple's Roadside Assistance via satellite. The own patrol fleet was further expanded to

over 60 vehicles across 6 regions (2023: 16 patrols across 2 regions).

– Commercial Direct: New risk models rolled out for Van and improvements made to Landlord online journeys.

–

Digital: New apps launched for Direct Line and Churchill Motor, with almost 300,000 downloads to date, enabling

customers to make policy changes with ease.

–

Cost saving programme: A series of initiatives aimed at simplifying the organisation is projected to deliver £50 million

gross cost savings in 2025, as part of our target to achieve run-rate gross savings of more than £100 million by the end

of 2025

. Our drive to create a leaner and more efficient operating model is well advanced, with consultations now

complete as part of a reduction of 550 roles.

–

Claims: A range of initiatives launched across Motor and Home, designed to deliver better outcomes for customers at

lower cost.

–

Travel: We have decided to close our annual multi-trip and single trip travel insurance products to focus on our core

markets in Motor, Home, Rescue and Commercial Direct.

Operational transformation

We have made considerable progress over the year. In Motor, in

July we announced that we would be putting our strongest

brand, Direct Line, on Price Comparison Websites ("PCWs"),

where 90 per cent of motorists purchase their insurance. Less

than six months later, in December 2024, we delivered on this

promise. We launched three new Direct Line branded motor

products on the biggest PCW in the UK

with an ambition to

return our overall Motor policy count to growth during 2025.

Our Motability partnership has also seen an increase in policy

count and we aim for it to continue to grow.

Beyond Motor, we outlined ambitious plans to grow our Home,

Rescue and Commercial Direct offerings. In Home we delivered

own brands premium growth of 18% and increased own brands

policies by 1.3%. Technology re-platforming is now largely

complete with Direct Line, Churchill and Privilege all trading on

a new platform.

In our Commercial Direct Insurance business, our strong

proposition in Landlord and our compelling SME offering

delivered 8.8% gross written premium growth and strong

customer retention. We stayed disciplined on the bottom line

in Van and our earned loss ratios were within our target range.

Our Rescue business made significant strategic progress in

2024. We grew our ‘owned patrol’ network to over 60 vehicles,

covering 28% of the UK market, supported nationally by a

network of independent providers. These owned patrols helped

customers, and also generated over £600,000 in additional

roadside revenue.

Technical innovation will remain a key focus across the Group

as we seek to drive home a competitive advantage. We signed

a contract with Apple for Green Flag to become the first UK

breakdown provider to offer rescue services through Apple’s

Roadside Assistance via satellite capability. This allows us to

reach people who might otherwise not get help because they

don’t have mobile phone reception or Wi-Fi access.

We launched two new apps, for Direct Line and Churchill,

meeting the needs of customers who increasingly want to

engage with us digitally. We will keep our focus on aiming to

build seamless customer journeys, letting people self-serve,

simplifying the claims process and making our products more

accessible. We aim to expand AI solutions to reduce cost and

increase the speed of service to meet the evolving needs of

policyholders.

In Claims we’re improving the service we provide customers

while unlocking savings across our operations. We’re settling

bodily injury claims much more proactively, reducing the

number of cars we write off and using our network of owned

repair centres to control costs. Effective claims management

also relies on excellent counter fraud capabilities, and we

delivered a 21% increase in cost savings after introducing data

analytics and voice analysis profiling.

Effective risk management

As a general insurer, the environmental factors impacting the

Group’s performance are major UK floods, windstorms, freeze

events and subsidence. We believe we are appropriately

reserved against those perils. During the year, we acquired

climate scenario modelling capability to support our

assessment of the impact climate change could have on our

underwriting and investment portfolio. This also helps us better

understand the opportunities that may arise from the transition

to a lower-carbon economy.

11 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

When implementing the strategy outlined at the Capital

Markets Day, we ensured that we set out to embed enhanced

risk controls within the business. For example, new pricing and

risk models enable us to be more agile, allowing for more

frequent rating and risk model updates. This renewed focus on

risk management procedures, monitoring emerging threats

and tightening control environments helps protect profitability

and reduces the likelihood of unexpected impacts on our Group.

Cultural transformation

We have recruited an entirely new Executive Committee of

high calibre, experienced leaders, with a track record of delivery.

This new leadership team have made great strides in

transforming the culture of the business, and our colleagues

have embraced the opportunity to grow and operate with a

high-performance mindset.

Transforming a business is not easy, and we’ve had to make

tough decisions about people and capital expenditure. We are

simplifying our management structure in line with our aim of

being a more efficient organisation with clearer accountability.

Over the last year we have made the necessary changes to

succeed in what is an incredibly competitive industry.

Throughout it all, our talented colleagues have consistently

demonstrated their resilience, energy and commitment. They

take immense pride in our brands and want to be brilliant for

our customers every day.

Navigating headwinds

In 2024, the insurance industry continued to grapple with

significant trading headwinds. Inflation drove up the cost of

claims, particularly in Home and Motor, where repair and

replacement costs have surged in recent years. Economic

uncertainty and the ongoing pressures from the cost-of-living

crisis have created an increasingly competitive market, with

insurers facing challenges in balancing affordable premiums

while maintaining profitability. These factors meant we needed

to adopt innovative approaches to underwriting, pricing, and

risk management.

Looking forward

2024 was a landmark year for Direct Line Group, with the Board

recommending a cash and share offer for the purchase of

Direct Line Group by Aviva plc. On 10 March 2025 Direct Line

Group’s shareholders will vote on the transaction.

The potential acquisition by Aviva, which remains subject to

shareholder and regulatory approval, reflects the attractiveness

of the Group, and we believe indicates the significant strength

of our brands and products, the trust of our customers, talent of

our people and the scale of the future opportunity. In the

meantime, we remain an independent business focused on

transforming our organisation, so we are better equipped to

serve our customers with exceptional products and services.

While we need to plan appropriately for this potential takeover,

we need to make sure we don’t take our foot off the accelerator

when it comes to delivering business change.

I am filled with immense pride in what this business has

achieved since I joined. The passion and dedication of our

colleagues, with an unwavering commitment to delivering

brilliant customer outcomes, is unparalleled. Our mission goes

beyond policies and claims: we help safeguard communities,

support the vulnerable and allow our customers to face the

future with confidence.

We are set to embrace the opportunities of tomorrow thanks to

the hard work and dedication of all those at Direct Line Group.

Adam Winslow

Chief Executive Officer

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

tofinancial statement lineitems.

2. Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA

Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that

the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary on pages 238 to 241 for

definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums, gross written premium and associated

fees and in-force policies on pages 246 to 253.

3. Net insurance margin for ongoing operations, normalised for event weather.

4. The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,

commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.

5. Estimates based on the Group’s Solvency II partial internal model.

12 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

“I was delighted to join the Group

asCFO at such an important time

andlead our financial strategy as

weaim togrow, to deliver on our

commitments to serve millions of

customers, and tocreate long-term

sustainable shareholder value.”

Gross written premium and

associatedfees

1,2

£3,732m

2023: £2,978m

Ongoing

operating profit

£205m

2023: £190m loss

Ongoing

net insurance margin

3.6%

2023: minus 8.7%

2024 has been a year of significant transition for our Group. I

was delighted to join the Group as CFO at such an important

time and lead our financial strategy as we aim to grow, to

deliver on our commitments to serve millions of customers, and

to create long-term sustainable shareholder value.

Against a challenging external environment, we have

embarked on a bold reset strategy, to focus on improving

business performance, enhance financial strength, and embed

a robust culture of accountability and control.

Financial highlights

This report outlines the financial results for the year. 2024

performance illustrates the early stages of our turnaround

andprovides a strong foundation upon which to build as

weaccelerate delivery of our strategy. Our key financial

highlightswere:

– 25% growth in gross written premiums and associated fees.

Strong growth of 32% in Motor including Motability and 11%

inNon-Motor, above our 7% to 10% compound annual growth

rate ("CAGR") target.

– £395 million increase in ongoing operating profit, largely due

to the turnaround in Motor profitability, alongside a strong

result in Non-Motor.

– Net insurance margin of 3.6% for ongoing operations, a 12.3pt

improvement versus prior year, demonstrating disciplined

underwriting.

– Investment income was £200 million (2023: £139 million), as

we continued to benefit from higher rates with a Group net

investment yield of 4.1%.

– Group profit before tax was £218 million, £59 million lower

than previous year which included a gain of £444 million

from the sale of the Brokered commercial business.

– Tangible net asset value growth of 10% to £1,362 million and

net asset value grew by 4% to £2,138 million.

– Strong solvency capital ratio (pre dividend) of 200% and the

Board has recommended a final dividend of 5.0 pence per

share. The Group generated 20pts of capital during the year

supporting the strong balance sheet.

Further information is set out in the Group financial

performance section onpage20.

Driving business performance

It is critical, at this stage of our turnaround, that we focus on

supporting strategic execution and driving improved business

performance. To achieve this, our Finance team are driving a

step change in performance focus by providing improved

management information to the commercial teams and

prioritising financial performance. We aim to do this while

maintaining excellent cost control, operating more efficiently

and focusing on our ambition of achieving at least £100 million

of gross cost savings by end of 2025 on a run-rate annualised

basis

In 2024, we focused on strengthening our performance in core

segments, leveraging our strategic advantages, and investing in

key areas of growth. Our results highlight early stages of

recovery as we delivered 25% growth in gross written premiums

and associated fees

1,2

, a £395 million improvement in ongoing

operating profit

1,2

and 10% growth in tangible net asset value

These results provide a strong foundation from which to be

able to deliver on our strategic ambition of achieving 13% net

insurance margin

1,4

in 2026.

13 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

CFO review

Strengthening financial resilience

Ensuring long-term financial strength is a key priority,

positioning us well for sustainable growth and enhanced

shareholder value opportunities. I have reviewed our balance

sheet, acted to assure balance sheet strength and remain

focused on prudent capital management. By leveraging

targeted financial strategies, we aim to further optimise capital

allocation, enhance efficiency, and help drive long-term

performance.

– Capital allocation framework: During 2024, we introduced a

more rigorous capital allocation framework to help us

prioritise investments in the most profitable and strategically

aligned opportunities.

– Investments: Our investment portfolio is already well

diversified, and optimised in line with our approach to asset

and liability management. During the year we reinvested

cash back into investment grade credit and introduced index

linked gilts, which are capital light, to match our PPO

liabilities and further diversify whilst generating good yields.

– Reinsurance programme: At the end of 2024 we

implemented a comprehensive reinsurance programme

designed to reduce earnings volatility, strengthen our

balance sheet, and support our long-term financial health. In

our January renewals we optimised cost and risk: in Motor we

now have unlimited cover above £5 million; in property we

increased our catastrophe cover limit in line with our

exposure to cover a 1 in 200 year loss event; while retention is

unchanged at £100 million.

– Reserve strength is a key underpin to balance sheet strength

and the setting of best estimate liabilities is a key accounting

judgment in the Group’s financial statements. Alongside the

independent re-projections performed by our auditors, the

Board annually commissions an independent review of our

claims reserves. These alongside Audit Committee challenge

to our internal actuarial analysis on reserves, provides us with

additional comfort that our best estimate liabilities are within

a reasonable range.

Embedding a culture of accountability and

control

We enhanced our financial control framework and assurance,

delivering greater oversight, control and proactive risk

management. This will help to improve long-term stability.

– Governance enhancements: A comprehensive overhaul of

our governance structures is progressing and aims to

strengthen accountability at all levels and to ensure rigorous

oversight and effective decision making.

– Financial control: We enhanced our financial control

framework and controls assurance, delivering greater

oversight, control, and proactive risk management.

– Focus on risk awareness: We proactively identify and address

emerging risks, positioning the organisation to respond

effectively to an evolving landscape.

– Cultural transformation: A strong and engaged workforce

underpins our ability to achieve sustainable growth. By

embedding a sense of accountability and ownership, we are

empowering teams to deliver results and drive the

company’s turnaround strategy.

Outlook

As we continue our turnaround journey, our financial strategy

remains focused on our clear objectives of delivering profitable

growth, enhancing operational efficiency, and reinforcing our

financial resilience. Whilst we have made significant progress,

we recognise there is more work to do to achieve our long-term

ambitions. I am confident that the disciplined execution of our

strategy can deliver lasting value for our customers, colleagues,

and shareholders.

Jane Poole

Chief Financial Officer

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

tofinancial statement lineitems.

2. Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA

Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships

thatthe Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly. See glossary on pages 238 to 241 for

definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums, gross written premium and associated

fees and in-force policies on pages 246 to 253.

3. The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,

commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.

4. Net insurance margin for ongoing operations, normalised for event weather.

14 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

“At Direct Line Group we are a team

oftalented individuals, in a place

thatempowers us to be the best

wecanbe to drive high performance.”

Colleague engagement

UK average: 72

Engagement survey response rate

82%

UK average: 75%

Jane's letter to the shareholders

At Direct Line Group we are a team of talented colleagues, in

aplace that empowers us to be the best we can be. We believe

that by working together, we can achieve great things.

Inspiring, challenging and supporting each other to aim higher

to continually improve our performance and set new standards.

We take accountability for our work. We strive to be brilliant

for customers every day and deliver great outcomes for them.

We celebrate difference and value diverse perspectives, ideas

and opinions.

In 2024, we have been focused on continuing to support and

encourage colleagues to build on their skills and experience to

do the best work of their career and make their full contribution

to becoming a high performing business.

Driving high performance culture

We have continued the emphasis around high performance,

giving greater clarity to colleagues on what this looks like, what

they need to deliver and how to deliver it, through setting clear

objectives and building our managers' capability to have better

performance and development conversations. We have

communicated this change to provide colleagues with clarity,

fairness and transparency.

We continue to conduct multiple engagement surveys

throughout the year to seek feedback from our colleagues on

how they are feeling so that we can make actionable change.

InSeptember 2024, we were proud to receive an Engagement

score of 72, which was a growth of 3% when compared to our

previous survey in February 2024, and is in line with the average

engagement across the UK.

Strengthening our Leadership Capability

In 2024, we appointed a new Executive team. To accelerate the

development of the team, we commenced a 12-month group

development programme partnering with an external team

performance coach. The programme involves a combination

ofindividual and group coaching, building strong alignment

ofgoals and performance standards, establishing effective

team practices, and ultimately aims to ensure groups are

performing at their best, both individually and collectively.

Alongside this, we placed a key focus on the development

of our senior leaders, including externally facilitated,

psychometric leadership assessments followed by the launch

ofa bespoke programme designed to accelerate our high

performance culture supported by an external coach.

There is strong evidence to suggest our recruitment and

development approach is adding value, with our September

2024 employee engagement survey having reported a

significant 10 percentage point increase in confidence in our

senior leadership team since the survey in February 2024.

Rewarding Colleagues

In April 2024, all eligible colleagues (excluding senior

management) received at least a 5% pay rise, with our

minimum salary rising by 7% to £23,400 a year, in line with the

Living Wage Foundation’s National Real Living Wage (as set

in October 2023 for roles outside of London). This was 5% above

the Government’s statutory National Living Wage, effective

1 April 2024, for those aged 21 and over. From April 2024, all

colleagues became eligible either for incentives or our annual

incentive scheme.

15 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Chief People Officer review

A diverse and inclusive business

We know that to succeed as a high performing business

weneed our workforce to be truly representative of our

customers and society. Diverse perspectives, ideas and opinions

lead to more insight, innovation and better decision making.

And we know that being diverse is not enough, we also need

tobe inclusive, so everyone feels free to be themselves and

beable to succeed in their careers.

We believe that delivering change requires both policies and

targets and a change in mindsets so we undertake activity

todeliver both. Some examples include:

– Targeting ambitious new representation targets by 2027

andincluding them in their annual objectives.

– Using inclusive hiring principles, which include the use

ofrecruitment tools, such as language decoders for job

adverts and panel-basedinterviewing.

– Building a stronger pipeline of diverse talent, especially

inareas where the jobs of the future are, because we want

tofuture-proof our activity. This includes work experience,

mentoring and skills building programmes that target

lessadvantaged communities for our Ignite

apprenticeshipprogrammes.

– Developing our partnerships with The Diversity Trust, Race

Equality Matters and Spear and maintaining our relationship

with Parenting Mental Health. The intention of these

partnerships is to support external communities whilst

alsodriving greater equity, inclusivity andactive allyship

acrossthe Group.

– We also partner with the Business Disability Forum, who

have supported us this year in auditing our guidance on

working with vulnerable customers, and with the ABI who,

through their active DEI network, provide benchmarking

opportunities and learning on industry best practice.

– Learning from our Diversity Network Alliance ("DNA") which

comprises seven employee networks which are a key driver

of diversity and inclusion across our business. They focus on

the following areas: Belief, Life (families and carers), LGBTQ+,

Neurodiversity and Disability, REACH (race, ethnicity and

cultural heritage), Social Mobility and Thrive (gender).

We feel confident that all of these things are contributing

tousbecoming a more diverse and inclusive business.

Finally, I wanted to add what a pleasure it has been joining

theGroup. I have been so impressed by the talent across the

organisation, the commitment to deliver against our strategy

and the strong sense of a high performance culture that we are

building. I am looking forward to spending more time with the

teams, across our different locations over the coming months.

Jane Storm

Chief People Officer

Note:

1. Senior leadership is defined as ExCo and their Direct Reports, where

our definition of ExCo-1 is direct reports of the approved list when

they meet all the following criteria:

– must be at a certain reward level and therefore not support staff;

– not a fixed term contractor covering maternity or medical leave; and

– not on garden leave.

Senior Leadership

female representation

Increasing the diversity of our senior leadership is an ongoing

target for the Group. In 2024 we made an intentional move

toensure Diversity Equity & Inclusion ("DE&I") is considered

through allpeople and business decisions. In 2024 we have

made progress towards our 2027 target of women comprising

40% of Senior Leadership, particularly at ExCo level.

Senior leadership

female representation

asat31 December 2024

41.7%

40.0%

34.2%

43.5%

35.4%

Board

ExCo

ExCo-1

ExCo-2

Senior

Leadership

Senior Leadership ethnic minority

andBlackrepresentation

We recognise that we need to do more to ensure equitable

representation across our organisation, particularly for ethnic

minorities, and have set targets to achieve representation in

Senior Leadership roles of 16% ethnic minorities, including 4%

Black representation, by the end of 2027. Weare accelerating

programmes to improve inclusivity across the employee

lifecycle, increasing the retention and promotion of colleagues

from ethnic minority backgrounds. We have strengthened our

succession plans, including high potential talent from under-

represented groups and will review these annually. To facilitate

colleague progression, we invested in access to WeQual, the

world’s leading development network for women leaders and

INvolve Emerging Leaders’ programmes for under-represented

communities.

Ethnic minority representation

inSenior Leadership

8.3%

12.5%

12.1%

2024

2023

2022

Black representation in Senior

Leadership

0.0%

1.5%

2024

2023

2022

16 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Gender diversity

of our Board

As of 31December 2024

41.7%

58.3%

Women (5)

Men (7)

Gender diversity

of Senior Leadership

As of 31December 2024

35.4%

64.6%

Women (17)

Men (31)

Gender diversity of Senior Leadership defined as

Executive Committee and direct reports, excluding

those in support or administrative roles

Gender diversity

of all employees

As of 31December 2024

44.2%

55.8%

Women (3,966)

Men (5,009)

Ethnicity of all employees

As of 31December 2024

11.7%

Asian (1,053)

3.1%

Black (282)

2.1%

Mixed (188)

1.4%

Other (126)

73.2%

White (6,566)

6.1%

Prefer not to Say (544)

2.4%

Not Specified (216)

Gender pay gap

In 2024, our mean gap widened by 1.1 percentage points

and our median gap by 1.7 percentage points. Our pay gap

isnow broadly in line with peers when compared with the

broader financial and insurance services sector but we want

tosee that gap close. We are comfortable that we do not pay

people differently because of their gender and believe that

theway to reduce the gap in the medium to long term is

tocontinue with our work to seek to address the

disproportionate representation of women at senior levels and

in certain areas of our business. The figures used for the gender

pay gap reporting are reflective of the snapshot at 5 April 2024,

which this year has been impacted by a lower proportion of

women in senior leadership roles across the Group at that time.

Since this time, good progress has been made in enhancing

women in senior leadership roles. A further influence in the

paygap relates to our accident repair centres, an area that is

heavily resourced by men and where pay levels are at a market

premium compared to other positions within our lower bands

due to the external recruitment market, resulting in them

being positioned in our top two pay quartiles.

Our 2024 gender pay gap showed:

Gender pay gap

Mean Median

2024 22.2 % 25.1 %

2023 21.1 % 23.4 %

2022 19.3 % 20.3 %

Gender bonus gap

Mean Median

2024 56.3 % 43.6 %

2023 53.8 % 43.8 %

2022 46.7 % 45.4 %

% of employees receiving bonus

Men Women

2024 77.2 % 71.2 %

2023 84.2 % 87.3 %

2022 83.1 % 82.6 %

Note:

1. Gender diversity refers to Legal Sex.

17 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Ethnicity pay gap

This is the fourth year that we are voluntarily disclosing

ourethnicity pay gap. As with the gender pay gap, we are

comfortable that we do not pay people differently because of

their ethnicity and believe that the way to reduce the gap in the

medium to long term is to continue with our work to address

the disproportionate representation of ethnic minority

colleagues at certain levels and in certain areas of our business.

We are proud that 91% of colleagues have disclosed their

ethnicity with us, as we continue to encourage more colleagues

to share, the numbers we report in the future may change

asaresult. It is important to note that when pay gap data is

represented by a smaller number of colleagues, it can vary

significantly due to changes in the make up of our colleagues

during the year. Our pay gap for all ethnic minorities remains

low and has narrowed in 2024.

Ethnicity pay gap

2024 2024 2023 2023

Mean Median Mean Median

Ethnic minority

(overall) -0.8 % 11.0 % 1.0 % 12.7 %

Asian -6.6 % 8.9 % -2.7 % 14.1 %

Black 16.8 % 19.7 % 12.2 % 17.8 %

Mixed 3.2 % 9.0 % 3.2 % 8.2 %

Other -0.3 % -4.9 % 2.9 % -0.2 %

Ethnicity bonus gap

2024 2024 2023 2023

Mean Median Mean Median

Ethnic minority

(overall) 27.2 % 4.1 % 28.7 % 20.4 %

Asian 29.4 % 0.0 % 29.2 % 20.5 %

Black 42.4 % 16.3 % 40.6 % 24.5 %

Mixed 21.7 % 3.4 % 22.3 % 15.3 %

Other -3.3 % 12.6 % 16.9 % 10.1 %

% of employees receiving bonus

2024 2023

White 77.4% 88.0%

Ethnic minority (overall) 63.5% 78.5%

Asian 64.0% 77.7%

Black 53.4% 74.1%

Mixed 69.4% 78.6%

Other 72.8% 89.6%

Notes:

1. Gender pay gap shows the difference in average pay between women and men. This is different to equal pay, which is women and men receiving

the same pay for work of equal value. Our reporting is based on a snapshot date of 5 April 2024.

2. Ethnicity pay gap shows the difference in average pay between ethnic minorities, Asian, Black, Mixed, Other and White colleagues. This is different

to equal pay that is ethnic minority and White colleagues receiving the same pay for work of equal value. Our reporting is based on a snapshot date

of 5 April 2024 and 91% of colleagues that have shared their ethnicity with us.

18 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Motor premium and claims inflation

The UK motor market

continued to be affected by

challengingconditions, driven by the impact of elevated

inflation. The average cost of motor cover was £622, 15% higher

than 2023 although average premiums reduced during the

year and ended 1.3% lower year on year in the fourth quarter.

This is against a backdrop of total claims payouts that were

17%higher in 2024 compared to the previous year.

Claims inflation remained elevated in 2024, albeit lower

thanthe levels seen in 2023 as inflationary pressures began

tomoderate. Repair cost inflation remained above long term

averages driven by higher labour costs. The market observed

areduction in claims frequency during the year which is likely

to reflect changes to driving patterns, car safety and cost

oflivingpressures.

In February 2024, the Association of British Insurers (“ABI”)

published a 10-Point Roadmap to help combat the cost

ofmotor cover. The Roadmap outlined ten actions that the

industry, government or regulators could take, and areas where

improvements could be made to address the affordability

ofmotor insurance. The ABI believes the Government can help

combat high claims costs by addressing the skills and capacity

challenge in the vehicle repair sector, improving the UK's roads,

and delivering its road safety strategy.

During the year, the Government announced a cross-

government motor insurance taskforce, supported by industry

experts, to help drive down the costs of car insurance.

The Government announced changes to the discount rate used

by courts to decide how much insurer compensation personal

injury claimants should receive as a lump sum. In September

the discount rate for Scotland and Northern Ireland changed to

0.5% (previously minus 0.75%) and in January 2024, the discount

rate in England and Wales changed to 0.5% (previously

minus0.25%).

The Group focused on maintaining margins throughout the

year and growing its share of new business through the PCW

channel. In December the Group launched its Direct Line brand

on its first PCW, the channel where over 90% of customers

buytheir insurance.

Home premium and claims inflation

The UK household market

experienced strong premium

inflation in 2024, likely driven by a combination of claims

inflation and the impact of weather events.

The average price for a combined policy rose 16% to £395 which

led to an increase in the volume of consumers shopping in the

market, particularly in the first half of the year before prices

softened in the second half of the year.

The market experienced a number of weather events in

theyear, particularly in the fourth quarter where, according

tothe ABI, claims for damage to homes from adverse weather

reached £146 million.

Against this backdrop, the Group focused on maintaining

margins whilst growing own brand new business sales

yearonyear.

Climate change

A focus on climate remains, with particular emphasis placed

onhow firms are assessing and managing longer-term climate-

related risks. Increased importance is also being given to the

communication of plans that companies have in place to

support the transition to a low-carbon economy. This includes

the actions that are being taken to progress against emission

reduction targets and net zero aims. Furthermore, we continue

to expect an increase in regulatory focus on how firms are

managing climate-related financial risks, as well as how this is

reported, supported by developments in reporting frameworks

and disclosure requirements.

The Group continues to respond to climate change, and

wetake our responsibilities seriously in our assessment of

climate-related risks to our business. Our disclosure against

therecommendations of the Task Force on Climate-related

Financial Disclosures (“TCFD”) (see pages 58 to 71) sets out our

strategic response to climate change and reflects continued

action to further develop our understanding and management

of the associated risks and opportunities. The disclosure reports

on the progress we have made in the year against our carbon

emissions reduction targets, which were approved by the

Science Based Targets initiative (“SBTi”) in 2022.

Notes:

1. Based on ABI Q4 motor premiums and claims tracker.

2. Based on ABI Q4 household premiums and claims tracker.

19 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Market Overview

2024 2023 Change

Ongoing operations

1,2

In-force policies

(thousands) 8,827 9,339 (5.5%)

FY 2024 FY 2023 Change

Notes £m £m £m

Ongoing operations

1,2

Gross written premium and associated fees

3,731.9

2,977.6

25.3%

Net insurance revenue

2,857.1

2,422.6

17.9%

Insurance service result

104.6

(212.0)

316.6

Net insurance margin

3.6% (8.7%) 12.3pts

Combined operating ratio

96.4% 108.7% 12.3pts

Net insurance claims ratio

69.9% 82.1% 12.2pts

Net acquisition costs ratio

6.3% 6.8% 0.5pts

Net expense ratio

20.2% 19.8% (0.4pts)

Normalised net insurance margin

3.0% (10.0%) 13.0pts

Investment income

200.3

139.1

44.0%

Unwind of discounting of claims

1,3

(98.9)

(116.5)

17.6

Other operating income and expenses before restructuring and one-off costs

(1.0)

(0.5)

(100.0%)

Ongoing operating profit/(loss)

1,2

205.0

(189.9)

394.9

Current-year operating profit/(loss)

208.2

(45.4)

253.6

Prior-year reserves development

(3.2)

(144.5)

141.3

Other investment movements

111.9

98.9

13.1%

Restructuring and one-offcosts

(118.1)

(59.5)

(98.5%)

Brokered commercial business, Non-core and Run-off

39.7

(1.5)

41.2

Other finance costs

(15.4)

(14.5)

(6.2%)

(Loss)/gain on disposal of business

(4.7)

443.9

(101.1%)

Profit before tax

218.4 277.4 (59.0)

Tax charge

(55.8)

(54.5)

(1.3)

Profit for the year attributable to the owners of the Company

162.6

222.9

(60.3)

Performance metrics

Basic earnings per share (pence) 12

11.2

15.9 (4.7)

Diluted earnings per share (pence) 12

11.1

15.7 (4.6)

Operating earnings/(loss) per share (pence)

1,3

9.8

(12.8) 22.6

Return on equity

14 7.0% 10.6% (3.6pts)

Operating return on tangible equity

1,3

10.0% (14.9%) 24.9pts

Investments metrics

Investment income yield

1,3

4.1% 3.5% 0.6pts

2024 2023 Change

Capital and returns metrics

Dividend per share – final (pence)

5.0

4.0 25.0%

Dividend per share – total ordinary (pence)

7.0

4.0 75.0%

Net asset value per share (pence) 13

164.3

158.0 4.0%

Tangible net asset value per share(pence)

104.7

95.6 9.5%

Solvency capital ratio – post dividends

1,5,6

195% 188% 7pts

Notes:

1. See glossary on pages 238 to 241 for definitions.

2. Ongoing operations – the Group's ongoing operations result excludes the results of the Brokered commercial business, that it sold to RSA

Insurance Limited in 2023, and its Non-core businesses, announced at the Group's 2024 Capital Markets Day, and three run-off partnerships that

the Group completed its exit from in H1 2024. Relevant prior-year data has been restated accordingly.

3. See appendix A – Alternative performance measures on pages 242 to 245 for reconciliation to financial statement line items.

4. Other investment movements relate to net fair value gains/(losses), the effect of the change in the yield curve and interest expense on funds

withheld liabilities.

5. Estimates based on the Group’s Solvency II partial internal model.

6. The full year 2023 solvency capital ratio has been re-presented as explained in the Capital analysis sub-section of the Group financial performance

section in this report (previously reported in the Group's full year 2023 preliminary results and Annual Report and Accounts as being 197%).

20 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Group financial performance

2024 performance

Profit from ongoing operations increased by £395 million to

£205 million driven by a turnaround in Motor earnings which

increased by £427 million. Non-Motor delivered a profit

of £98 million.

The Group has excluded the results of the Brokered commercial

business, three run-off partnerships and its Other personal lines

products from its ongoing results. Results relating to ongoing

operations are referenced in Appendix B tothe report and

inthe financial statements, note 2 (Segmental information)

hasalso been amended to reflect the change. Theinsurance

serviceresult from ongoing operations was a profit of £105

million (FY 2023: £212 million loss) and for the Group, as a whole,

it was a profit of £126 million (FY 2023: £227 million loss).

The Group profit before tax was £218 million, £59 million lower

than prior year, which included £444 million from the sale

ofthe Brokered commercial business in 2023.

In-force policies

and gross written premium and

associated fees

In-force policies from ongoing operations were 8.8 million, 5.5%

lower than at the end of 2023. The largest reduction was in

Motor where own brand policies were 13.2% lower as we

focused on disciplined underwriting which more than offset

growth in the Motability partnership. Non-Motor in-force

policies were 3.1% lower than the end of 2023, mainly due

toRescue. Commercial Direct grew 0.8% and Home own

brands grew 1.3%.

Gross written premiums and associated fees for ongoing

operations grew by 25.3% to £3,732 million driven by strong

growth in Motor and Non-Motor. The 31.8% growth in Motor

wassupported by the Motability partnership, where we had

afull year of premium in 2024 compared to only seven months

during 2023, and higher own brand average premiums.

Non-Motor achieved growth of 11.0%, ahead of the CAGR target

of 7% to 10%, due to double-digit premium growth in Home

and 8.8% growth in Commercial Direct.

Insurance service result

The net insurance margin for ongoing operations was 3.6%,

12.3pts better than 2023, primarily due to a significant

improvement in Motor, particularly in the second half of 2024

following repricing action. The Non-Motor net insurance

margin remained strong at 8.9%.

The net insurance claims ratio for ongoing operations was

69.9%, an improvement of 12.2pts compared with 2023 due to

significant improvement in both the current year attritional

claims ratio and the prior year reserves development ratio.

Thechanges to the Ogden discount rate for large bodily injury

claims resulted in a £41 million reserve release for the Group,

ofwhich £36 million related to ongoing operations.

The current year attritional claims ratio improved by 6.7pts as

the pricing actions taken in Motor began to earn through while

the prior year reserves development ratio improved by 5.9pts.

Weather event related claims in Non-Motor were £43 million

(FY 2023: £27 million). Our assumption for the full year 2024 was

£62 million. In addition, the Group experienced approximately

£10 million of non-event weather above expectation in the first

half of 2024.

The prior-year reserves development ratio was an immaterial

strengthening of 0.1% (FY 2023: 6.0% strengthening). Motor saw

positive development in prior year claims, following the

changes to the Ogden discount rate for large bodily injury

claims, which was more than offset by prior year strengthening

in Non-Motor.

The net acquisition costs ratio for ongoing operations improved

by 0.5pts to 6.3% as higher acquisition costs were more than

offset by higher premiums. The net expense ratio for ongoing

operations was broadly stable at 20.2% (FY 2023: 19.8%) as the

full year of Motability costs alongside higher depreciation and

amortisation charges and general inflation were largely offset

by premium growth.

Expenses in insurance service result

Operating expenses for ongoing operations were £577 million,

an increase of £97 million compared with FY 2023. Controllable

costs increased by £51m in line with growth from Motability and

expected inflation, resulting in a broadly stable net expense

ratio of 20.2% (2023: 19.8%).

FY 2024

FY 2023

£m £m

Commission expenses (121.2) (104.8)

Marketing (58.1) (61.1)

Acquisition expenses (179.3) (165.9)

Staff costs

(225.2) (185.1)

IT and other operating expenses

7,8

(104.4) (93.2)

Insurance levies (104.1) (79.1)

Depreciation, amortisation and

impairment of intangible and fixed

assets

(143.6) (122.9)

Operating expenses (577.3) (480.3)

Total expenses – ongoing

operations

1,2

(756.6) (646.2)

Total expenses – Non-core and

Run-off

(45.2) (54.2)

Total expenses – Brokered

commercial business

(105.3) (207.5)

Total expenses (907.1) (907.9)

Net acquisition costs ratio

– ongoing operations 6.3% 6.8%

Net acquisition costs ratio

–

totalGroup 7.5% 9.3%

Net expense ratio

– ongoing

operations 20.2% 19.8%

Net expense ratio

– total Group 21.6% 19.7%

21 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Brokered commercial business

1,2

The Group has excluded the results of the Brokered

commercial business from its ongoing results and has restated

all relevant comparatives across this review. The Group agreed

the transfer of the Group’s Brokered commercial lines

insurance business and associated partnerships to Royal & Sun

Alliance Insurance Limited with effect from 1 October 2023

through a combination of quota share reinsurance and a form

of renewal rights transfer. As a result, the economic effect of the

Brokered commercial insurance business moved to Royal &

Sun Alliance Insurance Limited and the back book of policies

has remained with the Group.

For 2024, gross written premium and associated fees were £437

million (2023: £666 million). The operating profit relating to the

Brokered commercial business in 2024 was £36 million (2023:

£28 million). The formal separation and operational transfers

started in the second quarter of 2024, with subsequent

transfers of outstanding elements of the overall Brokered

commercial insurance business following.

Non-core and Run-off

1,2

The Group has excluded the results of Other personal lines

products, including three partnerships that were previously

disclosed as being exited, from its ongoing operations and has

restated all relevant comparatives across this review. Other

personal lines is made up of Pet, Travel, Creditor and Select, our

insurance targeted at mid- to high-net worth customers. Pet is

the largest product within Other personal lines. As announced

at the Group’s Capital Markets Day in July 2024, the decision

was taken to pause investment in these products. Other

personal lines represented around £130 million of gross written

premium and associated fees in 2023.

Three partnerships in Travel and Rescue have now been exited

and will reduce the Group’s exposure to low margin insurance

products packaged with bank accounts so it can redeploy

capital to segments with higher return opportunities. The two

Travel partnerships were with NatWest Group and Nationwide

Building Society and expired during the first half of 2024,

although upgrades on existing Nationwide Building Society

policies will continue to be underwritten by the Group until

April 2025. The Rescue partnership was with NatWest Group

and expired during the second half of 2022.

Gross written premium and associated fees were £178 million

(2023: £279 million). The operating profit relating to Non-core

and Run-off was £4 million (2023: £29 million loss).

Investment result and unwind of discount rate

Net investment income from ongoing operations increased to

£200 million (FY 2023: £139 million) primarily driven by interest

rates remaining high following an environment of global

interest rates rising during 2023, and a phased reinvestment

back into investment grade credit more aligned with the

Group’s benchmark weighting, resulting in an investment

income yield of 4.1%.

FY 2024 FY 2023

£m £m

Investment income 207.5 146.3

Investment fees (7.2) (7.2)

Net investment income 200.3 139.1

Unwind of discounting of claims

1,3

(98.9) (116.5)

Finance income and expenses

inoperating profit 101.4 22.6

FY 2024 FY 2023

Investment income yield

(totalGroup)

4.1% 3.5%

Finance income and expenses in operating profit also benefited

from a decrease in expenses related to the unwind of the

discounting of claims.

Reconciliation of operating profit/(loss) to basic

earnings per share

FY 2024 FY 2023

£m £m

Motor 107.0 (319.6)

Non-Motor 98.0 129.7

Operating profit/(loss)¹ – ongoing

operations¹

205.0 (189.9)

Operating profit¹ - Brokered

commercial business

36.2 27.6

Operating loss

– Non-core and

Run-off1

3.5 (29.1)

Operating profit/(loss)¹ – total

Group

244.7 (191.4)

Restructuring and one-off costs

(118.1) (59.5)

Net fair value gains 37.1 124.4

Net insurance finance income

– effect of change in yield curve

89.2 (25.5)

Interest expense on funds withheld

liabilities

(14.4) –

(Loss)/gain on disposal of business (4.7) 443.9

Other finance costs (15.4) (14.5)

Tax charge (55.8) (54.5)

Profit for the year attributable to

the owners of the Company

162.6 222.9

Basic earnings per share (pence) 11.2 15.9

Operating return on tangible

equity

1,3

10.0% (14.9%)

22 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Restructuring and one-off costs

The Group incurred £118 million of restructuring and one-off

costs during 2024 (2023: £60 million), which were a result of

several items including cost out and control initiatives, non-

cash impairments, as well as work carried out in relation to the

takeover approach from Ageas NV and the offer from Aviva plc.

Net fair value gains

1,2

Net fair value gains in the period were £37 million (2023: £124

million), reflecting a further tightening of credit spreads and

interest rate movements year-on-year and the pull to par on

the Group's credit holdings.

Net insurance finance income – effect of change

inyield curve

Net insurance finance income of £89 million (2023: £26 million

expense) reflects the gross and reinsurance effect of changes

inthe yield curve and the ASHE index on the discounting

ofpreviously recognised PPO claims.

Other finance costs

Other finance costs were £15 million (2023: £15 million) and

relate to interest payable on the Group's £260 million (nominal)

subordinated debt due in 2032.

Profit before tax

Profit before tax reduced by £59 million to £218 million

(2023:£277 million) primarily due to the effect of the sale of

theBrokered commercial business in 2023 which generated

£444 million.

Effective corporation tax rate

The Effective Tax Rate ("ETR") for 2024 was 25.5% (2023: 19.6%),

which was slightly higher than the standard UK corporation tax

rate of 25.0% (2023: 23.5%). This was driven primarily by

disallowable expenses, partly offset by tax relief for coupon

payments on the Group's Tier 1 notes, which are accounted for

as a distribution, together with a prior-year credit. This is higher

than the effective tax rate for 2023 which reflected the offset

ofcapital losses brought forward which had not previously

been recognised in deferred tax.

Operating return on tangible equity

1,3

The operating return on tangible equity increased by 24.9pts to

10.0% (2023: minus 14.9%) due primarily to the increase in the

Group's operating profit from ongoing operations.

Earnings per share

The basic earnings per share in 2024 was 11.2 pence (2023: 15.9

pence). Diluted earnings per share in 2024 was 11.1 pence (2023:

15.7 pence), mainly reflecting a reduction in the Group's post-

taxprofit for the calculation of earnings per share in 2024 as

improvements to operating profit were offset by the non-

repeat of the gain on the sale of the Group's Brokered

commercial business experienced in 2023. Operating earnings

per share was 9.8 pence (2023: 12.8 pence loss).

The financial performance of the Group is discussed in detail

inthis and the Operating review sections. The calculation of

earnings per share is presented in note 12. The calculation of

operating earnings per share is presented in AppendixB.

Notes:

1. See glossary on pages 238 to 241 for definitions

2. Ongoing operations – the Group's ongoing operations result excludes

the results of the Brokered commercial business, that it sold to RSA

Insurance Limited in 2023, and its Non-core businesses, announced

at the Group's 2024 Capital Markets Day, and three run-off

partnerships that the Group completed its exit from in H1 2024.

Relevant prior-year data has been restated accordingly. See glossary

on pages 238 to 241 for definitions and Appendix B – Management

view statements of profit and loss, expenses, average premiums,

gross written premium and associated fees and in-force policies on

pages Appendix B – Management view statements of profit and loss,

expenses, average premiums, gross written premium and associated

fees and in-force policies on pages 246 to 253.

3. See appendix A – Alternative performance measures on pages 242 to

245 of insurance finance costs, operating return on tangible equity,

operating earnings/(loss) per share and investment income yield.

4. Other investment movements relate to net fair value gains/(losses),

the effect of the change in the yield curve and interest expense on

funds withheld liabilities.

5. Estimates based on the Group’s Solvency II partial internal model.

6. The full year 2023 solvency capital ratio has been re-presented as

explained in the Chief Financial Officer review of this report

(previously reported in the Group's full year 2023 preliminary results

and Annual Report and Accounts as being 197%).

7. Staff costs and other operating expenses attributable to claims

handling activities are allocated to the cost of insurance claims.

8. IT and other operating expenses include professional fees and

property costs.

9. Includes right-of-use ("ROU") assets and property, plant and

equipment. For the year ended 31December 2024, there were no

impairment charges which relate solely to own occupied freehold

property (2023: no impairments).

23 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Cash flow

2024 2023

Note

£m £m

Net cash (used in)/generated

from operating activities

(364.5) 404.9

Of which:

Operating cash flows

before movements in

working capital

137.2 (337.0)

Movements in working

capital

(168.2) 469.0

Tax received/(paid)

13.9 (30.9)

Cash flow hedges

(0.3) (0.6)

Cash (used in)/generated

from investment of

insurance assets

(347.1) 304.4

Net cash (used in)/generated

from investing activities

(106.5) 398.3

Net cash used in financing

activities

(129.6) (51.8)

Net (decrease)/increase in

cash and cash equivalents

25 (600.6) 751.4

Cash and cash equivalents at

the beginning of the year

1,689.8 938.4

Cash and cash equivalents

at the end of the year

25 1,089.2 1,689.8

The cash that the Group used in operating activities (£365

million), investing activities (£107 million) and financing

activities (£130 million) resulted in a net decrease in cash and

cash equivalents of £601 million to £1,089 million (2023: £751

million increase to £1,690 million).

Net cash used in operating activities of £365 million is largely

asa result of cash used in investment of insurance assets of

£347million (2023: £304million cash generated). The Group has

considerable assets under management and during the period

purchases of debt securities held at fair value through profit or

loss ("FVTPL") exceeded disposals and maturities. The Group

had an operating cash inflow before movements in working

capital of £137 million (2023: outflow £337 million), due to the

improvement in the insurance service result. After taking into

account movements in working capital, taxes and cash flow

hedges, the Group's cash outflow before investment of

insurance assets was £31 million (2023: inflow £132 million).

Net cash used in investing activities of £107 million primarily

reflected the Group's continuing investment in its major IT

programmes (2024: £93 million, 2023: £124 million) while the

net cash generated from investing activities in the period

ended 31 December 2023 primarily reflected net proceeds from

the sale of the Brokered commercial business of £470 million.

Net cash used in financing activities of £130 million included

£95 million in dividends and Tier 1 capital coupon payments

(2023: £17 million in Tier 1 capital coupon payments) and £13

million (2023: £11 million) in lease principal payments.

The levels of cash and other highly liquid sources of funding

that the Group holds to cover its claims and other cash flow

obligations are continually monitored with the objective of

ensuring that the levels remain within the Group’s risk appetite.

Balance sheet management

Capital management and dividend policy

The Group aims to manage its capital efficiently and generate

long-term sustainable value for shareholders, while balancing

operational, regulatory, rating agency andpolicyholder

requirements.

The Group aims to pay a regular dividend of around 60% of

operating profit after tax for ongoing operations

Where the Board believes that the Group has capital which is

expected to be surplus to the Group’s requirements for a

prolonged period, it intends toreturn any surplus to

shareholders.

The Group has a solvency risk appetite of 140% of the Group’s

solvency capital requirement ("SCR"). In normal circumstances,

the Board expects that a solvency coverage ratio of around

180% is appropriate and will take this into account when

considering the potential for additional returns, alongside

expectations for future capital requirements and other relevant

factors. In the short-term, the Group expects to maintain a

solvency coverage ratio above this level.

In the normal course of events the Board will consider whether

or not it is appropriate to distribute any surplus capital to

shareholders once a year, alongside the full yearresults.

The Group expects that one third of the annual dividend will

generally be paid in the third quarter as an interim dividend,

with the remaining regular dividend paid as a final dividend in

the second quarter of the following year. The Company may

consider a special dividend and/or a repurchase of its own

shares to distribute surplus capital to shareholders.

The Board may revise the dividend policy from time to time.

The Board has reviewed the progress the Group has made in

turning around the business and, based on the Group's strong

solvency coverage ratio and underlying capital generation over

the last 12 months, has concluded it is appropriate to

recommend to shareholders at the annual general meeting

afinal dividend of 5.0 pence per share (£65 million).

Subject to shareholders approving the dividend at the annual

general meeting on 14May 2025, the dividend is scheduled

tobe paid on 19May 2025 to shareholders on the register

on4April 2025. The ex-dividend date will be 3April 2025.

Note:

1. Operating profit from ongoing operations after finance costs, coupon

payments in respect of Tier 1 notes and tax at the standard rate.

24 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Capital analysis

The Group is regulated under Solvency II requirements, as

modified by the PRA's 2024 reforms, by the PRA on both a

Group basis and for the Group’s principal underwriter, U K

Insurance Limited. In its results, the Group has estimated its

Solvency II own funds, SCR and solvency capital ratio as at

31December 2024.

Capital position

At 31December 2024, the Group held a Solvency II capital

surplus of £1.11 billion above its regulatory capital requirements,

which was equivalent to an estimated solvency capital ratio

post dividends of 195%.

At 31 December 2024 2023

Solvency capital requirement (£

billion)

1.16 1.13

Capital surplus above solvency

capital requirement (£ billion)

1.11 1.00

Solvency capital ratio pre-final

dividend

200 % 192 %

Solvency capital ratio

post-dividends

195% 188%

Note:

1. The full year 2023 solvency capital ratio has been re-presented as

explained below (the post-dividend ratio previously reported in the

Group's full year 2023 preliminary results and Annual Report and

Accounts as being 197%).

During the Group’s half year results preparation, a

miscalculation was identified within the Group’s audited

Solvency II own funds for the year ended 2023. This

miscalculation arose in the Solvency II treatment of the whole

account quota share reinsurance arrangement (incepted 1

January 2023), and in particular the translation of the

reinsurance debtors between IFRS and Solvency II own funds.

This miscalculation had no impact on the IFRS figures.

Correcting for the miscalculation, the solvency capital ratio

(post-dividend) at year end 2023 was 188%, which was above

the Group’s risk appetite range of 140% to 180% (the previously

reported solvency capital ratio was 197%).

Capital Returns (£million)

595.2

401.3

149.1

52.0

91.1

299.7 301.3

99.0

52.0

91.1

195.5

100.0

50.1

2020 2021 2022 2023 2024

Ordinary dividends

Special dividends

Buyback programmes

Movement in capital surplus

(£bn)

1.00

0.24

0.10

(0.03)

(0.11)

(0.03)

(0.06)

1.11

Capital

surplus at 1

January

Capital

generation

excluding

market

movements

Market

movements

Change in

solvency

capital

requirement

Capital

expenditure

Interim

dividend

Final dividend

Capital

surplus at 31

December

25 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Movement in capital surplus

2024 2023

£bn £bn

Capital surplus at 1 January 1.00 0.57

Capital generation excluding

market movements

0.24 0.46

Market movements 0.10 0.06

Capital generation 0.34 0.52

Change in solvency capital

requirement

(0.03) 0.08

Surplus generation 0.31 0.60

Capital expenditure (0.11) (0.15)

Interim dividend (0.03) –

Final dividend (0.06) (0.05)

Decrease in ineligible Tier 3 capital

– 0.03

Net surplus movement 0.11 0.43

Capital surplus at 31 December 1.11 1.00

Notes:

1. The full year 2023 movement in capital surplus has been re-presented

as explained in the Capital position section of this report.

2. At 31December 2024 and 31December 2023 no ineligible Tier 3

capital arose as the Group's available Tier 3 capital was under the

amount of Tier 3 capital permitted under the Solvency II regulations

(15% of the Group’s SCR). In FY 2023 there was a £0.03 billion

reduction in ineligible Tier 3 capital as ineligible Tier 3 capital reported

at FY 2023 reduced to £nil.

During 2024, the Group generated £0.34 billion of Solvency II

capital from a combination of operating earnings, one-off

benefits from partnerships and market movements. After

achange to the solvency capital requirement of £0.03 billion,

capital expenditure of £0.11 billion and dividends of £0.09 billion,

the net surplus for the year increased by £0.11 billion to £1.11 billion.

Change in solvency capital requirement

2024

£bn

Solvency capital requirement at 1 January 1.13

Parameter changes –

Exposure and model changes 0.03

Solvency capital requirement at 31 December 1.16

During 2024, the Group’s SCR increased by £0.03 billion to £1.16

billion primarily due to updated exposure positions.

Scenario and sensitivity analysis

The following table shows the impact on the Group’s estimated

solvency capital ratio in the event of the following scenarios

asat 31December 2024. The impacts on the Group’s solvency

capital ratio arise from movements in both the Group’s SCR

andownfunds.

Impact on solvency capital ratio

At 31 December

2024

2023

Deterioration of small bodily injury

motor claims equivalent to that

experienced in 2008/09

(5pts) (5pts)

One-off catastrophe loss

equivalent to the 1990 storm

"Daria"

(8pts) (9pts)

One-off catastrophe loss based on

extensive flooding of the River

Thames

(7pts) (7pts)

100 bps increase in PPO real

discount rate

(11pts) (15pts)

100 bps increase in credit spreads

3,4

(6pts) (6pts)

100 bps decrease in interest rates

with no change in the PPO

discount rate

(4pts) (6pts)

Notes:

1. Sensitivities are calculated on the assumption that full tax benefits

can be realised.

2. The periodic payment order ("PPO") real discount rate is an actuarial

judgement which is based on a range of factors including the

economic outlook for wage inflation relative to the PRA discount rate

curve. The sensitivity was previously labelled, “Increase in Solvency II

inflation assumption for PPOs by 100 basis points”. The underlying

sensitivity and historic results remain the same.

3. The sensitivity has been updated to include assets that are accounted

for at amortised cost. Previously only assets that were treated as

FVTPL were included. The comparative period has been restated

onaconsistent basis.

4. Assumes no change to the SCR.

26 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Limitations of sensitivity analysis

– Sensitivities are calculated by applying an instantaneous

change to specific assumptions whilst leaving others

unchanged.

– In reality, changes in the environment occur over time and

are often interrelated; the sensitivities provided do not

capture these interactions.

– The impact of a change in assumptions is often non-linear

and users of this information should not assume that

applying a linear calculation methodology will provide

accurate results.

– The sensitivities are based on a balance sheet at a specific

point in time. The result of a sensitivity analysis will also

change due to business performance and any active

management of assets and liabilities.

– Movements in economic variables are unlikely to follow the

nature of a parallel shift as described in many of the

sensitivities.

– In addition, the sensitivities assume economic variables move

in a similar manner across different currencies and countries,

which is unlikely to be true in reality.

– Our specific portfolio of assets and liabilities will not match

the composition of market indices exactly and using such

indices to estimate an impact on the balance sheet should be

used with caution.

Own funds

The following table splits the Group’s eligible own funds by tier

on a Solvency II basis.

2024 2023

At 31 December £bn £bn

Tier 1 capital before foreseeable

distributions 1.71 1.51

Foreseeable dividend (0.06) (0.05)

Tier 1 capital – unrestricted 1.65 1.46

Tier 1 capital – restricted 0.32 0.32

Eligible Tier 1 capital 1.97 1.78

Tier 2 capital – subordinated debt 0.21 0.22

Tier 3 capital – deferred tax 0.09 0.13

Total eligible own funds 2.27 2.13

Note:

1. Full year 2023 eligible own funds have been re-presented

asexplained in the Capital position section of this report.

During 2024, the Group’s eligible own funds increased from

£2.13 billion to £2.27 billion. Eligible Tier 1 capital after

foreseeable distributions represents 87% of own funds and 170%

of the estimated SCR. Tier 2 capital relates to the Group’s £0.21

billion subordinated debt with no ineligible Tier 1 capital.

Themaximum amount of Restricted Tier 1 capital permitted

asa proportion of total Tier 1 capital under the Solvency II

regulations is 20%. Restricted Tier 1 capital relates solely to the

Tier 1 notes issued in 2017.

The amount of Tier 2 and Tier 3 capital permitted under the

Solvency II regulations is 50% of the Group’s SCR and the

amount of Tier 3 alone is 15% of the Group's SCR. The Group has

no ineligible Tier 3 own funds.

Reconciliation of IFRS shareholders’ equity to Solvency

II eligible own funds

At 31 December

2024 2023

£bn £bn

Total shareholders’ equity 2.14 2.06

Goodwill and intangible assets (0.78) (0.82)

Change in valuation of technical

provisions

0.39 0.34

Other asset and liability

adjustments

(0.04) (0.07)

Foreseeable dividend (0.06) (0.05)

Tier 1 capital – unrestricted 1.65 1.46

Tier 1 capital – restricted 0.32 0.32

Eligible Tier 1 capital 1.97 1.78

Tier 2 capital – Tier 2 subordinated

debt

0.21 0.22

Tier 3 capital – deferred tax 0.09 0.13

Total eligible own funds 2.27 2.13

Notes:

1. Full year 2023 eligible own funds have been re-presented as

explained in the Capital position section of this report.

2. At 31December 2024 and 31December 2023 no ineligible Tier 3

capital arose as the Group's available Tier 3 capital was under the

amount of Tier 3 capital permitted under the Solvency II regulations

(15% of the Group’s SCR).

27 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Reconciliation of IFRS shareholders’ equity to Solvency II eligible own funds (£bn)

2.14

1.65

0.78

0.39

0.04

0.06

0.32

0.21

0.09

Total shareholders’

equity

Goodwill and

intangible assets

Change in

valuation of

technical

provisions

Other asset and

liability

adjustments

Foreseeable

dividend

Total own funds

Tier 1 capital unrestricted

Tier 1 capital restricted

Tier 2 capital – sub debt

Tier 3 capital – deferred tax

Investment portfolio

Our investment strategy aims to deliver several objectives, which are summarised below:

– to ensure there is sufficient liquidity available within the investment portfolio to meet stressed liquidity scenarios;

– to match PPOs and non-PPOs liabilities in an optimal manner; and

– to deliver a suitable risk-adjusted investment return commensurate with our risk appetite.

The strategic asset allocation has continued to be regularly reviewed during 2024. Whilst the core outcome of the review reinforced

investment grade credit as the largest asset class within the portfolio, it suggested some modest changes to other areas of the

portfolio. Following the review, a phased approach during the year was adopted in reinvesting back into investment grade credit

securities and reducing the Group's overweight position in cash. To assist with the matching exercise of the Group’s PPO liabilities,

effective from Q4, the Group diversified further by acquiring some index-linked sovereign.

Asset and liability management

The following table summarises the Group's high-level approach to asset and liability management.

Liabilities Assets Characteristics

More than 10 years, for example PPOs Property and infrastructure debt and index-

linked sovereign

Inflation linked or floating

Short and medium term - all other claims Investment-grade credit Fixed - key rate duration matched

Tier 1 equity Investment-grade credit Fixed

Tier 2 sub-debt Commercial real estate loans and cash Floating

Tier 2 sub-debt fixed Investment-grade credit and cash Fixed or floating

Surplus - tangible equity Investment-grade credit, short-term high

yield, cash and government debt securities

Fixed or floating

28 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

2.27

Asset allocation and benchmarks – U K Insurance Limited

The current strategic benchmarks for U K Insurance Limited are detailed in the following table:

Benchmark

Holding

Actual

Holding

Benchmark

Holding

Actual

Holding

2024 2024 2023 2023

Investment-grade credit 61.0 % 55.7 % 60.0 % 43.8 %

High yield 6.0 % 5.9 % 6.0 % 5.4 %

Investment-grade private placements 0.0 % 1.1 % 0.0 % 1.4 %

Credit 67.0 % 62.7 % 66.0 % 50.6 %

Sovereign 13.0 % 14.4 % 10.0 % 13.0 %

Total debt securities 80.0 % 77.1 % 76.0 % 63.6 %

Infrastructure debt 4.0 % 3.7 % 4.0 % 4.1 %

Commercial real estate loans 4.0 % 2.6 % 6.5 % 2.8 %

Other loans 0.0 % 0.1 % 0.0 % 0.1 %

Cash and cash equivalents 7.0 % 10.9 % 8.0 % 24.1 %

Investment property 5.0 % 5.6 % 5.5 % 5.3 %

Total investment holdings 100.0 % 100.0 % 100.0 % 100.0 %

With the Group ending 2023 in a stronger capital position, a phased approach has been adopted throughout 2024 in reducing

theoverweight holding in cash and reinvesting back into investment grade credit.

Investment holdings and yields

2024 2023

Holding Income Gross yield Holding Income Gross yield

(£m) (£m) (%) (£m) (£m) (%)

Investment-grade credit

2,869.6 79.5 3.1 % 2,288.1 51.1 2.2 %

High yield 302.7 20.0 6.8 % 281.2 16.5 5.9 %

Investment-grade private placements 55.7 1.8 2.9 % 70.6 2.8 3.3 %

Credit 3,228.0 101.3 3.5 % 2,639.9 70.4 2.6 %

Sovereign

746.0 28.5 4.0 % 681.2 8.5 1.4 %

Total debt securities 3,974.0 129.8 3.6 % 3,321.1 78.9 2.4 %

Infrastructure debt 188.7 14.7 7.3 % 214.2 14.8 6.6 %

Commercial real estate loans 135.5 10.0 7.1 % 145.9 12.9 7.5 %

Other loans 5.4 0.1 2.1 % 3.1 0.0 0.4 %

Cash and cash equivalents

791.1 58.2 5.2 % 1,448.0 65.2 5.5 %

Investment property 287.6 17.4 6.1 % 277.1 16.1 5.8 %

Equity investments

20.1 0.0 0.0 % 19.7 0.0 0.0 %

Investment fees – (8.8) – – (9.3) –

Total assets under management 5,402.4 221.4 4.1 % 5,429.1 178.6 3.5 %

Notes:

1. Excludes £298.1 million (2023: £241.8 million) which is invested within money market funds under the 100% quota share reinsurance treaty for the

Brokered commercial business, which is operated on a funds withheld basis and is retained as security against the reinsurer's obligations.

2. Asset allocation at 31December 2024 includes investment portfolio derivatives, which have a mark-to-market liability value of £19.6 million which

issplit as assets of £19.6 million included in investment grade credit and of £nil included in sovereign debt (31December 2023: mark-to-market

asset value of £12.0 million and £0.4 million liability respectively). This excludes non-investment derivatives that have been used to hedge

operational cash flows.

3. Net of bank overdrafts: includes cash at bank and in hand and money market funds.

4. Equity investments consist of quoted shares and insurtech-focused equity funds. The insurtech-focused equity funds are valued based on external

valuation reports received from a third-party fund manager.

29 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

At 31December 2024, total assets under management of

£5,402 million were 0.5% higher than at the start of the year.

Total debt securities were £3,974 million (31December 2023:

£3,321 million), of which 2.2% were rated as ‘AAA’ and a further

63.1% were rated as ‘AA’ or ‘A’. The average duration at

31December 2024 of total debt securities was 2.5 years

(31December 2023: 2.1 years).

At 31December 2024, total unrealised losses on investments

held at FVTPL were £90 million (31December 2023: £137 million

unrealised losses).

FY 2024 FY 2023

Note £m £m

Investment income 207.5 146.3

Investment fees (7.2) (7.2)

Net investment income in

operating profit – ongoing

operations 200.3 139.1

Net investment income –

Brokered commercial

business 33.6 35.2

Net investment income –

Non-core and Run-off 1.3 4.3

Net investment income –

total group 4 235.2 178.6

Net FV gains 6 37.1 124.4

Total investment income

recognised through the

statement of profit or loss 6 272.3 303.0

Net investment income in operating profit for ongoing

operations increased to £200 million (2023: £139 million)

primarily driven by interest rates remaining high following an

environment of global interest rates rising during the first half

of 2023, and a phased reinvestment back into investment grade

credit more aligned with the Group’s benchmark weighting.

Fair value gains were £37 million (2023: £124 million), with a

tightening of credit spreads and interest rates accounting for

the majority of the movement.

Net asset value

2024 2023

Note

£m £m

Net assets 13 2,137.9 2,058.2

Goodwill and other

intangible assets 13 (776.3) (818.6)

Tangible net assets 13 1,361.6 1,239.6

Closing number of Ordinary

Shares (millions) 13 1,301.0 1,297.7

Net asset value per share

(pence) 13 164.3 158.6

Tangible net asset value per

share (pence)

13 104.7 95.5

Note:

1. See glossary on pages 238 to 241 for definitions and Appendix A -

Alternative performance measures on pages 242 to 245.

Net assets at 31December 2024 increased by £80 million

to£2,138 million (31December 2023: £2,058 million) and a

reduction in own shares held by the Group, increasing the

closing number of shares, resulting in tangible net assets per

share increasing to 104.7 pence (31December 2023: 95.5 pence).

Leverage

The Group’s financial leverage reduced slightly to 22.1%

(2023: 22.7%).

2024 2023

£m £m

Shareholders’ equity 2,137.9 2,058.2

Tier 1 notes 346.5 346.5

Financial debt – subordinated debt 259.1 258.8

Total capital employed 2,743.5 2,663.5

Financial leverage ratio

22.1% 22.7%

Note:

1. Total IFRS financial debt and Tier 1 notes as a percentage of total IFRS

capital employed.

Credit ratings

Moody’s Investors Service provides insurance financial-strength

ratings for U K Insurance Limited, our principal underwriter.

Moody’s rate U K Insurance Limited as ‘A2’ for insurance

financial strength (strong) and has been put on review for

potential upgrade.

Reserving

We make provision for the full cost of outstanding claims from

the general insurance business at the statement of financial

position date, including claims estimated to have been

incurred but not yet reported at that date and associated

claims handling costs. We consider the class of business, the

length of time to notify a claim, the validity of the claim against

a policy, and the claim value. Claims reserves could settle across

a range of outcomes, and settlement certainty increases over

time. However, for bodily injury claims the uncertainty is greater

due to the length of time taken to settle these claims. The

possibility of annuity payments for injured parties also increases

this uncertainty.

The liability for incurred claims ("LIC") reserves are the

combination of best estimate of liabilities ("BEL") and a risk

adjustment, which is set around the 75th percentile on an

ultimate basis and provides a margin on top of the BEL

reflecting the uncertainty on a best estimate basis. The BEL is

set on a discounted basis and includes an allowance for direct

and indirect claims handling expenses, as well as events not in

data ("ENIDs"), set by reference to various actuarial scenario

assessments. ENIDs also consider other short- and long-term

risks not reflected in the actuarial inputs, as well as the

Corporate Actuarial Function’s view on the uncertainties in

relation to the BEL.

The most common method of settling bodily injury claims is by

a lump sum. When this includes an element of indemnity for

recurring costs, such as loss of earnings or ongoing medical

care, the settlement calculations apply the statutory discount

rate (known as the Ogden discount rate) to reflect the fact that

payment is made on a one-off basis rather than periodically

over time. The current Ogden discount rate is 0.5% for England

and Wales and its equivalent is also 0.5% in Scotland and

Northern Ireland.

30 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

The Ogden discount rate for England and Wales increased

from minus 0.25% on 11 January 2025. The bodily injury discount

rate increased in Scotland and Northern Ireland on 24

September 2024 from minus 0.75% and minus 1.5%,

respectively. The impact of potential future changes in the

discount rate is shown in the sensitivity table below. Since 2021,

we have reduced the level of Motor reinsurance purchased,

resulting in higher net reserves for accident years 2021 to 2024.

If the claimant prefers, large bodily injury claims can be settled

using a PPO. This is an alternative way to provide an indemnity

for recurring costs, making regular payments, usually for the

rest of the claimant’s life. As it is likely to take time to establish

whether a claimant will prefer a PPO or a lump sum, until a

settlement method is agreed we make assumptions about the

likelihood that claimants will opt for a PPO. This is known as the

PPO propensity.

At 31 December 2024, the real discount rate for PPOs is 1.5%

(2023: 0.7%), the combination of cash flow weighted inflation

and discounting of 3.7% (2023: 3.9%), which allows for increased

short-term ASHE 6115 inflation of 6.5% over the next 12 months,

followed by a number of years of heightened inflation before

reverting to a long term assumption of 3.5%, and a yield curve

based discount rate of 5.2% (2023: 4.6%).

The assessment of claims inflation, and the underlying drivers of

claims inflation, remains a key consideration in deriving the

reserves. Claims inflation is correlated with price inflation but

there are several individual factors that are considered in

addition, for example the salary of care workers, the price of

used cars, judicial costs and repair costs. A range of general and

specific scenarios for excess inflation has been considered in

the reserving process.

The Group's prior-year reserves development (excluding

restructuring and one-off costs) in 2024 was a reserve release of

£5 million (2023: £124 million), driven by reserve releases in

Motor and Non-core and Run-off, partially offset by reserve

strengthening in Non-Motor and Brokered commercial.

Net liability for incurred claims

31 Dec 2024 31 Dec 2024 31 Dec 2024 31 Dec 2023 31 Dec 2023 31 Dec 2023

Estimate of

present value

cash flows

Risk

adjustment Total

Estimate of

present value

cash flows

Risk

adjustment Total

£m £m £m £m £m £m

Motor (1,661.8) (77.8) (1,739.6) (1,634.9) (79.9) (1,714.8)

Home (488.3) (20.9) (509.2) (483.2) (22.4) (505.6)

Total ongoing operations

(2,150.1) (98.7) (2,248.8) (2,118.1) (102.3) (2,220.4)

Brokered commercial business

1,2

26.8 (10.8) 16.0 (354.7) (18.5) (373.2)

Run-off partnerships (72.1) (2.7) (74.8) (136.8) (4.5) (141.3)

Total (2,195.4) (112.2) (2,307.6) (2,609.6) (125.3) (2,734.9)

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245.

2. 2024 balances reflects 12 months of the Royal & Sun Alliance Insurance Limited quota-share reinsurance compared with three months in 2023.

31 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Sensitivity analysis – changes in: the discount rate used in relation to PPOs and other claims, the assumed

Ogden discount rate and claims inflation

The table below provides a sensitivity analysis of the potential net impact of a change in a single factor (for example the illiquidity

premium ("ILP")) with all other assumptions left unchanged. Other potential risks beyond the ones described could have additional

financial impacts on the Group.

Increase/(decrease) in profit

before tax and equity gross of

reinsurance

Increase/(decrease) in profit

before tax and equity net of

reinsurance

2024 2023 2024 2023

At 31 December

£m £m £m £m

Discount curve - PPOs

Impact of an increase in the ILP of the discount rate used in the calculation

of present values of 100 basis points

87.0 95.0 38.5 39.0

Impact of a decrease in the ILP of the discount rate used in the calculation

of present values of 100 basis points

(115.1) (127.8) (51.4) (52.1)

Discount curve - other claims

Impact of an increase in the ILP of the discount rate used in the calculation

of present values of 100 basis points

65.1 55.9 41.3 37.2

Impact of a decrease in the ILP of the discount rate used in the calculation

of present values of 100 basis points

(68.3) (58.6) (43.2) (38.9)

Ogden discount rate

Impact of the Group reserving at a discount rate of 1.5% compared to 0.5%

(2023: 0.75% compared to minus 0.25%)

143.6 105.1 57.7 48.1

Impact of the Group reserving at a discount rate of minus 0.5% compared

to 0.5% (2023: minus 1.25% compared to minus 0.25%)

(204.9) (220.6) (73.8) (97.0)

Claims inflation

Impact of a decrease in claims inflation by 200 basis points for two

consecutive years

129.7 112.8 73.9 71.7

Impact of an increase in claims inflation by 200 basis points for two

consecutive years

(131.7) (114.6) (75.0) (72.8)

Risk adjustment (restated)

Impact of a risk adjustment at the 70th percentile compared to the booked

risk adjustment at the 75th percentile

52.3 52.3 26.9 28.9

Impact of a risk adjustment at the 80th percentile compared to the booked

risk adjustment at the 75th percentile

(61.4) (60.5) (30.2) (33.9)

The PPO sensitivity above is calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves

asat 31December 2024. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance

bad debt assumptions.

Notes:

1. These sensitivities exclude the impact of taxation.

2. These sensitivities reflect one-off impacts at the statement of financial position date and should not be interpreted as predictions.

3. The sensitivities relating to an increase or decrease in the discount rate used for PPOs illustrate a movement in the time value of money. The PPO

sensitivity has been calculated on the direct impact of the change in the discount rate with all other factors remaining unchanged. The sensitivity is

calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves as at 31December 2024. It does not take into

account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.

4. The sensitivities relating to an increase or decrease in the yield curve used to discount all reserves excluding PPOs illustrate a movement in the

time value of money from the assumed level at the statement of financial position dates. The sensitivity has been calculated on the direct impact of

the change in the discount curve with all other factors remaining unchanged.

5. Ogden discount rate sensitivity has been calculated on the direct impact of a permanent change in the discount rate in England and Wales with

all other factors remaining unchanged.

6. The risk adjustment sensitivities are with respect to the discounted risk adjustment at the statement of financial position dates, with the year-end

2023 sensitivities having been restated from an undiscounted basis as reported in the Group's 2023 Annual Report and Accounts.

32 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Reinsurance

The objectives of the Group’s reinsurance strategy are to reduce

the volatility of earnings, facilitate effective capital

management, and transfer risk outside the Group’s risk

appetite. This is achieved by transferring risk exposure through

various reinsurance programmes with the material ones being:

– Catastrophe reinsurance to protect against an accumulation

of claims arising from a natural perils event. The retained

deductible is £100 million and cover is placed annually on 1

January up to a modelled 1-in-200 year loss event.

– Motor reinsurance to protect against a single claim or an

accumulation of large claims, which renews on 1 January. The

retained deductible is set at an indexed level of £5 million per

claim up to an unlimited amount.

– Motor excess of loss reinsurance for Motability Operations has

been renewed with effect from 1 October 2024. The retained

deductible is set at an indexed level of £5 million per claim up

to an unlimited amount. Motability policies are 80% quota

share reinsured.

– Following the Group's sale of its Brokered commercial

business to RSA Insurance Limited, quota share reinsurance

between the two parties incepted on 1 October 2023, on an

earned basis, covering 100% of all premiums earned and

claims incurred after this date.

– Whole account (excluding Motability) structured quota share

reinsurance with a 10% cessation, ceded on a funds-withheld

basis with inception on 1 January 2023 for a three-year term.

Tax management

The Board recognises that the Group has an important

responsibility to manage its tax position effectively. The Board

has delegated day-to-day management of taxes to the Chief

Financial Officer and oversight is provided by the Audit

Committee.

These arrangements are intended to ensure that the Group

complies with applicable laws and regulations; meets its

obligations as a contributor and a collector of taxes on behalf of

the tax authorities; and manages its tax affairs efficiently,

claiming reliefs and other incentives where appropriate.

Tax authorities

The Group has open and co-operative relationships with the tax

authorities with which it deals in the countries where the Group

operates, namely the UK, the Republic of Ireland, South Africa

and India.

Tax policy and governance

The Group’s tax policy has been reviewed and approved by the

Audit Committee. The Group Tax function supports the Chief

Financial Officer in ensuring the policy is adhered to at an

operational level.

For more information please see our published Group Tax

policy on the Group’s website at:

www.directlinegroup.co.uk/en/sustainability/reports-policies-

and-statements.html

Total tax contribution

The Group’s direct and indirect tax contribution to the UK

Exchequer is significantly higher than the UK corporation tax

that the Group would ordinarily pay on its profits. The Group

collects taxes relating to employees and customers on behalf of

the UK Exchequer and other national governments. It also

incurs a significant amount of irrecoverable value added tax

relating to overheads and claims. Taxes borne and collected in

other tax jurisdictions have not been included in this note as

the amounts are minimal in the context of the wider UK Group.

During 2024, the sum of taxes either paid or collected across

the Group was £1,032.1 million

The Group's 2024 tax contribution is detailed further on page 50

in Society in the Sustainability section.

Jane Poole

Chief Financial Officer

33 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Operating profit/

(loss)

£107m

2023: £(320)m

Gross written

premium

£2,700m

2023: £2,048m

In-force policies

(thousands)

3,831

2023: 4,181

Gross written premium by channel

24.3%

33.3%

42.4%

Direct

Price comparison websites

Partnerships

Performance summary

Operating profit of £107 million, an

increase of £427 million as the result

started to benefit from pricing and

underwriting actions taken during 2023.

Gross written premium grew by 31.8%.

In-force policies reduced by 8.4% as

wecontinued to focus on disciplined

underwriting. Direct own brand policy

count reduced by 13.2%.

During 2024, Motor's return to profitability was delivered by two

key factors. Firstly, the pricing and underwriting actions taken

during 2023 continued to earn through and secondly, a return

to favourable prior year reserve development. Alongside a

higher investment result, this delivered a £427 million increase

in operating profit to £107 million.

2024 was a transitional year for Motor earnings given the net

insurance margin was a positive 4.9% in the second half of the

year, compared with negative 3.0% in the first half which was

impacted by the below target margin business written during

the first half of 2023.

34 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Motor

Financial summary

2024 2023

£m £m

In-force policies

(thousands)

3,831

4,181

Of which:

Direct own brands

2,927

3,373

Partnerships

904

808

Gross written premium

2,700.0 2,047.8

Of which:

Direct own brands

1,554.9 1,601.3

Partnerships 1,145.1 446.5

Operating profit/(loss)

107.0 (319.6)

Profit/(loss) before other finance costs 207.0 (274.4)

Net insurance margin

1.0% (21.1%)

Net insurance claims ratio

74.9% 95.5%

Current-year attritional net insurance claims ratio

76.0% 86.7%

Prior-year reserves development ratio

(1.1%) 8.8%

Net acquisition costs ratio

4.6% 5.7%

Net expense ratio

19.5% 19.9%

In-force policies and gross written premium

andassociated fees

Motor premiums grew by 31.8% compared to 2023 driven by the

Group's partnership with Motability, where we had a full year of

premium in 2024 compared to only seven months during 2023.

Our partnership with Motability accounts for around 41% of

Motor gross written premiums, is developing well and delivered

14% growth in policy count during 2024.

Motor average premiums

2,3

£ FY 2024 FY 2023

New business 583 551

Renewal 508 441

Own brands 530 470

Overall the motor market remained challenging in the second

half of 2024 and we continued to trade with discipline. This

resulted in a further reduction in our own brand policy count,

which for 2024 was down 13.2%. The reduction in policy count

was partly offset by an increase in average premiums, which

were in line with market, leading to a 2.9% reduction in our own

brand

gross written premiums and associated fees. Retention

across own brands improved during the year while we also

delivered 3% policy count growth in the PCW channel.

Underwriting

The current-year attritional net insurance claims ratio improved

by 10.7pts to 76.0% reflecting the benefit from the pricing

actions taken during 2023 and 2024 and claims inflation

tracking in line with expectations of high single digits. Prior-year

reserves saw a release of £21 million compared with a reserve

strengthening of £138 million in 2023.

Net insurance margin and operating profit/(loss)

The combination of an improved current-year attritional net

insurance claims ratio, and prior year development ratio,

delivered a 22.1pt improvement in the net insurance margin

to1.0%, (2023: minus 21.1%). The insurance service result was a

profit of £19 million and operating profit was £107 million due

tohigher investment income.

Profit before other finance costs

Profit before other finance costs improved to a profit of £207

million from a loss of £274 million in 2023 due to the factors

described above together with positive movements from

changes in the yield curve.

Notes:

1. See glossary on pages 238 to 241 for definitions and Appendix B – Management view statements of profit and loss, expenses, average premiums,

gross written premium and associated fees and in-force policies on pages 246 to 253.

2. Direct own brands include in-force policies under the Direct Line, Churchill, Darwin, Privilege and By Miles brands.

3. Average premium figures quoted relate to Motor own brands excluding the By Miles brand.

35 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Operating profit

£98m

2023: £130m

Gross written

premium and

associated fees

£1,032m

2023: £930m

In-force policies

(own brands)

(thousands)

3,469

2023: 3,503

Gross written premium by product (£m)

637

133

262

In-force policies by product (thousands)

2,461

1,780

755

Home

Rescue

Commercial Direct

Performance summary

Operating profit reduced to £98 million,

primarily due to higher weather-related

claims and prior-year strengthening.

Total gross written premium grew 11.0%

to £1,032 million. Direct own brand gross

written premium grew 13.1% to £831 million.

Total in-force policies 3.1% lower at 5.0

million. Direct own brand policies were

1.0% lower at 3.5 million.

Non-Motor delivered a solid result, with double-digit gross

written premium growth, a net insurance margin of 8.9%

(7.0%when normalised for event weather) and operating profit

of £98million.

In-force policies and gross written premium

andassociated fees

Non-Motor delivered gross written premium growth of 11.0%

during 2024, which is ahead of our target of 7% to 10% CAGR

announced at the Capital Markets Day in July 2024. Growth was

supported by a double digit increase of 15.5% in Home and 8.8%

in Commercial Direct while Rescue premiums were 3.3% lower.

Home own brands returned to policy count growth in 2024 as

competitiveness improved due to significant premium inflation

in the market, particularly in the first half. Strong retention

anda 13% increase in average premiums delivered own brand

gross premium growth of 17.5% year-on-year. Home

partnerships premium increased by 9.7% during the year.

36 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Non-Motor

Financial summary

2024 2023

In-force policies

(thousands) 4,996

5,158

Home 2,461

2,444

Rescue 1,780

1,965

Commercial Direct 755

749

Of which: Own brands

3,469.0 3,503.0

Gross written premium and associated fees

1,031.9 929.8

Home

636.8 551.5

Rescue

132.8 137.3

Commercial Direct

262.3 241.0

Of which: Own brands

831.3 734.9

Operating profit

98.0 129.7

Profit before other finance costs 110.4 156.9

Net insurance margin

8.9% 14.0%

Net insurance claims ratio

59.8% 57.5%

Current-year attritional net insurance claims ratio

52.8% 53.7%

Prior-year reserves development ratio

2.5% 0.7%

Event weather ratio

4.5% 3.1%

Net acquisition costs ratio

9.7% 8.9%

Net expense ratio

21.6% 19.6%

Normalised net insurance margin

7.0% 10.2%

Home average premiums

£ FY 2024 FY 2023

New business 259 206

Renewal 278 249

Own brands 274 242

In Commercial Direct, gross written premium grew 8.8%

compared to the prior year driven by growth in Landlord and

small-to-medium enterprises ("SME") while Van was broadly

stable. Policy count was 0.8% higher as we continued to target

growth in the attractive Landlord and SME markets, more than

offsetting a reduction in Van policies, where we increased

average premiums to take into account elevated levels of

inflation. Overall, retention was stable across the Commercial

Direct book.

In Rescue, policy count was 9.4% lower largely due to

partnerships while gross written premium and associated

feeswas 3.3% lower than prior year, largely due to lower

linkedpremiums, where we sell a Rescue policy alongside

aMotor policy.

Underwriting

The insurance service result was £85 million (2023: £120 million).

The net insurance claims ratio was 59.8%, 2.3pts higher

thanprior year, with the increase largely driven by higher

weather-related claims and prior year strengthening.

Weatherevent-related claims in Home and Commercial were

£43 million, £16 million higher than prior year. The 2025 event

weather claims assumption is £70 million (2024: £62 million.)

The current-year net insurance attritional claims ratio was

52.8%, 0.9pts lower than prior year. The prior-year claims

development ratio was 2.5%, mainly reflecting strengthening

inassumptions for subsidence and escape of water claims from

older years.

Net insurance margin and operating profit

The net insurance margin was 8.9% or 7.0% when normalised

for event weather, 3.2pts lower than prior year. However,

underlying margins were strong adjusting for the attritional

weather and prior year movements.

Operating profit was £98 million or £79 million normalised for

event weather.

Profit before other finance costs

Profit before other finance costs reduced to £110 million from a

profit of £157 million at 2023 due to the factors described above

alongside a small reduction in benefits received from changes

in the yield curve.

Notes:

1. Appendix B – Management view statements of profit and loss,

expenses, average premiums, gross written premium and associated

fees and in-force policies on pages 246 to 253.

2. Direct own brands include in-force policies under the Direct Line,

Churchill and Privilege brands.

37 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Our Risk Management Framework

The Risk Management Framework sets out, at a high level,

theGroup's approach to setting risk strategy, and managing

risks to the strategic objectives and day-to-day operations

ofthe business. The Risk Management Framework is designed

to manage the Group’s risk proactively and to enable dynamic

risk-based decision making.

This includes clear accountabilities and risk ownership

designed to ensure that we identify, manage, mitigate and

report on all key risks and controls, and is governed through

theGroup's three lines of defence model:

First line: Management is responsible for embedding risk

management into business as usual and change processes

whilst creating transparent reporting of risks and management

actions. The Chief Controls Office ("CCO") supports

Management and Senior Management Function ("SMF")

holders in discharging their responsibilities with respect to

riskand control.

Second line: Is responsible for the design of the Risk

Management Framework and oversight of its implementation

with the provision of proportionate oversight of key business

decisions and challenge of risks, events and management

actions throughout the Group.

Third line: Group Audit is responsible and accountable for

providing an independent and objective view of the adequacy

and effectiveness of the Group’s risk management, governance

and internal control framework.

Aligned to the three lines of defence model, the Risk

Management Framework articulates the high-level principles

and practices needed to achieve appropriate risk management

standards and the inter-relationships between components

ofthe Risk Management Framework.

The Risk Policies and Minimum Control Standards ("MCS")

arekey elements of the Risk Management Framework that

interpret risk management control objectives into a set of risk

and control requirements to be implemented across the Group.

The Group’s key controls are aligned to these control objectives

and are subject to regular assessment.

The Group uses a systematic approach for the assessment

ofrisks and the controls in place to mitigate risks, through

theRisk and Control Self-Assessment ("RCSA") process.

Theobjective of RCSA is to ensure that the Group understands

the risks to the achievement of its strategic objectives,

andtoprovide reasonable assurance over the effectiveness

ofmitigating controls, and to ensure an up to date and

consistent view of risks and controls.

Risk appetite

Our risk appetite statements define the opportunities and

associated level of risk the Group is prepared to accept to

achieve its business objectives. These statements, supported by

a suite of Key Risk Indicators ("KRIs"), support management in

making decisions aligned to the risk appetite of the Group. Risk

appetite statements are both qualitative and quantitative risk

statements and forward- and backward-looking. We review our

risk appetite statements and KRIs annually.

The Risk Appetite Framework is comprised of Overarching Risk

Appetite Statements, set out below, that are approved by the

Board annually, with risk appetite statements documented

inour Risk Policies.

Overarching risk objective

The Group recognises that its long-term sustainability

is dependent on having sufficient economic capital

tomeet its liabilities, therefore protecting customers,

its reputation and the integrity of its relationship with

policyholders and other stakeholders. As part of this,

itsappetite is for general insurance risk, focusing on

personal lines retail and small and medium-sized

enterprise insurance inthe United Kingdom. DLG has

appetite for non-insurance risks, as appropriate, to

enable and assist itto undertake its primary activity

ofinsurance.

Three strategic risk objectives

1. Maintain capital adequacy

The Group seeks to hold capital resources in the range

of 140% to 180% of the partial Internal Model Solvency

Capital Requirement ("SCR"). This is the buffer the

Group wishes to hold on top of its 1 in 200 regulatory

requirements, with a green threshold set at 155% of

SCR to provide an early warning indicator, but a target

of 180% of SCR consistent with its Dividend Policy.

2. Stable/efficient access to funding

andliquidity

The Group aims to meet both planned and

unexpected cash outflow requirements, including

those requirements that arise following a 1-in-200 year

insurance, market or credit risk event.

3. Maintain stakeholder confidence

The Group has no appetite for material risks resulting

in reputational damage, regulatory or legal censure,

poor customer outcomes, fines or prosecutions and

other types of non-budgeted operational risk losses

associated with the Group’s conduct and activities.

TheGroup’s objective is to maintain a robust and

proportionate internal control environment.

38 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Risk management

Managing risk in line with our strategy

Our management team, with oversight from the Board, is

responsible for developing our strategy. Our strategic planning

process aims to ensure we have developed clear objectives and

targets, and identified the actions needed to deliver them,

including the management of risks arising from the

strategicplan.

The Risk Strategy supports optimal business decision-making

through the proactive identification, assessment and

management of risks to the Group and its pursuit to be the

customers’ insurer of choice.

The Group recognises the need to ensure that:

– the Risk Strategy is aligned to the Group’s vision, purpose and

strategic objectives;

– risk and capital requirements are managed within the

Board’s risk appetite;

– the reputation of the Group is maintained;

– strong risk management capability is in place across the

business; and

– it drives for sustainable value for shareholders.

This is delivered by ensuring that:

– a robust, proportionate, proactive and forward-looking Risk

Management Framework is maintained to support the

business in achieving its strategic objectives;

– Risk Strategy aligns to the Group Strategy;

– risk management within the Group is a forward-looking

activity;

– strong risk behaviours and attitudes are exhibited across the

Group; and

– effective relationships are maintained with the Group’s

regulators.

Strategic

Objectives

Vision &

Business

model

Inherent

Risk

Insurance

Market

Credit

Liquidity

Operational

Conduct

Regulatory

Strategic

Group

“What the Group

istrying to achieve

as a Company”

“The risks (and

opportunities)

the Group’s

Objectives

expose it to”

The Group Enterprise Risk Management Framework

("ERMF")

Line of Defence 2

Line of Defence 3

Line of Defence

– Risk Policies &

Minimum Control

Standards

– Risk Appetites

– Risk & Control Self-

Assessment

– Monitoring &

Reporting

– Governance

– Business Processes

– Risk & Compliance

Function

– Set the

overarching ERMF

– Risk Management

Committee (RMC)

– Group Audit

Function

Internal Control Framework (ICF)

Control Environment

(Tone, Integrity, Values, Risk Culture,

RiskMaturity)

Internal Control Standards

(Structures, Policies, Standards,

Role&Responsibilities)

Control Activities

(Internal controls, Key Controls, Testing)

“How the Group manages those risks (and opportunities)”

Residual

Risk

Insurance

Market

Credit

Liquidity

Operational

Conduct

Regulatory

Strategic

Group

“The Backstop to protect

customers if the Group

getsitwrong”

39 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Capital

Our principal risks and uncertainties have been identified as those most likely to materially impact the Group's solvency capital.

These risks and uncertainties have been assessed as events or circumstances that might threaten the Group’s business model,

future performance, solvency or liquidity and reputation. The principal risks presented here are not intended to be exhaustive but

are consistent with those reported to the Risk Management Committee and Board Risk Committee for review and discussion.

Principal risk Description Risk commentary

Insurance Risk

Trend – stable

Insurance risk is the

risk arising from

insurance obligations,

in relation to the

perils covered and

the processes used in

the conduct of

business. It takes

account of the

uncertainty related to

the Group’s existing

insurance and

reinsurance

obligations as well as

to new business

expected to be

written. It includes

the risk of loss, or of

adverse change in

the value of insurance

liabilities, resulting

from:

– fluctuations in the

timing, frequency

and severity of

insured events, and

in the timing and

amount of claim

settlements; and

– significant

uncertainty of

pricing and

provisioning

assumptions

related to extreme

or exceptional

events (for

example

catastrophe risk).

Key drivers of the outlook for Insurance risk

include reserve, underwriting, distribution,

pricing and reinsurance risks. Issues relating to

claims inflation, ongoing Motor insurance

affordability concerns resulting in the creation of

the Motor Insurance Task Force, motor market

premium softening and the uncertainty in

economic environment, with elevated

geopolitical tensions, have been key areas of

focus for the Group in 2024.

Claims trends have been significantly impacted

by persistent claims inflation and large claims,

particularly in the motor market, contributing to

uncertainty in claims reserving and pricing in

2024 and beyond. This notwithstanding, our

reserving processes reflect improved insight in

claims experience and inflation trends resulting

from extensive work undertaken across the

business. In addition, the Group is continuing its

pricing and underwriting transformation

journey, targeting technical excellence in

support of best market practice in line with our

strategic objectives. This includes ongoing

monitoring of our underwriting risk profile

following the launch of the Direct Line for Motor

brand on price comparison websites in

December 2024.

Key risk themes relating to this category include

the macroeconomic environment, regulatory

and legislative environment, climate,

organisational resilience and agility, and a

softening motor market. We use scenario

testing to understand the potential financial

impacts of the key risks and we continue to

monitor them closely.

With respect to climate change, this

potentially poses significant risks to our

business in the longer term, particularly in

terms of weather-related perils. It could

impact the frequency and severity of events

such as floods, windstorms, freezes,

droughts, and subsidence, leading to more

extreme occurrences in the future. To

mitigate our exposure to these extreme

weather events, the Group employs

reinsurance arrangements and participates

in the Flood Re scheme. Additionally, we use

stress and scenario testing to quantify the

potential short and long term impacts of

climate change on our customers, business

model, and financial performance. These

stress tests particularly focus on the impact

on liabilities in the property (Home and

Commercial) lines of business.

Market Risk

Trend – stable

Market risk is the risk

of loss resulting from

fluctuations in the

level and in the

volatility of market

prices of assets,

liabilities and financial

instruments.

Key drivers of market risk are the sensitivity of

the values of our assets and investments to

changes in credit spreads, our exposure to losses

as a result of changes in interest rates, term

structure or volatility, and wider market volatility,

including the key risk themes of the impact

from the macroeconomic environment and

geopolitical landscape. In particular, the

worldwide and UK economic environment

remains uncertain with elevated geopolitical

tensions that could affect equity, credit and

property markets and lead to credit spread

increases, foreign exchange rate volatility and

the impact of interest rate changes.

Our Board has approved a strategic asset

allocation and investment strategy that

limits our exposure to individual asset classes

and illiquid investments. Technical provisions

are affected by changes in interest rates and

inflation, and in particular Periodic Payment

Orders as these are of longer duration. We

apply asset liability matching techniques to

partially mitigate these sources of risk. We

also use risk reduction techniques such as

hedging foreign currency exposures with

forward contracts.

40 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Principal risks and uncertainties

Principal risk Description Risk commentary

Credit Risk

Trend – stable

The risk of loss

resulting from default

in obligations due

from, and/or changes

in the credit standing

of, issuers of securities,

counterparties or any

debtors to which the

Group is exposed.

The Group monitors its key counterparties,

specifically the security of the issuers within its

investment portfolio and that of its reinsurance

counterparties.

To manage credit risk, we set credit limits for

each material counterparty and actively monitor

credit exposures, whilst also considering new

future exposures. With respect to reinsurance

counterparty credit risk, our exposures are

mainly held with reinsurers with high credit

ratings. Reinsurance is only purchased from

reinsurers that hold a credit rating of at least A–

for short tail reinsurance and the majority of

long tail reinsurance is to be purchased from

reinsurers rated A+ or above.

Exceptions to the above or strategic

reinsurance arrangements are assessed on a

case-by-case basis and follow clearly defined

internal credit risk processes.

Finally, we also have well defined criteria to

determine which customers and brokers are

offered and granted credit.

Operational Risk

Trend – stable

Operational risk is the

risk of loss due to

inadequate or failed

internal processes or

systems, including

from human error or

from external events.

Risks relating to this

category include,

technology and

infrastructure, change,

cyber, operational

disruption, financial

reporting, and

procurement and

outsourcing.

Our approach is to manage our operational

risksproactively, to mitigate potential customer

harm, regulatory or legal censure, financial,

reputational, or environmental, social,

governance ("ESG") impacts. This is principally

achieved through robust control, and the

Groupis continuing to strengthen its control

environment through various improvement

initiatives across the business. This includes

implementation of a new Risk & Control Self-

Assessment process, facilitated by a new Chief

Controls Office function in the first line, ensuring

greater consistency in control assessment and

testing. Material progress has been made

in2024, with further embedding to continue

into2025.

Technology and infrastructure risk is defined

asthe risk of loss resulting from inadequate

orfailed information technology processes

through strategy, design, build or run

components internally or externally provisioned.

This includes IT resilience and cyber security.

Changes to our technology environment follow

an industry standard service management

framework that provides risk assessment,

planning, testing and validation prior to

production with ongoing control and

performance monitoring.

Change risk is defined as the risk of failing to

manage the change portfolio and associated

change initiatives, within desired scope, time,

cost, quality and Group risk appetite, leading

toa failure to deliver strategic benefits, good

customer outcomes and possibly causing

business disruption. The Group’s Transformation

Management Office (“TMO”) is responsible for

implementing and embedding changes to

further mature our organisational change

portfolio management, delivery capability, and

associated control environment.

Cyber risk arises from inadequate internal and

external cyber security, where failures impact

the confidentiality, integrity and availability

ofour data. The Group’s Chief Information

Security Officer is responsible for ensuring the

appropriate cyber security policies and controls

are in place and operating effectively.

Operational disruption risk is the risk of

failing to deliver products and services at an

acceptable predefined level following

disruptive events. The Group’s Operational

Resilience Framework sets out requirements

for maintaining resilience which includes,

identifying Important Business Services

("IBS"), setting tolerances, and regularly

assessing the Group’s ability to remain

within these tolerances during disruptions.

The Group has planned mitigations in the

event of a disruptive event and monitors a

suite of IBSs. All IBSs undergo scenario

testing, as per regulatory guidelines, to

identify vulnerabilities and develop suitable

mitigations.

Financial reporting risk is defined as the risk

of material misstatement, misrepresentation

or untimely delivery of external or internal

financial information, including regulatory

financial information, resulting in

inappropriate movements in share price,

reputational damage, poor decision making/

planning in relation to finance,

tax,investment, strategy and capital, or

regulatory fines. During the Group's half year

results preparation, a miscalculation was

identified within the Group's audited

Solvency II Own Funds for the year ended

2023 as announced on 23 August 2024.

TheGroup has taken action to strengthen

the control environment in relation to

thespecific area where the miscalculation

occurred.

Procurement and outsourcing is the risk of

an outsourcing arrangement that is deemed

critical or material failing to deliver the

service provision in question to the expected

levels. The Group adheres to a defined

framework for the appointment and

management of suppliers, outsourcing

arrangements and Intra-Group relationships.

The Group manages its suppliers through

ongoing oversight and assurance.

41 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Principal risk Description Risk commentary

Conduct and

regulatory

compliance risk

Trend – stable

The risk of failing to

deliver good customer

outcomes and/or

failing to deliver on

our regulatory

commitments.

The Group sees its obligations to deliver good

customer outcomes as a priority area of focus.

Our approach is to act promptly to identify and

address the risk of failing to deliver good

customer outcomes.

The introduction of the Consumer Duty in July

2023 represented a significant shift in the FCA’s

expectations of firms and applies to all of the

Group’s regulated products. The FCA has been

clear that the Duty is not a “once and done”

exercise and firms must ensure they are

learning and improving continuously. The Board

approved the Annual Consumer Duty Report in

July 2024, which includes areas of focus to

deliver improvements on over the next 12

months, with work underway.

The outlook for regulatory compliance risk is

stable as financial institutions continue to

embed multiple regulatory changes, alongside

the challenging external environment referred

to in Strategic Risk and Insurance Risk. Further,

regulators are increasingly expecting financial

institutions to balance commercial and societal

outcomes in decision-making, as they seek to

meet the needs of different stakeholders (for

example, relating to climate change).

The FCA published two regulatory

requirements for Direct Line Group in 2023:

The FCA required the Group to undertake

past business reviews to

– review motor total loss claims settled

between 1 September 2017 and 17 August

2022 to identify policyholders who may

have received unfair settlements and

provide them with redress; and

– review renewal prices charged since

1January 2022, identify any that didn’t

comply with the rules relating to use

oftenure and provide redress.

Both reviews were materially complete by

the end of 2024. In January 2025, the FCA

confirmed that the voluntary requirements

("VREQs") in relation to both of these matters

had been satisfied and removed from the

Financial Services Register.

We have continued to engage with industry

bodies, regulators and HM Treasury

regarding the future regulatory framework

within the UK.

Strategic Risk

Trend – stable

The risk of direct or

indirect adverse

effects resulting from

strategies not being

optimally chosen,

implemented or

adapted to changing

conditions.

Strategic risk is influenced by internal and

external developments, including the potential

impacts of the cost of living, regulatory change,

changing trends for insurance products, the

potential for new and ongoing geopolitical

conflicts, and climate-related risks. These factors

continue to have an impact on the delivery

ofthe Group’s Strategy due to a high level

ofuncertainty in the market and changes

inconsumer behaviour and engagement

models.Delivery of our strategy is being

closelymonitored and managed with the

support of the Group’s Transformation

ManagementOffice.

The potential acquisition of DLG by Aviva

and subsequent integration activity

increases risks in the short to medium term,

including potential for impact to

management stretch, staff retention,

unplanned costs and process disruption.

These additional risks will be closely

monitored and managed by the Executive

team and Board through our regular and

project risk reporting processes.

42 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Emerging risks

Emerging risks are defined by the Group as newly developing

or changing threats or opportunities, that are subject to a high

degree of uncertainty but have the potential to materially

impact the Group either in the short term, due to rapid risk

emergence, or over the long term, through changing the

risklandscape.

The Group has in place an emerging risks process to:

– identify, assess, and prioritise a wide range of potential

emerging risks using both internal expertise and external

intelligence sources; and

– mitigate the impact of emerging risks which could impact

the delivery of the Plan.

Our process leverages subject matter expertise across the

Group, external horizon scanning and external industry data.

Emerging risks are regularly reviewed and reported to the Risk

Management committees.

Environmental

The Group recognises that emerging environmental issues,

such as climate change, pose material long-term financial risks

to the Group. Environmental risks can manifest themselves

through a range of existing financial and non-financial risks.

We continue to monitor these risks closely and to develop our

climate change modelling capability. Further details on our risk

management approach to climate change are included in the

Task Force on Climate-related Financial Disclosures ("TCFD")

section of the report starting on page 58.

Social & Economic

Increasing economic pressures and generational shifts in

consumer behaviour are expected to influence demand

patterns. Persistent cost-of-living concerns, along with younger

generations prioritising flexible, digital first solutions, may

require the Group to innovate and adapt its product offerings

inorder to appropriately meet changing demands and needs.

Political

Due to heightened geopolitical tensions, there is a risk that

measures are implemented by governments that decrease

political stability, erode countries’ relationships, and contribute

to increasing protectionism. This could lead to multiple impacts

including on investment performance and supply chains.

TheGroup conducts ongoing analysis to monitor exposure

tothe developing geopolitical environment.

Technological

Technological advancements, including relating to

autonomous vehicles and Artificial Intelligence applications are

expected to transform the insurance landscape. The Group is

closely monitoring these changes to assess their implications

for underwriting, claims and regulatory compliance. The Group

will continue to engage with industry bodies to help shape

policies and understand potential impacts on the Group.

43 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Direct Line Group believes that responsible business behaviour is the key not

onlytobeing a sustainable business but also a successful one. It supports our

visionofinsurance as a force for good in society and builds trust among the

Group'sstakeholders.

Ensuring a sustainable future for the Group means taking positive action

onenvironmental, social and governance issues. This includes fair treatment

ofcustomers and colleagues, transparency on climate-related risks, high

standards of conduct in business relationships and making a positive

contribution to UK society.

This section aims to provide the non-financial and sustainability information sought by investors and other stakeholders.

Itsetsout the practical ways in which legal requirements under the Companies Act and other measures, including

climate-related reporting, are carried out.

For more information on corporate governance, see the report on Pages 75 to 100.

To reflect the Group’s priorities as a responsible business, this section organises the

information under five pillars: Customers, People, Society, Planet and Governance.

Our vision

To create a world where insurance

is personal, inclusive and a force for good

Ambitions

Customers

Earn our customers’

trustby demonstrating

how we are acting

intheir interests

People

Encourage a culture that

celebrates difference

and empowers people

sothey can thrive

Society

Use our expertise

toimprove outcomes

forsociety and the

communities we serve

Planet

Protect our business

from the impact

ofclimate change and

give back more to the

planet than we take out

Governance

Look to the long term

forour stakeholders,

builda reputation for high

standards of business

conduct and develop

asustainable business

Priority areas

– Good customer

outcomes

– High service levels

– Inclusive and accessible

digital journeys

– Develop products that

offer better choice and

value for money

– High workplace

standards

– Fair outcomes for all

colleagues

– Invest in skills and

career development

– Increase representation

in our Senior

Leadership

– Improve employability

skills and access to

employment for under

represented young

people

– Colleague engagement

– Reduce operational

emissions

– Decarbonise

investment portfolio

– Manage climate-

related risks and

opportunities

– Engage and align

suppliers with

environmental aims

– Robust corporate

governance and effective

leadership

– Ethical and professional

conduct

– Responsible

procurement

– Responsible use of data

and technology

2024 actions

– Launched Churchill

and Direct Line apps

– Developed proposition

for Direct Line launch

on Price Comparison

Websites

– Rolled out new home

platform

– New target operating

model

– Improved skills

– Made some progress

against diversity targets

– Young people positively

impacted through

Community Fund

outreach programmes

– Colleagues engaged

inCommunity Fund

programmes

– Announced new

Community Fund

charity partners

– Further reduced

operational emissions

(Scope 1 + 2) by 3%

compared to 2023.

– Further reduced

commercial real estates

investment emissions

by 20% year on year.

– Increased supplier

sustainability weighting

to 10% in the

procurement process

– 99.5% of colleagues

trained on Business

Codeof Conduct and

associated standards

– Introduced new AI

responsibility framework

and risk assessments

– Over 95% of suppliers

paid on time (under

30days)

44 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Sustainability

This non-financial and sustainability information statement highlights information necessary for an understanding of the

Company’s development, performance, position and impact of its activity, information relating to environmental, employee, social,

respect for human rights, anti-corruption and anti-bribery matters.

Where possible, the following table states where additional information can be found that supports the requirements of sections

414CA and 414CB of the Companies Act 2006.

Reporting

Requirement

Annual Report Page

Relevant policies, statements and codes available

at directlinegroup.co.uk

Environment Sustainability 44 to 57

Environment Statement

Task Force on Climate-related Financial

Disclosures

58 to 71

Streamlined Energy and Carbon Reporting 72 to 73

Anti-bribery and

anti-corruption

Financial crime and anti-bribery and corruption 108

Prevention of Financial Crime Policy

Code of Business Conduct

Ethical Code for Suppliers 55

Ethical Code for Suppliers

Whistleblowing Policy

Employees People 15 to 18

Flexible Working Policy

Health & Safety Policy

Business model Group at a glance – our business model 2

Prompt Payment Code

Our investment story and strategy 3

Responsible Investment Policy

Delivering for our customers 4 to 5

Underwriting Standards

Tax Policy

Social and

community matters

Society 49 to 50

Board Diversity Policy

Nomination and Governance Committee report

– Diversity and inclusion

110 Data Privacy Policy

Corporate Website Privacy Notice

Human rights Human rights and modern slavery 55 and 112

Human Rights, Diversity and Inclusion Policy

Modern Slavery Statement

KPIs Our financial key performance indicators 7

Colleague engagement 15

Net Promoter Score 47

Operational emissions 53

Risk

management

Risk management 38 to 43

Principal risks and uncertainties 40 to 42

Emerging risks 43

The table below has been produced to comply with the requirements of section 414CB of the Companies Act 2006, as amended

bythe Companies (Strategic Report) (Climate-related Financial Disclosures) Regulations 2022. The information listed is

incorporated by cross-reference.

Reporting requirement Page Further information

(a) a description of the company's governance arrangements in relation to assessing and

managing climate-related risks and opportunities

58 to 59 Refer to Governance

(b) a description of how the company identifies, assesses, and manages climate-related risks

and opportunities

72 to 73

58 to 71

Refer to Risk Management

Refer to Management's role

Additional information available

throughout TCFD report

risks are integrated into the company’s overall risk management process

72 to 73 Refer to Risk Management

(d) a description of:

– (i) the principal climate-related risks and opportunities arising in connection with the

company’s operations; and

– (ii) the time periods by reference to which those risks and opportunities are assessed

69 Refer to table within Our

strategic response

(e) a description of the actual and potential impacts of the principal climate-related risks

andopportunities on the company’s business model and strategy

69 to 71 Refer to Our strategic response

(f) an analysis of the resilience of the company’s business model and strategy, taking into

account consideration of different climate-related scenarios

61 to 68 Refer to Scenario analysis

(g) a description of the targets used by the company to manage climate-related risks

andtorealise climate-related opportunities and of performance against those targets

70, 71 and 71

to 73

Refer to Science-Based Targets

(h) the key performance indicators used to assess progress against targets used to manage

climate-related risks and realise climate-related opportunities and a description of the

calculations on which those key performance indicators are based

71 to 73 Refer to Metrics and Targets

45 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Non-financial and sustainability

informationstatement

“In 2024 we took the momentous

decision to put our best known

brand, Direct Line, on Price

Comparison Websites so we are

offering even more choice to

motor insurance consumers.”

The Group has two of the UK’s iconic

motor insurance brands in Direct Line

and Churchill. It is in the top three for

Motor and Home

, number one for single

property Landlord

insurance and has

theUK’s third largest Rescue provider

inGreen Flag

In 2024, we focused on strengthening our performance in our

core businesses of Motor, Home, Commercial Direct and

Rescue alongside reducing costs and improving our claims

capabilities.

We are aiming for excellence through all stages of the

customers’ journey in order to become their insurer of choice.

We have invested over the past two years in digitalising that

journey and the transformation has further to run in 2025.

Ourapproach to earning customers’ trust can be broken down

into three themes: choice, value for money and service.

Choice

– More choice: Churchill, Darwin, Privilege and By Miles have

been available on price comparison websites for many years

and this year we took the momentous decision for Direct

Line to join them. This went live on Compare the Market in

December 2024.

– Essentials policies meet the needs of drivers who want core

insurance cover and are willing to trade additional elements

for a lower premium. First launched by Churchill in 2022 via a

leading price comparison website, a large proportion of new

sales are being driven by this product. Direct Line Essentials

was launched in September 2023 and we have identified a

similar opportunity for a Home Essentials product and are

designing one for launch in 2025.

– By Miles, where customers pay according to car usage,

launched Connect for Volvo drivers in August enabling these

customers to purchase a By Miles policy without requiring a

separate Miles Tracker. This takes the number of vehicle

manufacturers on our Connect platform to six.

– Enhanced renewal options: We launched a new retention

toolkit that offers contact centre colleagues better support

when having conversations with renewal customers. Also, for

renewing customers who pay in full, we now show a monthly

payment option to make it clear the cost can be spread.

– Expansion of Green Flag’s own patrols: Green Flag

launched its own patrol service in 2023 in Scotland and the

West Midlands. In 2024, Yorkshire, the Northwest and East

Midlands were added and coverage is being extended across

the Midlands and southern England in 2025. The new service,

which last year fixed 95% of the problems it responded to at

the roadside, complements the independent network of

third-party roadside rescue operators who carry out more

complex recoveries. In 2024 our patrols attended 19,491

customers, reaching them, on average, in 54 minutes.

– Commercial Direct put tool theft on the agenda with a

campaign to draw attention to the impact these losses have

on tradespeople. We provided practical advice on how to

protect tools and other property. Our data was widely

reported by the media, helping to drive awareness.

Value for Money

– To help with the cost of living challenge we offered an

Essentials range to customers and through our By Miles

brand, which ties premiums to car usage, offer customers

better choice and ways to control their insurance costs.

Customers can also use the new Churchill and Direct Line

Apps to tailor policies to their needs.

– Independent benchmarking by Consumer Intelligence

confirmed Green Flag offered more competitive pricing than

AAand RAC, across all cover levels, for both vehicle and

personalcover.

– Commercial Direct's Landlord product won the What

Mortgage best landlord insurance provider for the 12

year

ina row and scored 4.7/5 on Trustpilot.

– Darwin smart pricing:

– Improved pricing: We significantly improved our pricing

capability allowing us to offer competitive prices to

moreUK drivers.

– Renewals research: In 2024, we incorporated additional

feedback from customers into pricing and customer

experience improvements in our renewal journey resulting

in a step change in retention rates.

Notes:

1. Source: Ipsos Mori – FRS, January to December 2024.

2. Source: Consumer Intelligence Market Benchmarking – September &December 2024, 500 risks per month.

3. Mintel Vehicle Assistance and Recovery UK Oct 2024.

46 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Customers

– Premium Finance: With rising costs, more customers are

looking to spread the cost of insurance across their policy

term. Darwin has reviewed this scheme aiming to minimise

barriers and to offer an appropriate rate of interest. In 2024

we piloted and rolled out a new scheme which reduced the

initial deposit and extended the remaining payments over

alonger period. Learnings fromthe Darwin pilot also allowed

us to extend this scheme across our other brands.

– The Green Flag partnerships team collaborated with Virgin

Money to upgrade the level of Rescue cover for their Club M

packaged bank account customers. Before this upgrade

customers only had access to local cover. Following the

upgrade, National and European Cover became available

on1February 2024, along with other new benefits including

Onward Travel and Personal Cover in the UK.

– Working with Apple and utilising its robust satellite services,

Green Flag is the first UK breakdown brand to offer rescue

services as part of Apple's Roadside Assistance via satellite

oniPhone.

Service

– Better customer experience: enhanced digital capabilities

have enabled customers to manage their policies better.

TwoApps were launched in 2024, Churchill in July and Direct

Line in September. Customers can use them to change

cover, view policy documents, start a claim and get support

on thego. By the end of the year, 205,531 customers were

using the Apps, growing at an average rate of 1,181 sign-ups

aday. TheChurchill app reached #4 in the Finance charts

towards the end of October and is rated 4.5/5 on iOS App

Store, on which Direct Line is rated 3.95.

– “MyAccount”: one time passcode was introduced to make

iteasier for customers to access their online insurance

information without the need to remember a password.

Since its rollout from early 2024, this service has increased

successful sign ins by 20% and reduced customer password

resets by almost 90%.

– Our dedicated personal insurance advisors visit customers

when they’ve been impacted by flooding, to assess the

damage to the home and provide much needed advice and

reassurance. Advising on appropriate alternative

accommodation, if required, is the first and main action

takento ensure the safety of impacted customers. They also

provide guidance on what is safe to do and not do during the

time water is inside the property. The Group engage with

policymakers and others to highlight the importance of flood

defences and infrastructure to protect properties from the

risk of flood, as part of an effective and sustainable flood

resilience strategy.

– Claims tracking and repairs efficiency: The Group has

improved the digital experience in motor claims so that

customers can track progress online, reducing the need

tocall for updates. This has fed into improved Net

PromoterScores.

– In DLG Autocentres, the average repair time

of 24.2 days

isahead of the national average time at 34.4 days. Our own

garages also compare well with 3

party network providers

for both customer experience and cost to repair.

– To keep pace with the most up to date repair techniques

andthe highest customer safety standards, we’ve launched

our innovative Vehicle Damage Assessor accreditation

programme. What’s more, we are one of the few

organisations in the UK that is equipped to offer this

certification in our training centre based in our flagship

Stechford Technology Centre. Our training is recognised

bythe Institute of the MotorIndustry.

– The Direct Line Motability team has improved their

interaction with customers. All frontline teams are

experienced in supporting customers with dementia and

many have also had autism awareness training. By the end

of2025 all frontline teams will have completed their autism

awareness training. They also launched a "Hyper Care" team

to ensure that when the most vulnerable customers make

aclaim there is dedicated support on hand so customers

understand the next steps and feel supported and informed.

This customer centric approach has helped us attain an

overall average end of amendment customer score of +91

NPS and end of claim customer NPS score of +80. (TLF data).

– Overall the Group's Net Promoter Score

increased across

2024 ending the year at 52.2 improving from 50.1 in 2023.

Green Flag Apple Satellite case study

When a customer’s car began billowing smoke on a

remote road in North Wales, she found herself alone,

isolated and without any mobile phone signal. Using

Apple’s Roadside Assistance via satellite on iPhone she

contacted Green Flag who responded within a minute.

In a panic, she accidentally provided her own phone

number instead of her mother’s for her family to be

informed she was safe. Our team quickly identified the

error, located the correct number, and reassured her

family. After quickly dispatching a rescue vehicle, we

sent regular updates to support our customer,

ultimately leading to a safe resolution.

Notes:

1. Cycle Time taken from Activeweb.

2. The Group's NPS is calculated using Churchill, Direct Line and Green

Flag responses from customer surveys after purchase, amend, claim,

cancel andrenew (Green Flag is rescue claim only).

47 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

“Colleagues have raised their skill

levels to help meet the goal of

technical excellence and used

their experience to adapt to new

ways of working.”

The Group has focused on

encouragingand enabling colleagues

toplay a clearrole inimproving

theGroup’s performance.

This has involved embedding a high-performance culture

based on the brand’s core values of customer service and

teamwork. Colleagues have raised their skill levels to help meet

the goal of technical excellence and used their experience to

adapt to new ways of working. A simpler operating structure

has improved accountability for delivering better performance.

Building skills and capabilities

Our training and development programmes are focused on

building essential skills to meet our customers’ needs, making

the most of new digital platforms. Technical skills are being

upgraded across the Group, from data analysis to our in-house

automotive service centres. Our apprenticeship and graduate

programmes make a key contribution to this.

Graduates

A fifth cohort of graduates with a STEM degree joined our

Technical Engineering Programme within Automotive Services.

Graduate schemes are rare in the automotive industry and

weoffer a number of Institute of the Motor Industry accredited

qualifications. Our programme is flexible, allowing graduates

toexperience different aspects of the business and pursue

different paths, including data analytics.

A diverse and inclusive business

In the past year we've moved our Diversity & Inclusion ("D&I")

partner into our Leadership, Talent and Early careers centre

ofexcellence, as part of the People Partner and Organisational

Effectiveness team. This ensures we take a holistic and

pragmatic approach, using data to identify opportunities

toimprove equity and inclusion across all people processes.

We’vealso aligned our D&l priorities with the new Group

strategy, contributing to a high performing business.

Our shift in approach is driven by clear D&l objectives set

bysenior leadership and implemented throughout the

organisation. Our commitment has been recognised by a jump

from 17

to 12

in the 2024/25 Inclusive Top 50 UK Employers

rankings. Highlights cited by the judges included improved

representation of under-represented groups at senior level; bias

mitigation in performance management training; and a social

mobility network.

The work done in 2024 focused on building talent pipelines,

enhancing leadership capability, meeting regulatory

requirements and achieving equitable outcomes in

performance management. Here are some examples:

– new targets to increase representation at senior leadership

level of females to 40% and ethnic minority colleagues to

16% (including Black colleagues to 4%) by the end of 2027

– we’ve made significant progress towards our female target

increasing by 4.1% year on year but have more work to do

toseek to ensure ethnic minority representation continues

to increase. Current initiatives include targeting diversity

inrecruitment shortlists, setting leadership objectives for

representation in succession and developing our internal

talent development methods to support those from

underrepresented groups

– senior leadership championing D&I, supported by employee-

led “DNA” strands (Belief, Families & Carers, Gender, LGBTQ+,

Neurodiversity and Disability, Race and Ethnicity, and

SocialMobility)

– comprehensive policies to encourage dignity and respect,

zero tolerance of bullying and harassment, clear processes

toreport incidents

– a communication strategy that ensures we keep D&I top

ofmind, driving accountability and allyship beyond our

employee networks with regular contributions from the ExCo

– using data to identify focal areas to address change such

asrepresentation of females in our Motor Network.

Ignite Apprenticeship Programme

The Ignite apprenticeship programme, launched in 2022,

celebrated 159 completions in 2024 with standout results: 56%

achieved distinction and 17% earned merit.

At the end of the year, 257 colleagues were actively engaged

inapprenticeships across the Group. Of these, 32% were

focused on data and technology and 45% on vehicle repair, with

the remainder developing vital business skills. Among the 127

newapprentices in 2024, 68 were new hires with 62% of those

joining auto services and a further 25% dedicated to Motability.

We utilised 81% of our apprenticeship levy, with 10% of our

spending supporting local communities and smaller enterprises.

We are working with The Schools Outreach Company to

increase the number of female applications for our vehicle

repair apprenticeship and have signed up to the Automotive

30% Club (aiming to fill 30% of key leadership positions across

the Automotive industry with females by 2030). Targets have

been set to increase the number of females in leadership

positions within the Auto Repair Network.

48 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

People

“The number of students likely

toconsider a career in insurance

rose from 13% pre-programme

to95% afterwards. The Group

hasstarted to hire participants

into paid roles.”

A key part of our responsible business

strategy is to use our expertise and

resources to improve outcomes for

society and the communities we serve.

When our communities prosper, so

doesour business and so does the sense

ofwell-being among our colleagues.

Community Fund

The Community Fund helps to build a more inclusive and

equitable society by supporting disadvantaged young people

intheir quest for a brighter future. This complements our

commitment to being an inclusive and diverse employer,

whichhelps us to attract and retain a wide range of talent.

Our Bright Futures programme connects our colleagues

withyoung people from lower socio-economic backgrounds

viavolunteering opportunities to help them acquire the

knowledge and networks they need to improve their

employment chances.

In 2024, our colleagues gave 2,027 volunteering hours to

support more than 11,000 disadvantaged young people

through activities ranging from paid work experience to

mentoring. This more than doubled the total number reached

since the launch of the programme in September 2022.

Around half of these young people completed our virtual work

experience programme, with 43% based in coastal or rural

“coldspots” (regions with low social mobility). Of these, 38%

were eligible for free school meals and 28% came from ethnic

minority backgrounds. The number likely to consider a career

ininsurance rose from 13% pre programme to 95% afterwards.

The Group has started to hire participants into paid roles such

as apprenticeships.

Our commitment to social mobility was recognised by the

Social Mobility Foundation Employers Index as we rose eight

places to 60. The Index measures eight areas of employer-led

social mobility including recruitment approach, internal

progression opportunities and engagement with young people.

In 2024, the Community Fund donated £50,000 to four new

charity partners – Parenting Mental Health, Race Equality

Matters, employment support programme charity SPEAR and

The Diversity Trust. Each organisation focuses on at least one

ofthe fund’s strategic areas, such as increasing minority group

inclusion and improving outcomes for social mobility.

Charitable giving

Participating in charity initiatives enhances employees’

engagement with the company by fostering a sense of

belonging and connection, enabling them to align their

professional roles with personal values.

We launched a new volunteering platform, “Neighbourly”, in

May which provides market-leading data insights and reporting

capabilities. It found that 90% of volunteers reported a positive

change in their feeling of connection to the Group and 60%

upgraded their coaching skills. Our Community & Social

Committees continued to help colleagues get involved in

community activities and support fundraising ventures.

Colleagues can support good causes in three main ways: ‘give

as you earn’, for which the Group earned a Platinum Payroll

Giving Quality Mark Award; community cashback – each

individual can apply for £250 to support their volunteering

orfundraising activity; and ‘Change for Charity’ – in 2024

donations deducted from monthly pay went to MIND.

WhizzKidz: through our partnership with the charity devoted

to young wheelchair users, we donated £10,000 to children

living near our offices. With this partner, we also ran a Disability

Awareness Training session for more than 100 colleagues.

Insure Your Future – The Group spearheaded an

industry-wide collaboration with five insurers to

expand career opportunities in the sector for 500+

students from diverse backgrounds.

49 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Society

Direct Line Group financially contributed to SPEAR

programme in London and Leeds to support young

people, who may be care-experienced, receiving state

welfare, or have a disability or neurodifference, to find

ways into employment. We also collaborated with

them on their "Hire Me" events to help other students

from lower socioeconomic backgrounds to find jobs.

The Group's colleagues volunteered to participate in

career events, CV support sessions, and mock

interviews. We are proud that our investment in

SPEAR promotes social mobility in communities local

to our offices and aligns to our objective of being an

equitable and inclusive employer.

Values in action

As a leading insurer, we conduct research and mount

campaigns that tackle societal challenges.

In 2024, Churchill uncovered the shocking statistic that 1,200

children are injured every month in traffic collisions within 500

metres of a school. Film evidence from key locations revealed

that 10% of children were using their phones while crossing the

road and one in five secondary school pupils were hit or

narrowly missed by vehicles whilst using their phones. We

launched a campaign – ‘Eyes up, screens down’ – to highlight

the dangers.

On ‘Drink Driving’, we delivered a campaign to raise awareness

of the danger of being over the legal alcohol limit following a

wedding. Research revealed that 29% of people have 16 or more

drinks at a wedding and one in six admit they could still be over

the limit the morning after. The campaign highlighted the time

it takes for alcohol to leave the system and urged people to

think before getting behind the wheel.

The Group’s in-person career insight sessions, held at our offices

or delivered by a Group employee, catered for 6,300 young

people, of whom 84% were eligible forfree school meals and

89% were from ethnic minoritybackgrounds.

Insure Your Future event: As part of National Careers Week,

webrought together several insurance companies to introduce

young people (aged 16-20) from diverse backgrounds to a

career in insurance. 510 students took part in the business

simulation exercise and by the end of the day there was a 27%

increase in attendees agreeing that they could see themselves

working in insurance.

Bright Futures: Students enhance their teamwork,

communication, and commercial awareness during

aInsurance Business simulation in London.

Our 2024 tax

contribution

In accordance with

applicable tax laws and

regulations and our

responsibilities both as a

contributor of corporate

taxes and as a collector

of taxes on behalf of

HMRC, in 2024 the

Group’s net tax

contribution was £1,032.1

million, which includes

the Group’s direct and

indirect taxation.

Our

customers

IPT £392.1m

Our suppliers VAT £32.7m

Our people PAYE NIC £119.6m

Our

operations

Other taxes

including business

rates

£10.7m

Irrecoverable VAT £369.9m

Employers NIC £52.1m

Our

performance

Corporation Tax £55.0m

HM Treasury

£1,032.1m¹

Net tax contribution

Society

– Public services

– Healthcare

– Infrastructure

– Welfare

– Education

– Defence

Note:

1. The Group’s total tax contribution in 2024, including direct and indirect tax contributions.

50 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

“In 2024, 21% of managed suppliers

had signed up to SBTi-aligned

decarbonisation targets

oranequivalent.”

For more information, please see page 54.

Planet

Our strategic focus on climate change aims to reduce our

impact on the environment and manage the impact of climate

change on our business, playing a part in accelerating the

transition to a low-carbon future.

Our climate ambition is to be a Net Zero business across scopes

1, 2 & 3 by 2050. Management’s priorities are to decarbonise our

most carbon-intensive activities, protect our business from the

impact of climate change (see Task Force on Climate-related

Financial Disclosures report on pages 58 to 71) and support our

customers in the transition to a low-carbon economy.

Science Based Targets

In 2024, we continued to deliver against our five Science-Based

Targets (“SBTs”), which are aligned to a 1.5°C pathway and were

approved by the Science Based Targets initiative (“SBTi”) in

2022. We plan to continue to drive initiatives to decarbonise

ouroperational and investment emissions.

From 2025, we expect that updated sector guidance from SBTi

will enable us to create a new baseline for emissions, expand

the scope of our SBTs and further develop the transition plans

consistent with our Net Zero ambition.

Our climate ambition

To become a Net Zero business across scope 1, 2 & 3 by 2050

Management priorities

Decarbonising our

accident repair

centres and

officeestate

Decarbonising

ourinvestment

portfolio

Engaging our

supply chain

Supporting

customers in

thelow carbon

transition

Enhancing

management

ofclimate-related

financial risks

andopportunities

Science-Based Targets to support our ambition

Operational

emissions

(Scope 1 & 2)

1. Reduce emissions

by 46% across our

office estate and

accident repair

centres by 2030

Investment portfolio (Scope 3):

Corporatebonds

Investment

portfolio (Scope 3):

Commercial

property

4. Reduce emissions

from our

commercial

property portfolio

by 58% per square

metre by2030

Investment

portfolio (Scope 3):

Real estate loans

5. Reduce emissions

from our real

estate loans

portfolio by 58%

per square metre

by 2030

2. Align our scope 1

& 2 portfolio

temperature

rating to 2.08ºC

by 2027

3. Align our scope 1,

2 & 3 portfolio

temperature

rating to 2.31ºC by

2027

In 2024, we reduced

our operational

Scope 1 & 2

emissions by 46%

compared to 2019

In 2024, the

temperature rating

of the Scope 1 & 2

portfolio was 2.01ºC

In 2024, the

temperature rating

of the Scope 1, 2 & 3

portfolio was 2.31ºC

In 2023, we reduced

emissions from our

commercial

property by 39% per

square metre

In 2023, we reduced

emissions from our

real estate loans

by26% per

squaremetre

Notes:

1. Against a 2019 baseline.

2. Due to the practicalities of obtaining data from our external asset managers ahead of the release of the Group’s annual reporting, progress against

our commercial property and real estate loan targets is reported with a one-year time lag.

51 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Planet

Science-Based Targets

The Group made good progress in 2024 and is on track to deliver against its Science-BasedTargets. Last year we reduced our

operational Scope 1 & 2 emissions by5%

compared to 2023. This amounts to an overall reduction of46%

against our 2019 baseline,

meaning we have delivered against our 2030 target early.

2024 performance Progress against targets

Operational emissions (Scope 1 & 2)

Covering

Operational footprint

Our buildings and garage

network Including our

23auto services sites and

13offices.

Targets

T 1. Reduce emissions by

46%across our offices and

accident repair centres

by2030 against the

2019baseline.

Operational emissions

(Scope 1 & 2)

In 2024 we further reduced these emissions by 5%

compared

to 2023 as we continue to make progress in downsizing and

investing in our office estate, electrifying our auto services

sites and using alternative fuels in our recovery trucks.

Overall, we have now reduced our Scope 1 and 2 emissions

by46%

against our 2019 baseline meaning we have delivered

against our 2030 target early. Our work will continue this

yearand beyond as we look to renegotiate our renewable

energycontracts and continue the electrification of our auto

services sites.

Result — Target

Investments (Scope 3)

Corporate bonds

The largest asset class in

our investment portfolio

and typically short-

duration holdings.

T 2. Align our Scope 1 and 2

corporate bonds portfolio

temperature rating to

2.08°C by 2027 from

2.44°C in2019.

T 3. Align our Scope 1, 2

and 3 portfolio

temperature rating to

2.31°C by 2027 from 2.80°C

in 2019.

Corporate bonds

Scope 1 and 2 temperature rating

Our performance in 2024 shows we were successful in

reducing the temperature rating of this portfolio to 2.01°C

forScope 1 & 2 against our 2019 baseline of 2.44°C (Target 2)

and to 2.31°C for Scope 1, 2 & 3 (Target 3) against our 2019

baseline of 2.8°C. This means we have hit our 2027 targets

early, something we have achieved through working with

ourinvestment managers and providing them with

clearmandates.

Reductions have been largely driven by an increasing

number of investee companies achieving lower temperature

ratings by setting ambitious greenhouse gas reduction

targets including SBTs. This has helped to lower the

aggregate portfolio temperature score.

Corporate bonds Scope 1, 2 and 3

temperature rating

2023 Performance

Commercial property

T 4. Reduce commercial

property emissions by 58%

per square metre by 2030

compared to the 2019

baseline of 5,197 tCO

Commercial Property

investments

We are reporting on our 2023 performance for these two

assets in this year's report, as there is a lag in the availability

ofenergy performance data from our investment managers

ahead of our annual reporting.

Our performance in 2023 shows we were successful in

reducing the Commercial Property investment intensity by

39% against our 2019 baseline of 67 kCO

e/m

and on the real

estate loans we reduced our energy intensity by 26% against

our 2029 baseline of 81 kCO

Reductions in emissions were mainly delivered through the

implementation of an investment strategy requiring all assets

in our property portfolio to have an Energy Performance

Certificate of ‘D’ or better, or a funded plan to achieve that

level and engaging with investee companies, tenants and

property owners to encourage them to commit to emissions

reduction measures.

Real estate loans

T 5. Reduce real estate

loans emissions by 58%

per square metre by 2030

compared to the 2019

baseline of 13,769 tCO

Real Estates Loans

Note:

1. We are required to use Scope 1 and Scope 2 market-based emissions for SBTi operational target-setting and reporting. When including Scope 2

location-based emissions this reduction is equivalent to a 3% reduction when compared to 2023 and a 53% reduction against the 2019 baseline.

52 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19 20

21 22 23

25 26

28 29

2000

4000

6000

8000

10000

25 26

22 23

25 26

28 29

1000

2000

3000

4000

5000

6000

22 23

25 26

28 29

4000

8000

12000

16000

Operational emissions

4,257

4,500

6,529

7,032

7,811

2,535

2,499

2,453

3,155

3,886

2024

2023

2022

2021

2020

Scope 1

Scope 2

Overall, when compared to 2023, our Scope 1 and 2 emissions

decreased by 3%.

Our Auto Services, comprising 23 accident repair centres

andour recovery fleet, makes up over 70% of our operational

emissions. In 2024, Scope 1 and 2 emissions associated with our

repair centres reduced by 6%, compared with 2023.

We have achieved this through:

– the use of hydrogenated vegetable oil in our accident repair

centres as an alternative fuel for our recovery trucks. This

initiative has now been implemented at 95% of our repair

centres, resulting in an estimated 2,312 tCO

e saved in 2024;

– installing electrical infrastructure to remove gas from paint

spray booths at one of our site, providing an estimated saving

of 399 tCO

e in the year; and

– generated 140,000 kWh of energy from roof mounted solar

atone of our DLG Auto Services sites, providing 13% of the

total electricity used on-site.

Group energy consumption (kWh)

1,2

2024 2023

Electricity 12,133,434 11,906,788

Gas 16,862,562 19,779,732

Total 28,995,996 31,686,520

The Group adheres to the SBTi concept of the "mitigation

hierarchy", namely that the Group addresses its value chain

emissions and implements strategies to achieve these targets

as a priority, ahead of actions or investments to mitigate

emissions by using carbon offsets. Working with Climate

Impact Partners, we have supported a carbon removal project

to Verra Verified Carbon Standard in Uruguay since 2023 to

offset our remaining Scope 1 and 2 emissions over a three-year

period. The project involves reforestation and a sustainable

approach to wood production. The Project is certified by the

Forest Stewardship Council(FSC), balancing timber production

and sales with habitat creation for wildlife. Itprovides

employment for the local community and enhances

biodiversity and carbon sequestration opportunities.

Investments

Emissions from investments make up approximately 70%

ofour Scope 3 total. Aligned to our climate ambition, our long-

term goal is to reach Net Zero across our investment portfolio.

To deliver against our four current SBTs for investments,

wehave incorporated key climate considerations into our

investment strategy. In 2024 we:

– continued to make progress towards meeting our SBTs

forGHG emissions reduction for in-scope asset classes;

– reported performance against our SBTs for commercial

property and real estate loan portfolios for the first time;

– continued to reduce the carbon intensity of our corporate

bond portfolio in line with our goal of a 50% reduction

by2030 from a 2020 baseline; and

– encouraged high emitters to set science-based emissions

reduction targets as a signatory to the CDP’s science-based

targets campaign.

Our investments are underpinned by a wider Environmental,

Social and Governance ("ESG") framework. We expect all

external investment managers to be signatories to the United

Nations Principles for Responsible Investment (“UN PRI”),

ensuring that UN PRI criteria are integrated into the

investment process.

Our investment policy:

– excludes any company with a low MSCI low-carbon transition

score (indicating assets could be economically stranded);

– excludes companies involved in thermal coal activity, either

mining or power generation, at greater than 5% of revenues

unless the company is taking positive climate action

;

– has a preference for investments in green bonds where the

risk return characteristics are similar to conventional bonds;

and

– requires all assets in our property portfolio to have an Energy

Performance Certificate of ‘D’ or better, or a funded plan to

achieve that level.

Looking ahead, our priorities include:

– ensuring Investment Managers are engaging with investee

companies, tenants and property owners to encourage them

to implement half-hourly metering of their utilities and to set

emissions reduction targets;

– setting targets for asset classes not yet covered once

standards and methodologies are established;

– monitoring targets for all asset classes based on the latest

methodologies and best practice; and

– increasing the coverage across our private asset investments.

For more detail on how we manage climate-related risks and

opportunities in our investment portfolio please see page 71.

Notes:

1. 100% of the reported energy consumption relates to operations, all of which are based in the UK.

2. Data is reported in compliance with the Streamlined Energy and Carbon Reporting ("SECR") requirements (see page 72).

3. Companies taking positive climate action are defined as those that are committed to setting Science-Based Targets or have a 2°C or better carbon

performance alignment from the transition pathway initiative.

53 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Supply chain

Emissions from our supply chain make up approximately

30%of our Scope 3 emissions, highlighting the importance of

engaging with our suppliers to achieve our climate ambition.

Our Supply Chain Sustainability Programme is embedded in

our approach to responsible procurement. The focus of this

programme is twofold:

– engagement with our Tier 1 suppliers to keep them updated

on the Group’s climate commitments and practices, and

toobtain information on their appetite for and approach

toemissions reduction and target-setting; and

– embedding sustainability considerations into supply chain

decisions, processes and management.

During 2024 we increased the sustainability weighting for

contracts over a million pounds, which means that 10% of the

criteria relate to sustainability-related criteria. In addition to

measuring supply chain emissions, we monitor the

effectiveness of our engagement strategy. In 2024, 86% of

themanaged supply base that we reached out to responded

positively to our direction of travel on emissions reduction.

Bythe end of the year, 21% of managed suppliers had signed

upto SBTi-aligned targets or an equivalent.

Looking ahead, our priorities include creating a new baseline

for our supply chain emissions, updating the emissions

reduction target and moving to more accurate emissions

measurement methodologies.

Biodiversity

We continue to monitor our nature-related dependencies,

impacts, risks and opportunities as part of the wider integration

of ESG factors into our Group risk framework. While our

immediate strategic priority is to manage climate-related risks,

we recognise that conserving and restoring nature is essential

to limit emissions and adapt to climate change. This includes

nature's role in storing carbon and providing natural defences

against extreme weather events.

We are involved in various UK initiatives, including supporting

the Get Nature Positive movement formed by the Council for

Sustainable Business and supported by Defra. Incorporating

biodiversity into specific business activities, in 2024 we

continued to fund a tree-planting project in a flood prevention

scheme in Yorkshire, replacing trees we removed when home

insurance policyholders make subsidence claims.

Working with nature recovery charity Heal Rewilding, we

provided a loan in 2023 to acquire a 460-acre site in Bruton,

Somerset, where rewilding is in progress and wildlife is

flourishing. Over the last year, Heal Rewilding made major

progress in its work to rebuild wildlife populations, tackle

climate change and support people’s well-being. Surveys of

birds found 67 species, including 11 red-listed and 16 amber-

listed, with the breeding populations of some red-listed birds

faring unexpectedly well, including linnet, tree pipit and

yellowhammer. The baseline survey for invertebrates found

unexpectedly high abundance of common species, a key

finding because they are a vital food source for birds, mammals,

reptiles and amphibians. The year also saw a significant

expansion of community engagement work at the site, with

nearly 300 free visits by people with additional needs, dementia

and mental health challenges, young adults with life

challenges, and disadvantaged families, and free visits by

schoolchildren and young apprentices.

While our immediate strategic priority is to manage

climate-related risks, we recognise that conserving

and restoring nature is essential to limit emissions and

adapt to climate change.

54 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

“Our shared values shape the

Group's culture and conduct in

pursuit of the Group’s purpose.

These guiding principles help

colleagues to work together

effectively, make good decisions

and deliver for our customers.”

Governance and responsible business

Pursuing excellence in corporate governance and maintaining

the highest standards of business conduct are fundamental

tobuilding a long-term, sustainable business. Our Corporate

Governance report, including the work of our Customer and

Sustainability Committee, can be found on pages 75 to 141.

Thissection drills down into the governance framework

andapproach that drive alignment of responsibility and

sustainability aims with business goals, in line with the

Group’srisk framework.

Ethical business and professional conduct

Our shared values shape the Group's culture and conduct in

pursuit of the Group’s purpose. These guiding principles help

colleagues to work together effectively, make good decisions

and deliver for our customers. Our Group Code of Conduct sets

out the high standards of behaviour that we expect. Key areas

covered include combatting discrimination, harassment and

bullying, treating customers and suppliers fairly, diversity and

inclusion, fair competition and contributingto society.

Aligned to the Group risk framework, the Code is

supplemented by detailed policies and guidance that raise

awareness of financial crime and set out action to combat it.

Anti-bribery and corruption, anti-money laundering, terrorist

financing, fraud prevention and sanctions are covered. This

seeks to ensure that we can protect our business and

customers from financial harm as well as fulfilling regulatory

and legal responsibilities.

As part of our annual e-learning programme, colleagues

completed training on ethics and regulatory policy, including

compulsory assessment elements. In 2024, we enhanced this

programme by including new scenario-based examples and

additional content in relation to timeliness of logging gifts &

hospitality requests and 97% of colleagues completed modules

on anti-bribery and corruption. The Group’s whistleblowing

policy supports these standards and helps promote a culture

ofopenness. Anyone can raise concerns with managers or

utilise the services of an independent third party including

aconfidential telephone helpline.

Group policies and statements are available publicly at

www.directlinegroup.co.uk/en/sustainability/reports-policies-

and-statements

Responsible procurement

As an extension of our business it is important that our

Suppliers embody our values and standards just as we have

aresponsibility to treat them fairly and respectfully. This helps

to build long-term positive relationships that best serve our

customers and society. This approach is encapsulated in our

Ethical Code for Suppliers. The Code sets out our expectations

in areas such as human rights, labour standards, environment

and governance. It requires adherence to International Labour

Organisation (“ILO”) standards, which include a ban on the use

of child labour and forced or bonded labour.

Having rolled out a refreshed Code in 2023, all managed

suppliers were required to confirm their acceptance of it and

encouraged to ensure their supply chains also adhered to the

principles. Our Supplier Management and Outsourcing Policy

has processes in place to ensure we maintain high standards,

which include:

– supplier segmentation based on factors such as value,

expenditure and risk exposures;

– supplier assurance and oversight

– rigorous due diligence when onboarding new suppliers; and

– open and transparent sourcing including assessment

ofpotential new suppliers against criteria that cover

environmental, social and governance factors.

These processes are reviewed on an annual basis to ensure they

remain aligned with potential exposures faced by the business.

For more information on how we are embedding

environmental sustainability through our supply chain, please

see page 54. We expect managed suppliers toprovide

assurances of compliance with the Modern Slavery Act through

a published statement (where applicable). The procurement

process includes an annual review of our modern slavery risk,

annual training, due diligence on new suppliers andactive

assurance and management of existing suppliers. Further

detail on our approach and adherence to the Act can be found

in our latest Modern Slavery Statement.

55 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Governance

Data ethics and privacy

At Direct Line Group, enriching our data and making effective

use of technologies such as artificial intelligence (“AI”) and

machine learning are crucial to our strategy to become

thecustomers’ insurer of choice. They enable us to better

meetcustomer needs and upgrade their digital experience,

forexample, by increasing pricing accuracy and providing best-

in-class claims management.

The need for customers to trust the way we use their data

isparamount. This means using their data ethically while

weperform our day-to-day jobs. Our Data Ethics Principles

sitat the heart of a holistic framework, establishing the values

to which colleagues must adhere and driving fairness,

transparency and accountability.

Data Ethics Principles

1. Respect the person behind the data.

2. Ethics will be designed into data processes and

solutions from the outset.

3. Understand and document the purpose for any data

collected, used and/or shared.

4. Comply with applicable laws and regulations

inconnection with data, its collection and use.

5. Understand the limitations and quality of the

datawe use and how this may impact the decisions

we make.

6. Actively pursue a fair, explainable and

transparentapproach to algorithmic and statistical

decision-making.

7. Ensure accountability and appropriate governance

for any automated decision process.

8. Provide appropriate guidance and training to

support and encourage responsible data use.

We have implemented an extensive control framework to

manage privacy and security risks and meet our responsibilities

under data protection legislation, following regulatory and

industry standards and guidance. Governance forums ensure

privacy and security considerations receive high levels of

visibility. All businesses within the Group are required to meet

the standards set out in the framework and provide evidence

ofcompliance with UK GDPR obligations. All colleagues and

contractors receive annual training on data protection and

security responsibilities.

During 2024, we enhanced our approach to data privacy and

security by implementing several key initiatives. These included

the introduction of privacy enhancing technologies ("PETs")

toprotect personal data, improving our data anonymisation

and pseudonymisation processes, and strengthening our

accountability and governance frameworks. We also focused

onensuring compliance with data protection laws through

comprehensive training and awareness programs, and by

updating our internal controls and risk assessments to address

new technological developments and regulatory requirements.

Please see our online Group Data Privacy Policy for more

information on our privacy framework, privacy and security

programmes, and governance.

56 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

We actively support a variety of membership organisations, and disclose information to ratings and benchmarking authorities,

aswell as receive ESG performance ratings.

ESG ratings

MSCI

In 2024, we received a rating of AAA (on a scale of AAA-CCC)

in the MSCI ESG Ratingsassessment

MSCI ESG Rating

AAA

Sustainalytics

In 2024, we received an ESG Risk Rating of 22.2 and were

assessed bySustainalytics tobeata medium level of risk.

2,3

ESG Risk Rating

22.2

Ecovadis

We were awarded a silver medal in 2024

Ecovadis

Silver medal

Carbon Disclosure Project

We were awarded a B score for the 2024 assessment.

CDP score

Planet

Science Based Targets initiative

In 2024, we continue to make good progress towards our Science-Based Targets,

(Targetswere approved in November 2022)

Race to Zero

As part of our Race to Zero pledge, we have signed the Business Ambition for 1.5°C

Get Nature Positive

We are a supporter of the Get Nature Positive campaign, focused on restoring nature

andbiodiversity

People

Inclusive top 50 employers

We ranked 12

on the Inclusive Top 50 UK Employers List 2023/24

Social Mobility Pledge

We support the Social Mobility Pledge and have focused on helping students with their

careersthrough our Community Fund

Women in Finance

We are a signatory to HM Treasury’s Women in Finance Charter

Race at Work Charter

We support the Race at Work Charter to take positive action towards supporting ethnic

minorityrepresentation and inclusion

The Faith & Belief Forum

We are a signatory of the Charter for Faith & Belief Inclusion which aims to help create

understanding between people of different faiths and beliefs and a society which is fair

topeopleof all backgrounds – religious and non-religious

Notes:

1. (www.sustainalytics.com). Such information and data are proprietary of Sustainalytics and/or its third-party suppliers (Third Party Data)

andareprovided for informational purposes only. They do not constitute an endorsement of any product or project, nor an investment

adviceandare not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions

availableathttps://www.sustainalytics.com/legal-disclaimers.

2. Assessed to be at a medium level of risk of experiencing material financial impacts from ESG factors.

57 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

External ratings, memberships

andbenchmarks

Introduction

The Group’s 2024 disclosure against the Recommendations and

Recommended Disclosures ofthe Task Force on Climate-related

Financial Disclosures (“TCFD”) reflects our ongoing work to

further integrate climate risk management across the business,

while also outlining the progress we are making against our

climate ambitions, including our Science-Based Targets.

We continue to assess and develop our disclosures against

theRecommendations and Recommended Disclosures

oftheTCFD and recognise its importance in evolving our

understanding and management of the risks and opportunities

associated with climate change.

The Group, as at the time of publication, has complied withthe

requirements of UK Listing Rule 6.6.6R(8) by including climate-

related financial disclosures consistent with 9 of the 11 TCFD

Recommendations and Recommended Disclosures for all sectors

(‘Section C Guidance for All Sectors’), including the supplemental

guidance for insurance companies (‘Section D Supplemental

Guidance for the Financial Sector’) within the 2021 TCFD Annex.

The Group has reported against all 11 Recommended Disclosures

and believes its disclosure against 9 of the 11 Recommendations

meets theobjectives of the TCFD framework, with further detail

regarding the two remaining Recommendations

explainedbelow.

For Metrics and Targets disclosure Recommendations (a) and (b),

which includes sector-specific guidance for insurance companies,

we continue to work towards developing our disclosure against

the relevant components of these two Recommendations, as

outlined below.

Metrics and Targets disclosure Recommendation (a):

– to provide additional metrics, including cross-industry

metrics,within our disclosure to support measurement

andmanagement of climate-related transition risks and

opportunities; and

– to describe the extent to which our insurance underwriting

activities, where relevant, are aligned with awell below

2°Cscenario.

Metrics and Targets disclosure Recommendation (b):

– to disclose, where data and methodologies allow, the weighted

average carbon intensity or GHG emissions associated with

commercial property and specialty lines of business.

The Group expects its disclosure against these to evolve over

time,with improving alignment to these forming part of the

actions embedded within our climate-related risk management

roadmap. For Recommendation (b), above, whilst we continue

toreview emerging best practice, at present, we donot believe

available methodologies allow meaningful measurement of these

metrics for small commercial property portfolios. See page 70.

Companies (Strategic Report) (Climate-related

Financial Disclosures) Regulations 2022

The climate-related financial disclosures made by the Group,

within the following pages, comply with the requirements of the

Companies Act 2006 as amended by the Companies (Strategic

Report) (Climate-related Financial Disclosures) Regulations 2022.

The Non-Financial and Sustainability Information Statement,

onpage 45, outlines where disclosure against each of these

requirements canbefound.

International Sustainability Standard Board's

("ISSB") IFRS S1 and IFRS S2

The Group notes the ISSB's Sustainability Disclosure Standards,

IFRS S1 and S2, issued in 2023, and welcomes the value the

Standards will have in evolving the global baseline for climate-

related reporting. The Standards are currently subject to

UKendorsement.

Governance

Our approach

The Group’s approach to the governance of its sustainability

strategy is underpinned by a clear commitment from the

Board and senior management to align sustainability goals

with the Group’s strategy, and to encourage accountability

across the business.

Our five-pillar sustainability strategy (see page 44), endorsed

bythe Board, aims to foster the highest standard of

Environmental, Social and Governance practice and deliver

long-term sustainability for all our stakeholders. The Planet

pillar takes the lead on climate-related issues.

Boards and Committees

The potential and actual impact of climate change on the

business (“inbound”), as well as the Group’s impact on the

environment (“outbound”), are issues requiring robust

governance to empower business areas in the management

ofclimate-related risks and opportunities.

It starts with the Group’s Board, which seeks to underpin all

ofthe Group’s activities with the highest standards of corporate

governance. The Board has oversight on two keyaspects of

theGroup’s approach:

– Each year, the Board assesses the strategic plan (the “Plan”)

in conjunction with the Group’s Own Risk and Solvency

Assessment (“ORSA”), which considers material risks to

thePlan, including climate change-related risks. More

information on climate change and our financial planning

can be found on page 60.

– The Board oversees the Group’s sustainability activity

throughits Committees, which scrutinise and provide

appropriate challenge on the Group’s five pillar sustainability

strategy,including the establishment and monitoring of

Science-Based Targets and the Group’s development of

aclimate-related risk management roadmap (see page 59).

TheChairofeach Committee reports to the Board after

eachCommittee meeting.

Committees

– The Audit Committee meets a minimum of four times a

yearand is responsible for overseeing the Group’s financial

statements and non-financial disclosures, including

climate-related financial disclosures.

– The Board Risk Committee oversees financial, regulatory

compliance, conduct and operational risk, including the

riskto the Group from climate change. It meets a minimum

of four times a year and receives reports on stress testing

oflong-term climate change scenarios, discusses strategies

formanaging the associated risks and receives updates

onemerging risks throughout the year, with deep dives

asappropriate. During the year, the Committee played

akeyrole in monitoring the Group’s climate-related risk

management roadmap and identifying areas of opportunity

for improvement.

– The Investment Committee meets a minimum of three

timesa year and considers the strategy for incorporating

ESGfactors into the Group’s investment management, which

has seen our credit portfolios tilted towards issuers witha low

carbon transition category.

58 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Task Force on Climate-related

Financial Disclosures

– The Nomination and Governance Committee meetsa

minimum of two times a year, monitoring the Board’s

overallstructure, size, composition and balance ofskills.

ThisCommittee is also responsible for monitoring the

Group’s observance of corporate governance best practice.

– The Customer and Sustainability Committee receives

updates on progress made under our Customer, People,

Society, Planet and Governance pillars. The Committee meets

a minimum of four times a year. During 2024, it has reviewed

progress against the Group’s Science-Based Targets,

approved by the Science Based Targets initiative (“SBTi”)

in2022; and reviewed performance and approach on key

stakeholder matters, along with the Group's participation

invarious sustainability-related initiatives. The Committee

continues to monitor the Group’s progress towards its

NetZero aims.

– The Remuneration Committee meets a minimum of four

times a year and considers how executive remuneration

canbe used to drive progress on climate-related matters.

Anemissions metric has been applied to long-term incentive

plan (“LTIP”) awards made since 2022 and makes up a 10%

weighting of the total award made under the LTIP.

Theemissions performance condition includes a targeted

reduction in emissions and temperature score and is based

on the Science-Based Targets that were approved by the

SBTi in 2022.

More information on the structure of the Board and Board

Committees can be found within the Corporate Governance report

onpage 94.

Management’s role

There are three primary management roles designed

tooversee the delivery of the Group’s assessment and

management of climate-related matters:

– the Chief Executive Officer (“CEO”) has oversight of overall

climate-related matters;

– the Chief Financial Officer (“CFO”) oversees the

implementation of the Group’s investment strategy and

isadvised by the Investment Committee on the application

ofESG weightings, including those related to climate change,

to the relevant portfolios. The CFO is a member of the

Investment Committee and the Director of Investment and

Capital Management is a regular attendee. The CFO also

oversees the identification and management of climate-

related financial risk; and

– the Chief Risk Officer (“CRO”) provides subject matter advice,

challenge and objective opinions on all risk matters, including

climate-related risk, through their oversight of the Risk

Function. The CRO is also tasked with establishing

appropriate risk management processes and frameworks for

climate-related risks.

Further information relating to our climate risk identification process

can found on page 67.

In the year, the Group’s Climate Executive Steering Group

(“CESG” or the “Steering Group”) acted as a management

forum to assess the potential impacts of climate change on the

business, along with the business’s impact on the environment.

The CESG consisted of members representing various teams

across the organisation, which included senior management

representation, and supported the Customer and Sustainability

Committee's oversight of the Group's progress against its

climate ambitions.

The Steering Group’s responsibilities also included monitoring

the Group’s performance against its climate ambitions,

including its Science-Based Targets, and overseeing input into

the Group’s business development and strategic processes to

make sure climate is given appropriate consideration in long

term strategy and planning. This included the identification

and oversight of climate-related opportunities.

In 2024, tracking and management of the financial aspects of

climate risk management activities, as identified in the Group’s

climate-related risk management roadmap, transferred from

the CESG to the Risk Management Committee and Board Risk

Committee. Regular updates are provided to support their

oversight of climate-related risk.

The roadmap sets out a range of actions to further integrate

climate risk management across the business and to build

additional capabilities in areas such as climate risk modelling

and scenario analysis.

A Climate Risk Workshop meets monthly with representation

across the business including Risk, Finance and Sustainability.

During 2024, it received updates relating to enhancements

tothe risk management framework and climate scenario

testingcapabilities.

Further information relating to the processes by which management

areinformed about climate-related issues can be found on page 67.

More information on the key performance indicators used to assess,

monitor and manage climate-related risks and opportunities can be

found on pages 68 to 71.

Strategy

The effects associated with climate change are far reaching and

have the potential to cause significant economic and societal

impact. We know that through the actions we take as a business

we can contribute to a more sustainable future and as an

insurer with over 8.8 million in-force policies

, we recognise

ourrole in supporting – and accelerating – the transition to

alow-carbon economy.

Our strategy focuses on mitigating against, and adapting to,

climate change. This involves driving change across our

underwriting activities, our operations and our investments,

and includes the actions we are taking to progress against our

Science-Based Targets and Net Zero ambitions.

The following pages examine this strategy alongside the

actualand potential impacts of climate change on the Group,

in line with the TCFD Recommendations and Recommended

Disclosures, and outline how we continue to develop our

approach to climate-related risks and opportunities across

thebusiness.

Note:

1. Based on the Group's ongoing operations. See glossary on pages 238 to 241 for definitions.

59 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Climate change risks and opportunities

The potential impacts of climate change on organisations are

classified into the following three categories by the TCFD:

– physical risks – resulting from the physical effects of climate

change;

– transition risks – resulting from the transition to a lower-

carbon economy; and

– opportunities – arising from efforts to mitigate and adapt to

climate change.

We also recognise that litigation risk, which includes risks

arising when parties who have suffered losses from climate

change seek to recover them from those they believe may have

been responsible, could also cause adverse impact. This could

include direct climate-related litigation against the Group or

insurance risk arising from the underwriting of liability

products. The Group considers the risks associated with this to

be low due to low exposure in high-risk industry sectors.

Following the sale of the Brokered commercial business in 2023

we expect our exposure to liability insurance risk to reduce

further as the retained back book for this business continues to

run off over time.

Materiality

A greater level of estimation and assumption is required when

assessing materiality in the context of climate change and this,

combined with the longer term and forward-looking nature of

climate-related risks and opportunities, makes the assessment

inherently uncertain. As a result, we have chosen not to quantify

a materiality threshold for the purposes of our climate-related

financial disclosures.

Our approach to determine where information is material is

supported by quantitative assessment, such as the findings of

our scenario analysis activities where we consider the potential

financial impact of climate change over the longer term. Our

approach means we disclose relevant information that focuses

on the areas of our business that could be most affected by

climate change, which we identify as our underwriting

activities, our operations and our approach to investments.

Thekey physical and transition risks and opportunities that

could impact these areas are outlined on page 64.

We will continue to review emerging best practice associated

with assessing climate-related materiality and we expect this

toevolve over time. More information on our current approach

to measuring the impact of climate-related risk, and the

integration of climate change into the Group’s overall risk

management processes, can be found below and on page 67.

Defining the short, medium and long-term

timehorizons

Short 1 - 10 years

Medium 10 - 30 years

As in previous years, our approach to defining the time

horizonsassociated with climate-related risks and opportunities

is to align closely with the scenarios considered in the Group’s

quantitative analysis of climate-related risk, which typically

considers scenarios that span over a significantly longer time

period (seepage61).

When defining the time horizons, the useful life of assets

wasconsidered. However, the Group’s assets are primarily

depreciated or amortised over a period of up to 15 years.

Assuch, from a climate-related risk perspective, this falls into

our short-term, and lower end of our medium-term, time

horizon and therefore climate-related riskis not a significant

input into determining asset useful economiclives.

The time horizons over which specific climate-related issues

willmanifest themselves vary significantly. However, in general,

transition risks are likely to materialise more rapidly than

physical risks, which are likely to be gradual and materialise

over the longer term. The timing of climate-related litigation

risk is less certain due to the nature of the exposure.

The key physical and transition risks and opportunities that

could significantly impact the Group, as well as the time

horizons over which they could manifest, is available further

into our disclosure on pages 64 to 66.

Financial planning, performance and position

Without appropriate management, the risks posed by

climatechange could adversely impact the Group’s financial

performance and financial position.

To help quantify the potential impact of climate change we:

– perform scenario analysis, which enhances our

understanding of the financial risks associated with the

longer-term impacts of climate change and provides an

indication of strategic resilience (see pages 61 to 63);

– undertake climate risk modelling to assess the most

predominant physical drivers of risk in our property insurance

products, enabling us to evaluate the potential impact to the

Group’s capital position (see pages 67 to 68); and

– integrate climate risk into the Group’s overall approach

toriskmanagement. This includes measuring the relative

significance of climate-related risks to other risks in the Group

Risk Taxonomy (see page 67).

Financial planning

We acknowledge that limitations exist in aligning

climatechange and financial planning. A key issue relates to

the modelling of the impact of climate change, which typically

extends out to a significantly longer time period than our

current financial plan.

Although limitations and uncertainties associated with the

longer-term impacts of climate change exist, we continue

toembed climate-related considerations into our planning.

Thisincludes within the Group’s Plan, which reflects the

strategic planning that is ongoing across the business and

covers any climate-related initiatives that are embedded within.

These include the costs associated with the actions we are

taking to reduce the carbon footprint of our accident repair

centres, and the use of reinsurance in our property insurance

business, acknowledging that the cost to obtain catastrophe

reinsurance could be impacted by an increase in the frequency

and severity of major weather events.

We also monitor losses from major weather events, which

include inland and coastal flooding, storm surge, freeze events

and subsidence. We use sophisticated modelling techniques

toestimate the expected losses from event weather in

ourproperty book to set an annual expectation for event

weather-related claims. The impact of major weather relative

tothis annual expectation for 2024 can be found within Metrics

and Targets on page 69.

60 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Long 30+ years

Financial performance and position

In preparing the financial statements, the Group has assessed

the impact of climate change. While the risks associated

withclimate change remain uncertain looking forwards, the

impact of event weather is reflected in the Group’s historical

performance and position as at 31 December 2024. The

potential impact of climate change on insurance risk is also

discussed in further detail within note 1 to the consolidated

financial statements (see page 176).

Areas of physical and transition risks the Group could be

exposed to are outlined in the table on page 64. The financial

impact of these risks can, if realised, be grouped broadly into

the following:

– Adverse impacts to revenue and market share due to a failure

to understand, and adapt to, the scale of change in market

demand for products and services due to climate-related

policy, technology and consumer preference.

– Increased climate-related operating costs and capital

expenditure due to the investments we make to progress

against our emission reduction targets, or higher operating

costs due to carbon cost increases or regulatory

requirements designed to limit carbon emissions.

– Changes in the value of our financial investments due to

theinfluence of physical and transition risk impacting the

wider economy.

– An increase in the frequency and severity of natural

catastrophes and other weather-related events adversely

impacting insurance liabilities.

We also recognise that our access to capital can be materially

affected by factors including, but not limited to, financial

performance and investment decisions, which have their own

associated climate-related risks. In addition, our performance is

assessed externally by ESG rating agencies, to which investors

and other stakeholders are giving increasing prominence.

Adverse impacts to our debt rating could negatively affect cost

and access to sources of debt finance and subsequent

interestrates.

In our approach to acquisitions and divestments, any climate-

related risks and opportunities are expected to form part of our

usual due diligence process.

Scenario analysis

The Group uses scenario analysis to better understand the

potential impacts climate change could have on our business

model and strategy.

Since 2021, we have updated our scenario stress testing

annually, evolving our approach to take account of changes in

our exposure, updates to our underlying risk models, leverage

new software, and to further enhance how we communicate

the outputs of our modelling in an effective way. Our analysis

focuses on the impact that transition and physical risks could

have on investment asset values and on liabilities associated

with weather-related perils.

Our stress tests have been designed around Intergovernmental

Panel on Climate Change (“IPCC”) pathways that project both

socio-economic changes and greenhouse gas concentrations

into the future. This allows usto assess the combined potential

impacts of transition andphysical risks on our business. The

IPCC's scenarios are globally recognised and standardised,

facilitating consistent and comparable stress testing aligned

with a wide variety ofimpact assessment studies.

Specifically, we considered SSP2 (“Middle of the Road”), in

combination with RCP4.5 ("SSP2-4.5"), and SSP5 (“Fossil-fuelled

Development”), in combination with RCP8.5 ("SSP5-8.5"),

focusing on two future points in time for our stress testing:

– 2030, to support our understanding of the potential impacts

on our business strategy; and

– 2050, to support our understanding of the potential impacts

on our long-term business model.

The choice of the SSP2-4.5 pathway represents a useful baseline

for understanding climate change impacts in terms of physical

risk, while incorporating the transition risk associated with

some reduction in emissions. The choice of the SSP5-8.5

pathway allows us to understand the effects of a severe but

realistic outcome in terms of physical risk. A scenario such

asthis would see over 2

C of global warming, which is seen

asacritical threshold with irreversible and far-reaching

consequences for the physical environment. The choice of

scenarios and timelines are sufficient to explore a wide range

ofpotential outcomes due to climate change, which can

beexpanded upon in future by the consideration of

additionalpathways.

Across both considered scenarios, increased temperatures

mean that the mid-Atlantic atmosphere can hold more

moisture, leading to more extreme rainfall events and flooding

in the UK. Sea levels will rise, although not uniformly, which

would increase the severity of coastal flooding events. The

scenarios also consider that there will be more frequent and

intense droughts. Drought conditions can lead to the drying

and shrinking of clay soils, which are prevalent in many parts

ofthe UK, leading to increased subsidence.

Our modelling approach

Different methods are used to quantify the impact of the

scenarios on our investment assets and weather-related

liabilities.

We use a specialised third-party software tool as the basis for

stress tests on our investment portfolio. The tool enables a

transition risk adjusted valuation and a physical climate

adjusted valuation to understand the financial impact of

thescenarios on individual securities and the overall portfolio.

Ituses a bottom-up approach that considers individual

companies and geolocation in assessing the potential impact

for a portfolio.

For estimating the impact of climate change on liabilities due

to flood and windstorm, we use third-party catastrophe

modelling software. This aligns with the approach for

quantifying catastrophe risk on our current portfolio. Custom

adjustments are applied to these models for each chosen

scenario and time horizon, reflecting changes in severe flood

frequency and the impact of sea level rise on coastal flooding.

This approach allows us to quantify changes in average annual

losses by peril, as well as changes in the size of extreme losses,

such as a 1 in 100-year loss, for example. All scenarios are applied

to our current exposures to ensure focus of the stress test

remains on climate change specific impacts. The windstorm

and flood impact assessments are updated quarterly for

portfolio exposure changes, and form part of our regular

catastrophe risk reporting.

For estimating the impact on subsidence, we extrapolate

published analyses from the British Geological Survey to

estimate the impact on average annual losses.

61 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Summary of results

2050 time horizon

Under the Middle of the Road pathway, climate policies are

implemented at a moderate pace and whilst there is progress

towards sustainable development goals, it is uneven and slow.

Technological development proceeds without fundamental

breakthroughs and there is a gradual shift towards cleaner

technologies while fossil fuel dependency decreases slowly.

Thenecessity for policy changes under this scenario leads to

transition risks that affect carbon-intensive industries and

property portfolios.

The impact observed on our asset portfolio under this scenario

was a small decrease in the value of assets under management,

estimated at less than a 1% impact. In this scenario, transition

risks dominate, particularly for the commercial property

assetclass which makes up only a small portion of our overall

portfolio. The impact is further limited due to the mix of our

portfolio, which is heavy in liquid assets such as cash, gilts,

andpublicly traded debt, and has negligible exposure to

carbon-intensive industries.

From a physical risk perspective the scenario aligns to an

approximate 1.8

C temperature rise above pre-industrial levels

by 2050. For the UK, this is expected to lead to increases in

precipitation and flooding, though to a lesser degree when

compared to the Fossil-fuelled Development scenario.

Sealevels under the Middle of the Road scenario rise by

over20cm,on average.

Under the Fossil-fuelled Development pathway, economic

growth is driven by intensive use of fossil fuels with minimal

effort to mitigate climate change. As such, there are fewer

transition risks due to fewer changes in policy or the economy.

The consequence is that greenhouse gas concentrations and

global average temperatures would continue to rise, reaching

an estimated 2.5

C above pre-industrial levels by 2050. This

would lead to far greater physical risks with much more

extremes in temperature and precipitation for the UK.

The impact on the valuation of our investment portfolio is

much smaller under this scenario compared with SSP2-4.5

because of the lower transition risk. However, we still observe

reductions in asset values due to the increased physical risk,

particularly in the publicly traded credit asset class where more

extreme weather events could potentially lead to operational

disruptions and asset devaluation for these companies.

Catastrophe modelling results for both scenarios at the 2050

time horizon showed increases in average annual losses from

both inland flooding and the coastal flooding element of

windstorm. This includes a significant increase in predicted

inland flood losses of 30% under the SSP2-4.5 scenario and over

65% for the SSP5-8.5 scenario, with the increases observed in

coastal flooding of 51% and 70%, respectively.

Under both scenarios, the higher weather-related losses are

further increased when including subsidence, where average

annual losses would grow by over 30% in the SSP2-4.5 scenario.

Under the SSP5-8.5 scenario, subsidence risk would be

morepronounced.

The following graph shows the impact of the scenarios on

theaverage annual losses for three weather-related perils.

Theresults illustrate the magnitude of impact from the

scenarios compared with the base case, and the relative

importance of each peril on the overall loss. Within the results,

the windstorm peril includes the associated losses from both

wind damage and coastal flooding.

The graph highlights that, whilst inland flood and subsidence

showed the strongest sensitivity to climate change, windstorm

continues to dominate the combined loss.

Although we observed an increase in average annual losses

across all perils, when the results are viewed in the context

ofthe combined modelled weather losses, the impact from

climate change is less pronounced as most of the combined

losses are from windstorm, and in particular the wind damage

element of this peril. Under our modelling for the scenarios,

windstorms see only a small increase in losses, which is due

tothe impact of sea level rise on coastal flooding.

Average annual losses by peril

2030 2050

SSP2-4.5

2050

SSP5-8.5

Windstorm

Subsidence

Inland Flood

Figure 1: Average annual losses by peril under both scenarios and time

horizons. Numbers within the bars represents the change in peril-

specific losses compared to the base. The 2030 result reflects the similar

impact under both the SSP2-4.5 and SSP5-8.5 scenarios.

There is significant uncertainty associated with how climate

change may affect UK windstorms and in previous iterations,

we incorporated the results of studies showing that climate

change may suppress the occurrence of large storms. However,

other studies argue that windstorms may become more

extreme and, as such, we have chosen to exclude the former,

more optimistic view, from our most recent modelling. Going

forward, we seek to enhance our understanding of the science

and how we can better incorporate this uncertainty into our

stress testing.

2030 time horizon

At the 2030 time horizon, under both scenarios, the effects of

climate change are expected to be more benign compared to

2050, both in terms of physical and transition risk.

The focus on the 2030 time horizon continues to be valuable

due to its direct relevance with the Group's five-year Strategic

Plan. Given that we observed limited impact on the investment

asset values at 2050, the associated impact at the 2030 time

horizon was not examined in detail.

In terms of physical risk, by 2030 there are no material

differences between the two scenarios and both see an

approximate increase in temperatures of around 1.4

C against a

pre-industrial average. Based on climate models, this could lead

to an increase in flood and subsidence risk, which in turn would

result in an increase to the amount of capital the Group needed

to hold to meet these additional liabilities.

We continue to keep track of scientific literature and maintain

in-house expertise to further support our understanding of new

scientific developments relating to peak flood risk.

62 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

+1%

+9%

+13%

+30%

+34%

+2%

+40%

+65%

Business impact

The increase in losses from weather-related perils could result

in a material increase in budgeted loss for weather, as well as to

the cost of reinsurance and capital.

Under both scenarios, the combined increase in weather-

related losses would need to be addressed through a

combination of measures including pricing and underwriting

action, increased reinsurance coverage, and investment in other

mitigation measures. This is deemed a manageable change for

the business given that weather-related losses are only a small

component of the Group’s overall expected losses. This is

further supported by the ability to reprice policies annually.

Losses under the scenarios at the 2050 time horizon, with our

current reinsurance in place, would be higher than our current

appetite for catastrophe risk. However, changes to capital

requirements at a Group level are mitigated by diversification

from parts of the business less sensitive to climate change risk,

and the estimated potential impact on capital requirements

could be mitigated further by additional reinsurance cover.

Thisassumes that reinsurance markets would still continue to

offer the coverage and terms that are offered today, although

we acknowledge that heightened global catastrophe activity

could increase the cost of obtaining reinsurance. In future stress

and scenario work, we intend to address the cost of reinsurance

more explicitly in our modelling.

Overall, the short-term nature of the business and the ability to

reprice annually help limit the impact on general insurance

liabilities, while reinsurance arrangements also provide further

risk mitigation. Nevertheless, the scenarios highlight that the

increased physical effects of climate change could make some

policies and perils either uninsurable or unaffordable.

Reverse stress test – electric vehicle adoption

In 2023, we conducted a reverse stress test to establish

whetherthe long-term future for motor insurance, specifically,

the adoption of electric vehicles, poses a threat to the viability

ofourcurrent business model. While not commonly covered by

transition risk scenarios, changes in consumer behaviour form a

significant part of the transition to a net zero emissions economy.

Whilst this exercise has not been updated in 2024, the overall

conclusions outlined below remain relevant as in the short

term, re-running the reverse stress test is unlikely to produce

materially different results.

For the short term time period, that covered to the end of 2025,

the findings showed that there areonly minor differences

between the scenario impacts, withmore significant

movements unfolding over a longer timeframe. Over the longer

term, the results varied considerably across the different

scenarios and included possible adverse impacts to the Group’s

business model or market share. Conversely, at the favourable

end of the range, the findings represented a possible growth

opportunity. The analysis also identified that the outcomes are

sensitive to assumptions which are largely outside of the

Group’s control, such as the rate of adoption of electric vehicles

in the UK, which is supported by changes in technology and

policy designed to limit carbon emissions.

The analysis supports our assessment of transition risk and

highlighted the importance of enhancing capabilities,

particularly around the Group’s ability to identify and respond

to the emerging electric vehicle and mobility landscape. More

information on how we are evolving our strategic response to

the adoption of electric vehicles can be found on page 65.

Key assumptions

In formulating scenarios to stress test key sensitivities of our

current business model we acknowledge there are limitations

in the assumptions used, particularly relating to the longer-term

2050 time horizon.

For example, the scenarios used do not take into account:

– the Group’s long-term commitments within its investment

strategy, including the ambition of holding a net zero

emissions investment portfolio by 2050, which could result

inlower transition risk (see pages 66 and 71); and

– the expiry of the Flood Re scheme in 2039. The ceding of

peak flood risk is a part of our current business strategy and

we have therefore assumed ceding would be available in the

2050 scenarios. This implies that either Flood Re would be

extended, or that an alternative private market reinsurance

solution would exist.

Additionally, whilst we have used credible scientific data to

build our scenarios, we recognise considerable uncertainty and

diverse opinions exist in relation to how climate change will

affect extreme weather in the UK. This provides incentive for

critically assessing the scenario design on a regular basis and

for considering alternate scenarios in future modelling, such as

more extreme windstorms, for example.

We plan for the scenarios to expand and evolve over time

which includes continuing to challenge our assumptions.

Thescenario design is iterative, as we learn how climate change

may affect our specific risk profile, while also allowing us to

focus on the aspects of the business most likely to be materially

impacted by the effects of climate change.

Management actions

The findings from our analyses continue to highlight the

importance of the Group’s existing Management Action

Framework, which includes a range of actions that could mitigate

against the risks identified through our climate-related modelling.

Considering the level of impacts that we have observed as part

of our modelling, we have identified a number of management

actions that would be effective to mitigate these risks and

respond to new opportunities.

Our Management Action Framework consists of three broad

categories based on the purpose and nature of theaction:

– Contingent Management Actions – These follow theGroup’s

existing Contingent Management Actions framework and

would be deployed to mitigate the scenario impacts,

assuming these arise as instantaneous shocks on the balance

sheet; potential action could include restricting capital

distributions, for example.

– Pre-emptive Management Actions – These have been

developed assuming that the business can observe the

scenarios unfolding in real time and begin to adapt the

business model in response to these emerging impacts;

theycover areas such as repricing, de-risking ofinvestments

and reinsurance.

– Strategic Management Actions – These actions are aligned

tothe Group’s ongoing strategic activity as part of our

contribution to the transition to a lower-carbon economy.

They include: taking action to progress against our Net Zero

ambitions and Science-Based Targets; understanding how

we can support in improving the flood resilience of UK

properties in flood-prone areas; and evaluating the impact

ofclimate change on our underwriting footprint, which

includes through scenario modelling.

63 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Our strategic response

Developing our understanding and management of climate-related risks, while seeking out opportunities that may arise from

efforts to mitigate and adapt to climate change, are important aspects for maintaining the longer-term resilience of our strategy.

Our approach continues to focus on driving change across key areas of our business: our underwriting activities; our operations; and

our approach to investments. The actions we are taking across these areas are considered in turn on pages 65 and 66.

In the following table, we outline the key physical and transition risks and opportunities that could significantly impact these areas

and include the time horizons over which we believe these could become manifest. Additional focus on the operating segments

that could be most affected by climate change can be found on page 65. More information on how we define the time horizons

used can be found on page 60.

Category Description Examples of potential impact on the Group

Time

horizon

Key area

ofimpact

Physical

risks

Acute – event

driven risks such as

flooding and storm

surge.

Chronic – longer-

term shifts in

climate patterns,

such as a continued

rise in average

temperatures,

changes in, and

extreme variability

of, precipitation and

weather patterns

and risingsea levels.

An increase in the frequency and severity of natural catastrophes

and other weather-related events could adversely impact

insurance liabilities, particularly those from our property

insurance products.

Disruption to our direct operations, which could includedamage

to our estate, impacting our ability toserve customers.

Chronic risks could lead to significant changes in our

underwriting criteria to maintain risk appetite, and/or higher

costs to obtain catastrophe reinsurance to protect us against an

accumulation of claims arising from a natural perils event.

Reduced returns from investments in companies whose

operations are impacted by physical climate risks, and realasset

investments directly impacted byphysical climate risks.

Transition

risks

Risks arising from

the transition to a

lower-carbon

economy.

These are

categorised by

theTCFD as:

– policy and

legalrisks;

– technology risks;

– market risks; and

– reputational risks.

A failure to understand the scale of change in market demand

for products and services due to climate-related policy,

technology and consumer preference could impact revenue and

market share. This could include risks from the transition to

electric-powered vehicles, for example.

Costs associated with the transition to a lower-carbon economy

may increase over time and the adoption of new lower emission

technologies may be unsuccessful.

Insufficient progress against our net zero ambitionscould cause

stakeholder concern andreputational damage.

Reduced returns from investments in high carbon intensity

companies that are not taking action to transition to a low

carbon economy, and real asset investments that are not

compatible with the transitionto a low carbon economy.

Opportunities Efforts to mitigate

and adapt to

climate change

canalso produce

commercial

opportunities.

Thesecould

allowusto help

accelerate the

transition and

continue

contributing to

asustainable

economy.

Accelerating the speed of transition to a lower-carbon economy

by, for example, supporting the move to greener transport

solutions, particularly electric-powered cars, allows us to develop

new insights and capabilities to help us build insurance solutions

that best meet our customers’ evolving needs.

Investment in energy-efficient features and equipment across

our office estate and accident repair centres could save on

energy consumption and operating costs, reduce our footprint

and improve operational andresourceefficiencies.

Potentially enhance risk-adjusted returns from our investments

by aligning the investment portfolio with the transition to a low

carbon economy whilst also enhancing our reputation as a

responsible investor. Ensuring the investment portfolio is

resilient against thephysical effects of climate change.

Short-term (1 – 10 years) Medium-term (10 – 30 years) Long-term (30 years +)

Underwriting Investments Operations

64 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Underwriting

Property

The physical risks from climate change are most likely to

manifest themselves as an insurance risk on our property

insurance products, where we protect millions of our

customers’ properties against weather events, such as

floodingand windstorms.

These natural catastrophes, and other weather-related events

in the UK, are key drivers in the Group’s solvency capital

requirements and we recognise that climate change could

cause the frequency and severity of these events to increase.

The short-term nature of the business we underwrite, the

abilityto re-price annually, and the risk mitigation provided

byreinsurance arrangements are all important factors in how

we manage our exposure. In addition, we further limit our

exposureby making use of Flood Re to cede high flood risk

residential properties.

In the second half of 2024, we deployed a new pricing and

underwriting engine across our Home business. This is

expected to provide further agility enabling us to increase the

frequency with which we refresh our view of underwriting risk.

Despite this, we acknowledge that, in general, the physical risks

from climate change are likely to intensify over the longer-term.

To assess the effects of this, we perform scenario analysis

tomeasure the potential impact of climate change on our

insurance liabilities over a time horizon spanning over 25 years.

This analysis helps us to quantify the financial implications

ofphysical risk under different possible future climate

scenarios,with the outputs providing an indication of the

Group’s resilience.

The analysis provides a framework to understand and assess

the potential future risks associated with climate change in

greater detail and the findings aid our strategic planning. This

has included the development of our Strategic Management

Actions (see page 63), which span across business areas and

include actions such as engaging with policymakers on the

importance of flooddefences in the UK to protect properties

located inflood-prone areas.

The potential impacts observed on the business under

thesescenarios, as well as the contingent and pre-emptive

management actions which could be deployed to mitigate

against the risks identified, can be found on page 63.

Theseactions cover areas such as pricing, de-risking

ofinvestments and reinsurance.

Motor

Being a large personal motor insurer, the moveto electric-

powered vehicles is particularly pertinent to the Group and,

supported by changes in technology and policy, the speed of

transition to electric continues to increase. Whilst this presents

new challenges, we also recognise this as an opportunity to

support the move to a lower-carbon economy, through the

insurance products we offer.

In recent years, our products have expanded to support our

Motor customers whoare making the switch to electric, for

example our car insurance includes battery, home charging

and charging cables cover.

We have also entered into new strategic partnerships which

can help grow our data on electric vehicles, such as with

Motability Operations from September 2023. We expect the

number of electric vehicles we insure to increase over the

course of the partnership, driving both scale and insight

through our accident repair centres.

We are also building further capabilities in our repair centres,

where an increasing number of our technicians are now

accredited in repairing electric vehicles, supporting the

development of insight into the future of vehicle technology

and repair.

During 2023, we performed a reverse stress test to assess how

the adoption of electric vehicles could impact the Group’s

business model, which considered a range of variables across

three time periods and scenarios.

Operations

We continue to take action to ensure we are operating in a

sustainable way, recognising this not only supports the planet,

butis also a part of how we can mitigate against the potential

climate risks that could cause disruption to our operations.

To date, this has included investing in our estate to integrate

new energy-efficient features and equipment, launching a

carbon reduction strategy in our network of accident repair

centres and since 2014, purchasing the electricity for all our

offices and accident repair centres from renewable sources.

Science-Based Targets

We aim to become a Net Zero business by 2050 and

this includes our direct operations. Our Science-Based

Targets were approved by the SBTi in 2022 and are

aligned to a 1.5°C pathway, meaning wehave

ambitious carbon reduction plans which support our

journey towards Net Zero.

For our direct operations, we are aiming for a 46%

reduction in absolute Scope 1 and 2 emissions from our

office estate and accident repair centres by2030, from

a 2019 baseline. Reporting against thistarget can be

found within Metrics and Targets on page 70 and

onpage 52.

Operational emissions

The steps we have taken in recent years mean we understand

where the most carbon-intensive areas of our operations are,

allowing us to prioritise carbon reduction activity across these

areas in support of our targets. Our 23 accident repair centres

remain a key area of focus and we continue to embed a range

of solutions as part our carbon reduction strategy, with this

work being led by colleagues in the Auto Services Sustainability

Programme. More information on what we have achieved in

2024 as part of the Programme can be found on page 53.

Emissions reporting

We calculate and report our GHG emissions annually and

ourmost recent carbon emissions reporting can be found on

page 73. In recognition of our hybrid operating model (where

people work from home at least part of the time), since 2021

ourreporting has also included emissions from homeworking.

Further disclosure on the progress we have made in reducing

our operational footprint to date can be found within Metrics

and Targets on page 70.

65 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Carbon offsetting

Our aim is to become less reliant on carbon offsetting and,

although our journey to net zero emissions continues to gain

momentum, we acknowledge that it will take time to facilitate

the transition. For this reason, we offset our remaining Scope 1

and 2 emissions, with this achieved in 2024 through carbon

removal credits. More information can be found on page 53.

Supply chain

The Group has an established Supply Chain Sustainability

Programme, recognising the importance of engaging with our

suppliers to achieve our climate ambition. During the year,

work has included increasing the weighting of sustainability

factors in our sourcing processes.

Further information on the activities undertaken in the year

aspart of our Supply Chain Sustainability Programme can be

found on page 54 and the Scope 3 GHG emissions from our

supply chain are reported on page 73.

Investments

We have been integrating more ESG considerations into our

investment strategy over a number of years, recognising this

isa long-term process which will require assessment and

challenge to inform future decision making.

We know that the impacts of potential physical and transition

climate-related risks arising in the wider economy will have an

impact on our investment portfolio, through their influence on

the value of assets. For example, our portfolio is exposed to

physical risks through our investment in companies that are

exposed to disruption from adverse weather events across their

supply chain. Itis also exposed to transition risks, where

companies thatwe are invested in are not adapting their

strategy to a low-carbon future. However, the transition

toalow-carbon economy also creates significant

investmentopportunities.

We have the long-term goal of our entire investment portfolio

being net zero emissions by 2050 and in support of our aims

wecontinue to implement key climate initiatives into our

investment strategy. During 2024, we:

– continued to work towards meeting our approved

Science-Based Targets for GHG emissions reduction for

inscope asset classes; and

– continued to reduce the carbon intensity of our corporate

bond portfolio in line with our aim of a 50% reduction by

2030from a 2020 base year.

The actions detailed above form part of the ongoing

development of the wider ESG framework underpinning

investments. In terms of holding investments in other

companies, those with higher reported ESG credentials have

more sustainable practices which better align to our

investment, environmental and social goals. As such, for our

investment-grade corporate bond portfolios, we require the

MSCI ESG rating of the portfolio to be at least as high as the

corresponding ESG weighted reference index or benchmark.

Science-Based Targets

In support of our long-term goal of ensuring our entire

investment portfolio is net zero emissions by2050, in

line with the aims of the Race to Zero campaign, we

set four science-based GHG emission reduction

targets in our investment portfolio.

Approved by the SBTi in 2022, the targets cover

corporate bonds, commercial property and real estate

loans which, as at the end of 2024, covered 70% of

assets under management.

More information on the targets, and our 2024 reporting

against them, can be found within Metrics and Targets

onpage 71 and on page 52.

Looking through the climate lens, we also have in place the

following current initiatives:

– Thermal coal screen whereby we restrict investment in firms

generating more than 5% of revenues from either thermal

coal mining or thermal coal power production unless the

company is taking positive climate action

– We actively encourage our investment managers to invest in

green bonds. Green bonds are designated bonds intended to

encourage sustainability and to support climate-related or

other environmental projects. All our relevant corporate bond

mandate guidelines now direct the portfolio manager to

purchase a green bond where the risk return characteristics

are similar to those of a comparable non-green bond.

– Within our investment property portfolio all assets must have

an Energy Performance Certificate of ‘D’ or better, or a plan

and funds in place to achieve that level. The property portfolio

also has a tailored set of ESG targets covering areas such as

carbon, energy, water and waste.

We also use climate scenario modelling to support our

assessment of the impact climate change could have on the

investment portfolio. This analysis enables us to measure and

quantify the potential financial impact of climate-related

physical and transition risk on our investments, while also

providing a better understanding of the opportunities that may

arise from a transition to a lower-carbon economy to inform our

strategic planning.

The potential impacts observed on the investment portfolio

under these scenarios can be found on pages 61 to 63.

Using our influence

We aim to use our influence to drive wider change. For

example, our investment managers are signed up to the UN

Principles for Responsible Investment. Wealso talk regularly

toour external asset managers to understand (and where

necessary, challenge) how they are using their global presence,

size and leverage to engage and encourage corporations to

tackle climate change.

Note:

1. Companies taking positive climate action are defined as those that are committed to setting Science-Based Targets or have a 2°C or better carbon

performance alignment from the transition pathway initiative.

66 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Risk Management

Our Risk Management Framework

The Risk Management Framework sets out, at a high level, the

Group's approach to setting risk strategy, and managing risks

to the strategic objectives and day-to-day operations of the

business. The Risk Management Framework is designed to

manage the Group’s risk proactively and to enable dynamic

risk-based decision making. This includes clear accountabilities

and risk ownership designed to ensure that we identify,

manage, mitigate and report on all key risks and controls, and is

governed through the three lines of defence model.

Furtherinformation can be found in the Risk management

section of the Strategic report on pages 38 and 39.

Risk taxonomy

The Group recognises that the effects of climate change are

wide-ranging, with uncertain and extended time-horizons, and

that a strategic approach to managing the risks from climate

change is required. The Group reflects the effects of climate

change in the drivers of those risks which are defined in the

Group Risk Taxonomy. This embeds the management of

climate-related risks in the normal risk management processes

for managing risks across the Group’s risk profile.

During 2024, the Group enhanced the coverage of climate-

related risk within its policies and minimum controls standards

for the financial risks considered to be most materially

impacted by climate change. Materiality was assessed through

SME judgement.

Risk impact

The impacts of all risks, events and action plans are rated using

the Impact Classification Matrix which facilitates a consistent

approach to the sizing and categorisation of risk across the

Group by using Financial, Regulatory, Customer, Reputation,

Operational disruptions and Economic, Social and Governance

factors (including Climate Change) inputs. This includes those

risks relating to climate change, including climate-related

litigation risks, and allows the Group to determine the relative

significance of climate-related risks in relation to other risks.

Climate-related risk identification process

Annual risk identification process

Each year, the business is required to review all current and

developing risks which could impact on the achievement of

strategic objectives. This process includes assessing the Group

risk drivers, such as those due to climate change, and their

potential impact and likelihood of risk crystallisation on both

aninherent and residual basis, in addition to identifying the

position which aligns with risk appetite. The risk drivers are

assessed at the sub-level most appropriate for the risk, for

example at a product level for insurance risk or business unit

level for certain operational risks.

We also use a variety of indicators across our product segments

to assess, monitor and manage climate-related risks. A number

of these key metrics can be found on pages 68 to 71.

Additionally, scenario analysis is used to quantify the potential

impact climate change could have on the business across

theshort and longer term, see pages 61 to 63.

Regulatory monitoring

The Group monitors and reviews relevant outputs from the

FCA, the PRA, and His Majesty’s Treasury, to consider existing

and emerging regulatory requirements.

During 2024, this included reviewing:

– the Bank of England’s bulletin on measuring climate-related

financial risks using scenario analysis;

– the Climate Financial Risk Forum’s guides on three areas

ofclimate risk: nature-related risk; use cases of short-term

scenarios; and mobilising adaptation finance to build resilience;

– the FCA’s finalised guidance on the anti-greenwashing rule;

and

– the FCA’s temporary measures for firms on ‘naming and

marketing’ sustainability rules.

We continue to monitor future developments. Reviews are

summarised and distributed to relevant stakeholders, and,

where necessary, responses are coordinated and overseen

bySecond Line of Defence subject matter experts.

Emerging risk process

In addition to the annual risk review process, the Group has

inplace an emerging risks process which facilitates the

identification, management and monitoring of new or

developing risks which are difficult to quantify or are highly

uncertain. The Group records emerging risks within an

Emerging Risk Register. Updates on emerging risk and the

actions being taken to address them are presented to the Risk

Management Committee and the Board Risk Committee

regularly, supplemented by deep dives on selected

emergingrisks.

Climate change, including climate-related physical and

transition risk, is one of the Group’s most prominent emerging

risks. In the year, oversight was provided by the Climate

Executive Steering Group and the Climate Risk Workshop,

consisting of First Line of Defence subject matter experts from

around the business where the impact of climate change is the

highest, in addition to Second Line of Defence subject matter

experts who provide oversight and challenge of risk

management activity relating to this.

Both physical and transition risks could manifest themselves

through a range of existing financial and non-financial risks,

including insurance, market, operational and strategic risks.

Formore information on emerging risk and climate change

seepage 43.

Climate risk modelling

The risk to the Group’s capital from extreme weather event

losses is modelled, monitored, and reported internally on

aquarterly basis. The largest loss potential comes from UK

windstorms or floods, which are explicitly modelled within the

Internal Economic Capital Model, along with less significant

perils such as freeze and subsidence.

The Group uses vendor catastrophe models to quantify wind

andflood risk for its in-force portfolio. These models are regularly

reviewed to ensure they reflect the latest scientific understanding.

Part of this review explicitly considers whether climate change

has materially altered the underlying risk assessment within

these models compared to historical observations. This task

ismanaged by the Capital Management Function.

A warming climate is likely to lead to increased flooding from

more frequent extreme rainfall events, and sea level rise will

increase the risk of coastal flooding. This informs an evolving

underwriting strategy for ceding peak flood risk to Flood Re,

which incorporates the modelled view of risk.

67 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Nearly all policies are of twelve months' duration and when

renewed are priced using advanced rating engines that

incorporate location-specific parameters for weather-related

risk. These rating engines include catastrophe risk to ensure

that pricing is adequate for potential extreme events not in the

historic record. Underlying algorithms are constantly reviewed

against claims data to seek to ensure adequate pricing. As

climate change affects loss patterns and catastrophic risk

evolves, our prices will adjust accordingly.

The Group mitigates its exposure to large catastrophic weather

events through catastrophe excess of loss reinsurance.

Thisreinsurance covers property (Personal Lines and

Commercial Direct) and motor physical damage losses. It

provides significant capital benefits by transferring volatility

from low-frequency, high-severity natural peril events away

from the Group. The reinsurance coverage purchased is based

on catastrophe modelling, capital analysis, the Group’s risk

appetite, cost of cover, and the overall impact on the income

statement. Typically, cover is purchased with an upper limit

equivalent to a 200-year modelled loss.

Metrics and Targets

We use a variety of key performance indicators across the different lines of our business to assess, monitor and manage

climate-related risks and opportunities. In the table below, we summarise the key metrics used across the three areas of activity,

asidentified earlier in our disclosure: our underwriting activities; our operations; and our approach to investments. Further detail

onthese, and our targets, can be found within the pages that follow. Where the Group believes that the values associated with

certain metrics are commercially sensitive these values have not been disclosed.

Area Metric Description Category Page

Underwriting

Total weather-

related loss impact

Track actual performance against our an annual expectations forevent

weather-related claims and monitor the impact of claims associated

with severe weather on the Group’s net insurance margin.

Physical risk 69

Flooding Monitor our market share for risks to be deemed in the high- or very

high-risk segments and track the volume and proportion ofpolicies we

are ceding to Flood Re.

Physical risk 69

Electric vehicles Monitor the number and proportion of electric vehicle policies

weunderwrite and track the number of new electric vehicles registered

in the UK.

Transition risk and

opportunities

Operations

Operational

emissions

Calculate and report our operational emissions (Scope 1 and 2),

tomonitor progress towards our science-based operational emissions

target.

Physical risk and

transition risk

52, 70

and 73

Measuring progress

within our repair

centres

Quarterly oversight of:

– GHG emissions and gas consumption metrics associated with

vehiclerepair;

– the delivery of carbon reduction plans; and

– opportunities for innovating and using new solutions within repair

centres, in support of plans and targets.

Physical risk,

transition risk and

opportunities

70 and

Investments

Investment

portfolio emissions

Measure and report the temperature score of our corporate

bondportfolio, and GHG emissions from commercial property and real

estate loans, to track progress against our science-based investment

targets to ensure we are delivering against our aims.

Physical risk and

transition risk

52, 71

and 73

The Group has also disclosed a number of materially relevant metrics consistent with the cross-industry categories recommended

by the TCFD. These include:

– GHG emissions: our Scope 1, 2 and 3 emissions and emissions

intensity metric reporting can be found on page 73.

– Remuneration: our LTIP awards have an emissions

performance condition which covers the targeted reductions

in emissions and temperature scores that form part of our

Science-Based Targets. More information can be found in the

Directors’ Remuneration Report from pages 115 to 141.

– Physical risks: the results of our scenario analysis activities,

which assesses the potential impact of climate-related

physical risk on the value of insurance liabilities, can be found

on pages 61 to 63. Analysis of the actual impact of severe

weather claims can be found on the following page.

– Transition risks: the results of our scenario analysis activities,

which assesses the potential impact of climate-related

transition risk on the value of investment assets, can be found

on pages 61 to 63. These pages also include the results of a

reverse stress test, undertaken in 2023, to assess how the the

transition to electric vehicles could impact the Group’s

business model, including both risks and opportunities.

We continue to assess how we incorporate additional metrics

into our disclosures, including those used to enhance the

measurement and management of transition risks and

opportunities, and expect this to evolve over time. In 2025,

actions to explore disclosure of additional metrics, which could

also support further development of the Group's transition plan,

have been embedded within our climate-related risk

management roadmap.

68 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Underwriting

Weather-related loss impact

The predominant direct physical drivers of catastrophe

weatherrisk from a capital perspective are major UK floods

andwindstorms. The last peak of windstorm activity was in the

late 1980s and early 1990s; the last decade being particularly

benign in comparison. By contrast, flood has seen more

elevatedactivity.

Catastrophe reinsurance is purchased annually to protect

against event losses greater than £100 million (see page 33).

Useof the Flood Re scheme also helps mitigate against the

highest individual residential flood risks.

The cost of claims relating to event weather can found

withinthe management view statement of profit or loss

(seepage 247).

Severe weather claims

(actual % of expected loss)

The Group uses sophisticated modelling techniques to

estimate the expected losses from severe weather events and

uses these to set an annual expectation for major weather-

related claims.

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

100

200

300

Actual weather

. . .

Assumed

The graph above shows the impact of event weather claims

relative to this annual expectation. In 2024, claims associated

with severe weather were below our 2024 event weather

assumption, which is set at 100% in the graph.

As shown in the graph, the trends are reflective of relatively

benign activity, although there is significant variability.

In 2022, claims from weather-related events were more than

double our annual assumption following three significant

storms in Q1, a rise in subsidence claims from extremely

hightemperatures in the summer and the December freeze

event.The 2018 peak was driven by the ‘Beast from the East’

freezeevent and the 2015 peak was a result of a number of

weatherevents in December, which caused severe flooding

acrosstheUK.

Impact of severe weather on net insurance

margin

1,2

(pt)

2022 2023 2024

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

Severe weather impacts

. . .

Assumed

Both these graphs reflect the number of major weather events

in the year that the Group responded to. The frequency and

severity of extreme weather events could be affected by climate

change, which in turn will affect our view of risk, how we price

severe weather risk, and the type and level of reinsurance we

purchase to protect our balance sheet.

Home

Key risk indicators are produced by the Underwriting Function

and reviewed monthly through relevant business forums.

The key climate change-related activities are flood, subsidence

and other weather incidents. For flood and subsidence perils,

we monitor the Group’s market share for risks deemed to be

inthe high- or very high-risk segments. We also monitor and

review the proportion of policies ceded to Flood Re. Each peril

ismonitored against set tolerances, with movements in amber

or red ratings generating investigation and action as required.

We maintain a view of trends and look to take action where

atrend is likely to result in a breach of tolerance.

Flooding

Governments have been working with insurers since 2000

tohelp make flood risk insurance more affordable and in 2016

Flood Re was introduced. Every insurer that offers home

insurance in the UK, the Group included, must pay into the

Flood Re scheme and this levy is used to cover the flood risks

inhome insurance policies.

To ensure the Group and its customers benefit from the levy

and guard against the highest of flood risks, wemonitor the

volume and proportion of policies we are ceding to Flood Re.

Properties are eligible to be ceded to Flood Re when they

meetcertain criteria.

Notes:

1. Data used within this analysis is based on the Group's ongoing operations. See glossary on pages 238 to 241 for definitions.

2. Following adoption of IFRS 17, analysis for periods prior to 2022 is not available. For historic reporting, see previous publications, including page 83

of the 2022 Annual Report and Accounts.

69 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Motor

The Group’s motor market is diversified throughout the UK,

andalthough weather-related factors will influence claims

frequency it is a relatively small influence compared with other

factors, such as used car prices.

In the year, in order to track the transition towards electric

vehicles we monitored both the number and proportion of

policies we underwrite for these types of vehicles as well as the

number ofelectric vehicles and alternatively fuelled vehicles

registered in the UK. This supports us in estimating our market

share andhelps inform our electric vehicle strategy.

Progress against the supplemental guidance for

insurance companies

The Group believes that its disclosure against certain

components of the sector-specific guidance, within Metrics

andTargets Recommendations (a) and (b), does not meet the

objectives of the TCFD.

Below, we outline the activities we have undertaken during

theyear to improve our disclosure against these areas in future

reporting, as well as the activities planned in future years.

The extent to which insurance underwriting activities,

whererelevant, are aligned with awell below 2.0°Cscenario

The Group recognises that measuring underwriting emissions

remains a developing area, with the frameworks and

methodologies to support insurers in calculating these

emissions continuing to evolve. An area of limitation that is

particularly pertinent to personal lines and small commercial

business insurers is the practicalities of obtaining data with

sufficient accuracy and reliability to determine the emissions

associated with these portfolios.

The Group has embedded plans to further assess its

disclosuresrelating to underwriting emissions through its

climate-related risk management roadmap. Actions that

arecurrently embedded include continuing to review issued

guidance related to measuring and reporting underwriting

emissions as this guidance evolves, in order tofurther inform

the Group’s approach.

The weighted average carbon intensity or GHG emissions

associated with commercial property and specialty lines

ofbusiness, where data and methodologiesallow

Following the sale of our Brokered commercial business in

2023, we expect our underwriting exposure to commercial

property lines to significantly reduce as the retained back book

for this business continues to run off over time.

We continue to remain active in the direct small business

commercial insurance market, which includes providing

insurance for small commercial properties, however, we view

our exposure to carbon intensive sectors through these

underwriting activities to be low, due to the type and size

ofthebusinesses we insure.

Whilst we will continue to review emerging best practice,

atpresent, we do not believe available methodologies have

sufficient maturity to meaningfully measure the weighted

average carbon intensity or GHG emissions associated with

small business commercial property lines. For example, current

frameworks recommend collecting emissions data from

companies’ own disclosures or official filings, or use of physical

or economic activity data, to determine emissions associated

with commercial lines portfolios. Such recommendations are

not currently pragmatic for insurers with small commercial

business customers, such as the Group.

The Group does not underwrite any specialty lines of business.

Operational

We calculate and report our operational GHG emissions

annually. Our most recent reporting can be found on page

73where we continue to break out our Scope 1 and Scope 2

emissions into separate performance figures across our office

sites and accident repair centres. We also disclose our Scope 3

footprint, which includes emissions from our supply chain.

Science-Based Targets

In support of our net zero ambitions, we have set five

Science-Based Targets, in line with a 1.5°C pathway, focused on

the most carbon intensive areas of our business, one of which

covers our operational emissions. These targets were approved

by the SBTi in 2022.

Scope Target 2024 update

Operational We target

reducing absolute

Scope 1 and 2 GHG

emissions by 46%

by 2030 from

a2019 base year.

As at the end

of2024, absolute

Scope 1 and 2 GHG

emissions reduced

by 46%

, from

a2019 base year.

Our 2024 reporting shows a 46%

reduction in Scope 1 and 2

emissions, when compared to the 2019 baseline, meaning we

have achieved our 2030 target early. This reflects the actions we

have taken in recent years, which has included reducing our

office footprint, investing in our estate to integrate more

energy-efficient features and equipment and the carbon

reduction initiatives we are implementing across our network

of accident repaircentres.

More information on our Science-Based Targets, including the

actions we have taken against them and our future priorities,

can be found on page 52.

Operational emissions performance

Overall, when compared to 2023, our Scope 1 and 2 GHG

emissions decreased by 3%. A summary of the movements in

the year can befound on page 73.

Auto Services Sustainability Programme

Our Auto Services Sustainability Governance Forum oversees

the activity that forms part of the Auto Services Sustainability

Programme. The Forum oversees progress against the activities

to deliver towards the carbon reduction strategy within our

accident repair centres and tracks key Programme milestones.

Note:

1. We are required to use Scope 1 and Scope 2 market-based emissions for SBTi operational target setting and reporting. When including Scope 2

location-based emissions this reduction is equivalent to a53%reduction.

70 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

This includes monitoring the delivery and performance against

GHG emissions reduction targets, where metrics, such as gas

consumption and emissions associated with vehicle repair, are

tracked. Scope 1 and 2 emissions from our accident repair

centres are reported on page 73.

The Forum also assesses the risks that could impact the delivery

or prioritisation of planned activity, coordinating the actions

required to mitigate against these. It also considers metrics

relating to opportunities from innovating and using new

solutions in support of plans and targets, such as assessing

thefeasibility and benefits of adopting new lower emission

technologies or equipment in repair centre sites.

Supply chain

While we wait for the publication of the Science-Based Net

Zero Targets for Financial Institutions from the SBTi, which

isnow expected in 2025, we have chosen to set an internal

emissions reduction target for our supply chain. This target

forms part ofour Supply Chain Sustainability Programme (see

page 54.

Investments

In 2018, the SBTi launched a project to help financial institutions

align their lending and investment portfolios with the

ambitions of the Race to Zero campaign. The project audience

includes universal banks, pension funds, insurance companies

and public financial institutions.

Science-Based Targets

Our long-term goal is for our entire investment portfolio to be

net zero emissions by 2050, in line with the aims of the Race to

Zero campaign. To support this, we have set Science-Based

Targets for our investment portfolio covering corporate bonds,

commercial property and real estate loans, these were

approved by the SBTi in 2022. As at the end of 2024 our

investment portfolio targets covered 70% of AUM.

Asset Class Target 2024 update

Corporate bonds Align the Scope 1

and 2 portfolio

temperature score

by invested value

from 2.44°C in 2019

to 2.08°C by 2027.

As at the end of

2024, the Scope 1

and 2 portfolio

temperature score

by invested value

was 2.01°C.

Align the Scope 1, 2

and 3 portfolio

temperature score

by invested value

from 2.80°C in 2019

to 2.31°C by 2027.

As at the end of

2024, the Scope 1, 2

and 3 portfolio

temperature score

by invested value

was 2.31°C.

Commercial

property

Reduce GHG

emissions by 58%

per square metre

by 2030 from a

2019 base year.

As at the end of

2023, GHG

emissions reduced

by 39% from a 2019

base year

Real estate loans Reduce GHG

emissions by 58%

per square metre

by 2030 from a

2019 base year.

As at the end of

2023, GHG

emissions reduced

by 26% from a 2019

base year

Further details on the emissions from our investments are

reported on page 73.

The temperature score for corporate bonds is the implied level

of warming above pre-industrial levels to which our portfolio

isaligned based on the CDP’s temperature rating data set.

Foran individual company the temperature rating is the level

ofwarming to which a company’s publicly stated emission

reduction targets align. The targets are set on a linear pathway

for the portfolio to reach 1.5°C by 2040 as is required by the SBTi.

We aim to achieve our corporate bond target by directing

investment to companies with lower temperature scores

asthese are the ones taking most serious action to reduce

emissions. We will also expect our external investment

managers to engage with portfolio companies to encourage

them to act by setting robust emissions reduction targets.

Wealso continue to target an interim 50% reduction in

weighted average carbon intensity by 2030 from a 2020 base

year for corporate bonds in order to seek to ensure emissions

are reducing overtime.

Carbon intensity is the GHG emissions intensity per $1 million

ofsales. Normalising by sales allows the investor to compare

carbon efficiency of different-sized firms within the same

industry and has become a standard metric usedin the

investment industry.

For commercial property and real estate loans, targets were set

using the SBTi sectoral decarbonisation approach for real estate

which uses the IEA ETP 2017 Beyond 2°C scenario. Emissions for

real estate relate to the energy use of buildings which is largely

emissions from electricity and heating use. Work towards our

real estate targets will require improving the energy efficiency

of buildings, engaging with tenants to share energy use

dataand encouraging them to settheirown emissions

reduction targets.

More information on our Science-Based Targets, including the

actions we have taken in the year against them and our future

priorities, can be found on page 52.

Note:

1. Due to the practicalities of obtaining data from our external asset

managers ahead of the release of the Group’s annual reporting,

progress against our commercial property and real estate loan

targets is reported with a one-year time lag.

71 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Streamlined Energy and Carbon Reporting

("SECR") regulations

The following table highlights where information can be found

that supports the requirement to disclose how the Group

manages its energy consumption and carbon emissions.

Requirement Page

Annual global GHG emissions (CO

e):

– from activities for which the Company

isresponsible

– from buying electricity, heat, steam or cooling by

the Group for its own use

Annual global energy consumption in kWh, being

the aggregate of:

– energy consumed from activities for which the

Company is responsible

– energy consumed resulting from buying

electricity, heat, steam or cooling by the Group

foritsownuse

The proportion of GHG emissions and energy

consumed relating to the UK and offshorearea

1,2

72, 73

Methodology used to calculate emissions and

energy consumption

At least one intensity metric in relation toemissions

Description of energy efficiency actions taken

Notes:

1. The offshore area is broadly defined as the sea adjacent

tothe UK, including the territorial sea, plus the sea in any

designated area under section 1(7) of the Continental Shelf

Act 1964 and section 41(3) of the Marine and Coastal Access

Act2009.

2. 100% of the Group’s GHG emissions and energy

consumption reported relates to operations, all of which

are based in the UK.

Greenhouse gas emissions

The Group's annual GHG emissions reporting is provided on

thefollowing page which includes a summary outlining our

performance in the year. More information relating to the

progress we are making against our Science-Based Targets

canbe found on page 52.

Definitions

Scope 1: This covers direct emissions from owned or controlled

sources. For example, our office sites throughout the UK using

gas boilers, the paint booths in our auto services sites currently

relying on gas powered processes, and our fleet vehicles.

Scope 2: These are indirect emissions. They are emissions

associated with the production and transmission of energy we

eventually use as a company across our office and auto services

sites. For example, the production of the electricity we buy to

heat and cool our buildings generates emissions.

Scope 3: These are indirect emissions that occur in our

investments and the value chain to support our company

operations. For example, employee commuting, activities

related to the disposal of waste, and the goods and services we

purchase to fulfil customer claims as part of our supply chain.

Reporting methodology

We apply the relevant greenhouse gas reporting requirements

contained within Schedule 7, Part 7 of the Large and Medium-

sized Companies and Groups (Accounts and Reports)

Regulations 2008 (as amended) and apply the GHG Protocol

Corporate Accounting and Reporting Standard (revised edition)

to calculate our emissions, which includes emissions associated

with electricity consumption. We use the operational control

method to define the boundary for consolidating GHG emissions.

Our carbon emissions are calculated by an external third

partyand reviewed internally. The calculation method used

forour 2024 emissions reporting remains consistent with

priorperiodsand with the reporting standards stated above.

For our 2024 reporting, the emission factors that were used in

the calculation of purchased goods and services emissions

were updated to EORA 26 emission factors to remain in line

with best practice. Our 2023 reporting has been represented

accordingly.

Emissions data is reported in compliance with the SECR

requirements to disclose annual global GHG emissions. 100%

ofthe emissions reported relate to our operations, all of which

are based in the UK.

Scope 3 emissions

The GHG Protocol defines Scope 3 emissions as all other

indirect emissions that occur in a company’s value chain. These

include Scope 3, Category 1: Purchased Goods and Services

(or‘supply chain’) and Scope 3, Category 15: Investments

(or‘financed emissions’). Estimates necessarily have to be made

regarding Scope 3 emissions as the information is not available

across all Scope 3 emissions sources, such as underlying

suppliers, for example.

In estimating the emissions from our supply chain, we use the

GHG Protocol’s spend-based approach. This involves using

supplier spend data and multiplying these values by a relevant

emissions factor to estimate the amount of emissions

associated with purchased goods or services.

We have applied the Partnership for Carbon Accounting

Financials (“PCAF”) methodology to calculate emissions

associated with our investment activities, in line with industry

best practice. We have included our corporate bonds,

commercial property and real estate loans within our financed

emissions calculations.

Due to the practicalities of obtaining data from our external

asset managers ahead of the release of the Group’s annual

reporting, investment emissions from commercial property and

real estate loans are reported with a one-year time lag.

Our Net Zero ambition

We aim to become a Net Zero business across all scopes by

2050, with external near-term targets and plans that cover our

operational emissions (Scope 1 and 2) and our investments.

Atpresent, we have not set an external target for our supply

chain emissions while we await the publication of the Financial

Institutions Net-Zero Standard from the SBTi, which is now

expected in 2025. For more information on our Supply Chain

Sustainability Programme, please see page 54.

72 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Group greenhouse gas emissions (tCO

Scope 1 2024 2023 2022 2019 (Baseline)

Office sites 858 671 1,023 1,418

DLG Auto Services 3,399 3,829 5,506 6,506

Total (tCO

e) 4,257 4,500 6,529 7,924

Scope 2

Location- Market- Location- Market- Location- Market- Location- Market-

based based

Office sites

622 23 659 16 1,089 0 4,516 0

DLG Auto Services 1,890 0 1,824 0 1,364 0 2,093 0

Total (tCO

e) 2,535 2,499 2,453 6,609

Total Scope 1 and 2 (tCO

e) 6,792 6,999 8,982 14,533

Of which: Office sites (tCO

e) 1,503 1,346 2,112 5,934

Of which: DLG Auto Services (tCO

e) 5,289 5,653 6,870 8,599

Scope 3

Purchased goods and services

333,876 253,844 244,316 294,080

Fuel and energy-related activities (not included inScope 1 & 2)

1,570 1,300 1,518 2,459

Upstream transportation and distribution 477 1,641 1,890 4,173

Waste generated in operations 1,529 1,762 2,523 3,358

Business travel 746 1,287 475 1,807

Employee commuting 6,073 7,100 7,227 3,176

Of which: homeworking emissions 4,327 5,256 5,583 –

Upstream leased assets 247 131 189 514

Downstream leased assets 3,080 2,878 1,552 1,658

Total Scope 1, 2 and 3 excluding investments (tCO

e) 354,390 276,942 268,672 325,758

Investments

Corporate bonds and private placements Scope (1 & 2) 2.01ºC 2.02ºC 2.44°C

Corporate bonds and private placements Scope (1, 2 & 3) 2.31ºC 2.31ºC 2.80°C

Commercial property (tCO

5,6

3,679 4,747 5,197

Commercial property – intensity (kCO

e/m

)

5,6

41 55 67

Real estate loans (tCO

6,093 10,011 13,769

Real estate loans – intensity (kCO

e/m

)

60 72 81

Intensity metrics

Scope 1 and 2 emissions (tCO

e) per £ million ofnet insurance revenue

2.2 2.2 2.9

Scope 1 and 2 emissions (tCO

e) per average number of employees

forthe year 0.7 0.7 0.9 1.3

Overall, when compared to 2023, our Scope 1 and 2 emissions

decreased by 3%.

Within our repair centres, we continued to see a reduction

inScope 1 emissions through the use of an alternative fuel for

our recovery trucks. These reductions were partly offset by an

increase in Scope 2 emissions where we continue to switch

toelectric from gas to power repair equipment, where possible.

Seepage 53 for more information.

Scope 3 emissions (excluding investments), increased by 29%,

primarily driven by higher emissions from purchased goods

and services. This was largely attributable to increased

expenditure associated with the partnership with Motability

Operations, which began in September 2023.

Investment emissions from our commercial property and

realestate loans portfolio further reduced in 2023

, primarily

reflecting a continued focus on energy efficiency by tenants

and property managers.

Further information relating to our performance against our

Science-Based Targets can be found on page 52.

Notes:

1. Figures for Scope 2 use standard location-based methodology.

Wefollow the GHG Protocol to disclose both location and market-

based figures; and as we have secured our energy from 100%

renewable sources since 2014, our Scope 2 market-based results

arenil prior to 2023. From 2023, emissions from electric and plug-in

hybrid vehicles in the company car fleet have been reported within

the Scope 2 market-based result.

2. The 2023 figures differ from our previously reported result following

areclass of 17 tCO

e between location-based and market-based.

3. As outlined on page 72, the emission factors used in the calculation

ofpurchased goods and services emissions were updated to EORA 26

emission factors in 2024 to remain in line with best practice. The 2023

result has been represented accordingly.

4. The 2023 figure of 1,300 tCO

e differs from our previously reported

figure of 1,354 tCO

e following recalculation.

5. Due to the practicalities of obtaining data from our external asset

managers ahead of the release of the Group’s annual reporting,

progress against our commercial property and real estate loan

targets is reported with a one-year time lag.

6. The 2022 figures differ from our previously reported figures of 4,630

tCO

e and 54 kCO

e /m

following recalculation.

73 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

In accordance with Provision 31 of the 2018 UK Corporate

Governance Code, the Directors assessed the viability over a

three-year period to December 2027, beyond the minimum

12months required. This assessment considered the Group’s

financial performance (page 20), principal risks (page 40),

capital management strategies (page 24), and regulatory

compliance as detailed in the Strategic Report and

FinancialStatements.

Every year, the Board considers the strategic plan (“the Plan”)

for the Group, which is based on the Group operating as a

standalone business. As the approved Plan is used for planning

over a timeframe of three years, to 31 December 2027, this has

been selected as the most suitable period for the Board to

review the Group’s viability.

The Group’s Risk Function assesses the Plan and provides a

report to the Board which supports the Board in concluding on

the Group’s viability.

In undertaking this review, the Group Risk Function has defined

a set of key risk themes, known as top risks, grouped around

the themes of financial resilience, operational resilience and

future strategic fit in the context of the Plan. The Plan did not

introduce any new material risks other than those already

contained within the Group’s Material Risk Register. Whilst

outcomes for the later years in the Plan are less certain, the Plan

remains a robust tool for strategic decision-making despite the

unpredictability of long-term outcomes.

The Group's Risk Function has also carried out an assessment

ofthe risks to the Plan and the dependencies for the success

ofthe Plan. This included running adverse scenarios on the

Plan to consider the downside risks and subsequent impact

onforecast profit. The key scenarios applied to the Plan were

inrelation to the impact of adverse claims inflation, failure to

achieve motor pricing initiative benefits, delay to delivery of

expense reductions and a fall in asset values. In applying these

scenarios, key judgements and assumptions are made, the

most relevant are as follows: adverse claims inflation; failure to

achieve motor pricing initiative benefits; delay to delivering

expense reductions and fall in asset values.

None of the scenarios individually were concluded to present

athreat to the Group’s expected viability across the duration

ofthe Plan. It is unlikely that all risks would materialise

atthesame time.

Finally, the Finance Function has also carried out an

assessment of the risks to the Group's capital position over 2025

and 2026, incorporating moderate and severe macroeconomic

stress tests individually and in combination. The stresses have

been run to assess the possible impact on own funds in the

period to 31 December 2025 and 31 December 2026, and both

scenarios confirmed the Group's solvency capital requirement

would not be breached, including when all stresses were

applied in combination. The most significant stresses

considered were widening credit spreads; increases in claims

inflation and reduction in business volumes.

The overall conclusion of these tests was that there could be

breaches in the Group’s risk appetite in the long term, however

a combination of contingent, pre-emptive, and strategic

management actions could be deployed to address the risks

and allow the business to recover to above risk appetite.

Further information in relation to the sensitivity of key factors

on the Group’s financial position are included in the Group

financial performance section on page 20 and in the market

risk note in the consolidated financial statements on page 177.

Takeover approach from Aviva plc

The Board has also assessed the impact of Aviva plc's offer to

purchase the entire share capital of the Company, subject to

regulatory and shareholder approval. In making its

recommendation to the shareholders to accept the bid, the

Board considered many factors. Further information in relation

to the considerations made is included in the Section 172 (1)

statement on page 86. In the event that the deal does not

complete, the Directors consider that the Group would

remainresilient.

Based on the results of these reviews, the Board has a

reasonable expectation that the Company and the Group

asstandalone businesses can continue in operation, meet

liabilities as they fall due and provide the appropriate degree

ofprotection to those who are, or may become, policyholders

orclaimants in the period to 31 December 2027. Although

theDirectors cannot be certain about the actions of the new

owners should a deal complete, they consider that the viability

of the Groups operations should not be adversely affected.

Statement of the Directors

in respect of the Strategic report

The Board reviewed and approved the Strategic report

onpages 1 to 75 on 03.03.2025.

By order of the Board

Adam Winslow

Chief Executive Officer

04.03.2025

74 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Viability statement

Dear Shareholders,

On behalf of the Board, I am pleased to present the Corporate

Governance report for the year ended 31 December 2024. This

report sets out how we have applied the principles of the UK

Corporate Governance Code (the "Code") 2018 throughout the

year. It provides information on the activity of the Board and

progress we have made in strengthening our corporate

governance practices.

Board changes

In March 2024 we were delighted to welcome our new CEO,

Adam Winslow. As we disclosed in last year’s Annual Report,

Adam was appointed following a highly competitive selection

process on account of his outstanding track record and

significant leadership experience, alongside his commitment to

delivering for customers. During the year, Adam has spent time

visiting many areas of the business, listening to our colleagues

and investors and sharing information on our new strategy.

More information on this engagement can be found on pages

89 and 90.

In April 2024 we announced that following a comprehensive

and extensive search, the Board had identified Jane Poole to

take on the role of Chief Financial Officer and Jane joined the

Board in October 2024. Jane is a highly experienced CFO with

extensive general insurance knowledge following a long and

successful career building high performance teams in the

financial services industry. More information on the process

leading to Jane's appointment can be found on page 109.

In April 2024 we were delighted to be joined by Carol Hagh as

an Independent Non-Executive Director. Carol brings with her

experience in actuarial services and technology consultancy;

brand, marketing and customer strategy development; as well

as board and executive search. Carol’s experience in executive

search has made her an extremely valuable addition to our

Remuneration and Nomination and Governance Committees.

Jon Greenwood, our former Acting CEO, and Neil Manser, our

former CFO, stepped down as Executive Directors in March and

October 2024 respectively. I thank them for their hard work and

commitment to the Company.

As a result of these changes to its composition, the Board

consisted of 42% women and 58% men as at 31 December 2024

and at the date of this annual report.

Having served for nine years, Richard Ward would have been

due to step down from the Board and from his roles as Senior

Independent Director and Remuneration Committee Chair at

the AGM in May 2025. However, in the light of Aviva’s potential

acquisition of the Company, Richard has kindly consented to

continue to serve for a period, to be reviewed in mid-2025. The

Board is confident inRichard’s continuing independence of

character and judgement.

Stakeholders

During the year the Board has spent time engaging with

andconsidering the interests of many of our investors and

keystakeholders on many important topics, including the

proposed acquisition of the Group by Aviva plc. Many of

ourBoard members attended meetings of our Employee

Representative Body to understand the views of our workforce

and our new directors undertook induction activities which saw

them meeting many of our colleagues around the business.

More information in respect of this activity can be found on

pages 89 and 91. Our customers are key stakeholders and an

important focus for the Board. We expanded the remit of the

Customer & Sustainability Committee chaired by Tracy

Corrigan to reflect this.

Risk, Audit and Internal Control

2024 was KPMG’s first year as auditor having been appointed

by shareholders at our 2024 AGM. During the year the Audit

Committee has overseen a programme of work to ensure a

smooth transition from Deloitte to KPMG. More information

onthis can be found on pages 101 to 105.

During the year, our Board Risk Committee has continued

tooversee a Group-wide controls improvement programme

which has helped the Group to improve the resilience of

itscontrol environment and with the aim of bringing our

oversight, monitoring and assurance processes into line with

industry best practice. In addition, the Audit Committee has

overseen a Control and Oversight Remediation Programme

within Finance, the aim of which is to enhance the financial

reporting control environment across the Group. More

information on this work can be found on pages 101 to 105.

75 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Chair’s Introduction

Remuneration

This Annual Report details the progress we have made in

executing our new strategy and the Group's improved financial

result. A majority of the targets established by the Remuneration

Committee under the 2024 Annual Incentive Plan ("AIP") have

been achieved, including targets for operating profit and cost

savings, resulting in the payment of bonuses to our people.

The Long-Term Incentive Plan awards made to our senior

managers in 2021, which were due to vest in 2024, did not meet

the RoTE and TSR threshold performance levels and, therefore,

lapsed with no payout. The Remuneration Committee

considered this outcome appropriate in the light of the Group’s

performance over the three-year performance period.

The Remuneration Committee continued to monitor the

remuneration of the wider workforce to ensure that outcomes

were fair and appropriate in comparison to executive pay

decisions. More information on executive remuneration and

thework of the Remuneration Committee can be found

onpage 115.

Shareholder Meetings

Notice of a Court meeting and a General Meeting of

shareholders in connection with the proposed acquisition

ofthe Company by Aviva plc wasgiven on 10 February 2025.

Thesemeetings will be held on10March 2025. The relevant

notices of meetings can be found on our corporate website.

Our 2025 AGM is scheduled to be held on 14 May 2025 at

10.30a.m. Full details, including the resolutions to be proposed,

can be found in the Notice of AGM, which will also be made

available on our corporate website.

The outcome of the resolutions to be voted and the meetings,

including poll results detailing votes for, against and withheld,

will be published on the London Stock Exchange’s Regulatory

Information Service and the Company’s websites once the

respective meetings have concluded.

Yours sincerely,

Danuta Gray

Chair of the Board

76 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Danuta Gray

Chair of the Board

Adam Winslow

Chief Executive Officer

Jane Poole

Chief Financial Officer

Committees

– Nomination and Governance Committee

(Chair)

– Remuneration Committee

Appointed

– Independent Non-Executive Director in

February 2017

– Chair of the Board since August 2020

Key Skills and Experience

– Extensive experience leading and

transforming large, consumer focused

businesses.

– Deep understanding of governance and

remuneration requirements affecting

listed companies gained from previous

Chair roles.

– Expertise in sales, marketing, and

technology.

Danuta was Chair of Telefónica in

Ireland until 2012. She was Chief Executive

between 2001 and 2010, during which time

Telefónica’s customer base increased to 1.7

million from just under 1 million.

Between 1984 and 2001, Danuta held a

variety of senior positions within the BT

Group. Elsewhere, Danuta has acted as

Senior Independent Director of the

Aldermore Group; Non-Executive Chair of St.

Modwen Properties; Non-Executive member

of the Ministry of Defence Board, NED and

Chair of the Remuneration Committee at

both Page Group plc and Old Mutual plc; and

was Non-Executive Chair of the Board of

Perth Topco Limited and North Tech.

External Appointments

– Non-Executive Director, Chair of the

Remuneration Committee and member

of the Nomination Committee of Burberry

Group plc.

– Chair and Non-Executive Director of Croda

International plc.

– Trustee Director of The Resolution

Foundation

Committees

– None

Appointed

– March 2024

Key Skills and Experience

– Extensive experience in the insurance

industry and financial services, gained

from over 20 years in the sector.

– Proven track record of leading high-

performance businesses.

– Expertise in driving operational excellence

with a focus on delivering for customers.

Adam became Chief Executive Officer of

Direct Line Group in March 2024. He joined

Direct Line Group from Aviva, where he was

CEO, UK & Ireland General Insurance and

previously held the post of CEO for Aviva’s

international businesses. Before working at

Aviva, Adam held various senior roles at AIG.

External Appointments

– Member of the Association of British

Insurers Board.

– Member of the FCA Practitioner Panel.

Committees

– Investment Committee

Appointed

– October 2024

Key Skills and Experience

– Chartered Accountant with deep

knowledge and extensive experience of

General Insurance in the UK marketplace.

– Expertise in leading large finance teams

operating in a regulated financial services

environment.

– Successful track record of delivering

cultural change and technological

transformation.

Jane became Chief Financial Officer of Direct

Line Group in October 2024. Prior to joining

the Group, Jane was CFO for Aviva's UK and

Ireland General Insurance business, where

she played a key role in driving business

performance and improving profitability.

Before her time with Aviva, Jane held senior

finance roles at RSA Insurance Group,

including serving as CFO of its UK &

International businesses.

External Appointments

– None.

77 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Board of Directors

NGC

Tracy Corrigan

Independent Non-Executive Director

Mark Gregory

Independent Non-Executive Director

Carol Hagh

Independent Non-Executive Director

Committees

– Customer and Sustainability Committee

(Chair)

– Nomination and Governance Committee

– Remuneration Committee

Appointed

– November 2021

Key Skills and Experience

– Track record of driving digital growth.

– Experience in digital transformation with a

focus on data, culture and customer.

– Expertise in ESG issues and

communications with multiple

stakeholders.

Tracy’s professional background spans

financial journalism, digital media and

corporate strategy in the media industry.

Most recently Tracy was Dow Jones’

ChiefStrategy Officer where she was

responsible for global strategy, customer

insight and commercial policy, and had

oversight of the digital transformation of the

business. Earlier in her career, Tracy was

Editor-in-Chief of The Wall Street Journal

Europe and Digital Editor of TheWall Street

Journal. She also held various positions,

including Editor of FT.com and Editor of the

Lex Column, attheFinancial Times.

External Appointments

– Non-Executive Director and member of

the Remuneration Committee of Barclays

Bank UK plc.

– Non-Executive Director, Chair of the

Sustainability Committee and member of

the Audit and Nomination Committees of

Domino’s Pizza Groupplc.

– Chair of The Scott Trust Endowment

Limited and Non-Executive Director and

member of the Nominations Committee

of TheScott Trust.

Committees

– Board Risk Committee (Chair)

– Audit Committee

– Investment Committee

– Nomination and Governance Committee

– Remuneration Committee

Appointed

– March 2018

Key Skills and Experience

– Extensive experience in both General and

Life insurance.

– Deep understanding of capital markets.

– Strategically orientated with a detailed

understanding of the retail sector.

Mark was CEO of Merian Global Investors

from January 2019 to August 2020. He

previously held the role of Group CFO and

Executive Director at Legal & General until

2017. Mark acted in a variety of senior roles in

his 19-year career at Legal & General,

including CEO of the Savings business,

Managing Director of the With-Profits

business, and Resources and International

Director. Earlier in his career, Mark held

senior financial and business development

roles at ASDA and Kingfisher. Mark is an

Associate of the Institute of Chartered

Accountants in England & Wales.

External Appointments

– Non-Executive Director, Chair of the Risk

Committee and member of the Audit

Committee ofPhoenix Group Holdings plc.

Committees

– Nomination and Governance Committee

– Remuneration Committee

Appointed

– April 2024

Key Skills and Experience

– Extensive experience of digitalisation,

brand strategy and the drivers of customer

satisfaction.

– Deep understanding of insurance brand

and customer strategy and of refining

products and propositions.

– Expertise in leadership and company

culture.

Carol’s career has spanned actuarial services

and technology consultancy; brand,

marketing and customer strategic

development; board and executive search, in

which she led Spencer Stuart’s UK insurance

practice; and senior executive coaching. In

senior leadership roles in General Insurance,

she was responsible for digital

transformation, direct channel development,

and proposition design. She has led

customer-centric culture transformation and

data driven approaches to improving

customer satisfaction.

External Appointments

– Non-Executive Director, Chair of the

Nomination and Governance Committee

and member of the Remuneration

Committee of Chesnara PLC.

78 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Key for Committee membership

AC Audit Committee IC Investment Committee RC Remuneration Committee Committee chair

BRC Board Risk Committee NGC Nomination and Governance

Committee

CSC Customer and Sustainability

Committee

CSC

NGC

CSC

NGC

BRC

NGC

Adrian Joseph OBE

Independent Non-Executive Director

Mark Lewis

Independent Non-Executive Director

Fiona McBain

Independent Non-Executive Director

Committees

– Customer and Sustainability Committee

– Nomination and Governance Committee

Appointed

– January 2021

Key Skills and Experience

– Leading expertise in digital, data science

and analytics.

– Track record of using data and AI to drive

business transformation.

– Recognised Diversity and Inclusion leader

and a passionate advocate on this topic.

Adrian is the former Managing Director,

Group Data and Artificial Intelligence at BT

Group and a former member of HM

Government’s AI Council. He has significant

industry and consultancy experience and has

held senior roles at EY and Google. Between

2016 and 2020, Adrian was a Non-Executive

Director at the Home Office where he sat on

the Data Board advising on data science,

digital transformation, and diversity and

inclusion. A former Chair of the Race Equality

Board, Adrian was appointed to the main

Board of Business in the Community in 2014

and continues to act as an adviser to them. In

2018, he was announced as the most

influential Black, Asian and minority ethnic

technology leader in the UK by the Financial

Times and Inclusive Boards. Adrian has been

awarded an OBE for services to equality and

diversity in business.

External Appointments

– Non-Executive Director of Allwyn

Entertainment Limited.

– Non-Executive Director of Great Ormond

Street Hospital for Children NHS Trust.

– Member of the Technology Advisory Board

of NatWest Group plc.

Committees

– Customer and Sustainability Committee

– Nomination and Governance Committee

– Remuneration Committee

Appointed

– March 2023

Key Skills and Experience

– Strong track record of delivering digital

transformation and growth.

– Highly experienced in customer-focused

and regulated business environments with

a focus on strategy and innovation.

– Expertise in price comparison websites.

Mark’s career has spanned financial services,

retail, e-commerce, management

consultancy and advertising. Most recently,

he was Chief Executive of the

MoneySupermarket Group, overseeing a

period of revenue and profit growth for the

UK listed price comparison business. Mark’s

previous roles include the Retail and Online

Director for John Lewis and the Managing

Director of eBay UK.

External Appointments

– Non-Executive Director and member of

the Audit, Remuneration, Risk and

Responsible Banking Committees of

Santander UK plc.

– Non-Executive Director of Hammer PW

Topco Limited.

Committees

– Investment Committee (Chair)

– Audit Committee

– Board Risk Committee

– Nomination and Governance Committee

Appointed

– September 2018

Key Skills and Experience

– Deep understanding of the development

of corporate and digital strategy.

– International experience with broad

perspective of business and capital

markets.

– Expertise in digital transformation,

customer analytics and stakeholder

communications.

Fiona’s experience in retail financial services,

both in the industry and as an auditor, was

gained in the UK and the USA. Fiona qualified

as an accountant early in her career at Arthur

Young (now EY). Until January 2019, she was

Vice-Chair of Save the Children UK and a

Trustee Director of the Humanitarian

Leadership Academy. Previously, Fiona served

as CEO of Scottish Friendly Group for 11 years,

before which she was Scottish Friendly

Group’s Finance Director. Between February

2009 and June 2023, she served as Chair and

Non-Executive Director of the Scottish

Mortgage Investment Trust plc. Fiona is a

Fellow of the Institute of Chartered

Accountants in England & Wales.

External Appointments

– Senior Independent Director, Non-

Executive Director, and Chair of the Audit

Committee of Monzo Bank Limited.

79 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Key for Committee membership

AC Audit Committee IC Investment Committee RC Remuneration Committee Committee chair

BRC Board Risk Committee NGC Nomination and Governance

Committee

CSC Customer and Sustainability

Committee

BRC

NGC

BRC

NGC

BRC

NGC

David Neave

Independent Non-Executive Director

Gregor Stewart

Independent Non-Executive Director

Dr. Richard Ward

Senior Independent Director

Committees

– Audit Committee

– Board Risk Committee

– Nomination and Governance Committee

Appointed

– October 2023

Key Skills and Experience

– Deep understanding of General and Life

insurance markets.

– Extensive experience in senior

management and Non-Executive roles.

– Proven record of delivering General

Insurance business modernisation.

David is a Chartered Insurer and former Chief

Executive of General Insurance for Co-

operative Insurance. Following his executive

career, spanning over thirty years in senior

management roles in General Insurance,

David has held chairmanships, Non-

Executive Directorships and advisory roles in

a number of insurance, InsurTech,

consultancy and legal businesses, including

Slater and Gordon UK Limited, The Solicitors

Indemnity Fund, Liverpool Victoria Friendly

Society, LV General Insurance Limited and

Accenture UK Limited.

External Appointments

– Chair of the Advisory Board of the

Common Automotive Platform Standard.

Committees

– Audit Committee (Chair)

– Board Risk Committee

– Nomination and Governance Committee

Appointed

– March 2018

Key Skills and Experience

– Strong audit background having worked

as a partner in Ernst & Young’s Financial

Services practice.

– Extensive experience in the insurance and

investment management industry.

– Deep knowledge and understanding of

financial services regulation and practice.

Gregor worked at Ernst & Young for 23 years,

10 of which were as partner in the financial

services practice. Between 2009 and 2012, he

was Finance Director for the insurance

division of Lloyd’s Banking Group plc which

included Scottish Widows. Gregor previously

served as Chair and Non-Executive Director

of Alliance Trust plc and FNZ (UK) Limited;

Chair of Quilter Financial Planning; and was

Honorary Treasurer of International Alert for

six years. Gregor is a Member of the Institute

of Chartered Accountants of Scotland.

External Appointments

– Non-Executive Chair of FNZ Group.

– Chair of the Royal Scottish National

Orchestra.

Committees

– Remuneration Committee (Chair)

– Board Risk Committee

– Nomination and Governance Committee

Appointed

– January 2016

Key Skills and Experience

– Highly experienced financial services

professional with expertise in dealing with

complex stakeholder groups.

– Extensive knowledge of the insurance

industry with deep insight into prudential

regulation.

– Background of delivering business

transformation and change in

challenging circumstances.

Richard was previously Executive Chair of

Ardonagh Specialty, Chief Executive of Lloyd’s

of London, and CEO of the International

Petroleum Exchange. He also held the roles of

Non-Executive Chair at Brit Syndicates

Limited and Executive Chair of Cunningham

Lindsey. Richard also held Non-Executive

Director roles at the Partnership Assurance

Group plc and the London Clearing House.

Earlier in his career he held a range of senior

positions at British Petroleum and was a

research scientist for the Science and

Engineering Council. Richard has also been a

member of the PwC Advisory Board, the PRA

Practitioner Panel and the Geneva

Association.

External Appointments

– Non-Executive Chair of CFC Group Limited.

– Non-Executive Chair of Mrald Limited.

80 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Key for Committee membership

AC Audit Committee IC Investment Committee RC Remuneration Committee Committee chair

BRC Board Risk Committee NGC Nomination and Governance

Committee

CSC Customer and Sustainability

Committee

Board independence

17%

75%

Chair (1)

Executive Directors (2)

Independent Non-Executive Directors (9)

Board gender

Chair and NED tenure

58%

42%

Women (5)

Men (7)

58%

17%

25%

0-3 Years (7)

4-6 Years (2)

7-9 Years (3)

Gender diversity of our Executive

Committee

Gender diversity of Senior Management

and Direct Reports

40%

60%

Women (4)

Men (6)

36%

64%

Women (16)

Men (28)

Notes:

1. As at 31 December 2024.

2. Senior Management in this context is defined as theExecutive Committee, Company Secretary and direct reports (where direct reports

are members of the Group’s Enterprise Leadership Network) as at 31 December 2024.

81 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

This report explains the Board’s role and

activities, and how corporate governance

operates throughout the Group.

Corporate Governance statement

This Corporate Governance Statement explains key features of

Direct Line Insurance Group plc’s (the “Company”) governance

structure and how it measures itself against the standards set

out in the UK Corporate Governance Code 2018 (the “Code”)

which applied to the financial year ended 31 December 2024.

For more information about the Code, visit the Financial

Reporting Council's ("FRC") website atwww.frc.org.uk.

ThisCorporate Governance statement fulfilsthe requirements

of the FCA’s Disclosure Guidance and Transparency Rule 7.2

(“DTR 7.2”). For full details refer to the Directors’ report on

pages142 to 146

The Company complied with the principles and

provisions of the Code throughout the financial year

andup to the date of this Annual Report and Accounts.

Board leadership and

companypurpose

Pages

– The role of the Board

– The role of the Board in the

Company’sculture

– Board activity and meeting attendance

– Consideration of Section 172(1) factors

– How the Board engages

withstakeholders

82 to 92

Division of responsibilities

– Governance framework and structure

– Structure of the Board, Board

Committees and executive management

– Roles and responsibilities of the Board

93 to 94

Composition, succession

andevaluation

– Board composition

– Induction, training and support

– Board’s approach to diversity, inclusion

andsuccession planning

– Board and Committee

effectivenessreview

95 to 97

Audit, risk and internal control

– Preparation of the Annual Report

andAccounts

– Assessing emerging and principal risks

– Risk management and internal

controlsystems

– Audit Committee report

– Board Risk Committee report

98 to 108

Remuneration

– Directors’ Remuneration report 115 to 141

Board leadership and company purpose

The role of the Board

The Board seeks to promote the long-term sustainable

successof the Company for the benefit of its shareholders

andstakeholders, and establishes the Company’s purpose,

values, culture, and strategy, while contributing to wider society.

TheBoard aims to create shared vision for the organisation

androle-models the values and standards that are expected

from all of our people. The Board and its Committees are

comprised of individuals with an appropriate mix of skills,

industry experience and knowledge.

The Board's role is supported by a formal Schedule of Matters

Reserved forthe Board, which contains items that are reserved

for the Board’s consideration and approval. These matters

relate to strategy and management, material contracts,

financial reporting and controls, internal controls and risk

management, Board membership and succession planning,

corporate governance, structure and capital, and delegation

ofauthority.

The Matters Reserved for the Board are kept under review to

ensure they remain appropriate. Throughout 2024, the Board

acted in accordance with the Schedule of Matters Reserved

forthe Board.

The Board discharges some of its responsibilities through

itsCommittees, each of which expands the work of the

Boardand enables deeper focus on particular areas. Each

BoardCommittee has written Terms of Reference defining its

role and responsibilities. The Terms of Reference for each of the

Board Committees can be found on our corporate website.

Further details regarding the role, responsibilities and activities

of the Board and its Committees can be found below and in

theDirectors’ Remuneration report which begins on page 115.

Whilst some of the key areas of the Board’s responsibility are

summarised in the following paragraphs, these are not

intended to be an exhaustive list.

Leadership

The Board provides leadership within a framework of

prudentand effective controls. The Board has clear divisions

ofresponsibility and seeks the long-term sustainable success

ofthe Group. Information on how opportunities and risks

tothefuture success of the business have been considered

andaddressed, and about the sustainability of the Company’s

business model, is set out in the Strategic report which

beginson page 1.

Operations

The Board oversees the implementation of a robust control

framework to allow effective management of risk. The Board

supervises the Group’s operations, with a view to ensuring they

are effectively managed, that effective controls are in place,

andthat risks are assessed and managed appropriately.

Financial performance

The Board sets the financial plans, annual budgets and key

performance indicators and monitors the Group’s results

against them.

82 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Corporate Governance

Strategy

The Board oversees the development of the Group’s strategy,

the sustainability of the business model and considers how

theGroup’s governance supports the delivery of strategy. The

Board approved a refreshed strategy in 2024. More information

on the Group’s refreshed strategy can be found on page 3.

The Board monitors management’s performance and progress

against the Group’s strategic aims and objectives.

Further details of how the Company applied the Code’s

principles and complied with its provisions can be found

intheremainder of this Governance report.

The role of the Board in the Company’s

culture

Our Mission:

To be brilliant for customers every day.

Our Vision:

To create a world where insurance is personal, inclusive

and a force for good.

Our Purpose:

To help people carry on with their lives, givingthem

peace now and in the future.

Our culture informs the way we work, the way we interact

withstakeholders and how we provide value for our customers

and underpins our mission, vision and purpose.

The Board recognises that evolving and enhancing the Group’s

culture is critical to its future success in a rapidly changing

world. In 2024, the Board had continued oversight of work

onthe Group’s culture and sought to bring together various

activities in the Group aimed at instilling a customer focused,

high performance and risk-positive culture. The Company

partnered with PwC to develop a business-driven culture

framework, supported by a culture narrative and a plan to

embed the culture framework in order to support the Group’s

refreshed strategy.

The ‘Tone from the Top’

The Group had a Culture Steering Committee, which met ona

quarterly basis to co-ordinate and lead activity on culture.

TheSteering Committee was made up of key individuals from

across the business who influence culture, including the Chief

People Officer and representatives from Business Change,

Human Resources, the Conduct Centre ofExcellence, Trading,

Customer Sales and Service, Corporate Communications,

Riskand Compliance.

Communications as an enabler of change

The Group has reviewed and enhanced the way it engages

onculture internally with a view to ensuring the tone from

thetop is cascaded clearly and effectively by using consistent,

open and transparent communication. Conscious effort

ismade to ensure that internal communications use key

language related to our cultural ambition with regard to

thehigh-performance culture.

Monitoring culture

In 2024 the Group continued to make use of a dashboard to

assist the Board in monitoring the Group’s culture. The

dashboard includes key metrics across Customer (for example;

NPS and complaints); People (for example; performance

management; grievances; diversity; hiring trends; and

engagement); and Risk (for example; colleague compliance

training completion levels; completion of internal audit actions;

and speaking up and whistleblowing reports), and is regularly

reviewed by the Board.

– People

In 2024 the Group introduced a new performance

management framework with the aim of promoting a high

performance culture, focused on objective setting, embedding

the performance framework, managing underperformance,

upskilling people managers and colleagues, and tackling bias

inperformance management. A revised set of standardised

objectives was rolled out across the business, supported by a

comprehensive audit in Q1 2024, to assess both quality and

completion of objectives.

– Customer and Consumer Duty

The Group continued to embed Consumer Duty Requirements

throughout the organisation. In addition, we launched the

Enterprise Leadership Network ("ELN") Customer Framework to

support business areas in the identification of best practice and

areas for improvement.

– Governance and Risk

Throughout 2024 the Group worked through the revised Risk

and Compliance Self-Assessment (‘RCSA’) process as part of the

Controls Remediation Programme (‘CRP’), with RCSAs being

carried out in each business area to identify areas in which

ourcontrols could be improved. Members of the Executive

Committee and the ELN were also given specific objectives

around controls for 2024. More information on the RCSA can

befound on pages 106 and 107.

83 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Board meetings and activity in 2024

Scheduled Board meetings focused on four main themes, as detailed below:

Themes Description

Strategy and execution – Approving and overseeing the Group’s key strategic targets and monitoring the Group’s

performance against those targets;

– reviewing customer experience and trends and monitoring the Group’s performance against

external brand metrics;

– reviewing and approving key projects aimed at developing the business or rationalising costs;

– considering growth opportunities; and

– reviewing the individual strategy of key business lines.

Strategic alignment

Financial performance

and investor relations

– Setting financial plans, annual budgets and key performance indicators, and monitoring the

Group’s results against them;

– considering the Group’s reserving position, approving Solvency II narrative reports and approving

financial results for publication;

– approving reinsurance programmes and renewals;

– reviewing broker reports on the Group, alongside feedback from investor meetings; and

– considering the appropriateness or otherwise of possible surplus capital distributions.

Strategic alignment

Risk management,

regulatory and other

related governance

– Reviewing and agreeing the Group’s policies;

– setting risk appetite;

– approving the Own Risk and Solvency Assessment (“ORSA”);

– seeking to ensure that the Group complies with its regulatory obligations;

– reviewing the Group’s solvency position and forecast, including overisight of work in connection

with the miscalculation of the Company's solvency capital ratio;

– overseeing the Control and Oversight Remediation Programme;

– reviewing the Group’s ESG initiatives;

– reviewing and approving the Group’s Task Force on Climate-related Financial Disclosures

(“TCFD”); and

– reviewing and approving the Group’s Consumer Duty implementation programme.

Strategic alignment

Board and Board

Committee governance

– Receiving reports from the Board’s Committees;

– updating the Schedule of Matters Reserved for the Board;

– updating Terms of Reference for the Board’s Committees;

– receiving corporate governance updates;

– overseeing Board and executive succession planning;

– conducting the annual review of the Board and Board Committees’ performance; and

– conducting an annual review of the Group’s governance framework.

Strategic alignment

In addition to its scheduled Board meetings, the Board

heldanumber of ad hoc meetings to deal with urgent

orarisingmatters.

In June 2024, the Board held a strategy day to monitor progress

against the Group’s refreshed strategy and to discuss the

Group’s future opportunities.

Link to core strengths and capabilities driving our strategy

Rejoin front runners in Motor

Target leading positions in Home, Commercial Direct

and Rescue

Achieve top quartile insurance technical excellence

Build a performance culture

Reduce cost base

Board and Committee meeting attendance

The Board and its Committees held a number of scheduled meetings in 2024, which senior executives, external advisers and

independent advisers were invited to attend and to present on business developments and governance matters. The Company

Secretary attended all Board meetings and he, or his nominated deputy, attended all Board Committeemeetings.

The table overleaf sets out attendance at the scheduled meetings in 2024. Attendance is expressed as the number of scheduled

meetings attended out of the number of such meetings possible or applicable for the Director to attend. In circumstances where

aDirector is unable to attend a meeting, the Director receives papers in advance and has the opportunity to raise issues and give

comments to the Chair in advance of the meeting.

Additional Board and Committee meetings were convened during the year to discuss current issues (including the offers received

for the Company), ad hoc business development, governance and regulatory matters.

84 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Board

Audit

Committee

Board Risk

Committee

Customer and

Sustainability

Committee

Investment

Committee

Nomination

and Governance

Committee

Remuneration

Committee

Chair

Danuta Gray 10 of 10 – – – – 3 of 3 3 of 3

Senior Independent Director

Richard Ward

9 of 10 – 5 of 5 – – 3 of 3 3 of 3

Non-Executive Directors

Tracy Corrigan 10 of 10 – – 4 of 4 – 3 of 3 3 of 3

Mark Gregory 10 of 10 5 of 5 5 of 5 – 4 of 4 3 of 3 3 of 3

Carol Hagh

7 of 7 – – – – – 1 of 1

Adrian Joseph OBE

10 of 10 – – 3 of 4 – 3 of 3 –

Mark Lewis

9 of 10 – – 3 of 4 – 2 of 3 3 of 3

Fiona McBain

8 of 10 5 of 5 5 of 5 – 4 of 4 3 of 3 –

David Neave 10 of 10 5 of 5 5 of 5 – – 3 of 3 –

Gregor Stewart 10 of 10 5 of 5 5 of 5 – – 3 of 3 –

Executive Directors

Adam Winslow

8 of 8 – – – – – –

Jane Poole

2 of 2 – – – 1 of 1 – –

Former Executive Directors

Neil Manser

8 of 8 – – – 3 of 3 – –

Jon Greenwood

2 of 2

Notes:

1. Directors were unable to attend some meetings due to conflicting commitments.

2. Carol Hagh was appointed to the Board and the Nomination and Governance Committee on 1 April 2024 and was appointed to the Remuneration

Committee on 1 November 2024.

3. Adam Winslow joined the Group as CEO on 1 March 2024 and was appointed to the Board on 21 March 2024.

4. Jane Poole joined the Group as CFO and was appointed to the Board and the Investment Committee on 10 October 2024.

5. Neil Manser resigned as CFO on 10 October 2024.

6. Jon Greenwood resigned as an Executive Director on 21 March 2024.

85 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Section 172(1) Statement

The Board of Direct Line Insurance Group plc (“Direct Line”) confirms that during the year under review, it has acted in the way

itconsiders, in good faith, would be most likely to promote the long-term success of the Company for the benefit of its members

asa whole, whilst having regard to the matters set out in Section 172(1)(a)-(f) of the Companies Act 2006 (“Section 172(1)”).

Purpose and Vision

The matters set out in Section 172(1) underpin Direct Line’s purpose and vision and form the foundation for the Board’s considerations

and decision making. Our purpose – to help people carry on with their lives, giving them peace of mind now and inthe future

– iscentred on customers and their long-term interests. Our vision – to create a world where insurance is personal, inclusive and

aforce for good – reflects our desire to do business in a way that benefits all stakeholders, the environment andwidersociety.

Stakeholders

Information on Direct Line’s key stakeholders is set out in the Sustainability section of the Strategic report on the following pages:

Customers, pages 46 to 47; People, page 48; Society, pages 49 to 50; and the Planet, pages 51 to 54.

Engagement

The Board recognises that our stakeholders have diverse and sometimes competing interests that need to be finely balanced, and

that these interests need to be heard and understood in order for them to be effectively reflected in decision making. Information

about how the Board has engaged with stakeholders during the year and outcomes of that engagement can be found on

pages 89 to 90 in the table titled “How the Board engages with stakeholders”.

Board decisions and oversight

Examples of how stakeholder engagement and Section 172(1) matters have influenced Board discussion and decision making

during the year can be found in the table titled “Consideration of Section 172(1) factors by the Board” on page 88. The table covers a

number of key topics including: the takeover approaches from Ageas SA/NV ("Ageas") and Aviva; the return of capital to

shareholders; the launch of a new strategy; and continuing compliance with the Consumer Duty rules. The metrics and processes

which the Board looks at to ensure that business practices and behaviours reflect the Company’s culture, purpose and values,

including the impact of decisions on key stakeholders, are set out on page 88. Information about Board oversight of environmental

matters can be found on pages 58 to 71 in the TCFD Report.

The table below sets out where key disclosures in respect of each of the Section 172(1) matters can be found.

Section 172(1) factor Relevant disclosures

the likely consequences of any

decision in the long-term

Mission, vision, purpose and strategic objectives (page 82)

Consideration of Section 172(1) factors by the Board (pages 87 to 88)

the interests of the Company’s

employees

Key performance indicators – Colleague engagement scores (page 15)

Outcome of employee engagement (pages 91 to 92)

Diversity and Inclusion (pages 95 to 96)

How the Board engages with stakeholders (pages 89 to 90)

Employee Representative Body (page 91)

the need to foster the Company’s

business relationships with suppliers,

customers and others

Key performance indicators – NPS and customer complaints metrics (pages 7 and 47)

Customer support (pages 46 to 47)

Supply Chain (page 54)

How the Board engages with stakeholders (pages 89 to 90)

the impact of the Company’s

operations on the community

andtheenvironment

Community Fund 2024 (page 49)

Science-Based Targets (page 52)

External ratings, memberships and benchmarks (page 57)

TCFD disclosures (pages 58 to 71)

How the Board engages with stakeholders (pages 89 to 90)

Customer and Sustainability Committee report (pages 111 to 112)

the desirability of the Company

maintaining a reputation for high

standards of business conduct

Our values (page 3)

The role of the Board in the Company’s culture (page 83)

Internal controls (pages 98 and 99)

the need to act fairly between

members of the Company

Capital management (page 24)

How the Board engages with stakeholders (pages 89 to 90)

Shareholder voting rights (page 143)

Annual General Meeting (page 236)

86 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Consideration of Section 172(1) factors by the Board

The table below sets out how factors under Section 172(1) of the Companies Act 2006 and engagement with stakeholders have

fedinto Board discussion and decision making on key topics. More information about Board engagement with stakeholders can

befound in the table on pages 89 to 90.

Section 172(1)

The Directors must act in a way they consider, in good faith, would be most likely to promote the success of the Company

for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:

The likely consequences of any decision in the long term;

the interests of the company’s employees;

the need to foster the company’s business relationships with suppliers, customers and others;

the impact of the company’s operations on the community and the environment;

the desirability of the company maintaining a reputation for high standards of business conduct; and

the need to act fairly between members of the company.

87 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Takeover

Approach

from Aviva

plc

Considered shareholders views on the

value of the offer.

On 23 December 2024, the Board announced it had agreed to

recommend a cash and share offer for the Group. More

information on the offer can be found on page 9. The Board

made the unanimous decision to recommend Aviva’s offer as it

delivered significant value and represented a substantial

premium for Direct Line shareholders that allowed them to

realise the value of their investment in the near term.

Subject to regulator and shareholder approval, our customers

and employees will join an established, successful business that

is well-placed to deliver for its stakeholders.

Considered the long-term implications of

combining the Group’s business with

Aviva’s.

Considered the impact on customers and

Aviva’s culture in respect of customer

service.

Considered the effect on the Group’s

workforce and Aviva’s people culture.

Takeover

approach

from Ageas

SA/NV

Considered shareholders views on the

value of the offer.

Early in 2024, Ageas made an indicative proposal to purchase

the Company. Following extensive consultation with the

Group’s investors, the Board unanimously rejected the proposal,

believing it to be uncertain, unattractive and significantly

undervaluing the future prospects of the business.

Return of

Capital to

Shareholders

Considered shareholder expectations in

respect of return of capital.

Based on the progress made on the turnaround of the business,

the strong solvency capital ratio, and underlying capital

generation over 12 months, the Board approved a dividend of

2.0 pence per share in respect of the first half of 2024.

On 10 July 2024, the Board approved a revised dividend policy

which targets a payout ratio of around 60% of post-tax

operating profit for any regular dividend. More information on

the Policy can be found on page 24.

Based on the strength of the Group’s capital position, taking

into consideration regulatory and policyholder requirements

and the long-term investment needs of the business, the Board

recommended a final dividend for 2024 of 5.0 pence per share.

Considered the Group’s capital position as

well as regulatory and policy holder

requirements and the long-term

investment needs of the business.

Considered the macro-economic

environment.

New

Strategy

Launch

Considered the needs of customers and

what they want from their insurer both

now and in the future.

The strategy is supported by a new Target Operating Model

("TOM") which aims to reduce our cost base to support the

target of at least £100 million gross run-rate cost savings by

2025

. The Board approved the TOM programme and have

overseen and monitored its implementation throughout the

year. By making improvements in procurement, technology

rationalisation and simplifying our operating model we expect

to deliver £50 million against our cost savings target in 2025,

with further work ongoing in respect of the rest of the targeted

savings by the end of 2025.

The delivery of the strategy is also underpinned by the

introduction of strengthened performance management and

a high-performance culture which the Board has supported.

See pages 15, 16 and 83 for more information.

More information on progress on the ongoing implementation

of the strategy can be found on pages 4 to 5.

Considered shareholder expectations in

respect of return on investment.

Considered feedback from employees

about what we do well and where we have

the potential to do better.

Considered impact on communities and

the environment and the Company’s

purpose of creating a world where

insurance is a force for good.

Consumer

Duty

Continuing

Compliance

Considered the extent to which work to

implement Consumer Duty was translating

into good outcomes for customers.

Following the implementation of the Consumer Duty in July

2023, during 2024 the Board reviewed how successfully the

Duty had been implemented and embedded in the business

and considered ways compliance could be enhanced. This

resulted in the Board approving the Group’s Customer

Outcomes Improvement Plan ("COIP") which represents a

programme of work that aims to deliver enhanced compliance

with customer outcomes by the time the 2025 Consumer Duty

Annual Board report is delivered. For more information, please

see page 111.

Considered the level of compliance

achieved under the Consumer Duty

implementation programme and the

importance of maintaining a reputation for

high standards of business conduct.

Considered the need to ensure

compliance with Consumer Duty becomes

embedded in in the business’s operation in

the long-term.

Topic Section 172(1) considerations Outcomes

Note:

1. The Group’s total operating expenses, acquisition expenses and claims handling expenses, adjusted to exclude restructuring and one-off costs,

commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.

88 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

How the Board engages with stakeholders

The Board has identified the Company’s key stakeholders and considers their opinions and needs to ensure that they are effectively

reflected in decision making, while recognising that their diverse and sometimes competing interests need to be finely balanced.

This approach aims to ensure that the decisions the Company makes are made having had regard to the matters set out in Section

172(1). The table below sets out how the Board has engaged with various stakeholders or received information about engagement

with stakeholders throughout the year.

Our Customers

The Board closely monitors customer conduct and satisfaction. It considers a Customer Outcomes report at each of its scheduled

meetings, which includes data in respect of a number of customer experience metrics including Net Promoter Scores and

customer complaints data relating to sales, service and claims. It also reviews data in respect of digital service interactions.

During the year, the Board received detailed updates on the impact of various key strategic matters on customers, including the

implementation of the new Consumer Duty Regulation.

Tracy Corrigan, Non-Executive Director, is the Consumer Duty Champion and acts as the voice of the customer in the boardroom.

In addition, the CEO has spent time with people across the business to see first hand how we support our customers. This

included visits to repair centres in Barnsley, Edinburgh and Perth, and shadowing a Green Flag patrol technician in Glasgow to

get an understanding of how the skill and commitment of our patrol technicians supports customers who are in vulnerable and

often stressful situations.

Members of the Board also attended a Household Customer Outcomes Forum to participate in a deep-dive on complaints.

Several Non-Executive Board Directors took part in a customer journey ‘walkaround’ to understand how customers' digital

journeys were being improved.

Our People

Executive Directors host interactive sessions with colleagues throughout the year to receive feedback and answer questions.

These sessions are held in various formats, for example, town halls and live Q&A sessions, in order to encourage maximum

participation from colleagues, allowing them to have a more informal discussion with senior managers.

During the year, Non-Executive Directors visited the Group’s operations around the country. Between them the Non-Executive

Directors visited sites in Birmingham, Bristol, Bromley, Glasgow, Doncaster, Leeds, Liverpool, Manchester and Stechford. All of the

visits included informal Q&A sessions with colleagues. The CEO visited fifteen of our sites around the country, (including 5

Accident Repair Centres ("ARCs").

In addition, Adrian Joseph, Non-Executive Director, hosted a conversation with the CEO and the co-lead of the REACH strand to

discuss the achievements and challenges experienced by ethnic minority colleagues in their careers and the importance of

allyship and leadership in building an inclusive culture as part of our celebration of Black History Month. This was aligned to a two-

day Bright Futures student business simulation event.

Employee Representative Body (“ERB”)

The ERB meets on a quarterly basis and comprises colleagues from across the business areas and locations. Meetings are

generally attended by Board members, including the CEO and one or two Non-Executive Directors per meeting, to discuss issues

and proposals which may have an impact on our people. Attendance and information on the work of the ERB during the year can

be found on page 91.

Motability

In September 2023, the Group welcomed 585 Motability colleagues to the business. People in this area are represented by the

union Unite. The business leads meet fortnightly with representatives of Unite to discuss matters affecting colleagues.

The Group is intent on building and maintaining a positive relationship with Unite based on transparency and trust throughout

the duration of the Motability partnership.

DiaLoGue

The Board receives regular updates on people matters from the Chief People Officer and reviews the results and key outcomes of

the Group’s colleague engagement survey, ‘DiaLoGue’, through which all colleagues are surveyed three times a year.

Findings provide both a snapshot and identify trends not only of all-colleague opinion but also findings for specific teams,

allowing solutions to be tailored to specific needs. Response to these surveys has consistently been high (over 80%).

Diversity Network Alliance (“DNA”)

There are seven employee networks, each of which are key drivers of diversity and inclusion across the business. They focus on the

following areas: Belief, Life (families and carers), LGBTQ+, Neurodiversity & Disability, REACH (Race, Ethnicity and Cultural

Heritage), Social Mobility and Thrive (gender).

89 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Our Planet and Our Society

The Customer and Sustainability Committee is a key vehicle through which the Board receives updates on engagement with key

community and environmental stakeholders. More information on the work of the Customer and Sustainability Committee can

be found on pages 111 to 112. During the year, the CEO visited our Technology Centre in Stechford where the Group tests how the

cars of the future, including Electric Vehicles ("EVs"), can be fixed in a greener way.

Our Shareholders

The Investor Relations team runs a comprehensive programme of engagement covering a broad range of the Company’s

shareholders and debt investors, which includes meetings with the Chair and Executive Directors, presentations and

conferencecalls to discuss performance and strategy. During the year, the CEO met with investors from Europe and the

UnitedStates of America.

The Remuneration Committee Chair engages with shareholders on remuneration-related matters (see page 116 of the Directors’

Remuneration report for more information).

The AGM provides both institutional and retail shareholders with the opportunity to ask the Board questions either live

orbysubmitting questions in advance.

Our Suppliers

The Board reviewed and approved the Group’s annual Modern Slavery Statement. The Group's Ethical Code for Suppliers, which

was last reviewed by the Board in 2023, states that the Company encourages and welcomes feedback from suppliers on the

Group as a customer and on how policies and procedures can be improved. This feedback can be given as part of regular review

meetings with management.

The Group is a long-standing signatory of the Prompt Payment Code. Key performance indicators in respect of prompt payment

are reported internally, and there are mechanisms in place for any significant issues regarding prompt payment to be escalated

to the Board.

During the year, the CEO visited key suppliers in South Africa and India.

90 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Colleague Engagement

The Group has an established Employee Representative Body, meetings of which are attended by elected representatives from

thedifferent areas of the business and by the CEO, the Chief People Officer and members of the senior leadership team, todiscuss

issues and proposals which have, or may have, an impact on colleagues. Non-Executive Directors also attended meetings on a

rotational basis (during the year, seven different Non-Executive Directors attended ERB meetings). Output from the meetings

attended by Directors is reported to the fullBoard so they can consider relevant colleague views in their decision making.

The Board considers that this arrangement fulfils the recommendation under Provision 5 of the Code to provide a mechanism for

engaging with the workforce, being an enhanced version of the “formal workforce advisory panel” method referred to in Provision 5.

The Board considers this arrangement to be highly effective as it provides a formal framework through which a wide variety

ofviews can be represented and provides colleagues the opportunity to express these views directly to both Executive and Non-

Executive Directors. It also means Director attendance can be tailored so that colleagues can engage with the most appropriate

Board member on a particular topic. For example, during the year, the Chair of the Remuneration Committee attended the

meeting at which workforce pay was discussed, and the Chair of the Board attended the meeting at which effect ofthe Consumer

Duty regulations were discussed.

Information about Board representation at ERB meetings can be found in the table below.

Meeting March June September December

Board Representation Adam Winslow

(CEO)

Danuta Gray

(Chair of the Board)

David Neave

(Non-Executive Director)

Adam Winslow

(CEO)

Tracy Corrigan

(Non-Executive Director)

Carol Hagh

(Non-Executive Director)

Adam Winslow

(CEO)

Mark Lewis

(Non-Executive Director)

Adam Winslow

(CEO)

Adrian Joseph

(Non-Executive Director)

Dr. Richard Ward

(Senior Independant

Director)

Examples of engagement with the ERB having resulted in business action include:

Issue Discussed Outcomes

Establishing

a new Target

Operating

Model

We discussed the

development and

establishment of

the new Target

Operating Model

with the ERB,

focusing on

communications

and employee

consultations.

ERB representatives have been engaged on the principles, design and implementation of

the proposed Target Operating Model ("TOM"), and specifically on providing feedback on

how this could be effectively communicated to our colleagues. This feedback was integral to

the communications strategy and informed email, intranet and video content made

available to all colleagues with the aim of providing clear and understandable information to

our people via multiple channels. The ERB’s recommendations led to the production of a

video which was hosted on our intranet and presented by the Chief People Officer and Chief

Operating Officer. The video outlined what was meant by the TOM, how it would be

implemented and what it would mean for the business and our people in the longer term.

The ERB was also subsequently engaged, or consulted as appropriate, on redundancy

proposals in various functions within the business that had applicable people impact under

the TOM proposals. Representatives were upskilled to ensure that people affected by

consultations could be appropriately supported. Feedback from the ERB was used by our

HR team as part of the consultation and communication process.

Takeover

Approach

from Aviva

plc

We discussed the

takeover approach

from Aviva with the

ERB, considering

process and

potential outcomes.

Following the offer from Aviva for the Company announced in December 2024, the CEO and

members of the Board engaged the ERB in line with the Takeover Code, and additionally

provided them with an overview of the timeline of a potential takeover, answering any

questions they had at the time. The feedback and questions from ERB representatives, as

the voice of the employee, was used as part of the communication strategy for the wider

workforce. This included consideration of key employee outcomes that would follow if and

when the acquisition was completed. The ERB will play an important role in the takeover

process and will be regularly engaged with to enable them to provide support to our people

in the coming weeks and months.

Hybrid

Working

We discussed the

Group’s approach to

Hybrid working with

the ERB.

During the year, the Group set out plans to return to a two day per week cadence in each of

our offices. The ERB was engaged and gave feedback in a number of areas including on the

approach to anchor days, the review of possible exceptions individuals may need, the layout

of redesigned office spaces, and ensuring that there was sufficient office space to support

the cadence. This included feedback from the Diversity Network Alliance (“DNA”) strands,

most specifically the Neurodiversity and Disability Strand. The ERB feedback helped shape

dedicated upskilling for people managers in respect of managing and communicating

change and to ensure that there was a consistent and fair approach to colleagues’

adherence to the Hybrid working policy and/or review of an exception being required.

91 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

DiaLoGue

DiaLoGue is our employee engagement tool that we use to survey our colleagues three times a year. Examples of outcomes

resulting from DiaLoGue feedback include:

Issue Raised Outcome

The Future Colleagues reported that they

wereexcited about the Group’s

future but felt unclear or anxious

about change.

We committed to keeping our colleagues regularly updated on

decisions that affected them – from changes to the TOM to the

takeover approach from Aviva plc. During the year we held a series

of townhalls during which people had the opportunity to put their

questions to management.

Transparency and

Direction from Senior

Leadership

While confidence in senior

leadership had grown, Colleagues

sought even more transparency

and direction from senior leaders.

To improve transparency and direction and to build on confidence

in leadership, we shared progress on strategy through regular

townhalls; held monthly senior manager calls with the ExCo team;

regularly engaged with the ERB to understand what was on

people’s minds; and held monthly ‘spotlight’ sessions, hosted by

ExCo, to improve understanding of different business areas.

Building a high-

performance culture

Colleagues fed back that they

wanted greater clarity and

consistency on priorities and

objectives to support the delivery

ofa high-performance culture.

We took action to bring clarity, consistency and focus to how

weset and track objectives by setting group objectives to ensure

that all colleagues had clear priorities that align with the Group

strategy. In addition, we made personal growth a mandatory

objective as this is critical to building a high-performance culture.

A series of practical tools were put in place to contribute to

individual and Group success through the ‘Evolve’ all-colleague

masterclass. People managers have also been set specific

objectives around making time to support and develop people

intheir teams.

92 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Division of responsibilities

Governance framework and structure

The Board oversees the system of governance in operation

throughout the Group. This includes an effective Enterprise

RiskManagement Framework and system of internal control.

The Board has established a risk management model that

separates the Group’s risk management responsibilities into

three lines of defence. An explanation ofthese responsibilities

can be found on page 38.

The Group’s governance framework is detailed in the Group’s

Systems of Governance document. This document also details

how the Group meets Solvency II requirements, as modified by

the Prudential Regulation Authority's (“PRA”) 2024 reforms, and

the PRA requirements to identify keyfunctions, and to have

and maintain a Responsibilities Map in respect of the PRA and

FCA’s Senior Managers and Certification Regime requirements.

The Board reviews this documentannually.

The core elements of the governance framework are the:

– Matters Reserved for the Board and the Board Committees’

Terms of Reference;

– Systems of Governance document;

– Risk appetite statements, which are described on page 38;

– Enterprise Risk Management Strategy & Framework and

Internal Control Framework, which are described on page 38;

– Group policies, which address specific risk areas, are aligned

to the Group’s risk appetite, and inform the business on how

it needs to conduct its activities to remain within risk

appetite; and

– Minimum Control Standards, which interpret the Group’s

policies into a set of requirements that can be implemented

throughout the Group.

The diagram below summarises the split of responsibilities

forthe different parts of the Group’s governance framework.

The Board approves

The Systems of Governance

Framework, overarching risk appetite

statements and Group policies,

following review by theBoard Risk

Committee.

Matters Reserved for the Board

andBoard Committees’ Terms

ofReference.

Matters Reserved

for the Board and

Board Committees’

Terms of Reference

The Systems of Governance Framework document

Overarching

risk appetite

statements

The Board Risk Committee

approves

The Risk Management Framework and

the policy risk appetite statements,

following review by theRisk

Management Committee (a committee

comprised ofexecutives).

Enterprise Risk

Management

Strategy and

Framework

Internal

Control

Framework

ERMF policies

Policy risk

appetite

statements

Minimum Control Standard

Policy owner approves

Minimum Control Standards, subject to

non-objection from the Risk

Management Committee.

Minimum Control Standards

93 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Structure of the Board, Board Committees and executive management

The following chart sets out the structure of the Board and its Committees and highlights the responsibilities of the Chair, the

Senior Independent Director, the Non-Executive Directors, the Executive Directors, the Company Secretary and the Executive

Committee. The role descriptions for the Chair and CEO are set out in writing; the profiles clearly define their respective roles

andresponsibilities, and ensurethat no one person has unlimited powers of decisionmaking.

The Board and Board Committees have unrestricted access to management and external advisers to help discharge their

responsibilities. Each Committee plays a vital role in helping the Board to operate efficiently and consider matters appropriately.

The Board and Board Committees are satisfied that, in 2024, sufficient, reliable and timely information was received in order

forthem to perform their responsibilities effectively.

The reports by each Board Committee are given in this Annual Report and Accounts. The Terms of Reference for each Committee

can be found on the corporate website at: www.directlinegroup.co.uk/en/who-we-are/leadership/board-committees

Roles and responsibilities of the Board

Board of Directors

Each Director brings different skills, experience and

knowledge to the Company, and the NEDs contribute

additional independent thought and judgement.

Depending on the business needs, the NEDs and the

Chaircommit at least two days a month and two days

aweek respectively to discharging their duties effectively

inaccordance with their letters of appointment.

As at 31 December 2024, the Board comprised the Chair,

nine independent NEDs, and two executive Directors

(theCFO and the CEO). Biographies of the full Board can

be found on pages 77 to 80.

Board Committees

Full details of membership, responsibilities and activity

ofeach Committee throughout the year can be found

onpages 101 to 118.

– Audit Committee.

– Board Risk Committee.

– Nomination and Governance Committee.

– Customer and Sustainability Committee.

– Investment Committee.

– Remuneration Committee.

The Executive Committee

The Executive Committee is the principal management

committee that helps the CEO manage the Group’s

operations and supports the CEO in:

– Setting performance targets.

– Implementing Group strategy.

– Monitoring key objectives and commercial plans to help

achieve the Group’s targets.

– Evaluating new business initiatives and opportunities.

Chair

– Guides, develops and leads the Board.

– Plans and manages the Board’s business.

– Oversees the Group’s governance framework.

Senior Independent Director

– Acts as a sounding board for the Chair and an

intermediary for the other Directors when necessary.

– Is available to shareholders if they have concerns that

cannot be resolved through other channels.

– Leads the Chair’s performance evaluation.

Non-Executive Directors

– Challenge management in an objective and

constructivemanner.

– Use their wider business experience to help develop

theGroup’s strategy.

Executive Directors

– The CEO and CFO are members of the Board,

withdelegated responsibility for the day-to-day

operation of the Group and delivering its strategy.

– The CEO delegates certain elements of their authority to

the Executive Committee members to helpensure that

senior executives are accountable andresponsible for

managing their business areas andfunctions.

Company Secretary

– Ensures the Directors receive accurate, timely and clear

information.

– Assists the Chair in overseeing the Group’s corporate

governance arrangements.

94 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Board composition

As at the date of this report, the Board comprised the Chair,

who had previously served as an independent Non-Executive

Director and was independent when appointed as Chair; two

Executive Directors; and nine independent Non-Executive

Directors, including the Senior Independent Director.

Adam Winslow joined the Group as CEO on 1 March 2024 and

was appointed to the Board on 21 March 2024. Jane Poole

joined the Group as CFO on 10 October 2024 and was

appointed to the Board on the same day. Carol Hagh, an

Independent Non-Executive Director, also joined the Board

during the year on 1 April 2024.

Biographical details of the Directors of the Company as at the

date of this report are set out on pages 77 to 80. Details of

Directors who have served throughout the yearcan be found

inthe Directors’ report on page 142.

Board succession

The Nomination and Governance Committee continues to

review succession plans both for the Board and at executive

level each year. Further information on our approach to

succession planning and Board appointments can be found

inthe Nomination and Governance Committee’s report

onpages 109 and 110.

Board induction and training

All new Directors appointed to the Board undertake an

induction programme aimed at ensuring they develop an

understanding and awareness of our businesses, people and

processes, and of their roles and responsibilities as Directors

ofthe Company. The programmes are tailored to suit each

Director and include provision of relevant current and historical

information about the Company and the Group; visits to

operations around the Group; induction briefings from Group

functions; one-to-one meetings with Board members, Senior

Management and the Company’s advisers; and engagement

with the Group’s ERB.

The Board is committed to the training and development

ofDirectors to improve their knowledge of the business and

theregulatory environment in which it operates. The Company

Secretary is responsible for helping the Chair identify and

organise training for the Directors which is tailored to

individualneeds.

As part of Adam Winslow's CEO induction activity, he

completed a busy schedule of site visits to fifteen of the Group's

sites around the UK (including 5 ARCs). He also visited key

suppliers in South Africa and India, and met with investors in

Europe and the United States of America.

Carol Hagh was appointed to the Board in April 2024. Her

induction programme has included site visits across the UK,

introductory meetings with members of the Executive

Committee and sessions with leadership across several

business areas (including Legal, Compliance, Risk and Finance).

In addition, she has attended Audit, Risk, Investment and

Customer and Sustainability Committee meetings and has met

with external advisers in respect of the Remuneration

Committee.

The Company Secretary maintained the training agenda for

theBoard and its Committees during the year. During the year,

the Board received technical briefings on Major Model Changes.

Non-Executive Director (“NED”) independence

On behalf of the Board, the Nomination and Governance

Committee assesses the NEDs’ independence, skills, knowledge

and experience annually. The Nomination andGovernance

Committee concluded that every current NED was

independent, continued to contribute effectively, and

demonstrated they were committed to the role. Each current

Director will submit themselves for election or re-election at the

2025 AGM. Youcanfind out more about the activities of the

Nomination and Governance Committee’s work during the

year on pages 109 and 110.

External directorships

The Board keeps Directors’ external commitments under

ongoing review to ensure they continue to have sufficient time

to dedicate to the Group. During the year, the Board reviewed,

and approved in advance, Adrian Joseph’s appointment as an

Independent Non-Executive Director of Allwyn Entertainment

Limited and Great Ormond Street Hospital. The Board also

reviewed and approved Gregor Stewart’s appointment as Chair

of the Board of the Royal National Scottish Orchestra. The

Board was satisfied that, in taking on these roles, both Adrian

and Gregor would continue to have sufficient time to dedicate

to their roles on the Board.

Information and support

The Board accesses assistance and advice from the Company

Secretary. The Board, and each member of the Board, may seek

external independent professional advice at the Company’s

expense, if required, to discharge its duties.

Board’s approach to inclusion and diversity

Last year, the Company reported that the Board had met two

out of three diversity targets set out in the UK Listing Rules,

having at least one senior Board position being held by a

woman and with at least one Board member being from a

minority ethnic background (this was also consistent with

Parker Review recommendations).

This year, as at 31 December 2024 and the date of this report,

and following the appointments of Carol Hagh (from 1 April

2024) and Jane Poole (from 10 October 2024), the Board is

pleased to report that it now meets all three diversity targets set

out in the UK Listing Rules, including the target that at least

40% of Board members should be women.

Diversity, including gender diversity, is a key consideration

insuccession planning, though as the skills and experience

ofthe Board are refreshed over time, the gender balance will

bedependent onthe availability of the best candidates for

Boardvacancies, with all appointments based on merit and

objective criteria.

In 2023 the Group set ambitious new targets to continue to

improve diversity in senior leadership. Our targets are aligned

with the definitions of senior leadership used by the FTSE

Women Leaders Review, Women in Finance review and Parker

Review. We are aiming to increase representation of women

to40%, ethnic minority talent to 16%, and Black talent to 4%

atsenior leadership levels (defined as Executive Committee

anddirect reports, excluding direct reports in support

oradministrative roles).

Current representation

(end Dec 2024)

Targeted representation

(end 2027)

Women

36 %

40 %

Ethnic minority

9 %

16 %

Black

– %

4 %

95 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

The tables below set out data about the sex and ethnicity of the Board and senior management as at 31 December 2024,

intheformat prescribed by the UK Listing Rules.

Number of

Board members

Percentage

of the Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in

executive

management

Percentage of

executive

management1

Men 7 58 % 2 7 58 %

Women 5 42 % 2 5 42 %

Not specified/prefer not tosay – – – – –

Note:

1. Executive management is the Executive Committee and Company Secretary.

Number of

Board members

Percentage

of the Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in

executive

management

Percentage of

executive

management1

White British or other White

(includingminority-white groups) 8 67 % 2 5 42 %

Mixed/Multiple Ethnic Groups 1 8 % – – –

Asian/Asian British – – – – –

Black/African/Caribbean/Black British – – – – –

Other ethnic group – – – – –

Not specified/prefer not to say 3 25 % 2 7 58 %

Note:

1. Executive management is the Executive Committee and Company Secretary.

The Group recognises the importance of understanding diverse representation and the monitoring of differential outcomes.

Itcollects diversity representation information on the basis of self-reporting across the categories of sex, gender identity, ethnicity,

religion, sexual orientation, disability and socio-economic background, collected using our HR Information Systems as part of the

onboarding process.

96 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Senior management succession planning

The Board recognises that in order to maintain and improve

ondiversity levels, it must ensure that senior management

succession planning is focused on promoting diverse

leadership, and that workforce diversity is sought at all levels

inorder to seek to secure a diverse pipeline of talent.

The 2024 Annual Incentive Plan includes targets for Executive

Directors, the Executive Committee and senior management

inrespect of improving the gender and ethnic diversity of the

workforce in the context of leadership succession planning

(more information on this can be found on pages 16, 48, 117

and123).

Board appointments and Diversity Policy

The Board has in place a Diversity Policy which sets out

thekeyprinciples to be followed in respect of the Board

appointment process. More information on this can be found

inthe Nomination and Governance Committee report on

pages109and 110.

Workforce diversity and inclusion

The Board encourages and supports equity, diversity and

inclusion in the workplace and is committed to building an

inclusive culture. It continues to support Group-wide diversity

and inclusion activities and initiatives, many of which are

outlined on page 48. This includes the work of the Company’s

Diversity Network Alliance (“DNA”) which champions diversity

and inclusion in the Group through its ‘DNA strands’: Race,

Ethnicity and Cultural Heritage ("REACH"); Belief; LGBTQ+; Life

(working families and carers); Neurodiversity and Disability;

Social Mobility; and Thrive (gender). Moreinformation about

thework of the DNA during the year can be found on page 16

ofthe Strategic report.

Board skills, experience and knowledge

The Nomination and Governance Committee assesses and

monitors the skills, experience and knowledge of Board

members with the aim of equipping the Board to challenge

and support the executive team effectively, taking into

consideration the Group’s evolving strategy.

Board and Committee effectiveness review:

three-year Board evaluation cycle

The Board conducts an annual review of the effectiveness of

theperformance of the Board, its Committees, the Chair and

individual Directors, with the input of an external facilitator at

least every third year. In 2024, the Board decided to reset the

three-year cycle and engaged Promontory Financial Group

(“Promontory”), which has no other connection with the

Company or any Director, to facilitate the review externally.

TheBoard recognises that a continuous and constructive

review of its performance is a critical factor in achieving the

Group’s objectives, realising potential and promoting the

long-term sustainable success of the Company.

Promontory conducted one-to-one interviews with Board

members and senior managers who were regular attendees of

Board and Committee meetings, reviewed samples of meeting

agendas and papers and observed a meeting of the Board and

each Committee. Promontory’s findings and recommendations

were considered by the Board and its Committees in

January2025.

Evaluation process

Step 1

The thematic priorities for the review were

established by Promontory in discussion with the

Chair and the Company Secretary.

Step 2

Promontory interviewed members of the Board

and senior managers about Board and

Committee performance and the Group’s

current and target culture, and reviewed sample

agendas and papers. Promontory observed a

Board meeting and one meeting of each of the

Committees.

Step 3

A report, covering Board and Committee

performance, was prepared and presented by

Promontory and discussed at the Board’s

January 2025 meeting.

Step 4

An action plan was defined, based on the

recommendations in Promontory’s report.

2024 evaluation outcome

The results of the review were presented to the Board and its

Committees in January 2025 and the recommendations form

the basis of an action plan for 2025 as summarised in the table

on page 98, along with an update on the action plan that

resulted from the 2023 review. Themes emerging from the

2024 review included investment in leadership capability and

culture change, a continuing focus on Board dynamics and

materials and investment in regulatory relationships.

Separately, the Senior Independent Director discussed the

Chair’s performance with the Directors (except the Chair) and

provided constructive feedback to the Chair. No Director was

involved in the review of their own performance.

97 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

2023 focus areas and action taken during 2024

Strategic Direction

The Board supported and challenged the new senior leadership team under Adam Winslow in setting out a new strategy

focusing on the Group’s core businesses, underpinned by the development of a high-performance culture and the

delivery of a significant reduction in the cost base. The new strategy was presented at a Capital Markets Day in July 2024

and included a proposal to launch the Direct Line brand on a price comparison website for the Motor business.

Investment in Leadership

Following Adam Winslow’s appointment as CEO in March 2024, a new and highly experienced senior management team

was assembled, including the new CFO, Jane Poole, who joined the Group in October 2024. The Group also invested in

high-performance training for its wider senior leadership team and started a comprehensive review of its target operating

model based on design principles intended to streamline the organisation and foster a culture of accountability and

performance.

Refreshing Culture

The Group has continued to invest in, and report at Board level on, its culture, including in relation to customer focus,

risk-positivity and the control environment.

2024 focus areas and proposed action for 2025

Board Dynamics

The Board will continue to focus on the effectiveness of its support for, and challenge of, management, including through

the continuous improvement of the quality of Board materials.

Leadership Capability and Culture

The Group intends to continue to invest in leadership capability and the culture change required to deliver its

strategicaspirations.

Regulatory Relationships

The Board will focus on continuing to invest in strengthening the Group's relationships with its regulators.

Audit, Risk & Internal Control

An explanation of how the Board complies with the Code in

relation to audit, risk and internal control is set outbelow,

except for the following matters, which are covered elsewhere

in the Annual Report and Accounts:

– how the Board has assessed the Group’s longer-term viability

and the adoption of the going concern basis inthe financial

statements is on page 74 and page 145; and

– the Board’s delegated responsibility to the Audit Committee

to oversee the management of the relationship with the

Company’s External Auditor.

You can find details of the Audit Committee’s role, activities and

relationship with the External Auditor in the Audit Committee

report which starts on page 101.

Responsibility for preparing the Annual Report

and Accounts

The Board’s objective is to give shareholders a fair, balanced

and understandable assessment of the Group’s position,

performance, business model and strategy. The Board is also

responsible for maintaining adequate accounting records,

andseeks to ensure compliance with statutory and

regulatoryobligations.

You can find an explanation from the Directors about their

responsibility for preparing the financial statements in the

Statement of Directors’ responsibilities on page 146. The Group’s

External Auditor explains its responsibilities on page 155.

As noted in the responsibility statement on page 146, the

Directors confirm that they consider that the AnnualReport

and Accounts, taken as a whole, are fair, balanced and

understandable, and provide the information that shareholders

need to assess the Group’s position, performance, business

model and strategy. In arriving at this conclusion, the Board

was supported by a number ofprocesses, including

thefollowing:

– management drafted the Annual Report and Accounts to

ensure consistency across sections, and a steering group

comprising a team of cross-functional senior management

provided overall governance and co-ordination;

– a verification process, to ensure the content was

factuallyaccurate;

– members of the Executive Committee reviewed drafts

oftheAnnual Report and Accounts;

– the Company’s Disclosure Committee reviewed an advanced

draft of the Annual Report and Accounts; and

– the Audit Committee reviewed the substantially final draft

ofthe Annual Report and Accounts, before consideration

bythe Board.

98 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Assessing emerging and principal risks

The Board determines the nature and extent of the risks that it

is willing to take to achieve its strategic objectives. The Directors

robustly assessed the emerging and principal risks facing the

Company, including risks that would threaten its business

model, future performance, solvency or liquidity and reputation.

You can find adescription of these risks, and their

management or mitigation, on pages 40 to 43.

This determination is based on the Board Risk Committee’s

review and challenge of the Group’s Material Risk Assessment

(the "Assessment"), and the Board’s review and approval of the

Group’s risk appetite statements. The Assessment identifies

risks quantified ashaving a residual risk impact of £30 million or

greater. Thequantifications are produced through stress and

scenario analysis, and our capital model.

Risk management and internal control systems

The Board, with the assistance of the Board Risk Committee

andthe Audit Committee, and support from the Chief Controls

Office and Risk function as appropriate, monitored the

Company’s risk management and internal control systems that

have been inplace throughout the year under review, and

reviewed their effectiveness. The monitoring and review

covered all material controls, including financial, operational

and compliance controls.

During the year, the Group continued its work to improve

itscontrol environment through the Group-wide controls

improvement programme that was commissioned in 2023.

Thiswas overseen by the Board Risk Committee. As part of this

programme, a number of improvements were made during

the year across the control environment and the three lines

ofdefence model:

– Implementation of a new quarterly Risk & Control

Self-Assessment (“RCSA”) process which assessed all

oftheGroup’s critical risks and controls;

– Documentation of the Group’s critical controls, including

anassessment of the design adequacy and operating

effectiveness of these controls;

– Introduction of clearer end to end ownership and

accountabilities of principal risks and critical controls;

– Implementation of a new risk management system with

improved functionality to track and monitor risks, control

deficiencies, and risk events; and

– Improvements to the quality of control testing in the first line.

To accelerate this progress and to enable the proper embedding

of these improvements, the CEO took the decision in 2024 to

create a new Chief Controls Office ("CCO") in the first line. The

primary responsibilities of the CCO includes:

– Ensuring consistency in the operation of the Group’s

Enterprise Risk Management Framework across the business;

– Facilitating the new RCSA process and assuring its outcomes

through centralised control testing; and

– Supporting the business in capturing, monitoring and

responding to risk events, control deficiencies and risk/

vulnerability management.

In addition, the Audit Committee has overseen a Control

andOversight Remediation Programme within Finance, the

aim ofwhich is to enhance the financial reporting control

environment across the Group. More information in respect

ofthese initiatives can be found in the respective Audit

Committee and Board Risk Committee reports.

The CCO Function produced a new Annual Risk and Control

Assurance (“ARCA”) report to support the Board in monitoring

the effectiveness of the Group’s risk management and internal

control systems. The CCO also facilitated a new quarterly RCSA

process, where each principal risk owner completed a self-

assessment of the key risks and controls across the Group’s risk

profile. The RCSA process is a key tool in assessing the inherent

and residual operational risk within the Group’s control

environment and aims to identify, understand and manage

these risks by reviewing the results of control assessments, risk

events, and other relevant information. The RCSA requires the

principal risk owners, which in most cases is a Senior Manager

or Executive Sponsor, to attest to the status of the effectiveness

of the risk management and internal controls across a range of

different risk types. This is supported by centralised control

testing within the CCO as well as through oversight and

challenge by the Risk function. In addition, the Group Audit

function provides an independent assessment of the overall

effectiveness of the governance, risk and control framework of

the Group.

The overall findings from the quarterly RCSA process, as well as

from other assurance mechanisms, such as second or third line

reviews, are combined into a Group-level assessment and

reported to the Board Risk Committee in the ARCA report.

The 2024 ARCA report referred to the miscalculation identified

within the Group’s audited Solvency II Own Funds for the year

ended 2023, and reported to the market on 23 August 2024, as

a material control deficiency within the Group’s financial

controls. Underlying root causes of the miscalculation are

considered to have included control deficiencies that arose in

2023. The Group has since remediated the relevant processes

and controls such that the control deficiencies were resolved for

the half year 2024 Solvency reporting and consequently by the

year-end balance sheet date.

This miscalculation arose in the Solvency II treatment of the

whole account quota share reinsurance arrangement (incepted

1 January 2023), and in particular the translation of the

reinsurance debtors between IFRS and Solvency II Own Funds.

This miscalculation had no impact on the IFRS figures.

Correcting for the miscalculation, the solvency capital ratio

(post-dividend) at year end 2023 was 188%, which was above

the Group's risk appetite range of 140% to 180% (the previously

reported solvency capital ratio was 197%).

The miscalculation was identified through the Group’s half year

results preparation, and the Group has taken a number of

actions in 2024 to strengthen the control environment in

relation to the specific area where the miscalculation occurred.

These include, but were not limited to:

– Detailed root cause analyses and identification

ofcorresponding management actions;

– Strengthening the change delivery framework around

operational readiness, downstream financial reporting

impact, risk acceptance and post implementation review;

– Strengthening the level of precision of the Financial

Reporting Control Framework ("FRCF") preventative and

detective controls related to the translation of the Group’s

financial results from IFRS to Solvency II;

– Simplification of the accounting transactions around key

reinsurance arrangements; and

– Improved controls assurance more generally of the

FRCFcontrols.

99 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

The 2024 ARCA report did not identify any further material

financial, operating, or compliance control deficiencies during

the year ended 31 December 2024, nor any further material

control deficiencies that remained unresolved at the

balancesheet date.

As discussed later in the Audit Committee report, the Group

undertook further enhancement work over its wider financial

control framework during the year.

The Group Audit function supports the Board by providing

independent and objective assurance on the adequacy and

effectiveness of the Group’s controls. It brings a systematic

anddisciplined approach to evaluating and improving the

effectiveness of the Group’s risk management, control and

governance frameworks and processes. Group Audit’s 2024

annual assessment of the risk management, governance and

control environment did not identify any matters that conflict

with the 2024 ARCA report.

On behalf of the Board, the Board Risk Committee reviewed

the 2024 ARCA report and was satisfied with the conclusion

that the Group’s risk management systems, including its

internal control systems, were adequate for managing all

material risks. The Board Risk Committee also regularly reviews

significant risks and how they might affect the Group’s financial

position, comparisons to agreed risk appetites, and what the

Group does to manage risks outside its appetite.

The Board confirms that there is an ongoing process for

assessing the Company’s risk management and internal

control systems and identifying, evaluating and managing the

significant risks faced by the Group, which has been in place

throughout the period and up to the date of this report.

TheBoard takes the view that, on the basis of the 2024 ARCA

assessment carried out, it would be reasonable to conclude

thatthe Group’s risk management and internal control systems

are effective. 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.

Remuneration

The Board is mindful at all times that remuneration policies and

practices must be designed to support strategy and promote

the long-term sustainable success of the Group. It delegates

responsibility to the Remuneration Committee to ensure that

there are formal and transparent procedures for developing

policy on Executive remuneration and determining Director

and senior management remuneration.

In his report on pages 115 to 118, the Remuneration Committee

Chair provides an overview of the Committee’s work in setting

an appropriate framework for remuneration of the Executive

Directors, Executive Committee and other senior managers,

aswell as the wider workforce, to ensure fair pay for all

ourcolleagues.

For details on how the Company has applied Provision 40

ofthe Code in determining Executive Director remuneration

policy and practices, see the summary on pages 136 to 137.

100 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Gregor Stewart

Chair

Committee membership

– Gregor Stewart

Chair and Independent Non-Executive Director

– Mark Gregory

Independent Non-Executive Director

– Fiona McBain

Independent Non-Executive Director

– David Neave

Independent Non-Executive Director

Key responsibilities

– Oversee the integrity of the Group’s

financial statements.

– Oversee and challenge the effectiveness of the

Group’s systems of financial internal controls and

regulatory reporting.

– Oversee Group Audit's annual assessment of the

Group's risk management, control and governance

frameworks and processes.

– Oversee the actuarial reserving process.

– Oversee the work and effectiveness of Group Audit

and the Group’s external auditors.

– Oversee the Group’s financial and non-financial

disclosures, including climate-related

financialdisclosures.

Areas of focus in the reporting period

– Financial reporting: reviewed and challenged the key

accounting estimates and judgements made by

management to support the financial statements.

– Insurance reserves: reviewed the Group’s insurance

reserves to obtain assurance that they remained

appropriate for discharging expected liabilities.

– External Audit: oversaw the transition from Deloitte

LLP to KPMG LLP.

– Oversaw the continuation of the CFO Control and

Oversight Remediation Programme.

– Reviewed and challenged Group Audit's annual

assessment of the Group's risk management, control

and governance framework and processes.

Committee skills and experience

In line with the UK Corporate Governance Code 2018

(the “Code”), allmembers of the Audit Committee are

independent, and the Committee as a whole is deemed to have

competence relevant to the insurance and financial services

sectors in which the Group operates.

The Committee Chair is a member of the Institute of Chartered

Accountants of Scotland. Fiona McBain and Mark Gregory are

members of the Institute of Chartered Accountants in England

and Wales. David Neave is a Chartered Insurer and brings to the

Committee 40 years of experience in senior general insurance

positions including claims and underwriting.

Each member has recent and relevant financial experience

gained in a number of different financial services businesses,

including insurance, enabling them to contribute diverse

expertise to the Committee’s proceedings.

Main activities during the year

At each of its scheduled meetings, the Committee received

reports on financial reporting, insurance reserves, internal

controls and Group Audit.

Financial reporting

The Committee followed a review process before

recommending the Annual Report and Accounts and Half

Yearreport to the Board, and focused on the choice and

application of significant accounting policies, emphasising

those requiring a major element of estimation or judgement.

Further information on the significant matters considered

isprovided in the table on page 102.

The Committee considered the estimates and judgements

used to prepare the Group’s capital position under Solvency II,

including focusing on the level of technical provisions held.

Specific matters considered included judgements made in

respect of events not in data, and the risk margin. The Committee

reviewed the Group's Solvency and Financial Condition report

on behalf of the Board before submission to the PRA.

Insurance contract liabilities – liability for

incurredclaims

The Committee reviewed and challenged the key assumptions

and judgements, emerging trends, movements, and analysis of

uncertainties underlying the reserving estimates made for the

liability for incurred claims. These assumptions and judgements

were informed by actuarial analysis, wider commercial and risk

management insights, and principles of consistency from

period to period. After its review, the Committee recommended

the liability for incurred claims to the Board.

The Committee also commissioned an external independent

actuarial review of material risk areas of insurance liabilities,

carried out for the Committee by PricewaterhouseCoopers

LLP(“PwC”).

101 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Audit Committee report

Significant judgements and issues

Matter considered

Description Action

Insurance liabilities

valuation

The Committee reviewed

the level of insurance

liabilities of the Group.

Insurance liabilities include

the liability for remaining

coverage and the liability for

incurred claims at the

statement of financial

position date. By its nature,

the liability for incurred

claims requires analysis of

trends and risks, and the

application of management

judgement, knowledge and

experience. The

measurement of the liability

for remaining coverage is

less judgemental than the

liability for incurred claims as

the Group applies the

Premium Allocation

Approach which simplifies

the measurement of the

Liability for Remaining

Coverage, using an

allocation of premiums over

the coverage period. Further

information on insurance

liabilities is provided on

pages 30 to 31.

During 2024, the Committee reviewed and challenged the approach,

methodology and key assumptions used by management in setting

the liability for incurred claims and monitored developing trends that

could have a material impact on them. On an ongoing basis, it

received updates from the interim Actuarial Director on emerging

experience and how this compared to expectations. Particular points

of discussion in 2024 were the developing trends in personal lines

Motor, covering large bodily injury claims experience and damage

claims, and in Home subsidence. The Committee was provided with

updates on the necessary provisions held from year end 2023 for

potential Ogden rate changes, updates to Labour Costs inflation ENID

(Auto Body Professionals rates) and updates to the General Damages

ENID (judicial court guidelines). The Committee discussed the

judgements that underpinned the year end liabilities, including those

based on current and prior-year development and settlement

patterns. The Committee reviewed analysis of the matters that

significantly impacted the booked reserves, alongside supporting

data and diagnostics, and the potential range of outcomes. The

Committee discussed the approach to identifying and recognising

those events which were not yet reflected in data and reviewed and

challenged the provisions proposed by management. Whilst headline

inflation reduced during the year, the Committee continued to closely

monitor the impact of inflation on the liabilities. Both economic and

sources of excess inflation were considered which resulted in a

reduction in the macro-ENID provisions. The Committee obtained

insight and reviewed results from an independent actuarial review of

material elements of insurance liabilities. Where there was divergence

between the independent actuarial review and that of management,

the Committee challenged the reasons for the divergence. The

Committee was satisfied that management had exercised

appropriate control and judgement in estimating insurance liabilities.

Valuation of

investments not held

at fair value and

investment property

The Committee considered

reports on the estimates and

judgements applied to the

carrying value of the Group’s

investments that are not

held at fair value, and the

basis for the valuation. These

assets principally comprise

infrastructure loans,

commercial real estate loans

and private placement

bonds held within the

investment portfolio. The

Group also holds a portfolio

of investment properties.

Information was provided to

the Committee on a regular

basis to support the value

recognised in the accounts.

In 2024, the Committee considered material accounting estimates

and judgements in respect of assets not held at fair value, and the

investment property portfolio, and was satisfied with the carrying

value of investments and the basis for their valuation. The Committee

considered the impact of the continuing challenging macro-

economic environment on the investment property portfolio and

noted the year end independent valuation resulted in a small decline

overall in the portfolio value. The Committee concluded that the

carrying values in the accounts were reasonably stated.

102 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Task Force on Climate-related Financial

Disclosures report

The Committee reviewed the financial disclosures in the Task

Force on Climate-related Financial Disclosures ("TCFD")report

on behalf of the Board as part of its review of the Annual Report

and Accounts. The TCFD report can be found on page 58.

Going concern, viability and fair, balanced

and understandable

The Committee considered the going concern assumptions

and viability statement in the 2024 Annual Report and

Accounts, valuation of assets and impairment reviews, non-

recurring period-specific transactions and clarity of disclosures.

The Committee reviewed and concluded that the Annual

Report and Accounts taken as a whole were fair, balanced and

understandable and provided sufficient information to enable

the reader to assess the Group’s position, performance,

business model and strategy.

When considering the 2024 Annual Report and Accounts,

theCommittee considered the significant judgements and

issues which could be material to the financial statements.

These included the matters set out in the table on page 102.

TheCommittee challenged the estimates and judgements

being made and also discussed these matters with the

ExternalAuditor.

For more information on the viability statement see page 74.

Internal control

During the year, the Committee continued to monitor and

review the adequacy and effectiveness of the controls that

underpin the Group’s Financial Reporting Control Framework

("FRCF"), which forms part of the Group’s wider internal controls

system. The Board delegates supervision of the framework to

the Committee, while the CFO is responsible for the

framework’s operation on a day-to-day basis.

During 2024, the miscalculation identified within the Group’s

audited Solvency II own funds for the year ended 2023 was

reported to the Audit Committee. This miscalculation arose

inthe Solvency II treatment of the whole account quota share

reinsurance arrangement (incepted 1 January 2023), and in

particular the translation of the reinsurance debtors between

IFRS and Solvency II own funds. This miscalculation had no

impact on the IFRS figures.

As discussed in the Risk Management and Internal

Control Systems section of Corporate Governance Report on

page 99, the Group has taken a number of actions in 2024 to

strengthen the control environment in relation to the specific

area where the miscalculation occurred. These measures

helped to ensure that the underlying root causes of the

miscalculation were remediated for the half year 2024 Solvency

reporting such that they did not represent an unresolved

material control deficiency at the year-end balance sheet date.

Further, the underlying root causes of the miscalculation are

considered to have been caused by control deficiencies in 2023.

There were no further material control deficiencies reported to

the Committee.

In 2024, the Audit Committee continued to oversee the CFO

Control and Oversight Remediation Programme (the

"Programme"), the aim of which is to enhance the financial

reporting control environment across the Group. During the

year, the Programme, which is led by the CFO Control Steering

Group and chaired by the CFO, reported back to the

Committee on its progress. Targeted remediation activities

relating to improvement in the financial reporting processes

were completed.

The Committee reviewed and challenged Group Audit's annual

assessment of the Group's risk management, control and

governance frameworks and processes. The Committee also

reviewed Group Audit's opinion on the overall effectiveness

ofthe Group's internal control framework. This assessment

didnot identify any matters that conflict with the 2024 Annual

Risk & Control Assurance ("ARCA") report as discussed in the

Corporate Governance section (Risk Management and Internal

Control Systems).

The Committee also considered management’s processes

andcontrols for identifying and responding to the risk of fraud.

TheCommittee noted that there were no fraud-related events

or actions to suggest that fraud might have a material impact

on the financial statements.

The Committee monitored management’s responses to the

control insights and observations raised by the External Auditor

in its annual management letter during the year and was

satisfied that management was taking appropriate and timely

action to resolve the issues raised.

Group Audit

The Committee is responsible for overseeing the work of

GroupAudit and for ensuring industry best practice is adopted

appropriately. The Group Head of Audit’s primary reporting line

is to the Chair of the Committee. The secondary reporting line,

for day-to-day administration, is to the CEO.

During 2023 the Committee oversaw the independent

ExternalQuality Assessment ("EQA") of the Group Audit

function. This rated Group Audit 'generally conformant'

withprofessional standards, with some improvements

recommended against relevant Internal Audit professional

standards. The Committee oversaw the development of the

action plan to address the findings from the EQA and during

2024 these were completed. PwC continued to provide

independent quality assurance activity with results reported to

the Committee.

During the year, Group Audit provided the Committee with

independent and objective reports on the adequacy and

effectiveness of the Group’s governance, risk management and

internal controls. Group Audit completed a number of reviews

of major programmes during the year. The Committee approved

Group Audit’s plan on a quarterly basis, and confirmed the

audit plan coverage on an annual basis. The Committee

received quarterly reports detailing internal audit activity, key

findings, management responses, and proposed action plans.

Following the completion of the actions from the independent

EQA and assessment by the Committee during the year, it

wasconcluded that the Group Audit function was effective.

The Committee approved the Group Audit Charter, which

isreviewed annually.

103 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Additional information

The Committee has unrestricted access to management and

external advisers to help discharge its duties. It is satisfied that

in 2024 it received sufficient, reliable and timely information to

perform its responsibilities effectively.

During the reporting period, the External Auditor and Head of

Group Audit met privately with the Audit Committee, in the

absence of management. The Chair of the Committee reported

on matters dealt with at each Committee meeting to the

subsequent scheduled Board meeting.

External Audit

The Committee is responsible for overseeing the work of

theExternal Auditor and agreeing the audit fee, as well as

approving the scope of the External Auditor’s annual plan.

During the year Deloitte LLP stepped down as the Company’s

auditor following completion of the audit of the financial year

2023 in line with mandatory rotation requirements. As

previously reported, the Board approved the appointment of

KPMG LLP (“KPMG”) as the Company’s auditor for the financial

year ending 31 December 2024 following a competitive tender

process, undertaken in 2022, and this appointment was

approved by shareholders atthe Company's 2024 AGM. James

Anderson is the lead Audit Partner for KPMG.

During the year, the Committee oversaw the transition from

Deloitte to KPMG. The lead Audit Partner from KPMG regularly

reported to the Committee on process against the transition

plan and key transition milestones. Transition activities included

KPMG shadowing Deloitte on the 2023 audit and performing

dry runs and initial risk assessment activities.

The Company has complied, during the financial year under

review and up to the date of this report, with the provisions of

the Statutory Audit Services for Large Companies Market

Investigation (Mandatory Use of Competitive Tender Processes

and Audit Committee Responsibilities) Order 2014.

Auditor independence

The Group has in place a minimum standard in relation to the

independence of the External Auditor, which is compliant with

the Financial Reporting Council’s ("FRC") review of its Ethical

Standard for Auditors. This establishes parameters for

preventing or mitigating anything that compromises

the External Auditor’s independence or objectivity. The

minimum standard includes:

– a formal process for the pre-approval of certain non-audit

services by the External Auditor;

– a requirement that any non-audit services are

reviewed annually;

– restrictions on employees of the auditor working for the

Group and vice-versa; and

– a requirement that key audit partners are rotated at least

every 5 years.

The Committee reviews the standard annually.

The Committee’s Terms of Reference require that the

Committee meet at least once annually with the External

Auditor in the absence of management.

In addition, the Committee reviews confirmation from

theExternal Auditor that in its professional opinion, it is

independent within the meaning of regulatory and

professionalrequirements.

Therefore, the Committee is satisfied that the Group has

adequate procedures to ensure that the External Auditor

isindependent and objective and that these procedures

operated effectively during the year.

The Committee considers that KPMG established

independence as incoming auditor from 14 June 2023. The

Committee reviewed and reconfirmed KPMG's independence

again ahead of their official appointment at the Company’s

AGM in May 2024.

Non-Audit Fees

During the year, the Committee approved non-audit fees in

respect of agreed upon procedures in respect of Solvency

Capital Ratios. The Company's policy for non-audit services is

compliant with the FRC’s ‘Revised Ethical Standard 2019’. In line

with regulation, the Group is required to cap the level of non-

audit fees paid to its external auditor at 70% of the average

audit fees paid in the previous three consecutive financial years.

The following is a breakdown of fees paid to KPMG for the year

ended 31December 2024 (excluding VAT).

Fees

£m

Proportion

Audit fees 3.6 88 %

Audit-related assurance services

0.5 12 %

Non-audit services

– 0 %

Total fees for audit and other services

4.1 100 %

Notes:

1. Fees of £0.5 million for audit-related assurance services have been

provided in 2024 (2023: £0.4 million) in respect of reporting

accountant services. Fees of £40,000 for non-audit services have

been incurred in 2024 (2023: £1.6 million) relating to agreed upon

procedures.

2. Total audit fees, excluding VAT.

Audit-related assurance services were in respect of the Group’s

Solvency II reporting and the review of the Half Year report

2024. Further information in respect of audit fees paid to KPMG

is disclosed innote 5 to the consolidated financial statements.

104 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Effectiveness of the external audit process

In 2024, the Committee conducted its annual review of

theExternal Auditor’s effectiveness. The Committee assessed

the External Auditor through:

i. a detailed questionnaire completed by key stakeholders;

ii. discussing matters with the CFO;

iii. formally reviewing the External Auditor’s independence;

iv. assessing the key risks identified by the External Auditor,

thequality controls put in place to deliver the audit and

whether the agreed audit plan was fulfilled; and

v. private meetings with the External Auditor in the absence

ofmanagement.

In addition, through regular interaction with the External

Auditor, the Committee was satisfied that the External Auditor

demonstrated professional scepticism and challenged

management’s assumptions.

The quality of the audit was assessed through review and

discussion of the External Auditor’s report to the Committee

ateach meeting, and from the challenges and insights

broughtto significant areas of judgement in the Group’s

financial statements.

After taking into account all of the information available

andconsidering FRC Audit Quality: Practice aid for audit

committees, the Committee concluded that Deloitte had

performed its obligations effectively and appropriately as

External Auditor to the Group in respect of their audit of the

2023financial year.

The Committee has closely monitored the performance of

KPMG since its appointment, considers that there has been

asmooth transition of the external audit and recommends

KPMG for re-election by shareholders at the Company's

2025AGM.

Committee effectiveness review

During the year, an evaluation of the effectiveness of the

Committee was carried out as part of the wider review of the

performance of the Board and the Board Committees which

was externally facilitated by Promontory. The review found that

the Committee operates effectively, has the right mix of skills

and experience and the appropriate level of cross-over with

theBoard Risk Committee. Further information on the Board

effectiveness review can be found on pages 97 to 98.

In addition, the Committee’s terms of reference were reviewed

against the activity of the Committee during the year. The

Committee’s Terms of Reference can be found on the

corporate website: www.directlinegroup.co.uk/en/who-we-are/

leadership/board-committees

The Board reviewed and approved this report on 3March 2025.

Gregor Stewart

Chair of the Audit Committee and Independent Non-

Executive Director

105 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Mark Gregory

Chair

Committee membership

– Mark Gregory

Chair and Independent Non-Executive Director

– Fiona McBain

Independent Non-Executive Director

– David Neave

Independent Non-Executive Director

– Gregor Stewart

Independent Non-Executive Director

– Dr. Richard Ward

Senior Independent Director

Key responsibilities

– Provide oversight and advice to the Board in relation

to current and emerging risk exposures of the Group

and the strategic approach to managing

risk, including determination of risk appetite.

– Promote a risk-aware culture within the Group.

– Review the design and implementation of the Risk

Management Framework, risk appetite and

tolerances.

Areas of focus in the reporting period

– Monitored and reviewed the Group’s top risks

acrossits financial, operational and organisational

resilience pillars.

– Regularly assessed the Group’s emerging risks,

including monitoring of the geopolitical landscape

and its impacts on the Group.

– Reviewed and provided challenge and input into

theGroup’s Consumer Duty Annual Board Report.

– Continued oversight of the Controls and Risk and

Control Self-Assessment ("RCSA") Project ("CRP"), a

Company-wide controls improvement programme

aiming to set a new activity and assurance standard.

– Received regular updates on the Pricing

PracticesRegulation and Motor Total Loss past

businessreviews.

Further detail on these areas can be found in the body

of the Committee report.

Chief Risk Officer’s report

At each scheduled meeting, the Committee received a report

from the Chief Risk Officer (“CRO”) which outlined the

challenges and risks being faced across the Group’s financial,

operational and organisational resilience pillars. The CRO’s

report provided an overview and status of the principal risks

against the Group’s appetite, as well as: key activities

undertaken by the Risk function to further embed risk

management across the Group; outputs of regular risk

monitoring activities; and details of any current and specific

financial, non-financial or regulatory and compliance risk

matters. Alongside the CRO's report, the Committee regularly

assessed the Group’s emerging risks – defined as newly

developing or changing threats or opportunities that are

subject to a high degree of uncertainty but have the potential

to materially impact the Group over the long-term. It

challenged management on the identification of all possible

significant emerging risks during the year and on the Risk

function’s role in ensuring that such emerging risks were being

monitored and managed appropriately. The most notable

emerging risks identified included those relating to geopolitical

tension, the transition to Electric Vehicles ("EVs"), generative

Artificial Intelligence ("AI"), climate change and granular pricing.

In addition, the Committee reviewed the plan of risk assurance

activities to be undertaken for each quarter and the year

aheadto support the Group's key strategic objectives and

toensure adherence to prevailing legal and regulatory

requirements, aswell as the Group’s enterprise and risk

management framework.

Focused business and risk reviews

Set out below are some of the areas of focus and key reviews

that the Committee carried out during the reporting period,

toexamine the risk profile of the business, and to challenge

therobustness of frameworks in place to manage key risk

exposures as well as regulatory requirements and expectations:

– oversaw and challenged progress and delivery of the 2024

Risk and Compliance Assurance Plan;

– review of the annual Consumer Duty Board report as part

ofthe Group's considerations of fair pricing and customer

outcomes across all Direct Line Group products. The Group's

pricing strategy and pricing governance and control

framework were also reviewed;

– reviewed the Group’s operational resilience self-assessment,

including important business services and associated

impacttolerances;

– reviewed the effectiveness of the Group’s risk management

and internal control systems and environment, including

material financial, operational and compliance risks, the

Group’s residual risk position, associated mitigating actions

and compensating controls. This included oversight and

challenge of the Group’s quarterly RSCA process;

– reviewed the Group’s adherence to privacy and data

protection legislation;

– reviewed the stability, security and capability of the Group’s

ITsystems;

– reviewed and approved the Group’s Risk Taxonomy, forming

part of the Risk Management Framework.; and

– oversaw risks arising from corporate plan implementation.

106 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Board Risk Committee report

Risk appetite

The Committee undertakes an annual review of the Group’s

riskappetite framework, which includes the overarching risk

appetite and policy risk appetite statements. It monitors the

Group’s exposure against these statements, considers key

riskindicators and assesses the key drivers that affect status

against risk appetite. In line with regulatory requirements,

theCommittee scrutinises and approves the Group’s overall

affirmative and non-affirmative cyber insurance underwriting

strategy, associated risk appetite statements and relevant

management information.

Committee members also reviewed and challenged the Own

Risk Self-Assessment ("ORSA") process and key content before

submission to the Board for approval. Committee challenges

on elements of the ORSA during the year included: whether

thelanguage in the ORSA relating to changes in the control

environment was appropriately consistent with wider

assessments discussed at the Audit and Remuneration

Committees; and whether the offer from Aviva had as yet

ledtoany adjustments in ORSA processes. In addition, the

Committee monitored and challenged the stress and scenario

testing plan and outputs. The Committee also reviewed the

potential Contingent Management Actions to possibly be taken

in times of stress to restore theGroup’s capital strength to

within an acceptable risk appetiterange.

Compliance and regulatory risk

During the year, the Committee considered the Group’s

compliance with a number of regulatory requirements,

including those relating to conduct, financial crime and anti-

bribery and corruption. The Committee also received regular

reports (alongside the Customer and Sustainability Committee)

that provided oversight of customer outcomes and how the

Consumer Duty had been implemented and embedded into

the business. This included review and challenge of the Group’s

Consumer Duty Annual Board Report ahead of its submission

to the FCA in July 2024.

The Committee received regular updates in respect of

thedelivery of the Group’s past business reviews on Pricing

Practices Regulation and Motor Total Loss valuations, to the

point of being materially complete. In January 2025, the FCA

confirmed that the voluntary requirements ("VREQs") in

relation to both of these matters had been satisfied and

removed from the Financial Services Register. The Committee

also received regular updates on Periodic Summary Meeting

(“PSM”) and Firm Evaluation (“FE”) Letters that the Group had

received in January 2024 from the PRA and in December 2023

from the FCA respectively.

The Committee also approved the Risk and Compliance

assurance plan which set out assurance activities to be

undertaken in the coming year, with a view to ensuring

compliance with various regulations, and supporting the Board

and colleagues to understand their regulatory responsibilities.

Internal control

During the year, the Committee continued to oversee the

control improvement programme commissioned in 2023

toimprove the Group’s control environment. As part ofthis

programme, a number of improvements were made during

the year across the control environment and the three lines

ofdefence model:

– implementation of a new quarterly RSCA process which

assessed all of the Group’s critical risks and controls;

– documentation of the Group’s critical controls, including

anassessment of the design adequacy and operating

effectiveness of these controls;

– introduction of clearer end to end ownership and

accountabilities of principal risks and critical controls;

– implementation of a new risk management system with

improved functionality to track and monitor risks, control

deficiencies, and risk events; and

– improvements to the quality of control testing in the first line.

To accelerate this progress and to enable the proper

embedding of these improvements, the CEO took the decision

in 2024 to create a new Chief Controls Office ("CCO") function in

the first line. The primary responsibilities of the CCO

functioninclude:

– Ensuring consistency in the operation of the Group’s Risk

Management Framework in the business.

– Facilitating the new RCSA process and assuring its outcomes

through centralised control testing.

– Supporting the business in capturing, monitoring and

responding to risk events, control deficiencies and risk/

vulnerability management.

This work is supported by further activity across the Group,

overseen by the Board and its relevant Committees, designed

to carry out control remediation, improve risk culture, and

develop the required capability across the first line of defence.

The Committee received updates from the CCO function on

the control improvement programme at each of its scheduled

meetings from the CCO, where it monitored and challenged

progress. Although the programme was concluded at the end

of 2024, the creation of the new CCO function will enable the

underlying improvements in risk and control to further

formalise and embed across the Group in 2025.

Climate change

The Committee regularly received updates on climate change.

In particular, the Committee reviewed the climate-related

riskmanagement roadmap that was in place and considered

the plan to take the Group to a position whereby it could

demonstrate credible progress towards Net-Zero. There are

twokey areas for development: climate change scenario

modelling and the management of financial risk from climate

change andplans are in place to address these via the

roadmap. Aspreviously reported, the Group’s Net Zero targets

have been accepted by the Science Based Targets initiative.

107 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Internal capital model

The Committee regularly reviewed and challenged reports

onthe Group’s partial Internal Economic Capital Model for

determining regulatory capital requirements during the year,

including key assumptions, methodologies and areas of expert

judgement used within the model, activities undertaken

tovalidate model outputs, model changes and future

management actions. During Q4 2024, the services of Willis

Towers Watson Limited were retained to perform a review of

the Internal Economic Capital Model used to model the Group’s

Solvency Capital Ratio: the Committee will receive and discuss

their findings in early 2025.

Whistleblowing

As delegated by the Board, the Committee routinely reviewed

the Group’s whistleblowing arrangements. The Committee

Chair oversees the independence, autonomy and effectiveness

of the Group’s policies and procedures on whistleblowing,

including the procedures for protection from detrimental

treatment for staff who raise concerns. The Committee

challenged management and was satisfied that the

whistleblowing process met the necessary standards and that

itwas adequately designed, operated effectively, and adhered

to regulatory requirements.

The Committee received updates on actions agreed by

management to enhance existing whistleblowing policies and

processes. The actions are underway and will be materially

complete by June 2025.

Financial crime and anti-bribery and corruption

The Group has an overarching fraud and financial crime policy,

which includes the requirement that all employees of the

Group comply with the anti-bribery and corruption, anti-money

laundering, fraud and payment security and sanctions

minimum control standards. The aim of the anti-bribery and

corruption minimum control standard is to ensure compliance

with applicable anti-bribery and corruption legislation and

regulation and to ensure that employees act responsibly and

ethically at all times when conducting business.

The Committee considered the Group’s actions to prevent

financial crime through its review of the annual financial crime

report and noted the progress made against the agreed actions

throughout 2024 following the quarterly Risk and Control

Self-Assessments. The Committee also considered the annual

anti-bribery and corruption report, which sets out the Group’s

procedures and controls in place to prevent bribery. The

committee noted the Group’s arrangements in place and

actions being taken to ensure effective oversight of bribery risk.

The Economic Crime and Corporate Transparency Act 2023

(”ECCTA”) introduces a corporate offence called "failure to

prevent fraud." Under this law, which comes into force in

September 2025, firms can be held criminally liable if an

employee or person associated with the firm commits a fraud

offence with the intention of benefiting the firm (either directly

or indirectly) and the firm did not have reasonable procedures

in place to prevent it. The Group is working to implement

thenecessary procedures and arrangements to comply with

the new legislation.

The continued conflict between Russia and Ukraine has seen

continued sanctions against the Russian regime throughout

2024. The Group continues to monitor the sanctions situation

and screen against the most up-to-date key sanctions lists on

adaily basis in order to mitigate this risk.

Risk governance

During the reporting period, the Committee received

assurance from management on the process for review

oftheGroup’s policies and reviewed material changes to the

Group’s most significant policies. The Committee reviewed

andchallenged each of these policies and recommended them

for approval by the Board as appropriate.

The Committee has unrestricted access to management and

external advisers to help discharge its duties. It is satisfied that

in 2024 it received sufficient, reliable and timely information to

perform its responsibilities effectively. In addition to one-to-one

meetings with the Chair, the CRO also met with the Committee

in the absence of the Executive Directors. The Chair reported

onmatters dealt with at each Committee meeting to the

subsequent scheduled Board meeting.

Committee effectiveness review

During the year, an external evaluation of the effectiveness

ofthe Committee was conducted with assistance from

Promontory, as part of the wider review of the performance

ofthe Board and its Committees. The review found that the

skills and experience of the Committee were appropriate, that

its interaction with the Board and other Committees was

constructive and that its level of challenge was effective,

reflecting current priorities. The review found that the

Committee has strong technical skills and has a highly effective

crossover with the Audit Committee. The Committee received

positive feedback, though it was noted that improvements

could be made to Committee papers in order to further

support constructive discussion and challenge, Further

information on the Board effectiveness review can be found

onpages 97 to 98.

In addition, the Committee’s Terms of Reference were reviewed

against the activity of the Committee during the year. The

Terms of Reference were found to be suitable, comprehensive

and of appropriate scope.

The Committee’s Terms of Reference can be found on the

corporate website:

www.directlinegroup.co.uk/en/who-we-are/leadership/board-

committees

The Board reviewed and approved this report on 3March 2025.

Mark Gregory

Chair of the Board Risk Committee and Independent

Non-Executive Director

108 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Danuta Gray

Chair

Committee membership

– Danuta Gray

Chair and Independent Non-Executive Director

– Tracy Corrigan

Independent Non-Executive Director

– Mark Gregory

Independent Non-Executive Director

– Carol Hagh

Independent Non-Executive Director

– Adrian Joseph

Independent Non-Executive Director

– Mark Lewis

Independent Non-Executive Director

– Fiona McBain

Independent Non-Executive Director

– David Neave

Independent Non-Executive Director

– Gregor Stewart

Independent Non-Executive Director

– Dr Richard Ward

Senior Independent Non-Executive Director

Key responsibilities

– Review the composition of the Board and its

Committees.

– Lead the process for Board appointments and make

recommendations to the Board.

– Oversee executive succession planning at a high

level to seek to ensure the development of a diverse

senior management talent pipeline.

– Set diversity objectives and strategies.

– Oversee and monitor the corporate governance

framework of the Group.

– Monitor developments in governance and investor

ESG expectations.

Areas of focus in the reporting period

– Led the search for the new Chief Financial Officer.

– Recommended appointments to the Board and to

the Board’s Committees.

Main activities during the year

Board and senior management succession planning

The Committee continuously keeps the composition of the

Board under review, with the objective of preserving and

refreshing the Board’s collective experience, expertise and

diversity to enable it to oversee the execution of the Group’s

long-term strategy effectively.

During the year, the Committee finalised the search for a new

Group Chief Financial Officer ("CFO"). The international

executive search firm, Odgers Berndtson (a signatory to the

voluntary code of conduct for executive search firms which has

no other connection to the Company or any individual director)

was engaged to assist with the search. Shortlisted candidates

underwent a psychometric assessment and a deep interview

process, including interviews by the Chair of the Board, the

Chairs of the Audit and Board Risk Committees and the Chief

People Officer, resulting in the selection of Jane Poole as the

preferred candidate. We announced on 10 April 2024 that Jane

would join the Group as CFO, and the Board as an Executive

Director, subject to regulatory approval. Jane joined the Group

as CFO and was appointed to the Board, and as a member of

the Investment Committee, on 10 October 2024.

The Committee led a search in 2023 that culminated in the

appointment of Carol Hagh as a Non-Executive Director with

effect from 1 April 2024. The Committee was assisted by Teneo,

the global executive search and advisory firm (and a signatory

to the voluntary code of conduct for executive search firms,

which has no other connection to the Company or any

individual director). Fuller details about that search were

reported in the 2023 Annual Report. In 2024, the Committee

commenced a further search for a new Independent Non-

Executive Director with the assistance of Odgers Berndtson.

Shortlisted candidates were interviewed by members of the

Committee. The search has been put on hold following the

Board’s recommendation of the offer by Aviva to acquire the

Group and is expected only to be reactivated should it become

clear that the transaction will not successfully complete.

Composition of Board Committees

During the year, the Committee considered the effect of

changes in the Board’s composition on the skills and

experience available to the other Committees of the Board and

recommended that Tracy Corrigan be appointed as Chair of the

Customer and Sustainability Committee with effect from 1 March

2024 and that Carol Hagh be appointed as a member of the

Remuneration Committee with effect from 1 November 2024.

Notes:

1. Tracy Corrigan, Mark Gregory, Adrian Joseph, Mark Lewis,

FionaMcBain, David Neave and Gregor Stewart were appointed

totheCommittee with effect from 1 January 2024.

2. Carol Hagh was appointed to the Committee with effect from

1April2024, the date of her appointment to the Board.

109 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Nomination and Governance

Committee report

Electing and re-electing Directors

Before recommending the proposed election or re-election

ofDirectors at the 2024 AGM, the Committee reviewed the

independence of the Non-Executive Directors and concluded

that all Non-Executive Directors remained independent

injudgement and character and met the criteria for

independence set out in the UK Corporate Governance Code.

The Chair of the Board was independent on appointment.

The Committee also carefully considered Directors’ external

responsibilities and concluded that all Directors had sufficient

time to dedicate to their respective roles. All current Directors

will submit themselves for election or re-election at the

Company’s 2025 AGM.

Diversity and inclusion

The Committee believes that diversity of skills and experience

equips the Board better to take a broad strategic perspective

and the management team better to lead a diverse workforce

and serve a diverse customer base.

The Board has in place a Diversity Policy, the objective of which

is to seek to ensure that individual differences, which contribute

to the success of the Company and represent the diversity

ofour customers and colleagues, are reflected at Board level.

Thepolicy underpins appointments that are made to both

theBoard and its Committees and is monitored and reviewed

bythe Nomination and Governance Committee. It is made

available to any executive search firm engaged to assist with

the selection and appointment process for Board positions.

TheBoard Diversity Policy is available to view on the Company’s

website at www.directlinegroup.co.uk/en/sustainability/reports-

policies-and-statements.

Further information on the Board’s approach to diversity,

andthe progress made towards senior management gender

targets, can be found in the Corporate Governance report

onpages 95 to 96, which includes progress against key

externaltargets.

The Committee also oversees the Group's talent development

and succession planning, focusing on future skills needed by

the business. More information on senior management

diversity can found on pages 81 and 95.

Corporate governance

The Committee monitors arrangements made by the

Company and its subsidiaries to comply with the UK Corporate

Governance Code and other relevant governance standards.

Italso considers emerging governance matters, observance

ofESG standards and developments, and reforms which may

affect the Group’s adherence to corporate governance

bestpractice.

Committee effectiveness review

During the year, an evaluation of the effectiveness of the

Committee was facilitated by Promontory as part of their wider

review of the performance of the Board. The review found that

the Committee had led the searches for the new CEO and CFO

effectively and that it should review its composition and the

frequency and formality of its meetings and consider renewing

its focus on executive succession planning. Further information

about the Board performance review can be found on page 94.

The Committee also reviewed its activity against its Terms

ofReference and determined that its Terms of Reference

remained comprehensive and of appropriate scope.

The Committee’s Terms of Reference can be found on the

corporate website: www.directlinegroup.co.uk/en/who-we-are/

leadership/board-committees.

The Board reviewed and approved this report on 3March 2025.

Danuta Gray

Chair of the Nomination and Governance Committee

110 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Tracy Corrigan

Chair

Committee membership

– Tracy Corrigan

Chair and Independent Non-Executive Director

– Adrian Joseph OBE

Independent Non-Executive Director

– Mark Lewis

Independent Non-Executive Director

Key responsibilities

– Provide oversight and advice to the Board on

conducting its business in a responsible and

sustainable manner.

– Monitor the progress of the Group under its five

sustainability pillars.

Areas of focus in the reporting period

– Monitored the Group’s activity under the five pillars

of the Group’s sustainability strategy.

– Oversaw the Group’s improvements to reporting

and monitoring of customer outcomes.

– Oversaw the Group’s sustainability-related initiatives

and tracked progress against the Group’s Science-

Based Targets.

– Reviewed the Group's refined approach to diversity

and inclusion.

– Reviewed ethical matters, including the Group’s

Modern Slavery Statement.

Main activities during the year

Customer

Following a review of its remit, the Committee increased its

oversight of customer outcomes, conduct and experience

in2024. An additional six Committee meetings were scheduled

toenable the Committee to review customer-related metrics

and track progress across a total of ten meetings during the

reporting period. TheCommittee placed particular emphasis

on identifying root causes of customer complaints and

overseeing the Group’s embedding of the Consumer Duty

(the"Duty".)

Together with the Board Risk Committee, the Committee

carefully reviewed the business's first annual Consumer

Dutyreport.

In addition, the Committee oversaw the development of the

Group's Customer Outcomes Improvement Plan to further

enhance compliance with and implementation of the Duty.

TheCommittee also reviewed the Risk Mitigation Plan ("RMP")

that was developed in conjunction with PwC with the aim of

improving the Group's compliance with monitoring and

reporting requirements under the Duty. The Committee

encouraged management to further develop the approach

totracking progress of the RMP using metrics and a

supportingtimeframe.

Planet

During the year, the Committee oversaw the Group’s

engagement with, and delivery of, its climate- and

sustainability-related commitments. In order to further

integrate sustainability into business decisions and strategic

choices, theCommittee reviewed plans to assign responsibility

for key sustainability workstreams across senior management.

Progress updates from the Climate Executive Steering Group,

in relation to the Group’s five Science-Based Targets (“SBTs”),

were reviewed, with an emphasis on the importance of

delivering the Group’s carbon emissions reduction plan.

People

Over the course of 2024, the Committee reviewed the

business’s initiatives to promote a culture that helps all

colleagues thrive and celebrates difference.

During the year, the Committee oversaw the refinement ofthe

scope of the People Pillar. Updates were received on diversity

and inclusion (“D&I”) initiatives, as well as themes that arose

from the all-employee ‘DiaLoGue’ engagement surveys and

other engagement with colleagues.

Society

The Committee oversaw the business’s work to use its expertise

to improve outcomes for society and the communities that the

Group serves.

In the latter part of the year, the Committee reviewed

Management's proposed new approach for the Community

Fund (the "Fund"), which has donated £6.9m to charities and

good causes since 2020. The Committee supported the

intention to align the Fund with the business's wider strategic

vision and to further enhance colleagues' emotional connection

with the Group's charitable initiatives.

111 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Customer and Sustainability

Committee report

Modern Slavery Statement

In February 2024, the Committee reviewed the Group’s

policyon compliance with the Modern Slavery Act 2015

(the“MSA”) and how third-party suppliers complied with the

Act’srequirements.

The Committee reviewed the Procurement function’s activity

inrelation to the MSA and concluded that processes and

policies in connection with the MSA were robust, effectively

embedded in supply chain processes, and reflected the

Procurement function’s updated sustainability processes.

The Modern Slavery Statement is available to view on the

corporate website:

https://www.directlinegroup.co.uk/en/sustainability/reports-

policies-and-statements

Governance

The Board is focused on ensuring that ethical and sustainable

business practice is embedded throughout the business.

During the year, the Chair of the Customer and Sustainability

Committee reported on matters dealt with at each meeting

tothe subsequent scheduled Board meeting. The Board,

recognising the growing strategic significance of sustainability

matters, received additional, dedicated reports on the Group’s

approach to Customer, People and Culture.

Committee effectiveness review

During the year, an external evaluation of the effectiveness

ofthe Committee was conducted with assistance from

Promontory, as part of the wider review of the performance

ofthe Board and its Committees. The review noted that during

the year, the Committee had further deepened its focus on the

Consumer Duty and customer outcomes. Further information

on the Board effectiveness review can be found on

pages 97 to 98.

In addition, the Committee’s Terms of Reference were

reviewedagainst the activity of the Committee during the year.

The Terms of Reference were found to be suitable,

comprehensive and of appropriate scope.

The Committee’s Terms of Reference can be found on the

corporate website:

www.directlinegroup.co.uk/en/who-we-are/leadership/board-

committees

The Board reviewed and approved this report on 3March 2025.

Tracy Corrigan

Chair of the Customer and Sustainability Committee and

Independent Non-Executive Director

112 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Fiona McBain

Chair

Committee membership

– Fiona McBain

Chair and Independent Non-Executive Director

– Mark Gregory

Independent Non-Executive Director

– Jane Poole

Chief Financial Officer

Key responsibilities

– Provide oversight of the Group’s investment

strategy.

– Oversee the management and performance of the

Group’s investment portfolio.

Areas of focus in the reporting period

– Monitored closely the changes in valuations and

resilience of the Group’s investment assets.

– Oversaw phases of implementation of the refreshed

target Strategic Asset Allocation exercise, including

review of adjusted recommendations and strategies

across asset classes.

– Ensured the investment portfolio held appropriately

matched assets and liabilities and remained within

agreed aggregate risk and exposure limits.

– Ensured the investment portfolio maintained

sufficient liquidity to meet a stress insurance or

financial market event in a 1 in 200-year insurance,

market, or credit risk event.

– Received progress updates on the calibration

ofScience-Based Targets (“SBTs”) for each asset class

in scope within the investment portfolio.

Oversight of market developments

During the year, the Committee considered trends in economic

growth, employment figures, credit spreads, inflation and

interest rates, and wider geopolitical contexts and took these

into account when providing oversight of, and challenge to,

theGroup’s investment strategy.

At each scheduled meeting, the Committee received reports

on key financial market developments from the Director of

Investments and Capital Management.

Monitoring investment activity and performance

Throughout the year, the Committee carefully reviewed the

performance of the Group’s investments. It received

presentations from representatives of its managed portfolios

ateach meeting. In 2024, attendees from Rothschild & Co.,

BlackRock Inc., Neuberger Berman and Goldman Sachs Asset

Management L.P. shared their views of relevant market

performance, market outlook and wider economic context.

TheCommittee discussed the performance of the Group's

various assets under management, and carefully considered

the balance between flexibility, investment return and

alignment with the Group's risk appetite for each mandate.

Management shared recommendations for the Group's

inhouse portfolios, which were reviewed and challenged by

theCommittee to ensure the investment strategy remained

appropriate and well-positioned. During the year, the

Group'sinvestment strategy was reviewed and compared

toapeergroup, and the Group's portfolio was found to

beperformingwell.

Reviewing investment strategy and liquidity

Early in 2024, the Committee conducted its annual review

ofthe business’s asset liability management, which was

undertaken to ensure that the Group’s asset and liability

matching, along with stressed liquidity requirements, remained

appropriate. The Committee reviewed Management's

recommendations for the Group's overnight liquidity

requirements, ensuring an improved balance was struck

between the business’s performance and the Group’s ability

toaccess sufficient liquidity if it were to meet a 1 in 200-year

stressrisk event.

In the second half of the year, the Committee reviewed both

interim and end solutions for improved hedging against

interest rate risk. It made recommendations for key areas

tobebrought back for review and challenge in 2025.

Strategic Asset Allocation ("SAA")

During the year, the Committee oversaw the phasing of

implementation of the refreshed SAA. A detailed action point

plan and corresponding timeline was produced to the

Committee, and progress carefully monitored by the

Committee.

Throughout the year, the Committee reviewed amendments

tothe target SAA as and when these occurred.

Notes:

1. Neil Manser was a member of this Committee until he stepped down from the Board of Directors on 10 October 2024.

2. Jane Poole was appointed as a member of this Committee with effect from 10 October 2024.

113 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Investment Committee report

Risk management

During 2024, a Risk and Control Self-Assessment was carried

out in conjunction with PwC and covered three risk areas: asset

and portfolio management; investment counterparty credit

and default; and liquidity management. No control gaps were

identified for the Investment and Treasury ("I&T") team in any of

the three risk areas and the two documentation enhancements

for liquidity management made by PwC were implemented.

The Risk function was engaged throughout the relevant

decision-making processes and a representative from Risk

attended each meeting of the Committee.

During the second half of the year, the Risk function carried out

a review of the I&T team's existing key risk indicators and made

some suggestions for adjustment.

Oversight of responsible investment

The Committee monitored the Group's externally managed

mandates for compliance with the Group's responsible

investment framework. The Committee was pleased to learn

that the Group achieved its targeted 50% reduction in

Weighted Average Carbon Intensity in its corporate bond

portfolio ahead of schedule.

During the year, a gap analysis against PRA SS3/19

requirements was performed and the Group updated its

climate change roadmap.

Governance

The Chair reported on matters dealt with at each Committee

meeting to the subsequent scheduled Board meeting.

Committee effectiveness review

Towards the end of the year, an external evaluation of

theperformance of the Committee was conducted with

assistance from Promontory, as part of the wider review of

theperformance of the Board and its Committees. The review

found that the Committee was highly organised and well-

structured, benefiting from a very active Chair. In addition,

thequality of materials available to the Committee was good.

Further information on the Board effectiveness review can

befound on pages 97 to 98.

In addition, the Committee’s Terms of Reference were reviewed

against the activity of the Committee during the year. The Terms

of Reference were found to be suitable, comprehensive and

ofappropriate scope. Updates were made regarding the

Committee’s oversight of climate and sustainability.

The Committee’s Terms of Reference can be found on the

corporate website:

www.directlinegroup.co.uk/en/who-we-are/leadership/board-

committees

The Board reviewed and approved this report on 3March 2025.

Fiona McBain

Chair of the Investment Committee and Independent Non-

Executive Director

Note:

1. The Prudential Regulation Authority's Supervisory Statement SS3/19:

Enhancing banks' and insurers' approaches to managing the

financial risks from climate change.

114 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Dr Richard Ward

Chair of the

Remuneration

Committee

Committee membership

– Dr Richard Ward

Chair and Senior Independent Director

– Tracy Corrigan

Independent Non-Executive Director

– Danuta Gray

Chair of the Board

– Mark Gregory

Independent Non-Executive Director

– Carol Hagh

Independent Non-Executive Director

– Mark Lewis

Independent Non-Executive Director

Note:

1. Carol Hagh was appointed to the Committee effective

1November 2024.

Key responsibilities

– Determine the policy for rewarding Executive

Directors and senior leadership for results that are

generated within the risk appetite set by the Board

and oversee how the Group implements its

Remuneration Policy.

– Oversee the level and structure of remuneration

arrangements for senior executives, approve share

incentive plans, and recommend them to the Board

and shareholders.

– Review workforce remuneration and related policies

and the alignment of incentives and rewards with

culture, ensuring all our colleagues are paid fairly.

Areas of focus in the reporting period

– Adam Winslow was appointed as CEO on 1 March

2024 and the Committee approved the grant

ofbuyout awards to compensate him for awards

forfeited from his previous employer, in accordance

with the remuneration arrangements approved

in2023.

– Jane Poole was appointed as CFO on 10 October

2024and the Committee carefully considered and

approved the appropriate remuneration package for

this role.

– The Committee also considered the remuneration

arrangements for the departing CFO, Neil Manser, in

accordance with the Directors’ Remuneration Policy

and incentive plan rules, contractual obligations and

shareholder expectations.

– Remuneration packages for senior hires below

themain Board were reviewed and approved

bytheCommittee.

– The Committee approved the measures and targets

for the 2024 AIP awards, which were subsequently

reviewed in July 2024.

– The Committee approved the measures and

targetsfor the 2024 LTIP awards to align with the

new strategy.

– The Committee reviewed the potential

remuneration implications associated with a change

of control, including in the context of the Ageas non-

binding offer and subsequent Aviva offer.

– Reviewed and approved risk adjustments in relation

to the solvency capital ratio misstatement.

– The Committee (and Board) continued to be

updated on wider workforce actions, including

employee feedback, voluntary turnover and salary

increase decisions.

115 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Directors’ Remuneration report

Dear Shareholders,

On behalf of the Remuneration Committee ("the Committee"),

I am pleased to introduce the Directors’ Remuneration Report

for the 2024 financial year.

In 2024, we welcomed a new senior leadership team, led

byAdam Winslow, and the Group made significant progress

onour strategic objectives following the priorities set out

attheCapital Markets Day in July 2024. This performance

hasbeen delivered in the context of a number of additional

unanticipated activities, including an approach from

Ageasinearly 2024 and an agreement on the terms

ofarecommended offer for Direct Line Group by Aviva,

asannounced in December.

The Committee has continued to make remuneration

decisionson a "business as usual" basis wherever possible,

carefully considering a range of factors in ensuring that 2024

remuneration outcomes are consistent with our broader

employee and shareholder experience (as outlined in detail

inthe remainder of this report).

The Report is set out in the following sections:

Section Page

Chair’s statement 115 to 118

Remuneration at a glance – summarising the

remuneration arrangements for Executive Directors 119

Annual Report on Remuneration – detailing pay

outcomes for 2024 and covering how the Group

will implement the Policy for 2025 120 to 137

Summary of the Policy approved at the 2023 AGM 138 to 141

Performance and incentive outcomes for 2024

As noted above, the Group has delivered on the strategic

objectives set out by Adam Winslow at our Capital Markets

Dayin July. Strong growth in our core product areas has driven

improved trading performance, further supported by bringing

Direct Line Motor onto price comparison websites for the first

time. During this transitional year, the Group has delivered

ongoing operating profit of £205m (2023: (£189.5m)) and

NetInsurance Margin from ongoing operations of 3.6%

(2023:(8.3%)) whilst making excellent progress on managing

costs. Our capital position remains strong – we announced

a2024 interim dividend of 2.0p per share (2023: Nil) and are

proposing a final year dividend of 5.0p per share (2023: 4.0p).

The Group has also placed significant focus on the experience

of our colleagues and our customers, with an improved

employee engagement score despite the challenging

businesslandscape, launching two new apps which have been

downloaded almost 300,000 times and delivering an improved

overall Net Promoter Score.

2024 AIP

As outlined in last year’s report, the Committee decided to

delay setting the 2024 LTIP targets until a strategic review had

taken place following Adam Winslow’s appointment as CEO.

However, given the shorter nature of the AIP performance

period, the Committee set the majority of the AIP targets

atthestart of the year (with the exception of the strategic

objectives (20% weighting), which were finalised following

Adam's appointment and split equally between Cost and Risk

objectives). These targets were set prior to this business wide

review, which culminated in the Capital Markets Day in July

andincluded a full financial re-forecast.

In this context, following the strategic review, the Committee

reviewed the original targets in light of the new strategic plan,

with particular focus on the operating profit targets (55%

weighting). The key consideration for the Committee was that

itconsidered it essential to have an incentive that supported

the critical work to be done in delivering the strategy over the

balance of 2024, especially given that the AIP scorecard targets

are applicable to many colleagues participating in the AIP

across the Group. The Committee considered the updated

internal financial forecasts as well as consensus performance

expectations (although the Committee noted that the

consensus forecasts at that time varied significantly, primarily

due to the way some analysts had treated investment income

from the sale of our Brokered commercial insurance business).

The Committee discussed potential options to improve the

alignment between the AIP and the new strategy, in particular

whether to amend the operating profit targets during the year

orleave them unchanged but consider the exercise of discretion

atthe end of the year. Whilst the Committee recognised the

challenges around the appropriateness of changing targets at

the mid-year, ultimately we decided that itwas the right thing

to do to amend the targets – in order toprovide greater clarity

to participants, to ensure that the AIP remained incentivising

and motivating to all colleagues and to drive the right

outcomes for the business. The Committee was also mindful of

the truly exceptional circumstances faced by the Group at the

time, with a new CEO and senior leadership team, challenging

insurance market landscape and business uncertainty following

the Ageas approach earlier in 2024. Taking all of these factors

intoaccount, the Committee approved amended Ongoing

OperatingProfit targets. Full details of the original and

amended Operating Profit targets are set out on page 122.

As noted in the introduction to this letter, the Group delivered

rapidly on key strategic priorities, particularly during the second

half of the year. In particular, we saw strong premium growth

inboth Motor and Non-Motor, with a return to profitability

inMotor alongside a strong result in Non-Motor. As a result,

ongoing operating profit (£205m) exceeded the revised

maximum level for this element of the AIP (55% weighting).

At our Capital Markets Day, we set out an ambition to deliver

atleast £100m cost savings by the end of 2025 on an annualised

run-rate basis. Over 2024 we made excellent progress

towardsthis target by making improvements in procurement,

rationalising technology and simplifying our operating model.

As a result, 2024 cost performance exceeded the maximum

level for this element (10% weighting).

The 2024 AIP also included targets related to Risk

(10%weighting), Customer (15% weighting) and People

(10%weighting). Performance under the Risk and Customer

elements were assessed to be around the target level and

slightly below the target level respectively, whilst performance

in relation to the People element was determined to be at

themaximum level. Further details are set out on page 123.

Based on the Committee’s assessment against the performance

targets, the overall 2024 AIP outcome was 86.4% of maximum.

The Committee debated the appropriateness of this outcome,

recognising the broader context in which the performance

wasdelivered. The Committee’s view was that our 2024

performance was particularly impressive given the relatively

short period that the new senior leadership team had been

inplace, as well as the significant time spent during the year

inrelation to the Ageas approach and subsequent Aviva offer,

which could easily have impacted the Group’s ability to deliver

on our key priorities.

116 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Following extensive discussion, the Committee determined

that the 86.4% overall outcome appropriately reflects the

performance of the Executive Directors, senior leadership team

and wider employees in delivering in an extremely challenging

environment and unprecedented year for the Group, and

therefore did not exercise discretion to adjust this outcome. In

line with the Policy, 40% of any AIP for the Executive Directors

will be deferred for three years under the Deferred Annual

Incentive Plan ("DAIP").

As noted above, the AIP outturn also impacts around 3,400

employees below Board level and the Committee was pleased

to be able to recognise the performance of all of our colleagues

in delivering our 2024 results, noting that the 2022 and 2023 AIP

outturns were 0% and 15% respectively. Full details on the

outcomes for the year are included on pages 122 to 123.

2021 and 2022 LTIP

The 2021 LTIP awards were granted in two tranches in March

and August 2021 and were subject to RoTE (60% weighting) and

relative TSR (40% weighting) performance. The performance

period for the RoTE element of the awards ended on 31

December 2023 was disclosed in last year’s report (0% vesting).

The performance period of the TSR element of the 2021 LTIP

awards ended on 26 March 2024 and 31 August 2024.

Performance was below the threshold performance level

(median) for both awards, and therefore these elements lapsed

in full. This means that the overall outcome of the March and

August 2021 LTIP awards was 0% vesting.

The 2022 LTIP awards were also granted in two tranches

inMarch and August 2022, and were subject to RoTE (50%

weighting), relative TSR (40% weighting) and Emissions (10%

weighting) performance. The performance period for the RoTE

and emissions elements of the 2022 LTIP awards ended on

31December 2024, with performance as follows:

– RoTE (50% weighting): Average RoTE for the three-year

performance period ending 31 December 2024 was minus

3.63%. This is below the threshold target level of 17.5%, and

therefore this element will lapse in full.

– Emissions (10% weighting): All of the 3 emissions metric

targets were met and therefore this element will vest at 100%.

The performance period of the TSR element of the 2022 LTIP

awards (40% weighting) ends on 28 March 2025 and 29 August

2025 (or shortly before completion of the potential Aviva

acquisition if earlier) respectively and is therefore not yet

known. The outcome of these elements, and therefore the

overall outcome of the 2022 LTIP awards (including the RoTE

and emissions outcomes asabove) will be disclosed in next

year’s report (subject tothestatus of the Aviva acquisition) once

the performance period iscomplete.

Committee decisions on remuneration outcomes

As noted above, the overall AIP outcome was considered

appropriate and therefore no discretion to adjust the outcome

was exercised.

The 0% vesting outcomes for the 2021 LTIP awards were

considered appropriate in the light of the Group’s performance

over the three-year performance period, and therefore no

discretion to adjust the outcome was exercised in relation

tothese awards.

Although the RoTE element (50% weighting) of the 2022 LTIP

awards will lapse, the full vesting in relation to the emissions

metric (10% weighting) reflects the strong progress on our

environmental targets and commitment to sustainability.

Theextent to which the TSR elements (40% weighting) vest will

be considered by the Committee in March and August 2025

(orshortly before completion of the potential Aviva acquisition

ifearlier), as the TSR performance period continues until the

vesting date.

Taking the points above into account, the Committee believes

the Policy has delivered an appropriate quantum of reward for

the corporate performance achieved. The Committee was

therefore satisfied that the Group’s Remuneration Policy has

operated as intended.

Wider workforce pay considerations and

engagement for 2024

The Committee regularly and carefully considers wider

employee pay as context for the decisions it makes.

As part of the wider Committee oversight on all-employee pay

matters, the Committee is pleased to confirm that the Group

will apply an increase to the Group's minimum salary of 5%

from 1 April 2025, to align with the Living Wage Foundation's

Real Living Wage. This will result in the Group-wide minimum

salary increasing to £24,570 on a full-time basis (for a 37.5hr

workingweek).

For employees who earn above the minimum salary, all eligible

employees will receive a salary increase of between 3.5%-4.0%

effective 1 April 2025.

As Chair of the Committee, I have attended at least one

meeting of the Group’s Employee Representative Body (“ERB”)

each year since 2018. The Group’s ERB is a valued forum for

having a two-way dialogue on many important matters.

Iattended the ERB meeting in December 2024, where I

discussed executive remuneration with colleagues and took

questions. The Q&A session covering topics such as the

alignment of pay and performance and the possible impacts

ofthe potential Aviva acquisition. Feedback was shared on how

people are experiencing the level of ongoing change in the

business as well as the response to the enhanced

communication strategy.

The outcome of our DiaLoGue People Survey is an important

factor for the Committee to reflect on and it has been kept

abreast of matters by the Chief People Officer and Chief

Executive Officer throughout the year.

Our existing workforce engagement is strengthened through

“town halls” and other forums. To supplement this, the

Committee receives papers setting out details of all-employee

pay and workforce policies across the Group at each meeting.

For 2024 this included information on the Group's gender and

ethnicity pay gaps, the approach to 2025 salary increases for the

wider workforce, as well as reward design changes to support in

driving a high-performance culture. This standing agenda item

provides valuable insight and context for framing executive pay

and policies.

Directors’ Remuneration Policy (the “Policy”)

The Company is required to submit the Directors'

Remuneration Policy to a shareholder vote by 31 December

2026 (and ordinarily at the 2026 AGM) in accordance with the

Companies Act 2006.

In the context of the potential Aviva acquisition, the Committee

will keep under review the appropriate approach given the

current uncertainty in the precise timing of completion.

A summary of the current Policy is set out on pages 138 to 141.

117 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Executive Director changes

As explained in last year's report, Adam Winslow was appointed

to the Board as Chief Executive Officer on 21 March 2024. Acting

CEO Jon Greenwood stepped down from the Board on the

same date and returned to a non-Board role.

As announced on 10 April 2024, Jane Poole was appointed

tothe Board as Chief Financial Officer on 10 October 2024.

Insetting Jane's remuneration, the Committee considered her

wealth of experience in general insurance, market data in

respect of FTSE51-150 companies and other FTSE350 insurers,

the previous CFO's remuneration package, our Directors'

Remuneration Policy and the pay and conditions of the wider

workforce. Taking these factors into account, Jane's salary was

set at £550,000, broadly in line with the previous CFO.

In accordance with the Directors' Remuneration Policy, Jane

receives pension contributions (or cash in lieu) in line with the

wider workforce (9% of salary) and her variable remuneration

opportunities (AIP and LTIP) are in line with the current

Directors' Remuneration Policy. Jane also received buyout

awards to compensate for awards forfeited from her previous

employer in connection with her appointment at DLG. Further

details are set out on page 134.

Neil Manser stepped down as CFO and from the Board on

10October 2024 and commenced his 12-month notice period.

Hecompleted a handover period to the new CFO to assist with

an orderly transition and was then placed on garden leave for

the remainder of his notice period. His employment will cease

on 9 October 2025.

Neil will retain his 2022 DAIP and LTIP awards, which will vest

on the normal vesting dates and (in the case of the LTIP)

subject to the relevant performance conditions and a two-year

post-vesting holding period. In light of the Company’s

announcement on 23 August 2024 relating to the

misstatement of the Company’s Solvency Ratio for the 2023

financial year, and following a review process conducted with

external support and advice, the Committee considered

whether any actions in relation to variable pay were

appropriate. The Committee determined that the malus

provisions under the DAIP rules should be applied in relation to

Neil’s DAIP award granted in 2024 in respect of the deferred

element of the 2023 AIP, and therefore this award has lapsed in

full. In addition, Neil's LTIP awards granted in 2023 and 2024 will

lapse on cessation of employment. He will not receive a

payment under the AIP in respect of the financial year ended 31

December 2024 and will not be eligible to participate in the

2025 AIP or LTIP awards.

Further details of Neil’s terms in relation to his departure are

provided on page 133.

Potential Aviva acquisition

In the context of the Aviva offer announced on 23 December

2024, the Remuneration Committee has been discussing the

impact that the transaction would have on our remuneration

arrangements for Executive Directors, senior leadership and the

wider workforce. This will continue to be an area of focus for the

Committee during 2025 as we work towards completion. The

agreed principles for the treatment of remuneration in

connection with the transaction are set out in the co-operation

agreement agreed by Direct Line and Aviva in December 2024,

but do not impact the 2024 outcomes set out in this report.

Executive Director remuneration for 2025

The Committee carefully considered salary increases for the

Executive Directors (and the Executive Committee) for 2025

and determined that Adam Winslow and Jane Poole should

receive an increase of 3.5% (below the wider workforce level)

from 1 April 2025.

Over the summer, (and prior to the Aviva approach), the

Committee undertook a review of our remuneration

arrangements, taking into consideration the new strategy

outlined at the Capital Markets Day in July. The Committee

concluded that it is critical that our new CEO and CFO and

newly appointed wider management team have a meaningful

incentive that aligns with delivering the key transformation

objectives over the next 1-3 years, recognising that the

performance required to achieve this transformation goes far

beyond “business as usual” and the need to ensure the

remuneration package is competitive in this context.

In view of the exceptional circumstances, the Committee

therefore proposed to use the exceptional 300% of salary limit for

LTIP awards in the Policy for Executive Directors (above the

normal grant level of 200% of salary). We were part way through

a consultation with our major shareholders and proxy agencies

when the initial Aviva announcement was made. Up to that

point, shareholders had been broadly supportive of the proposal

to grant awards at this level, with differing views on the

appropriate performance measures to be used. However, given

the Aviva approach, it was appropriate to pause the consultation.

Although agreement has been reached on the terms of an offer

by Aviva for Direct Line, the Committee strongly believes that

the 2025 LTIP awards must operate effectively in all scenarios,

noting that the acquisition is still subject to shareholder and

regulatory approval. The Committee determined that the 2025

LTIP awards would be granted at 300% of salary for the Executive

Directors, in line with the Committee's original intention.

Further details on the approach for the 2025 AIP and LTIP

awards are set out on pages 136 to 137.

Committee performance

During the year, an evaluation of the effectiveness of the

Committee was facilitated by Promontory, as part of their wider

review of the Board’s effectiveness. The review found the

Committee to be well structured with a good awareness of the

remuneration of the wider workforce. Further information about

the Board effectiveness review can be found on pages 97 to 98.

The Committee’s terms of reference can be found on the

corporate website: www.directlinegroup.co.uk/en/who-we-are/

leadership/board-committees

Your AGM vote

The Committee welcomes investor feedback on an ongoing

basis and this report seeks to describe and explain our

remuneration decisions clearly. I hope that having read the

information in this report, you will vote in support of the

Remuneration Report resolution at the upcoming AGM.

Should you have any questions about the Committee’s Report

please email our AGM email address

shareholderenquiries@directlinegroup.co.uk and I or one of my

colleagues at Direct Line Group will respond to you.

Yours sincerely,

Dr Richard Ward

Chair of the Remuneration Committee and Senior

Independent Director

118 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Remuneration outcomes for 2024

Total pay (£’000)

£7,875

£2,170

£0

£1,000 £2,000 £3,000

£4,000 £5,000

£6,000

£7,000 £8,000

Adam Winslow

(CEO)

2024

Jane Poole

(CFO)

2024

Base salary

Pensions and benefits

Annual bonus

Buyouts

Find out more on page 121.

Notes:

1. Adam Winslow was appointed as CEO effective 21 March 2024. His remuneration has been pro-rated accordingly for this period.

2. Jane Poole was appointed CFO effective 10 October 2024. Her remuneration has been pro-rated accordingly for this period.

AIP achievement

This chart illustrates the actual amounts earned from the AIP reflecting performance in 2024. 60% of the amount is payable in

March 2025 and 40% will be deferred into shares for three years.

£0

£200

£400

£600

£800

£1,000 £1,200 £1,400

Adam Winslow

(CEO)

Jane Poole

(CFO)

Actual (% of salary)

Maximum (% of salary)

…

Actual (£)

Find out more on page 122 to 123.

Shareholding at 31 December 2024

This chart illustrates the number of shares held at the end of 2024 by the Executive Directors against the share ownership

guidelines of 250% of salary for the CEO and 200% of salary for the CFO.

466%

174%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

Adam Winslow

(CEO)

Jane Poole

(CFO)

2024

…

Guideline

Find out more on page 129.

119 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Remuneration at a glance

£1,240k

£187k

175%151%

Annual Report on Remuneration

Introduction

We have prepared this Report in accordance with the

requirements of the Companies Act 2006 and the Large and

Medium-sized Companies and Groups (Accounts and Reports)

Regulations 2008 (as amended) (the “Regulations”). The Report

also meets the relevant requirements of the Listing Rules of

theFCA and describes how the Board has complied with the

principles and provisions of the Corporate Governance Code

2018 relating to remuneration matters. Remuneration tables

subject to audit in accordance with the relevant statutory

requirements are contained in this report and stated

to be audited. Unless otherwise stated, the information within

the Report is unaudited.

Committee members and governance

The following list details members of the Committee during

2024. You can find information about each member’s

attendance at meetings on pages 84-85. You can find their

biographies on pages 77 to 80.

Committee Chair

Dr Richard Ward

Non-Executive Directors

Danuta Gray

Tracy Corrigan

Mark Gregory

Carol Hagh (from 1 November 2024)

Mark Lewis

Advisers to the Committee

The Committee consults with the Chief Executive Officer, the

Chief Financial Officer, the Chief People Officer, and senior

representatives of the HR, Risk and Finance functions on

matters relating to the appropriateness of all remuneration

elements for Executive Directors and Executive Committee

members. No Director or other attendee is present when

theirremuneration is discussed. The Committee works closely

with the Chair of the Audit Committee, and the Board Risk

Committee Chair is a member of the Remuneration

Committee. Input was received regarding target-setting and

payouts under incentive plans, and whether it is appropriate to

apply malus and/or clawback. The Remuneration and Board

Risk Committees can also hold joint meetings to consider

matters of common interest.

The Committee appointed PricewaterhouseCoopers LLP

(“PwC”) as its independent adviser from 1 January 2019

following a competitive tender process.

During the year, PwC advised on market practice, corporate

governance and regulations, incentive plan design and target-

setting, recruitment, and other matters that the Committee

was considering. PwC supported the Group in several ways,

including the provision of internal audit, risk and controls, tax

and actuarial services during 2024. PwC is a member of the

Remuneration Consultants Group and a signatory to its Code

ofConduct and the Committee is therefore satisfied that the

advice PwC provided was objective and independent from the

Group and its Directors.

PwC’s total fees for remuneration-related advice in 2024 were

£198,650 excluding VAT. PwC charged its fees on a time and

expenses basis.

120 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Implementing Policy and pay outcomes relating to 2024 performance

Single figure table (Audited)

£’000 Salary

Benefits

Annual

bonus

357

Long-

term

Incentives

All-

employee

plans Pension

Buyout

awards

Other

Fixed pay

and

benefits

sub-total

Variable

remunera

tion sub-

total Total

Adam Winslow

2024 683 55 1,240 – 1 62 5,835 – 800 7,075 7,875

2023 – – – – – – – – – – –

Jane Poole

2024 124 1 187 – 0 11 1,848 – 135 2,035 2,170

2023 – – – – – – – – – – –

Jon Greenwood

2024 160 32 240 – 0 14 – – 206 240 446

2023 668 125 177 0 1 60 – – 854 177 1,031

Neil Manser

2024 419 2 0 – 1 38 – (55) 460 (55) 405

2023 527 2 138 0 1 47 – – 577 138 715

Notes:

1. Salary – the Company operates a flexible benefits policy, and salary is reported before any personal elections are made.

2. Benefits – include a private medical insurance, life assurance, income protection, health screening and discounted insurance. The CEO uses a

carservice for travelling on journeys between home and office; the Group also paid for any associated tax liability on this benefit. Jon Greenwood's

benefits also included a car allowance. Whilst Acting CEO, Jon Greenwood received reimbursement of reasonable travel and accommodation

expenses between his home in the North of England and the Group's London office to reflect the interim nature of this role; the Group also paid

forany associated tax liability on this benefit. The total cost to provide this travel and accommodation benefit in 2024 to 21 March 2024, being the

date he stepped down from the Board, was £23,467. The Acting CEO also received an allowance of £25,000 per annum (payable monthly, £5,511

received in respect of 2024) to reflect the significant disturbance to Jon and his family as a result of spending the majority of his time in London.

3. Annual bonus – includes amounts earned for performance during the year but deferred for three years under the DAIP. For more information,

seepages 122 to 123. These deferred awards are normally subject to continuous employment. Awards remain subject to malus and clawback.

4. Adam Winslow joined DLG on 1 March 2024 and was appointed to the Board on 21 March 2024. In accordance with the reporting regulations,

hisfixed pay and benefits shown above relate to his services as the CEO from 1 March 2024.

5. As agreed as part of his recruitment terms, Adam Winslow was eligible for a full-year bonus for 2024, as no buyout award in respect of the 2024

bonus forfeited from his previous employer was made.

6. Jane Poole joined the Board on 10 October 2024. Her fixed pay and benefits shown above reflect this period.

7. The annual bonus figure for Jane Poole is pro-rated from the date she joined DLG and was appointed to the Board.

8. Buyout awards – this relates to the value of the buyout awards made to Adam Winslow as compensation for awards forfeited from his previous

employer upon joining DLG. This includes compensation for his 2023 bonus which was delivered, 50% in cash and 50% deferred into shares, in 2024.

Also included are the share awards granted as compensation for the share awards Adam forfeited. These buyout awards are detailed on page 128.

9. Buyout awards – this relates to the value of the buyout awards made to Jane Poole as compensation for awards forfeited from her previous

employer upon joining DLG. This includes an estimated payment in lieu of the 2024 bonus forfeited, pro-rated to the date she joined DLG,

assumed for these purposes to be at the maximum level (£510,328). The actual payment will be confirmed in next year's report (subject to the

status of the Aviva acquisition). Also included are the share and cash awards granted as compensation for the share awards Jane forfeited.

Thesebuyout awards are detailed on page 128.

10. Jon Greenwood stepped down from the Board effective 21 March 2024 and returned to a below-Board role. His remuneration has been pro-rated

accordingly for this period.

11. Neil Manser stepped down from the Board on 10 October 2024. His remuneration has been pro-rated accordingly for this period. Details of Neil's

exit arrangements can be found on page 133.

12. Other – this relates to the value of the malus adjustment applied to Neil Manser’s 2024 DAIP award in respect of the deferred element of the 2023

AIP which has lapsed in full as detailed onpage133.

Each Executive Director has confirmed they have not received any other form of remuneration from the Group in relation to their

services as a Director, other than that already disclosed inthe single figure table.

121 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Annual Incentive Plan outcomes for 2024 (Audited)

The chart illustrates the final assessment, performance measures and weightings under the AIP.

Performance measures and weighting

55%

10%

15%

10%

Operating profit

Strategic financial

Customer

People

Risk

Performance achievement 2024 Outcome 2024

86.4%

Total

Operating profit

55%

Strategic financial

10%

Customer

6.4%

People

10%

Risk

Executive Director Achievement under the 2024 AIP 2024 AIP payment

Adam Winslow 86.4% £1,239,840

Jane Poole 86.4% £186,809

Jon Greenwood 86.4% £239,607

Neil Manser – –

Notes:

1. The AIP for Jon Greenwood is pro-rated to reflect the period to 21 March 2024, being the date he stepped down from the Board.

2. 40% of any AIP award is deferred into shares under the DAIP, vesting three years after grant.

Operating profit (55% weighting)

The primary financial performance measure for 2024 was operating profit for ongoing operations. The Committee established

threshold and maximum performance levels at the start of the year considering internal budgets and analysts’ consensus forecasts.

The original targets were £179.1m for threshold and £268.7m for maximum. As outlined in the Chair's statement, the Committee

reviewed the original targets, conscious of the updated Strategic Plan that was now in place following Adam Winslow’s

appointment. The Committee determined that the original targets were no longer appropriate or incentivising, noting that the

targets are applicable to all AIP participants. The Committee therefore approved an amended set of performance targets, as

outlined in the table below. Further details on this decision are set out in the Chair's Statement.

The approach taken to assessing financial performance against this measure was based on a straight-line outcome between 10%

for threshold performance and 100% for achievement of maximum performance.

The table below sets out the threshold and maximum performance targets for the year, and the actual performance achieved.

Measure Threshold 10% Maximum 100% 2024 Actual 2024 Achievement

Operating Profit £160m £200m £205m 100 %

122 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Cost savings

(10% weighting)

Achieve at least

£100m gross cost

savings by the end

of 2025 on an

annualised run-

rate basis.

– The Group's cost saving programme aimed at simplifying the organisation and achieving the cost

savings ambition set out at the Capital Markets Day has made strong progress over 2024. Noting the

2025 nature of the £100m ambition, the Committee set a cost target for 2024 as follows:

Threshold

(0%)

Target

(55%)

Maximum

(100%)

2024

Actual

2024

Achievement

<£949m £949m £929m £891m 100%

– This has been delivered by:

– Refining procurement: By making improvements in our procurement processes.

– Digitalisation: We have invested in digital distribution channels to improve customer accessibility,

streamline our operations and enhance the overall customer experience. This includes the launch of

two apps which have been downloaded almost 300,000 times to date.

– Rationalising technology: Reduction in costs by removing legacy technology systems and leveraging

our existing platforms.

– Simplifying our operating model: Our drive to create a leaner, less complex, and more efficient

operating model is well advanced, with consultations now complete as part of a reduction of 550 roles.

2024 outcome: 100% (10% out of 10%)

Customer

(15% weighting)

To better align

focus of our

leadership teams

on delivery of

customer

experience

Net promoter score (10% weighting)

– The Committee set a target to achieve a Group NPS score of 52 by the end of 2024 and a stretch target

of 53 – end of year Group NPS was just above the target level a 52.1.

– Underlying NPS score targets by brand are considered commercially sensitive, but strong performance

was delivered in Rescue and in Churchill, with weaker performance in Direct Line.

Complaints (5% weighting)

– The Committee set a target performance level of 4.5 complaints per 1000 in force policies (based on 2024

as a whole). Actual performance was in excess of this level (5.4 per 1000), although the Committee noted

a positive trajectory in reducing complaints during H2 2024.

– The Committee recognised that the outcome against the complaints metric was impacted by lower

levels of capacity across the motor repair industry and high inflation which drove price related

complaints. The impact of both led to higher resulting call volumes, leading to longer wait times.

– Nevertheless, the Committee concluded that the overall performance did not warrant any payout in

respect of this element of the AIP.

2024 outcome: 43% (6.4% out of 15%)

People

(10% weighting)

A range of

indicators around

employee

engagement,

reflecting the

importance of this

agenda to the

success of the

Group

Performance was assessed based on two key areas:

– Employee engagement: Employee engagement score of 72 (target: 72, 2023: 70). Overall engagement

among colleagues rose by 2 points since February 2024. The response rate has remained fairly consistent

in 2024, with a slight increase from 81% to 82% between February and September. The Committee

considered this an exceptional result given the uncertainty for colleagues following the Ageas non-

binding offer in March 2024 and the proposed changes to the business operating model. It should also

be noted that the DiaLoGue surveys occurred prior to the Aviva announcement, however the feedback

about the engagement programme and communication that has taken place with colleagues post-

announcement continues to be extremely positive.

– Confidence in Senior Leadership: Score of 71 (target: 69, 2023: 61). Given DLG’s ongoing period of

transformation and turnaround, highly effective leadership remains critical. In 2024, we focused on

uplifting leadership capability, specifically focusing on the Enterprise Leaders Network (“ELN”) and ExCo

populations. Our September 2024 DiaLoGue survey reported a significant 10-point increase in

confidence in our senior leadership since February 2024, reflecting the significant efforts taken by the

new Executive Committee team to foster a culture of open, honest engagement and communication.

2024 Outcome: 100% (10% out of 10%)

Risk

(10% weighting)

Continuously

strengthen risk

and controls

– In 2024, we sought to further embed a sustainable risk culture and promote continuous strengthening

of the risk & controls.

– Performance was assessed based on 5 indicator metrics:

– % of planned RCSAs completed – Outcome: Fully achieved

– % of planned ‘Controls Assurance’ activities completed – Outcome: Partially achieved

– Timely recording of Risk Events on the Group’s risk management system – Outcome: Broadly achieved

– Timely raising of MAPs and subsequent closure – Outcome: Partially achieved

– Timely closure of Line 2 risk recommendation – Outcome: Fully achieved

2024 outcome: 50% (5% out of 10%)

Note:

1. Group total operating expenses, acquisition expenses, and claims handling expenses, adjusted to exclude restructuring and one-off costs,

commission expenses and costs associated with the Brokered commercial business, Motability and By Miles.

123 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

LTIP outcomes for 2024 (Audited)

2021 LTIP awards (vesting in 2024)

Awards under the LTIP granted in March and August 2021 vested during 2024. They were subject to relative TSR performance over

the three-year period from the date of grant, and average RoTE performance over 2021, 2022 and 2023.

Consistent with the Regulations, the expected RoTE vesting outcomes for the year ended 31 December 2023 (together with the TSR

elements from the 2020 awards) were disclosed last year and included in the 2023 LTIP column of the single figure table because

the performance period for these elements ended in 2023. The performance outcomes of these elements are included in the table

below. Jon Greenwood and Neil Manser were participants in the 2021 LTIP awards (although Jon Greenwood’s awards were granted

prior to his appointment as Acting CEO).

The TSR elements of the 2021 awards (and the RoTE and emissions elements of the 2022 LTIP awards – see below) are included in

the 2024 single remuneration figure because the performance period for those elements ended in 2024. Details of the targets and

performance achieved are set out in the table below. As above, Jon Greenwood and Neil Manser were participants in the 2021 LTIP

awards, but the performance period ended after Jon Greenwood stepped down from the Board (and therefore the outcome is not

included in the 2024 LTIP column of single figure table for him in accordance with the Regulations, albeit the outcome was zero).

The performance achieved against the targets was as follows:

Award Performance measure Weighting

Threshold

(20% of

maximum)

Maximum

(100% of maximum) Actual performance Achievement Outcome

March 2021

RoTE

(2023 single figure)

60% 17.5% 20.5% 0.9% 0.0% 0.0%

Relative TSR

(2024 single figure)

40% Median Upper quintile Below median 0.0% 0.0%

August 2021

RoTE

(2023 single figure)

60% 17.5% 20.5% 0.9% 0.0% 0.0%

Relative TSR

(2024 single figure)

40% Median Upper quintile Below median 0.0% 0.0%

2022 LTIP awards (vesting in 2025)

Awards under the LTIP granted in March and August 2022 are subject to relative TSR performance over the three-year vesting

period, and average RoTE performance over 2022, 2023 and 2024 and progress on our emission targets to 31 December 2024.

Theperformance in respect of the RoTE and emissions elements are set out in the table below. Performance under the relative

TSRmeasure will be assessed at the end of the vesting periods in March 2025 and August 2025 respectively (or shortly before

completion ofthe potential Aviva acquisition if earlier) and will be disclosed in the 2025 Directors’ Remuneration Report. Vesting

issubject to the Committee’s satisfaction that the financial and risk underpins have been met at the end of the vesting period.

Consistent with the Regulations, the expected RoTE and emissions vesting outcomes for the 2022 LTIP awards (together with

theTSR elements from the 2021 awards above) are included in the 2024 single remuneration figures. You can find details

ofthison page 121.

Jon Greenwood and Neil Manser were participants in the 2022 LTIP awards (although Jon Greenwood’s awards were granted prior

to his appointment as Acting CEO). As the performance period ended after Jon Greenwood and Neil Manser stepped down from

the Board, in accordance with the Regulations, the outcome is not included in the 2024 LTIP column of single figure table.

Award Performance measure Weighting

Threshold

(20% of

maximum)

Maximum

(100% of maximum) Actual performance Achievement Outcome

March 2022

RoTE (average)

(2024 single figure)

50% 17.5% 20.5% (3.6%) 0.0% 0.0%

Emissions 10.0% 1 out of 3 3 out of 3 3 out of 3 100.0% 10.0%

Relative TSR

(2025 single figure)

40% Median Upper quintile Performance period not yet complete

August 2022

RoTE (average)

(2024 single figure)

50% 17.5% 20.5% (3.6%) 0.0% 0.0%

Emissions 10.0% 1 out of 3 3 out of 3 3 out of 3 100.0% 10.0%

Relative TSR

(2025 single figure)

40% Median Upper quintile Performance period not yet complete

124 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

LTIP awards granted during 2024 (Audited)

The table below shows awards granted under the LTIP to Executive Directors in 2024 in the form of nil-cost options. Prior to

granting the awards, the Committee considered the potential for windfall gains and determined that it would not be appropriate

to make an adjustment at the time of grant, and will instead review whether there has been a "windfall gain" at the time of vesting

(to the extent that the performance conditions have been met).

Awards granted in 2024 under the LTIP

Director Position Award as % of salary Number of shares granted Face value of awards (£)

Adam Winslow Chief Executive Officer

200% 858,638 £1,640,000

Jane Poole Chief Financial Officer

200% 668,693 £1,100,000

Neil Manser Chief Financial Officer

200% 572,108 £1,092,728

Notes:

1. The number of shares awarded was based on the average share price in the three-day period prior to grant. This was £1.91 for the award granted

toAdam Winslow and Neil Manser on 5 April 2024, and £1.65 for the award granted to Jane Poole on 11 November 2024.

2. Neil Manser's LTIP award will lapse on cessation of his employment. Further details are set out on page 133.

The performance conditions that apply to the LTIP awards granted in 2024 are set out below:

Performance conditions for awards granted in 2024 under the LTIP

Performance Measure Proportion of award

Performance for threshold

vesting (20%)

Performance for

maximum vesting (100%)

RoTE (2026) 25% 15.0% 22.0%

Operating earnings per share (2026) 25% 24.0p 30.0p

Expense ratio (2026) 20% 27.0 % 23.9 %

TSR vs. FTSE 51-150 (excluding Investment Trusts) 20% Median Upper quintile

Emissions 10% 1 out of 3 targets are met All 3 targets are met

Note:

1. Emissions targets are:

a. Operational Scope 1 and 2: Reduce Scope 1 emissions by 38% by 2026 versus the 2019 baseline.

b. Corporate bonds (Scope 1 and 2): Reduce Scope 1 + 2 portfolio temperature score by invested value within corporate bonds portfolio from 2.44°C

in 2019 to 2.16°C in 2026.

c. Corporate bonds (Scope 1, 2 and 3): Reduce Scope 1 + 2 + 3 portfolio temperature score by invested value within corporate bonds portfolio from

2.80°C in 2019 to 2.40°C in 2026.

A straight-line interpolation occurs from threshold to maximum performance.

The performance period for the awards granted on 5 April 2024 will end on 31 December 2026 for all performance measures.

DAIP awards granted during 2024 (Audited)

The table below shows the deferred share awards granted under the DAIP to Executive Directors on 5 April 2024 in respect of 40% of

the 2023 AIP. Awards will vest after three years, normally subject to continued service, and were granted in the form of nil-cost options.

Awards granted in 2024 under the AIP

Director Position Number of shares granted

Face value of deferred bonus

(£)

Jon Greenwood

Acting Chief Executive Officer

38,560 73,651

Neil Manser

Chief Financial Officer

289,482 55,292

Notes:

1. The number of shares awarded was based on the average share price in the three-day period prior to grant, which was £1.91. In accordance with

theDAIP rules, dividends in respect of the deferred shares are reinvested in additional shares, which vest when the deferred shares vest.

2. The face value of the DAIP represents the deferred element (40%) of Jon Greenwood's full year 2023 AIP. The 2023 AIP value in the single figure

table on page 121 represents the pro-rated AIP for the period from 27 January 2023 from which he was Acting CEO.

3. As outlined in the Chair's Statement and on page 133, the Committee determined that the malus provisions under the DAIP rules should be applied

in relation to Neil’s DAIP award granted in 2024 in respect of the deferred element of the 2023 AIP, and therefore this award has lapsed infull.

125 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Direct Line Group 2012 Share Incentive Plan (“SIP”) (Audited)

During 2024, all employees, including Executive Directors, were eligible to invest from £10 to £150 a month from their pre-tax pay

into the scheme, and receive one matching share for every two shares they purchased in the form of a conditional share award.

Thematching shares vest after 3 years subject to continued employment and continuing to hold the purchased shares. This table

details the number of shares held by the current and former Executive Directors under the SIP.

Matching shares

granted during

the year

Matching shares

cancelled during

the year

Value of matching

shares granted (£)

Total number of

matching shares at

31 December 2024

Adam Winslow 312 – 600 312

Jane Poole 29 – 73 29

Jon Greenwood 90 – 150 1,268

Neil Manser 360 – 674 1,362

Notes:

1. The total market value of matching shares granted at the time of each award. Purchase of the matching shares takes place within 30 days

ofthecontributions being deducted from salary.

2. Matching shares which are subject to forfeiture.

3. Jon Greenwood stepped down from the Board on 21 March 2024 and Neil Manser stepped down from the Board on 10 October 2024. The interests

shown here are as at those dates respectively.

126 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Directors’ share interests (Audited)

Executive Directors commit not to hedge their exposure to outstanding awards under these plans or in respect of shares they

arereporting to the Company within their ownership for the purposes of any share ownership guidelines. They also agree not to

pledge as collateral their participation under any of the plans or any shares which they are required to hold in the Company for any

purposes, including for share ownership guidelines. The table below sets out details of the Executive Directors’ share interests

exercised whilst serving as a Director in the year to 31 December 2024.

At 31 December 2024

Share plan interests exercised

whilst serving as aDirector during

the year to 31 December 2024

Share plan

awards subject

to performance

conditions

1,2,3

Share plan

awards subject

to continued

service

Share plan

awards vested

but unexercised

Shares held

outright

Number of

options

exercised

Share price on

date of exercise

(£)

Adam Winslow

858,638 1,830,090 – 516,799 965,619 2.03

Jane Poole

668,693 708,537 – 59 – –

Jon Greenwood

1,318,972 76,883 – 169,232 – –

Neil Manser

433,683 100,480 – 366,794 50,476 1.98

Notes:

1. These awards take the form of nil-cost options over the Company’s shares. Such awards accrue dividend entitlement from the grant date to the

date on which an award vests, or the end of the applicable holding period. Dividends added post vesting are shown to 31 December 2024 but are

not realised until exercise.

2. LTIP awards granted to Executive Directors include an additional two-year holding period before awards may be released.

3. Unvested awards subject to performance conditions represent LTIP awards.

4. Shares held outright include beneficial share interests acquired under the SIP. At 3 March 2025, the number of shares beneficially held by Adam

Winslow has increased to 516,910, and the number of shares held by Jane Poole has increased to 169. There are no other changes in the Directors'

interests as set out above between 1 January 2025 and 3 March 2025.

5. Neil Manser exercised options on 28 March 2024. Adam Winslow exercised options on 21 May 2024.

6. The above share plan interests for Jon Greenwood are as at 21 March 2024 being the date he stepped down from the Board.

7. The above share plan interests for Neil Manser are as at 10 October 2024 being the date he stepped down from the Board, and exclude awards

which have lapsed in connection with his departure.

The table below shows the Non-Executive Directors’ beneficial interests in the Company’s shares

Director

Shares held at

31/12/2024

Shares held at

31/12/2023

Danuta Gray 26,500 26,500

Tracy Corrigan – –

Mark Gregory – –

Carol Hagh 10,000 –

Adrian Joseph – –

Mark Lewis – –

Fiona McBain – –

David Neave – –

Gregor Stewart 2,925 2,925

Richard Ward – –

Notes:

1. This information includes holdings of any connected persons, as defined in section 253 of the Companies Act 2006.

2. There were no changes to the above between 1 January 2025 and 3 March 2025.

127 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Buyout awards (Audited)

Adam Winslow

The table below details the awards made to Adam Winslow, granted on 5 April 2024, as compensation for awards forfeited from his

previous employer (Aviva), as set out in last year's report. The awards were made in the form of restricted stock options. The awards

granted to replace forfeited deferred bonus awards are not subject to performance conditions, in line with the terms of the original

awards. For the remaining awards, which were subject to performance assessment, the 2021 LTIP was based on the performance

disclosed in the 2023 Aviva Directors' Remuneration Report, and the 2022 and 2023 LTIPs were based on an estimated performance

outturn. The final values shown here have been updated from the estimated values given last year. All awards will accrue dividend

equivalents, in line with the originalaward terms.

Award

Three-day average share

price for grant of awards £ Face value award £

No. of share options

granted Vesting date

Deferred bonus 2021

1.913 162,515 84,953 8/4/2024

Deferred bonus 2022

1.913 160,169 83,726 8/4/2024

LTIP 2021

1.913 1,524,548 796,940 8/4/2024

Deferred bonus 2021

1.913 162,515 84,953 21/3/2025

Deferred bonus 2022

1.913 160,169 83,726 21/3/2025

LTIP 2022

1.913 1,204,839 629,816 21/3/2025

Deferred bonus 2023

1.913 162,500 84,945 28/3/2025

Deferred bonus 2022

1.913 160,169 83,727 20/3/2026

LTIP 2023

1.913 1,325,177 692,721 20/3/2026

Deferred bonus 2023

1.913 162,500 84,945 27/3/2026

Deferred bonus 2023 1.913 162,500 84,945 25/3/2027

In addition to the above, as disclosed in last year’s Directors’ Remuneration Report, Adam was compensated for the 2023 bonus he

forfeited from his previous employer. The value was determined by the Committee with reference to the Aviva Group CEO 2023

annual bonus outcome (prior to any personal performance adjustment) following publication of Aviva’s 2023 annual report.

TheCommittee also considered the performance of the business unit Adam led, and considered that this would have led to an

upwards adjustment to his bonus. On this basis, the Committee approved an outturn at the maximum level. The resultant value

ofthis award (£975,000) was delivered 50% in cash and 50% deferred into shares (i.e. an award of 254,835 DLG shares in three equal

tranches, made on 5 April 2024, which are detailed in the table above).

Jane Poole

The table below details the awards made to Jane Poole, granted on 11 November 2024, as compensation for awards forfeited from

her previous employer (Aviva). The awards were made in the form of restricted stock options, and are not subject to performance

conditions, in line with the terms of the original awards. The awards will accrue dividend equivalents, also in line with the original

award terms.

Award

Three-day average share

price for grant of awards £ Face value award £

No. of share options

granted Vesting date

Deferred bonus 2022

1.645 50,081 30,444 21/3/2025

Deferred bonus 2023

1.645 73,867 44,903 21/3/2025

LTIP 2022

1.645 246,996 150,149 21/3/2025

Deferred bonus 2024

1.645 67,991 41,332 28/3/2025

LTIP 2022

1.645 41,199 25,044 11/8/2025

LTIP 2024

1.645 125,791 76,468 22/9/2025

Deferred bonus 2023

1.645 73,872 44,906 20/3/2026

LTIP 2023

1.645 223,931 136,128 20/3/2026

Deferred bonus 2024

1.645 67,991 41,332 27/3/2026

LTIP 2024

1.645 125,791 76,468 22/9/2026

Deferred bonus 2024 1.645 67,996 41,334 25/3/2027

In addition to the above, Jane received cash payments of £46,183 and £125,791 in November 2024 as compensation for forfeited

share awards which would have vested before her start date.

As outlined further on page 134, Jane will also be compensated for the 2024 bonus she forfeited from her previous employer

onapro-rata basis, delivered two thirds in cash and one third in shares (vesting in equal tranches on the anniversary of grant

overathree-year period consistent with the original award). The maximum value of this award is £510,328. The final value of this

award will be determined after the publication of the 2024 Aviva Directors' Remuneration Report and will be set out in next year’s

report (subject to the status of the Aviva acquisition). However, for the purpose of the estimate in the 2024 single figure table

onpage 121, we have included the maximum value (£510,328).

128 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Non-Executive Directors (Audited)

Non-Executive Directors receive a basic fee plus additional fees for specific Board responsibilities and time commitments.

TheChairof the Board receives a single fee. Non-Executive Directors may also claim for reasonable travel and subsistence expenses,

in accordance with the Group’s travel and expenses policy, and, where these are classified as taxable by HMRC, they are shown

under ‘Taxable benefits’ below. The Non-Executive Directors receive no other benefits.

Fees Taxable benefits

2,3,4

Total

Director

2024

£’000

2023

£’000

2024

£’000

2023

£’000

2024

£’000

2023

£’000

Danuta Gray 350 350 19 10 369 360

Tracy Corrigan 103 90 – – 103 90

Mark Gregory 135 130 – – 135 130

Carol Hagh

62 – – – 62 –

Adrian Joseph 85 80 1 – 86 80

Mark Lewis

95 68 2 4 97 72

Fiona McBain 115 110 8 14 123 124

David Neave

100 29 6 3 106 32

Gregor Stewart 120 115 15 22 135 137

Richard Ward 150 150 1 – 151 150

Notes:

1. Non-Executive Directors are not eligible to participate in any of the Group’s bonus or share incentive schemes or to join any Group pension scheme.

2. The values shown under ‘Taxable benefits’ above comprise the value of taxable travel and subsistence expenses reimbursed by the Company

(including any gross-up for tax and national insurance contributions due).

3. The value of taxable benefits for Danuta Gray for 2024 reflects expenses incurred due to her increased presence in the London office during 2024.

4. The value of benefits for Tracy Corrigan, Mark Gregory and Carol Hagh in 2024, and for Tracy Corrigan, Mark Gregory, Adrian Joseph and Richard

Ward in 2023, were all less than £500. The values have been rounded to 0 for consistency in the table above.

5. Carol Hagh joined the Board on 1 April 2024. Her fees and expenses for 2024 reflect this period.

6. Mark Lewis and David Neave joined the Board on 30 March 2023 and 19 October 2023 respectively. Their fees and expenses for 2023 reflect

theseperiods.

Shareholdings (Audited)

This table sets out the Executive Directors’ share ownership guidelines and actual share ownership levels:

Director Position

Share ownership guideline

(% of salary)

Value of shares held at

31 December 2024

2,34

(% of salary)

Adam Winslow Chief Executive Officer 250% 466%

Jane Poole Chief Financial Officer 200% 174%

Notes:

1. Executive Directors are normally expected to retain all the ‘after tax’ Ordinary Shares they obtain from any of the Company’s share incentive plans

until they achieve a shareholding level that is equal to 250% of base salary for the CEO and 200% of base salary for the CFO respectively.

2. For these purposes, holdings of Ordinary Shares will be treated as including unvested DAIP awards, all vested but unexercised awards, or awards

unvested but after the performance period and in the holding period. Holdings of Ordinary Shares are valued on a basis that is net of applicable

personal taxes payable on acquiring such Ordinary Shares.

3. Shares held also include Partnership Shares, Matching Shares and Dividend Shares under the SIP, and share interests of connected persons.

4. Shareholding as a percentage of salary has been calculated based on the 31 December 2024 share price of £2.55.

As at the date he stepped down from the Board (21 March 2024), Jon Greenwood had not met the share ownership guideline

applicable to the CEO (250% of salary), but the Committee noted that the interim nature of the role means that this would

notbeexpected.

As at the date he stepped down from the Board (10 October 2024), Neil Manser had met his share ownership guideline

(200%ofsalary). As set out on page 133, he is subject to a post-employment share ownership requirement.

Service agreements and letters of appointment

The Executive Directors are employed under service contracts with no fixed term, and are subject to annual re-election at the AGM.

The Non-Executive Directors do not have service contracts and instead are appointed under letters of appointment.

129 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

CEO pay ratio

The table below compares the single total figure of remuneration for the CEO since 2019 with that of the Group employees who are

paid at the 25th percentile (lower quartile), 50th percentile (median) and 75th percentile (upper quartile) of its employee

population.

Director Method 25th percentile pay ratio Median pay ratio 75th percentile pay ratio

2024

Option A 270:1 187:1 132:1

2023

Option A 36:1 27:1 19:1

2022 Option A 35:1 27:1 18:1

2021 Option A 122:1 95:1 65:1

2020 Option A 132:1 108:1 73:1

2019

Option A 123:1 101:1 67:1

Notes:

1. As required by the regulations, the CEO single figure used to determine the 2024 pay ratios is based on the sum of the total single figures

ofremuneration for Jon Greenwood and Adam Winslow.

2. As required by the regulations, the CEO single figure used to determine the 2023 pay ratios is based on the sum of the total single figures

ofremuneration for Penny James and Jon Greenwood.

3. As required by the regulations, the CEO single figure used to determine the 2019 pay ratios is based on the sum of the total single figures

ofremuneration for Paul Geddes and Penny James, but with remuneration in respect of Penny’s service as CFO excluded.

The UK employees included are those full-time employees employed on 31 December 2024 for the full financial year, and

remuneration figures are determined with reference to the financial year ending on 31 December 2024.

Option A, as set out under the reporting regulations, was used to calculate remuneration for 2024 as we continue to believe that

that is the most robust methodology for calculating these figures. The value of each employee's total pay and benefits was

calculated using the single figure methodology consistent with the CEO. No elements of pay have been omitted.

The table below sets out the salary and total pay and benefits of the employee at the lower quartile, median and upper quartile for

the 2024 financial year:

Director 25th percentile (P25) Median (P50) 75th percentile (P75)

Salary £28,553 £41,475 £53,819

Total pay and benefits £30,828 £44,513 £62,979

Base salaries of all employees, including our Executive Directors, are set with reference to a range of factors including market

practice, experience and performance in role. In reviewing the ratios, the Committee also noted that the CEO’s remuneration

package is weighted more heavily towards variable pay (including the AIP and LTIP) than the wider workforce due to the nature

ofthe role, and this means the ratio is likely to fluctuate depending on the performance of the business and associated outcomes

ofincentive plans in each year.

The 2024 ratios have increased significantly versus 2023 levels, driven primarily by a higher AIP outcome for 2024 compared to

recent years and the value of buyout awards granted to Adam Winslow to replace awards forfeited from his previous employer,

which are included within the 2024 single figure (but vest over several years). Pay and benefits across the organisation reflect

acombination of salary increases and bonus outturns across the incentive schemes we operate.

The Group’s employees are fundamental to the Group’s strategy and to ensuring a high level of service to our customers.

Weareproud that a high number of consultants in our customer service centres are employed by the Group (rather than being

outsourced) and note that the impact of these lower paid roles is reflected in the ratios above. Further details on the remuneration

of Executive Directors and the wider workforce are set out on page 117. The Committee notes that the pay ratios for 2024 reflect the

nature of the CEO’s package being more heavily weighted towards variable pay compared to more junior colleagues, consistent

with our reward policies. Furthermore, the Committee is satisfied that these policies drive the right behaviours and reinforces the

Group’s values which in turn drives the correct culture, and for the reasons outlined above, believes that the ratios are consistent

with the Group’s reward policies.

130 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Percentage change in Executive Directors’ and Non-Executive Directors’ pay for 2020 to 2024

The table below shows the year-on-year percentage change in salary, taxable benefits, and bonus (where applicable) of the

Executive Directors and Non-Executive Directors, compared to the average pay for all other employees.

Director

Salary/Fees

Benefits

Bonus

(including deferred amount)

2024 2023 2022 2021 2020 2024 2023 2022 2021 2020 2024 2023 2022 2021 2020

Executive Directors

Adam Winslow – – – – – – – – – – – – – – –

Jane Poole – – – – – – – – – – – – – – –

Jon Greenwood 0% 0% 0% – – 30 % 0% – – – 473 % – – – –

Neil Manser 3 % 2% 0% – – 22 % 7 % 4 % – – (100) % – (100) % – –

Non-Executive

Directors

4,5,6

Danuta Gray 0% 0% 0% 67% 90% 91 % 56% – 0% (100%) – – – – –

Tracy Corrigan 14 % 2% 18% – – (4) % 0% – – – – – – – –

Mark Gregory 4 % 1% 3% 15% 7% 173 % 0% 0% 0% (100%) – – – – –

Carol Hagh – – – – – – – – – – – – – – –

Adrian Joseph 6 % 0% 0% – – 462 % 0% – – – – – – – –

Mark Lewis 6 % – – – – (54) % – – – – – – – – –

Fiona McBain 5 % 1% 7% 7% 15% (40) % 26% – (100%) (80%) – – – – –

David Neave 33 % – – – – 97 % – – – – – – – – –

Gregor Stewart 4 % 0% 0% 0% 0% (31) % 92% – (100%) (87%) – – – – –

Richard Ward 0% 0% 5% 19% 0% 32 % (4%) 105% 193% (6%) – – – – –

All employees (average)

Average employee 6 % 9% 6% 3% 4% 53 % 0% 57% (19%) (1%) 51 % 34% (41%) 9% 4%

Notes:

1. Based on the change in average pay for employees employed in the year ended 31 December 2024 and the year ended 31 December 2023. Adam

Winslow and Jane Poole both joined the Board during 2024 and therefore there is no comparison to prior year. Non-Executive Director fee levels

were unchanged between 2023 and 2024.

2. For all employees, there were no changes in benefits provision between 2023 and 2024. For Non-Executive Directors, benefits comprise taxable

travel and subsistence expenses reimbursed by the Company (including any gross-up for tax and national insurance contributions due).

3. This includes average amounts earned under the AIP, and other variable incentive schemes, including monthly incentive schemes operated

incertain parts of the Group. Non-Executive Directors are not eligible to participate in any of the Group’s bonus or incentive schemes.

4. Carol Hagh joined the Board during 2024.

5. The value of taxable benefits for Danuta Gray for 2024 reflects expenses incurred due to her increased presence in the London office during 2024.

6. The value of benefits for Mark Gregory and Adrian Joseph in 2023 was less than £500. The percentage increase therefore appears significant,

butthe actual value of increase is minimal, at less than £500 for Mark, and less than £1,000 for Adrian.

131 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Chief Executive Officer’s pay between 2015 and 2024 and historical performance of TSR

The table below shows historical levels of the CEO’s pay between 2015 and 2024. It also shows vesting of annual and long-term

incentive pay awards as a percentage of the maximum available opportunity. The graph reflects the TSR for the Company and the

FTSE 350 index (excluding Investment Trusts) on a cumulative basis over the period from 31 December 2014 to 31 December 2024,

as the Company is a constituent of this index.

Total Shareholder Return (%)

31 Dec

2014

31 Dec

2015

31 Dec

2016

31 Dec

2017

31 Dec

2018

31 Dec

2019

31 Dec

2020

31 Dec

2021

31 Dec

2022

31 Dec

2023

31 Dec

2024

100

150

200

250

— DLG — FTSE 350 (excluding Investment Trusts)

Director

2015 2016

2017 2018 2019

2019

2020 2021 2022 2023

2023

2024

Paul Geddes Penny James

Jonathan

Greenwood

Adam

Winslow

CEO single figure of

remuneration(£’000s) 4,795 4,071 4,039 3,250 774 2,773 3,286 3,137 940 63 1,031 446 7,875

Annual bonus payment

(%ofmaximum) 83% 43% 88% 68% 76% 76% 82% 84% 0% n/a 15% 86% 86%

LTIP vesting

(% of maximum)

96% 86% 99% 71% 0% 100% 80% 75% 0% n/a 0% 10% n/a

Notes:

1. The 2016 single figure and annual bonus payment reflect an adjustment to the original award, made in 2019, of 20% of maximum opportunity

related to the Ogden discount rate change.

2. The 2019 single figure reflects part of the year for the outgoing CEO, Paul Geddes, and the entire year for the newly appointed CEO, Penny James.

3. The 2023 single figure reflects part of the year for the outgoing CEO, Penny James, and part of the year for the Acting CEO, Jon Greenwood.

4. The 2024 single figure reflects part of the year for the outgoing Acting CEO, Jon Greenwood, and part of the year for the CEO Adam Winslow.

132 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Payments for Loss of Office (Audited)

Neil Manser

Neil Manser stepped down from the Board on 10 October 2024 and commenced his 12-month notice period. His contractual salary,

pension and benefits will continue to be paid in the normal way until the end of his employment on 9 October 2025.

The table below sets out the total value of the amounts paid (or which are due to be paid) to Neil in relation to his departure,

asoutlined above:

Salary (£’000) Benefits (£’000) Pension (£’000) Total (£’000)

Total pay and benefits £ 546 3 49 598

Neil also had legal fees paid on his behalf (£24,500) and was eligible to receive outplacement support (up to £50,000) in connection

with the termination of his employment.

The Committee carefully considered the appropriate leaving arrangements for Neil, including in relation to the timing of

commencing the notice period. The Committee acknowledged typical market practice and investor expectations that notice

periods should commence immediately once a decision has been made and announced. However, the Committee felt strongly

that this would not be appropriate in these circumstances because Jane Poole could only join DLG on 10 October 2024 due to

existing contractual obligations and the regulatory approvals process. In the event of any unforeseen circumstances where Jane

didnot join the Board as planned, noting the significant business challenges and Ageas takeover bid, it would have been critical

toensure continued business stability in the CFO role. In this context, if Neil’s notice period ended before a new CFO joined DLG,

the Remuneration Committee concluded (in collaboration with the Nomination Committee) that there would be no sufficiently

experienced internal interim CFO candidates available. The Committee therefore determined that it would not be in the best

interests of shareholders to commence Neil’s notice period until the new CFO had joined the Board.

The Committee also considered the treatment of variable remuneration awards for Neil, as set out below.

2022 awards

The 2022 DAIP award (in respect of the 2021 AIP) will continue to vest on the third anniversary of grant and remain subject to the

scheme rules, including malus and clawback provisions. The award will be exercisable for 12 months after vesting.

No DAIP award was granted in 2023, as no payment was made under the AIP in respect of 2022.

The 2022 LTIP awards will continue to vest on the normal vesting dates, subject to the relevant performance measures. The final

outcome will be set out in next year's report (subject to the status of the Aviva acquisition). The awards are subject to a two-year

post-vesting holding period and will be exercisable (to the extent performance targets are met and the awards vest) for 12 months

after the end of the holding period. As Neil will be in employment on the normal vesting dates (March and August 2025

respectively), no time pro-rating will be applied. These awards will remain subject to all scheme rules, including malus and

clawback provisions.

2023 and 2024 awards

In light of the Company’s announcement on 23 August 2024 relating to the misstatement of the Company’s Solvency Ratio for

the2023 financial year, and following a review process conducted with external support and advice, the Committee considered

whether any actions in relation to variable pay were appropriate. The Committee determined that the malus provisions under the

DAIP rules should be applied in relation to Neil’s DAIP award granted in 2024 in respect of the deferred element of the 2023 AIP,

and therefore this award has lapsed in full. This amount is shown as a negative value in the “single figure table” on page 121.

In addition, awards granted under the LTIP in 2023 and 2024 will lapse on cessation of Neil's employment and he will not receive

apayment under the AIP in respect of the financial year ended 31 December 2024.

2025 awards

Neil will not be eligible to participate in the 2025 AIP and will not be granted any further LTIP awards.

All-employee share schemes

Neil's shares held under the DLG SIP will be treated in accordance with the rules of the SIP. Any shares subject to forfeiture

provisions under the rules will be forfeited.

Share Ownership Guidelines

Neil will comply with the post-employment shareholding guidelines outlined under the Directors’ Remuneration Policy,

maintaining a shareholding of the lower of 200% of salary or his actual shareholding on cessation of employment for a period of two

years post employment. Neil’s current shareholding includes shares owned outright, unvested DAIP awards (excluding the 2024

DAIP as outlined above) and all-employee share scheme awards. Neil will be permitted to sell sufficient shares to cover any tax

liability on exercise of any awards as applicable.

133 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Payments to Past Directors (Audited)

Jon Greenwood

Jon Greenwood stepped down as Acting Chief Executive Officer and an Executive Director effective 21 March 2024, at which point

Jon returned to a non-Board role. The AIP award in relation to Jon's tenure as an Executive Director has been included in the single

figure of remuneration table on page 121.

New Executive Director

Jane Poole

Jane Poole was appointed as Chief Financial Officer effective from 10 October 2024 and was appointed to the Board on the same date.

In setting Jane’s remuneration, the Committee considered her experience in general insurance, market data in respect of FTSE

51-150 companies and other FTSE 350 insurers, the previous CFO’s remuneration package, our Directors’ Remuneration Policy and

the pay and conditions of the wider workforce. Taking these factors into account, Jane’s salary was set at £550,000, broadly in line

with the previous CFO.

Pension and variable remuneration opportunities have been set in line with the Directors’ Remuneration Policy.

On joining, Jane received an LTIP award of 200% of salary on the same terms as the April 2024 grant (except that the three-year

vesting period will commence from the date of grant on 11 November 2024). This award was made at the same level as her

standard annual LTIP award as no buyout award was made to compensate her for the loss of her 2024 award from her

previousemployer.

The Committee also approved share awards to compensate Jane for awards forfeited from her previous employer in connection

with her appointment, as disclosed on page 128. These awards were made in the form of nil-cost options, and are not subject to

performance conditions, in line with the terms of the original awards. The awards will vest on the original timescales and accrue

dividend equivalents (also in line with the original award terms).

Jane received two payments in cash, £46,183 and £125,791 in November 2024, to compensate for two tranches of shares forfeited

where the vesting date preceded her joining DLG.

Jane will also receive an amount in lieu of the bonus forfeited from her previous employer for the period 1 January to 9 October

2024. In order to mirror the original award as far as possible, the final value will be determined based on the published Aviva

GroupCEO 2024 annual bonus outcome, prior to any personal adjustment. The Remuneration Committee will then consider

theperformance of the business unit for which Jane was the CFO, based on published information, and may adjust the outcome

upwards or downwards accordingly. The award will be delivered two thirds in cash and one third in shares, vesting in equal

tranches on the anniversary of grant over a three-year period, in line with the original award terms. The single figure disclosures

onpage 121 include an estimated amount of £510,328, which is based on the maximum level. This will only be paid once the

Committee has made a final determination ofthe amount due and any change to the estimated amount will be confirmed

innextyear's report (subject to the status of the Aviva acquisition).

Full details of the (share) awards bought out are set out in the relevant section on page 128.

134 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Distribution statement

This chart shows the overall pay expenditure across all Group employees compared with the total dividend value paid to

shareholders in 2023 and 2024.

Dividend (£m) Overall expenditure on pay (£m)

78.2

2024

2023

% change

100.0%

Ordinary

553.2

511.7

2024

2023

% change

8.1%

Note:

1. The dividends paid information has been taken from note 11 to the Consolidated financial statements. The overall expenditure on pay has

beentaken from note 6 and therefore, consistent with market practice, it has not been calculated in a manner consistent with the single figure

inthis report.

AGM voting outcomes

The table below shows the percentage of shareholders’ votes which were for or against, and the percentage of votes withheld,

relating to the resolutions to approve the 2023 Directors’ Remuneration Report (which was put to shareholders at the 2024 AGM)

and the Policy (which was put to shareholders at the 2023 AGM).

For Against

Number of

votes withheld

(abstentions)Number Percentage Number Percentage

Approval of Directors’ Remuneration Policy (2023 AGM) 1,030,959,263 98.1% 19,918,567 1.9% 1,356,094

Approval of Directors’ Remuneration Report (2024 AGM) 998,020,044 98.6% 14,387,945 1.4% 5,070,730

135 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Implementing the Policy in 2025

Base salary

Key features

– Reviewed annually with any increases taking effect

on1April

– The Committee considers a range of factors when

determining salaries, including pay increases throughout

the Group, individual performance, and market data

Implementation in 2025

– The CEO’s salary will increase by 3.5% to £848,700 from

1April 2025

– The CFO's salary will increase by 3.5% to £569,250 from

1April 2025

– These increases are in line with the average increase for

the wider workforce

Pensions

Key features

– Pension contributions are paid only in respect

of base salary

– The Executive Directors’ pension is set in line with the

pension level received by the employee population

Implementation in 2025

– Pension contributions remain at 9% (in line with

theworkforce)

Annual Incentive Plan

Key features

– Maximum opportunity of 175% of salary for the CEO and

the CFO

– At least 50% of the AIP is based on financial measures.

TheCommittee considers various non-financial

performance measures such as strategic measures

fortheremainder

– The outcome is assessed at the end of the performance

period with reference to targets agreed at the start

oftheyear

– Any payment is subject to an additional gateway

assessment, including assessing risk factors

– Malus and clawback provisions apply

Implementation in 2025

– No change to the maximum opportunity

– There will be a straight-line vesting between AIP threshold

and maximum performance

– Operating Profit (55% weighting)

– Customer (15% weighting)

– People (10% weighting)

– Cost (10% weighting)

– Risk (10% weighting)

– The performance targets are considered commercially

sensitive and will therefore be disclosed in next

year’sreport (subject to the status of the Aviva acquisition).

Deferred Annual Incentive Plan

Key features

– 40% of the AIP is deferred into shares

– Typically vesting after three years, normally subject

tocontinued employment

– Malus and clawback provisions apply

Implementation in 2025

– No further performance conditions apply

136 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Implementing the Policy in 2025 continued

Long-Term Incentive Plan

Key features

– Awards typically granted as nil-cost options

– Awards granted once per year

– The LTIP allows for awards with a maximum value

of 200% of base salary per financial year

– Performance is measured over three years

– Awards vest subject to financial underpin and

paymentgateway

– Malus and clawback provisions apply

– Awards are subject to an additional two-year holding

period following the end of the three-year

performanceperiod

Implementation in 2025

– As outlined in the Chair's Statement, the Committee

intends to use the exceptional circumstances provision set

out in the approved 2023 Remuneration Policy to grant

Adam Winslow and Jane Poole LTIP awards at 300%

ofsalary opportunity

– Single grant intended in March 2025

– No change from the performance conditions or

weightings used for the 2024 LTIP, being RoTE (25%), EPS

(25%), Expense Ratio (20%), TSR (20%) and Emissions (10%)

– A RoTE target range of 15% to 23.5% (2027) is required for

the awards to vest under this element

– The target for EPS is based on Threshold 25.5p and

Maximum 31.9p (2027)

– Vesting under the Expense Ratio will be based on

Threshold 27.8% and Maximum 25% (2027)

– The relative TSR comparator group will be vs. FTSE 51-150

(excluding Investment Trusts)

– The emissions targets for the 2025 LTIP awards will be set

based on the SBTi certified targets with the targets being:

– Operational emissions (Scope 1 and 2): Reduce Scope 1

and 2 emissions by 62% by 2027 versus the 2019 baseline

– Corporate Bonds (Scope 1 and 2): Reduce Scope 1 + 2

portfolio temperature score by invested value within

corporate bonds portfolio from 2.44°C in 2019

to2.01°Cin 2027

– Corporate Bonds (Scope 1, 2 and 3): Reduce Scope 1, 2 + 3

portfolio temperature score by invested value within

corporate bonds portfolio from 2.80°C in 2019

to2.31°Cin2027

Non-Executive Directors’ fees

The fees for the Chair and Non-Executive Directors for 2025 are set out below (unchanged from 2024).

Position

Fees for 2025

£’000

Board Chair fee 350

Basic Non-Executive Director fee 75

Additional fees

Senior Independent Director fee 30

Chair of Audit, Board Risk and Remuneration Committees 30

Chair of Sustainability and Investment Committees 15

Member of Board Committee (Audit, Board Risk or Remuneration) 10

Member of Board Committee (Sustainability, Investment or Nomination) 5

137 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Directors’ Remuneration Policy

The following is a copy of the main table from the Policy approved by shareholders at the 2023 AGM on 9 May 2023. The full Policy

isavailable in the Directors' Remuneration report of the 2022 Annual Report and Accounts, which is available on the Direct Line

Group website, under the 'Results and Reports' heading in the Investors page. You can find further details regarding the operation

of the Policy for 2025 on pages 136 and 139.

Policy table

Base salary

– This is the core element

ofpay that reflects the

individual’s role and

position within the Group

– Staying competitive in the

market allows us to attract,

retain and motivate high-

calibre executives with the

skills to achieve our key

aims while managing costs

Operation

– Base salaries are typically reviewed annually and set in April of each year, although the

Committee may undertake an out-of-cycle review if it determines this to be appropriate

– When reviewing base salaries, the Committee typically takes the following into account:

– general base salary movements across the Group;

– level of skill, experience and scope of responsibilities, individual and business

performance, economic climate, and market conditions; and

– the appropriate benchmarking peer group(s) that reflects the Group’s size and industry

focus, the corresponding market pay range(s) and the relevant positioning within the

market pay range(s).

– The Committee does not follow market data in isolation, and instead uses it as a

reference point when considering, in its judgement, the appropriate salary level, while

regarding other relevant factors, including corporate and individual performance, and

any changes to an individual’s role and responsibilities

– The principles for setting base salary are like those applied to other employees in the

Group. However, the specific benchmarking groups used to review external market

relativities may differ across employee groups

– Base salary is typically paid monthly

Maximum opportunity

– When determining salary increases, the Committee will consider the factors outlined

inthis table under ‘Operation’

Performance measures

– Not applicable

Pension

– To remain competitive

within the marketplace

– To encourage retirement

planning and retain

flexibility for individuals

Operation

– Pension contributions are paid only in respect of base salary

– Executive Directors are eligible to participate in the defined contribution pension

arrangement or alternatively they may choose to receive a cash allowance in lieu

of pension

– The Executive Directors’ pension will be set in line with the pension level for the

wider workforce

Maximum opportunity

– The maximum pension percentage contributions are set at the wider workforce level

(currently 9% of salary)

Performance measures

– Not applicable

138 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Policy table continued

Benefits

– A comprehensive and

flexible benefits package

isoffered, emphasising

individuals being able

tochoose the combination

of cash and benefits

that suits them

Operation

– 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

– The Executive Directors are eligible to receive such additional benefits as the Committee

considers appropriate having regard to market norms

– In line with our approach to all employees, certain Group products are offered to

Executive Directors at a discount

– Executive Directors are eligible to participate in any of the employee share plans

operated by the Company, in line with HMRC guidelines (where relevant) and on the

same basis as other eligible employees. Currently, this includes our HMRC-approved SIP,

which has been used to provide an award of free shares to all employees (including

Executive Directors) and permits employees to purchase shares with a corresponding

matching award

– Where an Executive Director is required to relocate to perform their role, they may be

offered appropriate relocation benefits. The level of such benefits would be determined

based on the circumstances of the individual and typical market practice and be consistent

with the relocation arrangements available to the workforce generally. In normal

circumstances, relocation benefits will only be paid for a period of up to 12 months

Maximum opportunity

– The costs of benefits provided may fluctuate from year to year, even if the level of

provision has remained unchanged

– Additionally, the limit for any employee share plans in which the Executive Directors

participate will be in line with the caps permitted by HMRC from time to time

– The Executive Directors may be entitled to retain fees received for any directorships held

outside the Group

– Similarly, while not benefits in the normal usage of that term, certain other items such

ashospitality or retirement gifts may also be provided

Performance measures

– Not applicable

139 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Element and purpose in supporting the Group’s strategic objective

AIP

– To motivate executives and

incentivise delivery of

performance over a one-

year operating cycle and

enable a stronger focus

and alignment with the

short to medium-term

elements of our strategic

aims

– Deferral delivers further

alignment with

shareholders and aids

retention of key executive

talent

Operation

– The AIP is measured based on performance over the financial year against performance

targets which the Committee considers to be appropriate

– At least 40% of the AIP is deferred into shares (typically in the form of nil-cost options

orconditional share awards) under the DAIP

– This typically vests three years after grant (with deferred awards also capable of being

settled in cash at the discretion of the Committee, for example, when it gives rise to

legaldifficulties to settle in shares). The remainder of the award is paid in cash following

the year-end

– The Committee will keep the percentage deferred and terms of deferral under review.

This will ensure levels are in line with regulatory requirements and best practice and may

be changed in future years but will not, in the Committee’s view, be changed to be less

onerous overall

– Dividends will accrue during the deferral period

– Malus and clawback provisions apply to the cash and deferred elements of the AIP

Maximum opportunity

– The maximum bonus opportunity under the AIP is 175% of base salary per year

– The current maximum bonus opportunity applying for each individual Executive Director

is shown in the statement of implementation of Policy

– Threshold and maximum bonus levels for Executive Directors are set by considering

annual bonus practice throughout the organisation and referring to practice at other

insurance and general market comparators

– Outcomes for performance between threshold and maximum will be determined

onastraight-line basis

– No more than 10% of the bonus is paid for threshold performance

– However, the Committee retains flexibility to amend the pay-out level at different levels of

performance for future bonus cycles. This is based on its assessment of the level of stretch

inherent in the set targets, and the Committee will disclose any such determinations

appropriately

Performance measures

– Performance measures for the AIP may be financial and non-financial (Group, divisional,

business line or individual)

– Each year, at least 50% of the AIP is based on financial measures. The remainder of the

AIP may be based on a combination of, for example, strategic, operational, ESG, shared

orindividual performance measures

– The Committee sets targets at the beginning of each financial year

– Before any payment can be made, the Committee will perform an additional gateway

assessment (including in respect of any risk concerns). This will determine whether

theamount of any bonus is appropriate in view of facts or circumstances which the

Committee considers relevant. This assessment may result in moderating (positively

ornegatively) each AIP performance measure, subject to the individual maximum

bonuslevels

– The AIP remains a discretionary arrangement. In line with the Code requirements, the

Committee maintains discretion to override formulaic outcomes where those outcomes

are not reflective of the overall Group performance. DAIP awards vest subject to

continued employment only

140 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Element and purpose in supporting the Group’s strategic objective continued

LTIP

– Aligning executives’

interests with those of

shareholders to motivate

and incentivise delivering

sustained business

performance over the long

term

– To aid retaining key

executive talent long term

and deliver market

competitive remuneration

Operation

– Awards will typically be made in the form of nil-cost options or conditional share awards,

which vest to the extent performance conditions are satisfied over a period of at least

three years. Under the Plan rules, awards may also be settled in cash at the discretion

ofthe Committee. This may be appropriate, for example, if legal difficulties arise with

settling in shares

– Vested options will remain exercisable for up to the tenth anniversary of grant

– Malus and clawback provisions apply to the LTIP.

– Executive Directors will be subject to an additional two-year holding period following the

vesting period, during which time awards may not normally be exercised or released

– During the vesting period and additional holding period (during which time awards

cannot be exercised) the awards will continue to accrue dividends. Following the holding

period, awards will cease to accrue dividends if not exercised

Maximum opportunity

– The maximum LTIP award in normal circumstances is 200% of salary

– Awards of up to 300% of base salary are permitted in exceptional circumstances,

forexample relating to recruiting or retaining an employee, as determined

bytheCommittee

Performance measures

– The Committee will determine the performance conditions for each award made

underthe LTIP, measuring performance over a period of at least three years with

noprovision toretest

– Performance is measured against targets set at the beginning of the performance

period, which may be set by referring to the time of grant or financial year

– Awards vest based on performance against financial and/or such other measures (including

share return), as set by the Committee, to be aligned with the Group’s long-term strategic

objectives. The Committee may alter the precise measures used for future awards

– Not less than 50% of the award shall be subject to one or more financial measures

– Awards will be subject to a payment gateway, such that the Committee must be satisfied

that there are no material risk failings, reputational concerns or regulatory issues

– 20% of the award vests for threshold performance, with 100% vesting for

maximumperformance

– The Committee reserves the right in respect of future awards to lengthen (but not

reduce) any performance period and/or amend the terms of any holding period; however,

there is no intention to reduce the length of the holding period

– In line with the Code requirements, the Committee maintains discretion to override

formulaic outcomes where those outcomes are not reflective of the overall

Groupperformance

Share ownership

guidelines

– To align the interests of

Executive Directors with

those of shareholders

Operation

– Executive Directors are expected to retain all the ordinary shares vesting under any of the

Company’s share incentive plans, after any disposals for paying applicable taxes, until

they have achieved the required shareholding level; unless earlier sale, in exceptional

circumstances, is permitted by the Chair of the Board

– Shares considered will include those held by the director and their connected persons,

vested awards subject to holding requirements and unvested awards not subject to

performance conditions (on a net of tax basis). Executive Directors are also expected to

retain their in-employment shareholding requirement (or actual shareholding, if lower)

post their employment for a period of two years

– In exceptional circumstances, earlier sale is permitted subject to the Chair’s discretion

Maximum opportunity

– 250% of salary for the CEO and 200% for the CFO

– The Committee reserves the discretion to amend these levels in future years

Performance measures

– Not applicable

141 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

The Board of Directors present their report for the financial

yearended 31December 2024 as required by the Companies

Act 2006.

The Board would like to draw your attention to the

forward-looking statements disclaimer which can be found

onpage 254.

Directors’ report disclosures

The Board takes the view that some of the matters required to

be disclosed in the Directors’ report are of strategic importance

and these are, therefore, included in the Company’s Strategic

report which is on pages 1 to 74 as permitted by the

Companies Act 2006. These matters, and all matters referenced

in the table below, are incorporated into this Directors’ report:

Subject Pages

Use of financial instruments 28 to 30

Important events since the financial year end 8 to 14

Likely future developments in the business 12

Employee engagement 15, 89, 91 and 92

Engagement with suppliers, customers and other

business relationships 44, 89 and 90

Research and development 3 to 5

Greenhouse gas emissions, energy consumption

and energy-efficient action

61, 64 to 65, 70

to 72 and 73

Branches outside the UK 233

Disclosure of information required by

Disclosure Guidance and Transparency Rule 7.2

The FCA’s Disclosure Guidance and Transparency Rule 7.2

requires a Corporate Governance statement in the Directors’

report to include certain information. You can find information

that fulfils the Corporate Governance statement’s

requirements in this Directors’ report, the Corporate

Governance report, the Committee reports and the Directors’

Remuneration report, all of which are incorporated into the

Directors’ report by reference.

Disclosure of information under UK Listing

Rule6.6.1

In accordance with UK Listing Rule 6.6.1, the table below sets

out the location of the information required to be disclosed

under LR 6.6.1, where applicable:

Subject Pages

Interest capitalised by the Group Not applicable

Unaudited financial information Note 1.4

Details of long-term incentive schemes 140 to 141

Directors’ waivers of emoluments Not applicable

Directors’ waivers of future emoluments Not applicable

Non pro-rata allotments for cash (issuer) Not applicable

Non pro-rata allotments for cash (major subsidiaries) Not applicable

Listed company is a subsidiary of another company Not applicable

Contracts of significance involving a Director Not applicable

Contracts of significance involving a

controlling shareholder Not applicable

Details of shareholder dividend waivers 143

Controlling shareholder statement Not applicable

Dividends

As explained in the Chair's statement on page 8, the Board

isrecommending a final dividend of 5.0 pence per share for

2024. More information ondividends and capital management

can be found in the Group financial performance section

onpage 21.

Directors

The names of all current Directors and their biographies are set

out on pages 77 to 80.

All Directors will retire and those wishing to continue to serve

will be submitted for election or re-election at the 2025 AGM.

This is in accordance with the UK Corporate Governance Code

and the Articles of Association of the Company, which govern

appointing and replacing Directors.

Changes in the composition of the Board during the year

under review and up to the date of this report were as follows:

– Adam Winslow was appointed to the Board with effect from

21 March 2024.

– Jon Greenwood stepped down from the Board with effect

from 21 March 2024.

– Carol Hagh was appointed to the Board with effect from

1April 2024.

– Jane Poole was appointed to the Board with effect from

10October 2024.

– Neil Manser stepped down from the Board with effect from

10 October 2024.

142 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Directors’ report

The Company’s Articles of Association set out the Directors’

powers. You can view these on the Company’s website at

www.directlinegroup.co.uk. The Directors’ powers are also

subject to relevant legislation and, in certain circumstances,

including in relation to the issuing or buying back of shares,

authority from the Company’s shareholders. You can find

details of the Directors’ remuneration, service contracts,

employment contracts and interests in the shares of the

Company in the Directors’ Remuneration report

on pages 115to141.

The Articles of Association of the Company permit it

to indemnify the Company’s officers, and officers of any

associated company, against liabilities arising from conducting

Company business, to the extent permitted by law. As such, the

Company has executed deeds of indemnity for each Director’s

benefit regarding liabilities that may attach to them in their

capacity as Directors of the Company or associated companies.

These indemnities are qualifying third-party indemnities as

defined by Section 234 of the Companies Act 2006. No amount

was paid under any of these indemnities during the year.

TheCompany maintains directors’ and officers’ liability

insurance. This provides appropriate cover for legal actions

brought against its Directors. The Company has also provided

the Directors of DLG Pension Trustee Limited with qualifying

pension scheme indemnities. This is in accordance with

Section 235 of the Companies Act 2006. During 2024, DLG

Pension Trustee Limited acted as trustee for two of the

Company’s occupational pension schemes.

Secretary

Roger Clifton is the Company Secretary of Direct Line

Insurance Group plc and can be contacted at the Company’s

Registered Office, details of which are on page 255.

Share capital

The Company has an Equity Shares (Commercial Companies)

listing on the London Stock Exchange. As at 31December 2024,

the Company’s share capital comprised 1,311,388,157 fully paid

Ordinary Shares of 10

pence each.

At the Company’s 2024 AGM, the Directors were authorised to:

– allot shares in the Company or grant rights to subscribe for or

convert any security into shares, up to an aggregate nominal

amount of £47,686,842, and to allot further shares up to a

total aggregate nominal amount of £95,373,684 for the

purpose of a rights issue or other pre-emptive offer;

– allot shares having a nominal amount not exceeding in

aggregate £14,306,052 for cash, without offering the shares

first to existing shareholders in proportion to their holdings,

and with the possibility of a follow-on offer as described in

the Statement of Principles published by the Pre-emption

Group in November 2022 (the 'Statement of Principles');

– allot additional shares having a nominal amount not

exceeding in aggregate £14,306,052 for the purposes

of financing a transaction which the Board of the Company

determines to be an acquisition or other capital investment,

without offering the shares first to existing shareholders in

proportion to their holdings, and with the possibility of a

follow-on offer as described in the Statement of Principles;

– make market purchases of up to 131,138,815 shares in the

Company, representing 10% of the Company’s issued share

capital at the time; and

– allot shares (with the disapplication of pre-emption rights) up

to an aggregate nominal amount of £23,250,000 in relation

to the issue of Restricted Tier 1 Instruments.

To date, the Directors have not used these authorities granted

in 2024. At the 2025 AGM, shareholders will be asked to renew

these authorities. The Company has not held any shares in

treasury during the period under review. You can find out more

about the Company’s share capital and shares under option

asat 31December 2024 in notes 6 and 27 of the consolidated

financial statements.

Under the Company’s Share Incentive Plan, Trustees hold

shares on behalf of employee participants. The Trustees will

only vote on those shares, and receive dividends that a

participant beneficially owns, in accordance with the

participant’s wishes. An Employee Benefit Trust also operates

which has discretion to vote on any shares it holds as it sees

fit,except any shares participants own beneficially, in which

case the Trustee will only vote on such shares as per a

participant’sinstructions.

The Trustee of the Employee Benefit Trust has waived its right

to dividends on all shares within the Trust. You can find out

more about the number of shares held by the employee share

plan trusts in note 27 from page 226. The Company is not aware

ofany other dividend waivers or voting restrictions in place.

Shareholder voting rights and restrictions

on transfer of shares

All the Company’s issued Ordinary Shares rank equally in all

respects. The Company’s Articles of Association set out the

rights and obligations attaching to the Company’s

Ordinary Shares.

Employees of the Company and Directors must comply with

the UK Market Abuse Regulation and the Company’s share

dealing rules. These rules restrict particular employees’ and

Directors’ ability to deal in the Company’s shares at certain

times, and require the employee or Director to obtain

permission to deal before doing so. Some of the Company’s

employee share plans also include restrictions on transferring

shares while the shares are held within the plans.

Each general meeting notice will specify a time, not more than

48 hours before the time fixed for the meeting (which may

exclude non-working days), for determining a shareholder’s

entitlement to attend and vote at the meeting. To be valid, all

proxy appointments must be filed at least 48 hours (which

mayexclude non-working days) before the time of the

generalmeeting.

Where the Company has issued a notice under Section 793

ofthe Companies Act 2006, and the person interested in the

relevant shares has been in default of the notice for at least 14

days, they shall not be entitled to attend or vote at any general

meeting until the default has been corrected or the shares sold.

There is no arrangement or understanding with any

shareholder, customer or supplier, or any other external party,

which provides the right to appoint a Director or a member of

the Executive Committee, or any other special rights regarding

control of the Company.

143 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Articles of Association

Unless expressly specified to the contrary in the Articles of

Association, the Articles may only be amended by a special

resolution of the Company’s shareholders at a general meeting.

Significant agreements affected by a change

of control

A number of agreements may take effect, alter or terminate

upon a change of control of the Company. None of these

agreements is considered significant in terms of its impact on

the Group’s business as a whole. All the Company’s employee

share incentive plans contain provisions relating to a change of

control. Outstanding awards would typically vest and become

exercisable. This is subject to satisfying any performance

conditions, and normally with an additional time-based

pro-rata reduction where performance conditions apply,

andwith approval from the Remuneration Committee.

Substantial shareholdings

The table below shows the holdings of the major shareholders

in the Company’s ordinary issued share capital, as at

31December 2024 and as at 15March 2025, 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.

Subject

31 December

2024

28 February

2025

Nature of

Holding

abrdn plc 4.57 % 4.57 % Indirect

Ameriprise Financial Inc. 4.99 % 4.99 % Indirect

APG Asset Management

N.V.

2.99 % 2.99 % Direct

Ariel Investments, LLC 4.90 % 4.90 % Direct/

Indirect

Artemis Investment

Management LLP

4.82 % 4.82 % Indirect

BlackRock, Inc. 3.76 % 3.76 % Direct/

Indirect

FIL Limited 4.81 % 4.81 % Indirect

FMR LLC 7.11 % 7.11 % Indirect

Majedie Asset Management

Limited

4.99 % 4.99 % Indirect

Norges Bank 4.17 % 2.33 % Direct

RWC Asset Management

LLP

4.86 % 4.86 % Direct

Schroders plc 4.96 % 4.96 % Indirect

Société Générale 0.00 % 5.86 % Direct

T.Rowe Price Associates, Inc. 4.68 % 4.68 % Indirect

Political donations

The Group made no political donations during the year (2023: £nil).

Disabled and neuro-divergent colleagues

The Group is committed to supporting those who are

neuro-divergent or have a disability and recognises the benefits

that diversity of thought or body brings to an organisation.

For recruitment purposes, we adjust and enhance our

application and selection process, and guide and provide

additional training for interviewers where necessary.

Wereasonably adjust colleagues’ working environments and

equipment, and roles and role requirements (including for

colleagues who become disabled during their time working

inthe Group). We also seek to ensure that everyone can access

the same opportunities.

The Neuro-Diversity & Disability strand of our Diversity

NetworkAlliance (“DNA”) works to celebrate and support those

who are neuro-divergent or disabled with the aim of ensuring

that all our colleagues feel understood, fully appreciated, and

empowered to be their best selves. More information about

thework of the DNA strand can be found on page 48 of the

Strategic report.

144 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Going concern

As a standalone business, the Directors believe that the Group

and Company have sufficient financial resources to meet their

financial needs, including managing a mature portfolio of

insurance risk. The Directors believe the Group and Company

are well positioned to manage its business risks successfully

inthe current economic climate. The Chief Financial Officer

Review describes the Group’s capital management strategy,

including the capital actions taken to ensure the continued

strength of the balance sheet. The Group’s financial position

isalso covered in that section, including a commentary on cash

and investment holdings, claims reserves and management

ofinsurance liabilities, and the Group's financial leverage. This

covers insurance, market, credit, liquidity and operational risk;

and the Group's approach to monitoring, managing and

mitigating exposures to these risks.

Having made due enquiries, the Directors believe they can

reasonably expect that the Group and Company has adequate

resources to continue in operational existence on a standalone

basis for at least 12 months from 3March 2025 (the date of

approval of the consolidated financial statements). Accordingly,

the Directors have adopted the going concern basis in

preparing the consolidated financial statements.

Material uncertainty in relation to going concern`

On 23 December 2024, the Boards of the Company and Aviva

plc ("Aviva") reached an agreement pursuant to which Aviva

agreed to purchase the entire share capital of the Company,

subject to regulatory and shareholder approval. Although the

Directors cannot be certain about the actions of Aviva should a

deal complete, they consider that the ability of the Group to

continue as a going concern should not be adversely affected

by the transaction should it proceed. In making this

assessment, they have considered many factors, including the

strategic fit of Aviva for the Group as well as Aviva's record of

executing transactions, including integrating a number of

acquisitions, and of delivering profitable growth. While the

Directors would expect Aviva to continue to deliver long term

value from the Group’s ongoing operations they note however,

that it is beyond their control as to whether Aviva would

undertake any restructuring of the Group’s legal entities.

Therefore, given the potential change in control, the Directors

consider these conditions to constitute a material uncertainty

(as defined under IAS 1) which may cast significant doubt over

the Company’s and therefore, the Group’s ability to continue as

a going concern. The Directors would not expect this to impact

the continued operation of the Group’s core insurance activities.

Notwithstanding this uncertainty, the Directors are satisfied

that the going concern basis remains appropriate for the

preparation of the financial statements.

Disclosing information to the Auditor

Each Director at the date of approving these Annual Report

and Accounts confirms that: as far as they are aware, there is

norelevant audit information of which KPMG, the Company’s

External Auditor, is unaware; and they have taken all the steps

that they ought to have taken as a Director to make themselves

aware of any relevant audit information, and to establish that

KPMG is aware of that information. This confirmation is given

and should be interpreted in accordance with the provisions

ofsection 418 of the Companies Act 2006.

Auditor

A resolution to re-appoint KPMG will be proposed at the

forthcoming 2025 AGM. You can find more information about

the External Auditor in the Audit Committee report on page 101.

Conflicts of interest

Each Director has a duty to avoid conflicts of interest and must

declare any conflict of interest that could interfere with their

ability to act in the Group’s best interests. In accordance with

the Companies Act 2006, the Company’s Articles of Association

allow the Board to authorise matters where there is, or may be,

a conflict between the Group’s interests and the direct or

indirect interests of a Director, or between a Director’s duties to

the Group and another person. As a matter of course, the Board

authorises certain potential conflicts of interest in this way,

including Directors’ external directorships and their interests

insecurities of other financial service institutions. The Company

Secretary maintains a register of potential conflicts which the

Board reviews at each scheduled Board meeting.

145 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Directors’ responsibility statement

The Directors are responsible for preparing the Annual Report

and financial statements in accordance with applicable law

and regulations.

Company law requires the Directors to prepare such financial

statements for each financial year in accordance with UK-

adopted international accounting standards.

The Directors have elected to prepare the Parent Company

financial statements in accordance with FRS 101 'Reduced

Disclosure Framework'. Under company law, the Directors

must not approve the accounts unless they are satisfied that

they give a true and fair view of the Company’s state of affairs

and profit or loss for that period.

In preparing these financial statements, IAS 1 requires that

Directors: properly select and apply accounting policies;

present information, including accounting policies, in a

manner that provides relevant, reliable, comparable and

understandable information; provide additional disclosures

when compliance with the specific requirements in IFRS is

insufficient to enable users to understand the impact of

particular transactions, other events and conditions on the

entity’s financial position and financial performance, and to

assess the Company’s ability to continue as a going concern.

The Directors are responsible for keeping adequate accounting

records that: are sufficient to show and explain the Company’s

transactions and disclose, with reasonable accuracy, the

Company’s financial position at any time; and enable them to

ensure the financial statements comply with the Companies

Act 2006. Additionally, the Directors are responsible for

safeguarding the Company’s assets and, hence, taking

reasonable steps to prevent and detect fraud and other

irregularities. The Directors are responsible for maintaining

andensuring the integrity of the corporate and financial

information included on the Company’s website at:

www.directlinegroup.co.uk.

Legislation in the UK governing preparing and disseminating

financial statements may differ from legislation in other

jurisdictions.

Each of the Directors in office as at the date of this report,

whose names and functions are listed on pages 77 to 80

confirms that, to the best of their knowledge:

– the financial statements, prepared in accordance with IFRS,

give a true and fair view of the assets, liabilities, financial

position, and profit or loss of the Company, and the

undertakings included in the consolidation taken as a whole;

– the Strategic report (on pages 1 to 74) and Directors’ report

(on pages 142 to 146) include a fair review of: (i) the business’s

development and performance; and (ii) the position of the

Company and the undertakings included in the consolidation

taken as a whole, together with a description ofthe principal

risks and uncertainties they face; and

– the Annual Report and the financial statements, taken as a

whole, are fair, balanced and understandable, and provide

the information necessary for shareholders to assess the

Company’s position, performance, business model

andstrategy.

This report was approved by the Board on 3March 2025

andsigned on its behalf by:

Roger C. Clifton

Company Secretary

Registered address: Churchill Court, Westmoreland Road,

Bromley, BR1 1DP

Registered number: 02280426

146 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Group Financial Statements

Independent Auditor's Report 148

Accounting policies 156

Consolidated Financial Statements

Consolidated Statement of Profit or Loss 168

Consolidated Statement of Comprehensive Income 169

Consolidated Statement of Financial Position 170

Consolidated Statement of Changes in Equity 171

Consolidated Cash Flow Statement 172

Notes to the Consolidated Financial

Statements

1. Risk management 173

2. Segmental analysis 189

3. Insurance service result 192

4. Insurance finance result 193

5. Other operating expenses 194

6. Employee information 194

7. Auditors remuneration 196

8. Other finance costs 196

9. Disposal of business 196

10. Tax charge 197

11. Dividends and appropriations 198

12. Earnings per share 198

13. Net asset value per share 199

14. Net tangible assetvalue per share 199

15. Goodwill and other intangible assets 200

16. Property, plant and equipment 201

17. Lease assets and liabilities 202

18. Investment property 203

19. Insurance contract assets and liabilities

– grossandreinsurance

204

20. Tax assets and liabilities 218

21. Prepayments, accrued income and other assets 218

22. Fair value 218

23. Financial investments 221

24. Retirement benefit obligations 223

25. Cash and cash equivalents and borrowings 225

26. Assets held for sale 226

27. Share capital 226

28. Other reserves 226

29. Tier 1 notes 227

30. Subordinated liabilities 227

31. Provisions 227

32. Trade and other payables 227

33. Commitments and contingent liabilities 228

34. Notes to the consolidated cash flow statement 228

35. Related undertakings 229

36. Post balance sheet events 229

Parent Company Financial Statements

Accounting policies 230

Parent Company Statement of Financial Position

231

Parent Company Statement of Changes in Equity 232

Notes to the Parent Company Financial

Statements

1. Risk management 233

2. Investment in subsidiary undertakings 233

3. Other receivables 234

4. Tax assets and Liabilities 234

5. Financial Instruments 234

6. Cash and cash equivalents and borrowings 235

7. Share capital, capital reserves and

distributablereserves

235

8. Tier 1 notes 235

9. Subordinated liabilities 235

10. Dividends 235

11. Share-based payments 235

12. Employees, Directors and key

managementremuneration

235

147 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Contents

1. Our opinion is unmodified

We have audited the financial statements of Direct Line Insurance Group plc (the "Company”) for the year ended 31

December

2024 which comprise the Consolidated Statement of Profit or Loss, Consolidated Statement of Comprehensive Income,

Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement,

Parent Company Statement of Financial Position, Parent Company Statement of Comprehensive Income, Parent Company

Statement of Changes in Equity and the related notes, including the accounting policies on pages 156 to 167, except the

information being disclosed as unaudited in Note 1.4.

In our opinion:

– the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at

31 December 2024 and of the Group’s profit for the year then ended;

– the Group financial statements have been properly prepared in accordance with UK-adopted international accounting

standards;

– the Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including

FRS 101 Reduced Disclosure Framework and

– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.

Ourresponsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis

for our opinion. Our audit opinion is consistent with our report to the audit committee.

We were appointed as auditor by the shareholders for the financial year ended 31 December 2024. We have fulfilled our ethical

responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements, including the FRC

Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.

2 Material uncertainty related to going concern

The risk: Our response:

Going concern

We draw attention to

note (A) to the financial

statements which

indicates that because

of the potential change

in control, the directors

have concluded it is

beyond their control to

conclude as to whether

Aviva would undertake

any restructuring of the

Group’s legal entities

should a deal complete.

These events and

conditions constitute a

material uncertainty

that may cast

significant doubt on the

parent company’s

ability to continue as a

going concern.

Our opinion is not

modified in this respect.

Refer to page 103 (Audit

Committee Report),

page 145 (Director’s

report) and page 156

(Going concern basis of

preparation)

Disclosure quality

The financial statements explain how the Board

has formed a judgement that it is appropriate to

adopt the going concern basis of preparation for

the Group and parent Company.

That judgement is based on an evaluation of the

inherent risks to the Group’s and Company’s

business model and how those risks might

affect the Group’s and Company’s financial

resources or ability to continue operations over a

period of at least a year from the date of

approval of the financial statements.

There is limited audit judgement required in

evaluating the directors’ conclusion that the

circumstances related to the Aviva deal

described in note (A) to the financial statements

represent a material uncertainty over the

company, and, therefore the group to continue

as a going concern for a period of at least a year

from the date of approval of the financial

statements.

However, clear and full disclosure of the facts

and the directors’ rationale for the use of the

going concern basis of preparation, including

that there is a related material uncertainty, is a

key financial statement disclosure and so was

the focus of our audit in this area. Auditing

standards require that to be reported as a key

audit matter.

Our procedures included:

Assessing transparency

We considered whether the going concern disclosure on page 156

to the financial statement gives a full and accurate description of

the directors’ assessment of going concern, including the identified

risks and dependencies.

Enquiry of directors

We inquired with the directors as to their discussions to date with

Aviva plc in relation to their intention following the purchase

transaction.

Considering the existence of any barriers to restructuring

We evaluated the assessment by management of whether they

believed there were any economic, financial or legal barriers that

existed which could influence Aviva plc not to restructure the

existing group.

Our assessment of management’s going concern assessment also

included the procedures set out in section 6 of our report.

Our results

We found the going concern disclosure in note (A) with a material

uncertainty to be acceptable.

3. Other key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial

statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,

including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing

the efforts of the engagement team. Going concern is a significant key audit matter and is described in section 2 of our report.

Wesummarise below the other key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above,

together with our key audit procedures to address those matters and, as required for public interest entities, our results from those

procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for

the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are

incidental to that opinion, and we do not provide a separate opinion on these matters.

148 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Independent Auditor's Report to the shareholders of Direct Line

Insurance Group plc

Valuation of the

Liability for Incurred

Claims (£4,109.7m)

Refer to page 101

(Audit Committee

Report), page 160

(accounting policy)

and page 204 (financial

disclosures)

The liability for incurred claims

represents the largest liability for the

Group and the estimation of the

incurred but not reported claims

(“IBNR”) is the most subjective

component of the liability for incurred

claims.

There is significant complexity and

subjectivity in the valuation of the

fulfilment cash flows related to IBNR

claims due to the level of estimation

uncertainty inherent in the assumptions.

It involves significant judgement and the

use of actuarial and statistical

projections, as some claims can take

some time to emerge or develop.

A number of assumptions are required

to be made with high estimation

uncertainty such as: frequency, severity,

inflationary assumptions and discount

rates. There may also be additional

amounts held in the form of Events Not

In Data reserves (“ENIDs”) which are

judgemental and can be significant in

value. Certain perils have greater

inherent uncertainty. The losses arising

from bodily injury and subsidence claims

are significant and can be both large in

value and difficult to predict. Some

bodily injury claims may also be

expected to settle partly as lump sum

amounts and partly as periodic payment

orders (“PPOs”). Claims may also be

impacted by changes in the market or

regulations: for example: through the

impact of whiplash reform, higher

inflationary environment, Judicial

College Guidelines reviews and changes

to Ogden rates.

The determination and application of

the methodology and performance of

the calculations are also complex.

The effect of these matters is that we

determined that valuation of the liability

for incurred claims has a high degree of

estimation uncertainty, with a potential

range of reasonable outcomes greater

than our materiality for the consolidated

financial statements as a whole, and

possibly many times that amount.

We performed the tests below over the valuation rather than seeking to rely

on the Group’s controls because the nature of the balance is such that we

would expect to obtain audit evidence primarily through the detailed

procedures described.

We have used our own actuarial specialists to assist us in performing our

procedures in this area.

Our procedures included:

Control design and implementation

We obtained an understanding of the design and implementation of the

relevant controls over the appropriateness of the methodology and

assumptions for setting actuarial assumptions and the calculation of the

liability for incurred claims.

Independent re-projections

Using our own models we performed independent re-projections across

93% of all perils for certain classes of business. The determination of which

classes to re-project was based on qualitative and quantitative risk

assessment procedures.

Assessment of assumptions and methodology

We assessed and challenged whether methodologies applied are

appropriate with reference to Direct Line’s business and industry practice

including consideration of the effect of uncertain economic conditions. We

also evaluated the appropriateness of models and assumptions used to

develop the best estimate of liabilities by comparing with industry practice

and understanding any key differences.

Sector Experience and Benchmarking

We applied our industry experience and market benchmarks to support our

consideration and challenge of the Group’s reserving methodology, key

judgements and assumptions.

We assessed the impact of regulatory changes on the valuation of best

estimate liabilities by using appropriate benchmarks and/or performing

sensitivity testing on key assumptions.

Assessing ENIDs

We assessed the documentation over the selection and completeness of

ENIDs and evaluated the rationale for their inclusion.

Discounting

We evaluated the actuarial assumptions applied in the discounting of cash

flows. This included assumptions related to payment patterns and the

determination of the discount rates used. We also tested the accuracy of the

discounting of reserves by independently reperforming the discounting

recalculations.

Reconciliations over actuarial data

We performed completeness and accuracy testing over actuarial data used

in projections, by reconciling the key data elements from the data used in

projections to policy and claims administration systems and data recorded

in the ledger. For a sample of transactions, we traced these through to

appropriate documentation.

Assessing Transparency

We considered the adequacy of the Group’s disclosures over the degree of

estimation uncertainty and the sensitivity of recognised amounts to

changes in assumptions and assessed whether the disclosures comply with

relevant accounting standards.

Our results

We found the valuation of the liability for incurred claims to be acceptable.

The risk: Our response:

149 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Parent company –

Recoverability of the

Parent Company’s

investment in

subsidiaries

(£3,460.9m)

Refer to page 101

(Audit Committee

Report), page 232

(accounting policy)

and page 233 (financial

disclosures)

Low risk, high value

The carrying amount of the parent

Company’s investments in subsidiaries

represents 94.2% (2023: 95.6%) of the

parent Company’s total assets.

Their recoverability is not at a high risk of

material misstatement or subject to

significant judgement. However, due to

their materiality in the context of the

parent Company financial statements,

this is considered to be the area that had

the greatest effect on our overall parent

Company audit.

We performed the tests below rather than seeking to rely on any of the

parent Company’s controls because the nature of the balance is such that

we would expect to obtain audit evidence primarily through the detailed

procedures described.

Our procedures included:

Tests of detail

Comparing the carrying amount of 100% of investments with the relevant

subsidiaries’ draft balance sheet to identify whether their net assets, being

an approximation of their minimum recoverable amount, were in excess of

their carrying amount and assessing whether those subsidiaries have

historically been profit-making.

Comparing valuations

For investments where the carrying amount exceeded the net asset value,

comparing the carrying amount of the investment with the expected fair

value less costs of disposal.

Our results

Based on our procedures performed, we found the Parent Company’s

conclusion that there is no impairment of its investment in subsidiaries to

be acceptable.

The risk: Our response:

4. Our application of materiality and an overview of the scope of our audit

Materiality for the Group financial statements as a whole was set at £24.0m, determined with reference to a benchmark of Net

Assets, of which it represents 0.97%.

Materiality for the Parent Company financial statements as a whole was set at £19.2m, determined with reference to a benchmark

of Company Net Assets, of which it represents 0.61%.

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower

threshold, performance materiality, so as to reduce to an acceptable level the risk that immaterial misstatements in individual

account balances add up to a material amount across the financial statements as a whole.

Performance materiality was set at 65% of materiality for the financial statements as a whole, which equates to £15.6m for the

Group and £12.4m for the Parent Company. We applied this percentage in our determination of performance materiality based

onthe Group’s history of uncorrected misstatements, control deficiencies and a significant turnover of senior management in the

period.

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £1.1m for the Group

and £0.8m for Parent Company, in addition to other identified misstatements that warranted reporting on qualitative grounds.

Overview of the scope of our audit

We applied the revised group auditing standard in our audit of the consolidated financial statements. The revised standard

changes how an auditor approaches the identification of components, and how the audit procedures are planned and executed

across components.

In particular, the definition of a component has changed, shifting the focus from how the entity prepares financial information

tohow we, as the group auditor, plan to perform audit procedures to address group risks of material misstatement (“RMMs”).

Similarly, the group auditor has an increased role in designing the audit procedures as well as making decisions on where these

procedures are performed (centrally and/or at component level) and how these procedures are executed and supervised. As a

result, we assess scoping and coverage in a different way and comparisons to prior period coverage figures are not meaningful.

Inthis report we provide an indication of scope coverage on the new basis.

We performed risk assessment procedures to determine which of the Group’s components are likely to include risks of material

misstatement to the Group financial statements and which procedures to perform at these components to address those risks.

In total, we identified three components, having considered our evaluation of the Group’s legal structure, the existence of common

information systems the presence of key audit matters business activities and our ability to perform audit procedures centrally.

All components were identified as quantitatively significant components which contained the largest percentages of either total

revenue or total assets of the Group, for which we performed audit procedures.

We note that audit procedures for all components are also performed by the Group audit team.

We set the component materialities, ranging from £14.4m to £21.6m, having regard to the mix of size and risk profile of the Group

across the components.

150 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Independent Auditor's Report to the shareholders of Direct Line

Insurance Group plc continued

Group Net Assets

£2,404m

Group materiality

£24.0m

£24m

Whole financials statements materiality

£15.6m

Whole financials statements performance materiality

£21.6m

Range of materiality at 3 components (£14.4m to £21.6m)

£1.1m

Misstatements reported to the audit committee

Net Assets

Group materiality

Our audit procedures covered the following percentage of Group Net Assets:

We performed audit procedures in relation to components that accounted for the following percentages of Group total revenue

and Group total assets:

Group total assets Group insurance revenue

4.2%

95.8%

99.8%

Group auditor oversight

As part of establishing the overall Group audit strategy and plan, we conducted the risk assessment and planning discussion

meeting to discuss Group audit risks relevant to the components, including the key audit matters in respect of the valuation

oftheliability for incurred claims, and recoverability of the parent company’s investment in subsidiaries.

We considered the work performed at the components for the purpose of the Group audit and evaluated the appropriateness

ofconclusions drawn from the audit evidence obtained and consistencies between communicated findings and work performed.

Impact of controls on our group audit

We identified a number of IT systems to be relevant to our audit, including those supporting the policy and claims administration,

actuarial data processing, expense payment and financial reporting processes. Our IT auditors assisted us in assessing the design

and, for certain IT systems, operating effectiveness of relevant general IT controls.

For some IT systems related to policy and claims administration and journals, following our testing of controls, including

compensating controls or additional follow up testing where relevant, we were able to rely on general IT controls, and automated

controls and related manual controls and took this into account in determining our audit work.

For the remaining identified relevant IT systems, we were not able to rely on general IT controls due to deficiencies identified.

Asaresult, we increased the extent of our substantive testing, and tested additional manual compensating controls addressing

thecompleteness and reliability of data from the affected IT systems. As a result, our audit was predominantly substantive.

151 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

5. The impact of climate change on our audit

In planning our audit, we performed a risk assessment, including enquiries of management, to consider the potential impact that

commitments made by the Group in respect of the transition to net zero carbon emissions, as well as the physical risks of climate

change could impact on the financial statements and our audit. We held discussions with our own climate change professionals to

challenge our risk assessment. Through the procedures we performed, we did not identify any material impact of climate change

on the Group’s material accounting estimates and there was no significant impact of this assessment on our key audit matters.

The Group primarily underwrites short-term personal line insurance. Climate change may result in an increase in the frequency and

severity of natural catastrophes and other weather-related events leading to an increase in volume and higher insurance pay-outs,

adversely impacting the insurance liabilities, in particular for property insurance products. However, the risk is factored into

insurance premium rates for new policies and periodic repayments and is also mitigated by the short-term nature of policies and

the reinsurance arrangements in place.

Climate risk may also impact the valuation of investments, in particular investment properties, held by the Group. Considering the

nature of the Group’s investment portfolio and valuation techniques used, we concluded that while climate change may pose a risk

to the determination of asset values, the risk is not significant.

We have also read the disclosures of climate related information in the Annual Report and Accounts as set out on pages 58 to 73

and considered their consistency with the financial statements and our audit knowledge.

6. Going concern

The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group

orthe Company or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position

means that this is realistic for at least a year from the date of approval of the financial statements (the "going concern period”).

Asstated in section 2 of our report, they have also concluded that there is a material uncertainty related to going concern. We used

our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model

and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the

going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial

resources over this period were adverse claims inflation, failure to achieve Motor pricing initiative benefits, delays to delivering

expense reductions and falls in asset values.

We also considered less predictable but realistic second order impacts that could affect demand in the Group’s markets, such

asthe impact of climate change on the Group’s results and operations, and credit ratings of key reinsurers.

We considered whether these risks could plausibly affect the liquidity in the going concern period by assessing the directors’

sensitivities over the level of available financial resources indicated by the Group’s financial forecasts taking account of severe,

butplausible adverse effects that could arise from these risks individually and collectively.

Our procedures also included evaluation of the consistency, arithmetical accuracy and reasonableness of the data and assumptions

used in management’s Going Concern assessment paper.

An explanation of how we evaluated management’s assessment of going concern is further set out in section 2 of our report.

Our conclusions based on this work:

– we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements

isappropriate;

– we have nothing material to add or draw attention to in relation to the directors’ statement in the Accounting Policies on page

156 to the financial statements on the use of the going concern basis of accounting and their identification therein of a material

uncertainty over the Group and Company’s ability to continue to use that basis for the going concern period, and we found the

going concern disclosure in the Accounting Policies on page 156 to be acceptable; and

– the related statement under the Listing Rules set out in the Viability statement and Accounting Policies on page 156 is materially

consistent with the financial statements and our audit knowledge.

7. Fraud and breaches of laws and regulations – ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an

incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

– Enquiring of directors, the audit committee, internal audit and the risk committee and inspection of policy documentation as to

the Group high-level policies and procedures to prevent and detect fraud, including the internal audit function, and the Group’s

channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud;

– Reading Board, Audit Committee and Risk Committee minutes;

– Considering remuneration incentive schemes and performance targets for management;

– Using analytical procedures to identify any unusual or unexpected relationships;

– Consultation with our own forensic professionals regarding the identified fraud risks and the design of the audit procedures

planned in response to these. This involved the forensic professionals attending the Risk Assessment and Planning Discussion

and discussion between the engagement partner, and the forensic professional;

– inspecting correspondence with regulators to identify instances or suspected instances of fraud; and

– reading broker reports and other public information to identify third-party expectations and concerns.

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout

theaudit.

152 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Independent Auditor's Report to the shareholders of Direct Line

Insurance Group plc continued

As required by auditing standards, and taking into account possible pressures to meet profit targets, changes to senior

management, and our overall knowledge of the control environment, we perform procedures to address the risk of management

override of controls, in particular the risk that Group management may be in a position to make inappropriate accounting entries

and the risk of bias in accounting estimates such as the liability for incurred claims. On this audit we do not believe there is a fraud

risk related to revenue recognition due to the routine nature of revenue transactions.

We also identified a fraud risk related to the valuation of insurance contract liabilities in response to possible pressures to meet profit

targets. Further detail in respect of our response to these areas is set out in the key audit matter disclosures in section 3 of this report.

We also performed procedures including:

– Identifying journal entries and other adjustments to test at the Group level and for all components based on risk criteria and

comparing the identified entries to supporting documentation. These include, but are not limited to, journals that represent

unexpected pairing to revenue, or cash, journal entries made to seldom-used accounts and journals posted by senior

management or unauthorised users.

– Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.

Identifying and responding to risks of material misstatement related to compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements

from our general commercial and sector experience, through discussion with the directors and others management (as required

by auditing standards), and from inspection of the Group’s regulatory and legal correspondence regarding compliance with laws

and regulations.

As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the

entity’s procedures for complying with regulatory requirements. This includes engaging internal KPMG regulatory specialists to

provide additional expertise and guidance on regulatory risk and conduct matters that impact the Group.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance

throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting

legislation (including related companies legislation), distributable profits legislation, taxation legislation and regulatory capital,

solvency and liquidity regulations, and we assessed the extent of compliance with these laws and regulations as part of our

procedures on the related financial statement items.

Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a

material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the

loss of the Group’s license to operate. We identified the following areas as those most likely to have such an effect: data protection

laws, money laundering, anti-bribery, regulatory consumer conduct, and certain aspects of company legislation recognising

thefinancial and regulated nature of the Group’s activities. Auditing standards limit the required audit procedures to identify

non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory

andlegal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant

correspondence, an audit will not detect that breach.

For the matter discussed in note 33 we assessed disclosures against our understanding from legal correspondence and inquiries

with management and management’s experts.

We discussed with the audit committee other matters related to actual or suspected breaches of laws or regulations, for which

disclosure is not necessary, and considered any implications for our audit.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material

misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with

auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and

transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards

would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material

misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance

with all laws and regulations.

8. We have nothing to report on the other information in the Annual Report and Accounts

The directors are responsible for the other information presented in the Annual Report together with the financial statements.

Ouropinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion

or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work,

the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely

on that work we have not identified material misstatements in the other information.

153 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Strategic report and directors’ report

Based solely on our work on the other information:

– we have not identified material misstatements in the strategic report and the directors’ report;

– in our opinion the information given in those reports for the financial year is consistent with the financial statements; and

– in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the

Companies Act 2006.

Disclosures of emerging and principal risks and longer-term viability

We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in

respect of emerging and principal risks and the Viability statement, and the financial statements and our audit knowledge.

Based on those procedures, we have nothing material to add or draw attention to in relation to:

– the directors’ confirmation within the Viability statement page 74 that they have carried out a robust assessment of the

emerging and principal risks facing the Group, including those that would threaten its business model, future performance,

solvency and liquidity;

– the Emerging and Principal Risks disclosures describing these risks and how emerging risks are identified, and explaining how

they are being managed and mitigated; and

– the directors’ explanation in the Viability statement of how they have assessed the prospects of the Group, over what period they

have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable

expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their

assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

We are also required to review the Viability statement, set out on page 74 under the Listing Rules. Based on the above procedures,

we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit.

As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with

judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a

guarantee as to the Group’s and Company’s longer-term viability.

Corporate governance disclosures

We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate

governance disclosures and the financial statements and our audit knowledge.

Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements

andour audit knowledge:

– the directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced

andunderstandable, and provides the information necessary for shareholders to assess the Group’s position and performance,

business model and strategy;

– the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit

committee considered in relation to the financial statements, and how these issues were addressed; and

– the section of the annual report that describes the review of the effectiveness of the Group’s risk management and internal

control systems.

We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions

of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect.

9. We have nothing to report on the other matters on which we are required to report byexception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been

received from branches not visited by us; or

– the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not

inagreement with the accounting records and returns; or

– certain disclosures of directors’ remuneration specified by law are not made; or

– we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

154 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Independent Auditor's Report to the shareholders of Direct Line

Insurance Group plc continued

9. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 146, the directors are responsible for: the preparation of the financial

statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to

enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing

the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern;and using the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company

ortocease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level

ofassurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial

statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance

and Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report has

been prepared in accordance with those requirements.

10. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act

2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to

state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report,

orforthe opinions we have formed.

James Anderson (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square

London

E14 5GL

3March 2025

155 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Direct Line Insurance Group plc (the "Group") is a public limited

company registered in England and Wales (company number

02280426). The address of the registered office is Churchill

Court, Westmoreland Road, Bromley, BR1 1DP, England.

The principal activity of the Group is the provision of general

insurance.

(A) Basis of preparation

As required by the Companies Act 2006, the Group's

consolidated financial statements are prepared in accordance

with UK adopted International Accounting Standards ("IASs")

and International Financial Reporting Standards ("IFRSs") as

endorsed by the International Accounting Standards Board

("IASB"). The Group has elected to prepare its parent company

financial statements in accordance with FRS 101 'Reduced

Disclosure Framework'.

The consolidated financial statements are prepared on the

historical cost basis except for (i) insurance and reinsurance

contract assets and liabilities which are measured at their

fulfilment value in accordance with IFRS 17 'Insurance

Contracts'; (ii) debt and equity investments held at either fair

value through profit or loss ("FVTPL") or fair value through other

comprehensive income ("FVOCI"); (iii) defined benefit scheme

liabilities measured on an actuarial basis and scheme assets

measured at their fair value; and (iv) financial assets; investment

property and derivative financial instruments, which are

measured at fair value (fair value is defined in note 22).

Where necessary, adjustments have been made to the financial

statements of subsidiaries to bring the accounting policies used

into line with those used by the Group.

The policies set out below have been applied consistently

throughout the years ended 31 December 2024 and

31 December 2023 to items considered material to the financial

statements. The accounting policies are consistent with those

set out in the Group’s 2023 annual financial statements, with

the exception of new accounting standards which became

effective for periods beginning on or after 1 January 2024. The

nature and effect of these changes are disclosed in note (A).

The Company's financial statements and the Group's

consolidated financial statements are presented in sterling,

which is the functional currency of the Company .

Going concern

As a standalone business, the Directors believe that the Group

and Company have sufficient financial resources to meet their

financial needs, including managing a mature portfolio of

insurance risk. The Directors believe the Group and Company

are well positioned to manage its business risks successfully

in the current economic climate. The Chief Financial Officer

Review describes the Group’s capital management strategy,

including the capital actions taken to ensure the continued

strength of the balance sheet. The Group’s financial position

is also covered in that section, including a commentary on cash

and investment holdings, claims reserves and management

of insurance liabilities, and the Group's financial leverage. This

covers insurance, market, credit, liquidity and operational risk;

and the Group's approach to monitoring, managing and

mitigating exposures to these risks.

Having made due enquiries, the Directors believe they can

reasonably expect that the Group and Company has adequate

resources to continue in operational existence on a standalone

basis for at least 12 months from 3 March 2025 (the date of

approval of the consolidated financial statements). Accordingly,

the Directors have adopted the going concern basis in

preparing the consolidated financial statements .

Material uncertainty in relation to going concern

On 23 December 2024, the Boards of the Company and Aviva

plc ("Aviva") reached an agreement pursuant to which Aviva

agreed to purchase the entire share capital of the Company,

subject to regulatory and shareholder approval. Although the

Directors cannot be certain about the actions of Aviva should a

deal complete, they consider that the ability of the Group to

continue as a going concern should not be adversely affected

by the transaction should it proceed. In making this

assessment, they have considered many factors, including the

strategic fit of Aviva for the Group as well as Aviva's record of

executing transactions, including integrating a number of

acquisitions, and of delivering profitable growth. While the

Directors would expect Aviva to continue to deliver long term

value from the Group’s ongoing operations they note however,

that it is beyond their control as to whether Aviva would

undertake any restructuring of the Group’s legal entities.

Therefore, given the potential change in control, the Directors

consider these conditions to constitute a material uncertainty

(as defined under IAS 1) which may cast significant doubt over

the Company’s and therefore, the Group’s ability to continue as

a going concern. The Directors would not expect this to impact

the continued operation of the Group’s core insurance activities.

Notwithstanding this uncertainty, the Directors are satisfied

that the going concern basis remains appropriate for the

preparation of the financial statements.

New standards, interpretations and amendments

to published standards that have been issued and

endorsed by the UK and adopted by the Group

or the Company

The Group has adopted the following new amendments to

IFRSs and IASs that became mandatorily effective for the Group

for the first time from 1 January 2024. None of these

amendments have a material impact upon the Group.

In January 2020, the IASB issued ‘Classification of Liabilities

as Current or Non-current (Amendments to IAS 1 'Presentation

of Financial Statements')’ which clarifies the requirements for

classifying liabilities as current or non-current. More specifically

these amendments:

– specify that an entity’s right to defer settlement must exist

at the end of the reporting period;

– clarify that classification is unaffected by management’s

intentions or expectations about whether the entity will

exercise its right to defer settlement of a liability;

– clarify how lending conditions affect classification; and

– clarify requirements for classifying liabilities an entity will or

may settle by issuing its own equity instruments.

In January 2020, the IASB issued ‘Non-current liabilities with

covenants (Amendments to IAS 1)’ which clarified how an entity

classifies debt and other financial liabilities as current or non-

current in particular circumstances.

On 22 September 2022, the IASB issued 'Lease Liability in a

Sale and Leaseback (Amendments to IFRS 16)’, which adds

subsequent measurement requirements for sale and

leaseback transactions.

On 25 May 2023, the IASB issued ‘Supplier Finance

Arrangements (Amendments to IAS 7 'Statement of Cash

Flows' and IFRS 7 'Financial Instruments: Disclosures')’ to add

disclosure requirements, and ‘signposts’ within existing

disclosure requirements, that ask entities to provide qualitative

and quantitative information about supplier finance

arrangements.

156 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Accounting policies

Standards, interpretations and amendments

to published standards that are not yet effective

and have not been early adopted by the Group

or the Company

New IFRS standards and amendments that are issued but are

not effective until after 31 December 2024 have not yet been

adopted by the UK and have not been early adopted by the

Group are disclosed below. The Group intends to adopt these

standards, if applicable, when they become effective.

The following amendments have been adopted by the UK and

are effective from 1 January 2025.

The IASB issued amendments Lack of Exchangeability

(Amendments to IAS 21 The Effect of Changes in Foreign

Exchange Rates) that provide guidance to specify when a

currency is exchangeable and how to determine the exchange

rate when it is not. This amendment is not expected to have a

significant impact on the Group’s consolidated financial

statements or the Company’s financial statements.

The following amendments are effective from 1 January 2026

but are yet to be adopted by the UK for which The Group

intends to undertake an assessment of the impact in 2025.

‘Amendments to IFRS 9 'Financial Instruments' and IFRS 7

Amendments to the Classification and Measurement of

Financial Instruments’ which provide further clarification and

requirements for:

– the recognition and derecognition criteria for financial assets

and liabilities;

– the classification requirements for financial assets, particularly

those containing contingent, non-recourse features or

contractually linked instruments; and

– disclosures related to the amendments to the classification

requirements, and also for investments in equity instruments

designated at fair value through other comprehensive

income.

Annual improvements to IFRS Accounting Standards – Volume 11.

The following new standards are effective from 1 January 2027

but are yet to be adopted by the UK for which the Group

intends to undertake an assessment of the impact in 2025.

IFRS 18 ‘Presentation and Disclosures in Financial Statements’

which aims to ensure that financial statements provide relevant

information that faithfully represents an entity’s assets,

liabilities, equity, income, and expenses. The standard

introduces new requirements for the presentation of the

statement of profit or loss, including mandatory sub-totals,

aggregation, disaggregation, and disclosures related to

management-defined performance measures.

IFRS 19 ‘Subsidiaries without Public Accountability: Disclosures’

specifies reduced disclosure requirements that an eligible

entity is permitted to apply instead of the disclosure

requirements in other IFRS accounting standards.

(B) Basis of consolidation

The consolidated financial statements incorporate the financial

statements of the Company and the entities that are controlled

by the Group at 31 December 2024 and 31 December 2023.

Control exists when the Group is exposed, or has rights, to

variable returns from its involvement with the entity and has

the ability to affect those returns through its power over the

entity. In assessing whether the Group controls another entity,

the existence and effect of the potential voting rights that are

currently exercisable or convertible are considered.

A subsidiary acquired is included in the consolidated financial

statements from the date it is controlled by the Group until

the date the Group ceases to control it. On acquisition of a

subsidiary, its identifiable assets, liabilities and contingent

liabilities are included in the consolidated financial statements

at fair value.

The Group accounts for the disposal of subsidiary undertakings

or a disposal group when it ceases to exert control.

A gain or loss is measured as the difference between the fair

value of consideration received or receivable and the value

of the assets and liabilities de-recognised, which relate to

businesses disposed of. The gain or loss is recognised on the

effective date of the completion of the disposal.

All intercompany transactions, balances, income and expenses

between Group entities are eliminated on consolidation .

estimates and judgements

Material accounting policies

The preparation of financial statements requires the Group

to select accounting policies and make estimates and

assumptions that affect items reported in the consolidated

income statement, consolidated statement of financial position,

other primary statements and notes to the consolidated

financial statements.

The accounting policies in the table below are those that have

the most material impact on the amounts recognised in the

financial statements, with those judgements involving

estimation summarised thereafter.

	Policy
Material accounting policies	reference
Insurance and reinsurance contracts (IFRS 17)	(F), (J)
Fair value of investment properties (IAS 40)	(O)
Financial instruments (IFRS 9)	(P)
Impairment provisions – financial assets (IFRS 9)	(P)

157 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

estimates and judgements continued

Critical accounting judgements

The following are the critical judgements, apart from those

involving estimations (which are presented separately below),

that the Directors have made in the process of applying the

Group’s accounting policies and that have the most significant

effect on the amounts recognised in financial statements.

	Note
Critical accounting judgements	reference
Level of aggregation and combination of insurance contracts	(J)
The Group exercises judgement in determining
whether a set of insurance and reinsurance
contracts with the same or related counterparty
should be treated collectively, considering both qualitative and quantitative factors like pricing
and credit risk exposure. Additionally, judgement is applied in defining portfolios of insurance contracts by grouping contracts with similar risks that are managed together. This involves assessing which risks are similar and how contracts are operationally managed, with contracts in the same product line typically
grouped in the same portfolio.
Classification of financial instruments	(P)
The Group exercises judgement in assessing the business model within which the assets are held and whether the contractual terms of the assets are solely payments of principal and interest on the principal amount outstanding.
The Group assesses its business models at a portfolio level based on its objectives for the relevant portfolio, how the performance of the portfolio is managed and reported, and the frequency of asset sales and has concluded on the classification category of each portfolio of financial instrument in accordance with IFRS 9.
Impairment of financial assets	(P)
The measurement of the expected credit loss
("ECL") allowance under IFRS 9 for financial
assets measured at amortised cost requires
significant judgements and assumption in particular, for the estimation of the amount and timing of future cash flows when determining
impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by the outcome of modelled ECL scenarios, and the relevant inputs
used.

The critical accounting judgements made by management

in applying the Group’s accounting policies and the key sources

of estimation uncertainty were the same as those that applied

to the consolidated financial statements for the year ended

31 December 2023, except for a new accounting judgement

in relation to combination of direct and reinsurance contracts

with Motability.

Additionally, the following areas are no longer considered

significant:

– PAA eligibility (see note (J) Level of aggregation for further

details)

– Onerous contracts (see note (J) Loss components and loss

offsetting)

Key sources of estimation uncertainty

The table below sets out those items considered particularly

susceptible to changes in estimates and assumptions, that

have a significant risk of resulting in a material adjustment to

the carrying amounts of assets and liabilities within the next

financial year, and the relevant note disclosures.

	Policy	Carrying
Key sources of estimation uncertainty	reference	value	Sensitivity
Measurement of insurance	(J)	Note 19	Note
and reinsurance contracts			1.3.1
The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims
projection techniques. Key
estimates involved in determining both the insurance liabilities and the corresponding recoverable
amount from reinsurance
contracts include the amount
and timing of future claims
payments in relation to claims
already incurred, the allowance for illiquidity
premium in the determination
of discount rates, and the calibration of risk adjustment.
Fair value of financial	(O), (P)	Note 22	Note
instruments and investment			1.3.2
property
Where quoted market prices
are not available, valuation
techniques are used to value
financial instruments and investment property. These include broker quotes and models using both observable
and unobservable market
inputs. The valuation
techniques involve judgement
with regard to the valuation
models used and the inputs to these models can lead to a range of plausible valuations
for financial instruments and investment property.

There have been no significant changes in the basis upon

which judgement and estimates have been determined,

compared to that applied as at 31 December 2023.

(D) Foreign currency translation

Group entities record transactions in the currency of the

primary economic environment in which they operate (their

functional currency), translated at the foreign exchange rate

ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign

currencies are translated into the relevant functional currency

at the foreign exchange rates ruling at the statement of

financial position date. Foreign exchange differences arising

on the settlement of foreign currency transactions and from

the translation of monetary assets and liabilities are reported

in the statement of profit or loss.

158 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Accounting policies continued

Non-monetary items denominated in foreign currencies that

are stated at fair value are translated into the relevant

functional currency at the foreign exchange rates ruling at the

dates the values are determined. Translation differences arising

on non-monetary items measured at fair value are recognised

in the statement of profit or loss except for differences arising

on equity investments held at FVOCI, which are recognised in

other comprehensive income.

Assets and liabilities of foreign operations, including goodwill

and fair value adjustments arising on acquisition, are translated

into sterling at the foreign exchange rates ruling at the

statement of financial position date. Income and expenses of

foreign operations are translated into sterling at average

exchange rates unless these do not approximate the foreign

exchange rates ruling at the dates of the transactions. Foreign

exchange differences arising on the translation of a foreign

operation are recognised in the consolidated statement of

other comprehensive income. The amount accumulated in

equity is reclassified from equity to the consolidated statement

of profit or loss on disposal or partial disposal of a foreign

operation.

(E) Fair value measurement

Fair value is the price that would be received to sell an asset or

paid to transfer a liability in an orderly transaction between

market participants at the measurement date, regardless of

whether that price is directly observable or estimated using

another valuation technique. There were no changes in

valuation techniques during the year.

(F) Insurance service result

Insurance revenue

For insurance contracts applying the premium allocation

approach ("PAA"), the insurance revenue for the period is the

amount of expected premium receipts allocated to the period.

The Group allocates the expected premium receipts and

instalment income (being the additional fees payable by a

policyholder associated with paying for an insurance contract

over 12 months that are considered non-distinct from the

underlying insurance policy) to each period of insurance

contract services on the basis of the passage of time.

Cash flows associated with arrangement fee and administrative

fee income are included within the insurance revenue cash

flows as they are considered non-distinct from the underlying

insurance policy, and spread evenly over the term of the policy.

Insurance service expenses

Insurance service expenses include the following:

– incurred claims and other claims expenses;

– other incurred directly attributable expenses, such as

marketing and acquisition costs;

– changes that relate to past service (i.e. changes in fulfilment

cash flows relating to liability for incurred claims ("LIC")); and

– other directly attributable claims income including vehicle

replacement referral fees, salvage income and legal services

fees which have been assessed as part of the IFRS 17 contract

boundary.

Other expenses not included above are included in other

operating expenses in the consolidated statement of profit or

loss. Directly attributable overheads are allocated using a

systematic and rational basis.

Income and expenses from reinsurance

contracts held

Income and expenses from reinsurance contracts held

represents the insurance service result for groups of

reinsurance contracts held and is comprised of:

– the allocation of reinsurance premiums paid, which is

calculated using the same principles as used to calculate

revenue on insurance contracts;

– amounts recoverable from reinsurers, which is calculated

using the same principles as used to calculate insurance

service expenses on insurance contracts;

– the recognition of, and subsequent movements in,

reinsurance loss recovery components; and

– the effect of changes in the risk of reinsurers’ non-

performance.

(G) Insurance finance result

Insurance finance income and expenses comprise the change

in the carrying amount of the group of insurance contracts in

respect of incurred claims arising from:

– the effect of the time value of money and changes in the

time value of money. This mainly comprises interest accreted

on the LIC; and

– the effect of financial risk and changes in financial risk. This

mainly includes the effect of changes in interest rates (i.e

discount rates) and the inflation assumptions for Periodic

Payment Orders ("PPOs") (which are predominantly inflated

with respect to the ASHE 6115 index).

(H) Investment return

Interest income on financial assets held at amortised cost is

determined using the effective interest rate method. The

effective interest rate method is a way of calculating the

amortised cost of a financial asset (or group of financial assets)

and of allocating the interest income over the expected life of

the asset.

Rental income from investment property is recognised in the

statement of profit or loss on a straight-line basis over the

period of the contract.

Dividend income is recognised when the right to receive

payment is established.

(I) Other income

The Group's other operating income comprises vehicle recovery

and repair services provided to other third-party customers.

Income in respect of vehicle recovery and repairs is recognised

upon completion of the repair obligations in accordance with

IFRS 15 'Revenue from contracts with customers'. The price is

determined using market rates for the services and materials

used after discounts have been deducted where applicable.

Revenue from any goods provided is accounted for at the point

of sale .

159 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

(J) Insurance and reinsurance contracts

IFRS 17 measurement models

Insurance contracts are those contracts where the Group (the

insurer) has accepted significant insurance risk from another

party (the policyholder) by agreeing to compensate the

policyholder if a specified uncertain future event (the insured

event) adversely affects the policyholder.

Once a contract has been classified as an insurance contract, it

remains an insurance contract for the remainder of its lifetime,

even if the insurance risk reduces significantly during this period.

The Group issues mainly short-term insurance contracts for

various products in the normal course of business, under which

it accepts significant insurance risk from its policyholders.

The Group has reinsurance treaties and other reinsurance

contracts, in the form of quota share and excess of loss ("XoL"),

that transfer significant insurance risk. The Group cedes

insurance risk by reinsurance in the normal course of business.

The Group applies the following measurement model to its

insurance and reinsurance contracts:

Model	Applicable business
	Short duration insurance contracts automatically
	eligible for PAA
	Longer duration insurance contracts which meet
PAA	the PAA eligibility requirements
	Reinsurance contracts issued or held automatically
	eligible for PAA
	Reinsurance contracts issued or held which meet
	PAA eligibility requirements

The basis for the measurement model is determined as follows:

– the coverage period of each contract in the group is one year

or less and therefore automatically eligible, including

insurance contract services arising from all premiums within

the contract boundary; or

– for groups of insurance and reinsurance contracts longer

than one year, the Group has modelled possible future

scenarios to test the measurement of the liability for

remaining coverage, for the group containing those

contracts under the PAA does not differ materially from the

measurement that would be produced by applying the

General Measurement Model. Materiality is a key

consideration in the quantitative assessment of results, and

qualitative factors about the nature of the contracts,

including the timing and size of cash flows are considered

when forming conclusions on PAA applicability.

The Group’s reinsurance contracts (both quota share and Motor

excess of loss) include contracts with a coverage period greater

than one year and therefore do not automatically qualify for

PAA. The measurement of the asset for remaining coverage

between the PAA and the general model is determined and

where the difference in measurement is immaterial, PAA is

applied.

Insurance contracts – initial measurement

For a group of contracts that is not onerous at initial

recognition, the Group measures the liability for remaining

coverage as:

– the premiums, if any, received at initial recognition; plus

– any other asset or liability previously recognised for cash flows

related to the group of contracts that the Group pays or

receives before the group of insurance contracts is

recognised.

An insurance or reinsurance contract acquired in a transfer of

contracts or a business combination is recognised on the date

of acquisition.

When the contract is recognised, it is added to an existing

group of contracts or, if the contract does not qualify for

inclusion in an existing group, it forms a new group to which

future contracts are added. Groups of contracts are established

on initial recognition and their composition is not revised once

all contracts have been added to the group.

Any premiums received before the recognition of the

corresponding group of insurance contracts are recognised as

deferred revenues in trade and other liabilities. When a group of

contracts is recognised as per above the premiums received are

reclassified to the liability for remaining coverage.

Reinsurance contracts – initial measurement

The Group measures its reinsurance assets for a group of

reinsurance contracts that it holds on the same basis as

insurance contracts that it issues. However, they are adapted

to reflect the features of reinsurance contracts held that differ

from insurance contracts issued, for example, the generation

of expenses or reduction in expenses rather than revenue.

Insurance contracts – subsequent measurement

The Group measures the carrying amount of the liability for

remaining coverage at the end of each reporting period as:

– the liability for remaining coverage at the beginning of the

period; plus

– premiums received in the period; minus

– the amount recognised as insurance revenue for the services

provided in the period.

Where an entity is required to apply IAS 34 (as for the Group)

there is an option as to whether to choose a "year-to-date” basis

or a “period-to-period” basis for financial reporting. The Group

has opted to apply the option to use "period-to-period"

accounting for interim reporting.

Claims reserves are assessed separately for large and attritional

claims, typically using standard actuarial methods of projection

such as the Chain Ladder and Bornhuetter-Furguson methods.

Reinsurance contracts – subsequent measurement

The subsequent measurement of reinsurance contracts held

follows the same principles as those for insurance contracts

issued and has been adapted to reflect the specific features

of reinsurance contracts held.

A credit exposure exists with respect to reinsurance contracts

held, to the extent that any reinsurer is unable to meet its

obligations.

Combination of insurance contracts

The Group exercises judgement in deciding whether a set of

insurance and reinsurance contracts with the same or a related

counterparty should be treated collectively. Specifically, the

Group assesses whether the direct and reinsurance contracts

with Motability should be considered a combined agreement

or as separate contracts. Based on management's assessment,

it was concluded that each contract should be treated on

a standalone basis.

Separating components from insurance and

reinsurance contracts

The Group assesses its insurance contracts to determine

whether they contain distinct components which must be

accounted for under another IFRS instead of under IFRS 17.

After separating any distinct components, the Group applies

IFRS 17 to all remaining components of the (host) insurance

contract. Currently, the Group's contracts do not include any

distinct components that require separation.

160 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Accounting policies continued

Level of aggregation

Insurance contracts are aggregated into groups for

management purposes at initial recognition. The grouping

of contracts is not subsequently reconsidered. The level of

aggregation for the Group is determined firstly by dividing

the business written into portfolios.

The Group defines a portfolio as insurance contracts subject to

similar risks and managed together. Contracts within the same

product line are expected to be in the same portfolio as they

have similar risks and are managed together. The assessment

of which risks are similar and how contracts are managed

requires the exercise of judgement. The general principles for

defining the portfolio of insurance contracts for level of

aggregation are equally applicable to reinsurance contracts

held. Portfolios and groups may be changed prospectively if

there are changes to facts and circumstances.

The Group manages insurance contracts issued by product and

brand. Contracts within each product and brand are grouped

together into different sub-groups for IFRS 17 reporting and

disclosure based on the criterial of similar risks which are

managed together, the nature of the product and brand and

profitability.

Portfolios are further divided based on expected profitability

and within a calendar year at inception into three categories:

i. onerous contracts, if any;

ii. contracts with no significant risk of becoming onerous; and

iii. the remainder group of contracts in the portfolio.

A group of insurance contracts is considered to be onerous at

initial recognition if the fulfilment cashflows allocated to that

group of contracts in total are a net outflow. This occurs if the

present value of expected claims, attributable expenses and risk

adjustment exceeds the premium. As all inwards contracts are

measured under the PAA model, due to the short-term nature

of the contracts, the Group takes the standard’s default

assumption that no groups are onerous unless facts and

circumstances indicate otherwise.

Portfolios of reinsurance contracts held are assessed for

aggregation separately from portfolios of insurance contracts

issued. Applying the grouping requirements to reinsurance

contracts held, the Group aggregates reinsurance contracts

held based on the criteria of similar risks which are managed

together on a product level. The reinsurance contract held

portfolios are further divided within a calendar year into three

groups that comprise:

i. contracts for which there is a net gain at initial recognition,

if any;

ii. contracts for which, at initial recognition, there is no

significant possibility of a net gain arising subsequently; and

iii. remaining contracts in the portfolio.

The grouping of insurance and reinsurance contracts is

determined at initial recognition and is not subsequently

reassessed.

Recognition, modification and derecognition

Recognition

The Group recognises groups of insurance contracts it issues

from the earliest of the following:

– the beginning of the coverage period of the group

of contracts;

– the date when the first payment from a policyholder in the

group is due or when the first payment is received if there

is no due date; or

– for a group of onerous contracts, when facts and

circumstances indicate that the group is onerous.

The Group recognises a group of reinsurance contracts held

it has entered into from the earlier of the following:

– the beginning of the coverage period of the group of XoL

reinsurance contracts held. However, the Group delays the

recognition of a group of reinsurance contracts held that

provide proportionate coverage (the Group's quota share

reinsurance) until the date any underlying insurance contract

is initially recognised, if that date is later than the beginning

of the coverage period of the group of reinsurance contracts

held; and

– the date the Group recognises an onerous group of

underlying insurance contracts if the Group entered into the

related reinsurance contract held at or before that date.

Modification and derecognition

The Group derecognises insurance contracts when:

– the rights and obligations relating to the contract are

extinguished (i.e. discharged, cancelled or expired); or

– the contract is modified such that the modification results

in a change in the measurement model or the applicable

standard for measuring a component of the contract

substantially changes the contract boundary, or requires the

modified contract to be included in a different group. In such

cases, the Group derecognises the initial contract and

recognises the modified contract as a new contract.

When a modification is not treated as a derecognition,

the Group recognises amounts paid or received for the

modification of the contract as an adjustment to the estimate

of fulfilment cash flows.

Estimates of future cash flows

The estimate of future cash flows for the liability for incurred

claims represents the best estimate of the Group's cost to fulfil

a contract incorporating current estimates of non-financial

assumptions. The estimate allows for all the cash inflows and

outflows expected to occur within the contract boundary.

In estimating future cash flows, the Group incorporates, in an

unbiased way, all reasonable and supportable information that

is available without undue cost or effort at the reporting date.

This information includes both internal and external historical

data about claims and other experience, updated to reflect

current expectations of future events. The estimates of future

cash flows reflects the Group's view of current conditions at

the reporting date, ensuring the estimates of any relevant

market variables are consistent with observable market

prices. However, these cash flows are inherently uncertain

in size, timing and are based on probability-weighted

average expectations.

Cash flows are modelled separately for gross and reinsurance

contracts for which the effect of any risk of non-performance

by the issuer of the reinsurance contract, including the effects

of collateral and losses from disputes, is included.

161 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

(J) Insurance and reinsurance contracts

continued

Contract boundaries

Cash flows are within the boundary of an insurance contract

if they arise from substantive rights and obligations that exist

during the reporting period in which the Group can compel

the policyholder to pay the premiums, or in which the Group

has a substantive obligation to provide the policyholder with

insurance contract services.

A liability or asset relating to expected premiums or

claims outside the boundary of the insurance contract

is not recognised, as such amounts relate to future

insurance contracts.

The contract boundary is reassessed at each reporting date to

include the effect of changes in circumstances on the Group's

substantive rights and obligations and therefore may

change over time.

The contract boundary for a reinsurance contract is dependent

on the terms and conditions of the reinsurance contract and

therefore may not necessarily be the same as for the underlying

insurance contracts. For groups of reinsurance contracts held,

cash flows are within the contract boundary if they arise from

substantive rights and obligations of the Group that exist

during the reporting period in which the Group is compelled

to pay amounts to the reinsurer or in which the Group has a

substantive right to receive insurance contract services from

the reinsurer.

Risk adjustment

A risk adjustment for non-financial risk is determined to reflect

the compensation that the Group would require for bearing

non-financial risk and its degree of risk aversion.

The Group estimates the probability distribution of the

expected present value of future cash flows from the contracts

at each reporting date and calculates the risk adjustment for

non-financial risk as the excess of the value at risk at the target

confidence level over the expected present value of the future

cash flows allowing for the associated risks over all future years.

Once the risk adjustment is determined at Group level on a

gross and net of reinsurance basis, it is allocated to groups of

contracts based on the size of their reserves. More recent

accident periods tend to be less developed with generally

larger reserves than older contract periods, so that a higher

proportion of the overall risk adjustment is allocated to these

more uncertain groups of contracts.

The target confidence level is at the 75th percentile for the

liability for incurred claims.

Financial assumptions

Discount rates

The Group adjusts the future cash flows for the time value of

money and the effect of financial risk for the measurement of

liability for incurred claims, including those that are expected to

be paid within one year of being incurred.

The Group has selected to apply the ‘bottom up’ approach to

determine discount rates which requires the use of risk-free

rate curves and adding the illiquidity premium.

The Group determines the risk-free discount rate using

Solvency II risk-free rates sourced from the Bank of England.

The illiquidity premium is determined by using a fundamental

spread approach by deducting the risk-free rate and credit risk

premium from corresponding corporate bond reference

portfolios having regard to the assumptions on the Prudential

Regulation Authority ("PRA") Solvency II website. The term and

credit rating of the underlying bonds is aligned with the

duration of the liabilities and quality of assets held to match the

liabilities. For non-PPOs, the reference portfolio is A rated bonds

with terms of 1 to 3 years and for PPOs, the reference portfolio is

BBB rated bonds with a remaining term of 15 or more years.

Judgement is applied when determining the illiquidity

premium with respect to allowances for past and future trends,

considering changes in the economic environment. Generally,

the illiquidity premium is expected to be stable over time

however, assessment of the illiquidity premium assumption

is reviewed periodically and adjusted where required.

The Group has chosen to take the effect of the time value of

money and changes in the time value of money and financial

risk to the statement of profit or loss.

There is no allowance made for the time value of money

where insurance premiums are due within one year of the

coverage period.

Inflation assumptions

Future inflation assumptions that are contractually linked

to an inflation index are treated as a financial assumption.

Presentation of financial assumption changes

The Group recognises the impact of financial assumption

changes in the statement of profit or loss.

Loss components and loss offsetting

In utilising the PAA measurement model approach, the Group

assumes that no material contracts are onerous at initial

recognition unless facts and circumstances indicate otherwise.

Where facts and circumstances indicate that contracts are

onerous at initial recognition, the Group performs additional

analysis based on the Strategic Business Plan to determine

if a net outflow is expected from the contract. Such onerous

contracts are separately grouped from other contracts and the

Group recognises a loss in the consolidated statement of profit

or loss for the net outflow, resulting in the carrying amount of

the liability for the group being equal to the fulfilment cash

flows. A loss component is established by the Group for the

liability for remaining coverage for any such onerous group

depicting the losses recognised. Accordingly, by the end of the

coverage period of the group of contracts the loss component

will be zero.

Where the Group recognises a loss on initial recognition of

an onerous group of underlying insurance contracts or when

further onerous underlying insurance contracts are added to

a group, the Group establishes a loss-recovery component of

the asset for remaining coverage for a group of reinsurance

contracts held depicting the recovery of losses.

After initial recognition quarterly reviews are undertaken to

determine the likelihood of changes in facts and circumstances

which could result in groups of contracts subsequently

becoming onerous.

Insurance acquisition cash flows

The Group has taken the option to expense insurance

acquisition cash flows as they are incurred.

Presentation

The Group presents in the consolidated statement of financial

position:

– the carrying amount of portfolios of insurance contracts

issued that are assets;

– portfolios of insurance contracts issued that are liabilities;

– portfolios of reinsurance contracts held that are assets; and

– portfolios of reinsurance contracts held that are liabilities.

The Group presents net the income or expenses from

reinsurance contracts held and the expenses or income from

insurance contracts issued gross.

162 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Accounting policies continued

The Group treats reinsurance cash flows that are contingent

on claims on the underlying contracts as part of the claims

recoverable from reinsurance contract held and treats amounts

not dependent on the underlying claims, such as ceding

commissions, as a reduction in the premiums paid to

the reinsurer.

Presentation of reinsurance contract with

‘funds withheld’ arrangement

The Group has quota share reinsurance contracts that have

funds withheld features, whereby the quota share proportion

of reinsurance premiums and related recoveries are retained

by the Group and will be settled on a net basis at commutation.

Under this arrangement, no assets are transferred to the

reinsurer at the inception of the contract. Instead, the asset

is deposited within a segregated funds withheld account that

is maintained by the Group with a third-party custodian. Cash

withheld under funds withheld arrangements is presented

in cash and cash equivalents within the statement of

financial position.

The funds withheld account balance is adjusted at the agreed

commutation date, with any shortfall or surplus resulting from

reinsurance premium compared to reinsurance recoveries

necessitating an adjustment to funds withheld. The funds

withheld account is measured by reference to the fulfilment

cash flows (of the reinsurance contract held) that, according to

the contractual terms, give rise to the funds withheld feature.

Until it is settled in cash, the funds withheld liability is included

within reinsurance contract assets or liabilities.

Whilst the funds withheld arrangement operates on a net

settlement basis, the Group’s policy is to present the

reinsurance results on a gross basis in the notes to the financial

statements, but combine them into a single line in the

consolidated statement of profit or loss.

(K) Goodwill and other intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over

the Group's share of the net fair value of the identifiable assets,

liabilities and contingent liabilities of the subsidiary acquired,

and which is initially recognised at cost and subsequently at

cost less any accumulated impairment losses. Goodwill arising

on the acquisition of subsidiaries is included in the statement of

financial position category "goodwill and other intangible

assets". The gain or loss on the disposal of a subsidiary includes

the carrying value of any related goodwill.

Other intangible assets

Other intangible assets consists primarily of internally

generated software acquired by the Group and are stated at

cost less accumulated amortisation and impairment losses.

Amortisation is charged to the statement of profit or loss over

the assets' economic lives from the point it is operating as

intended using methods that best reflect the pattern of

economic benefits and is included in operating expenses.

Other intangible assets are amortised on a straight line method

over a period up to 10 years.

Expenditure on indirect advertising costs is written off as

incurred. Direct costs relating to the development of internal-

use computer software and associated business processes are

capitalised once technical feasibility and economic viability

have been established. These costs include payroll costs,

the costs of materials and services and directly attributable

overheads. Capitalisation of costs ceases when the software

is capable of operating as intended.

During and after development, accumulated costs are

reviewed for impairment against the projected benefits that

the software is expected to generate. Costs incurred prior to

the establishment of technical feasibility and economic viability

are expensed as incurred, as are all training costs and

general overheads.

(L) Property, plant and equipment

Items of property, plant and equipment are stated at cost

less accumulated depreciation and impairment losses. Where

an item of property, plant and equipment comprises major

components having different useful lives, they are accounted

for separately.

Depreciation is charged to the statement of profit or loss on a

straight-line basis so as to write off the depreciable amount of

property, plant and equipment over their estimated useful lives.

The depreciable amount is the cost of an asset less its residual

value. Land is not depreciated. The estimated useful lives

are as follows:

Freehold and leasehold	50 years or the period
buildings	of the lease if shorter
Other equipment, including	2 to 15 years
computer equipment, vehicles and property
adaptation costs

The gain or loss arising from the derecognition of an item of

property, plant and equipment is determined as the difference

between the disposal proceeds, if any, and the carrying amount

of the item.

(M) Leases

Where the Group is a lessee

At inception, the Group assesses whether a contract contains a

lease arrangement, which involves assessing whether it obtains

substantially all the economic benefits from the use of a specific

asset, and it has the right to direct the use of that asset. The

Group recognises a right-of-use ("ROU") asset and a lease

liability at the commencement of the lease (when the

underlying asset is available for use), except for short-term

leases of 12 months or less and low-value leases which are

expensed on a straight-line basis in the statement of profit or

loss. The ROU asset is initially measured based on the present

value of the lease payments, plus initial direct costs less any

incentives received. Lease payments include fixed payments

and variable payments. Variable payments relate to contractual

rent increases linked to inflation indices. When leases contain

an extension or purchase option which is reasonably expected

to be exercised this is included in the measurement of the lease.

In calculating the present value of lease payments, the Group

uses the incremental borrowing rate at the lease

commencement date unless the interest rate implicit in the

lease is readily determinable. The incremental borrowing rate

is determined based on available risk-free market yield-to-

maturity pricing linked to the lease amount and term, and

includes a credit spread. The lease liability is subsequently

measured at amortised cost using the effective interest rate

method and remeasured, with a corresponding adjustment

to the ROU asset, when there is a change in future lease

payments, terms or reassessment of options.

The Group's property leases mainly relate to office space and

vehicle repair centres. Leases in respect of motor vehicles relate

to recovery and replacement vehicles, and management cars.

The Group also leases certain IT equipment which is not a

significant portion of the total leased asset portfolio.

163 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

(M) Leases continued

Where the Group is a lessor

Leases where a significant proportion of the risks and rewards

of ownership is retained by the lessor are classified as operating

leases. Lease income from operating leases is recognised in the

statement of profit or loss on a straight-line basis over the

lease term.

Right of use assets

Where the Group is the lessee, a lease liability equal to the

present value of outstanding lease payments and a

corresponding ROU asset equal to cost are initially recognised.

The ROU asset is depreciated over the lease term, or its

economic useful life if shorter, and is subject to impairment

testing if there is an indicator of impairment.

(N) Impairment of non-financial assets

At each reporting date, the Group assesses whether any events

or circumstances indicate that the carrying amount of its

goodwill, intangible assets, property, plant and equipment or

ROU assets may not be recoverable. If such indication exists, the

Group estimates the recoverable amount of the asset and the

impairment loss, if any.

Goodwill is tested for impairment annually or more frequently, if

events or changes in circumstances indicate that it might be

impaired. If an asset does not generate cash flows that are

independent of those of other assets or groups of assets, the

recoverable amount is determined for the cash-generating unit

("CGU") to which the asset belongs.

The recoverable amount of an asset is the higher of its fair value

less costs to sell and its value-in-use.

Value-in-use is the present value of future cash flows from the

asset or CGU, discounted at a rate that reflects market interest

rates, adjusted for risks specific to the asset or CGU that have

not been reflected in the estimation of future cash flows.

If the recoverable amount of an intangible or a tangible asset

is less than its carrying value, an impairment loss is recognised

immediately in the statement of profit or loss and the

carrying value of the asset is reduced by the amount of the

impairment loss.

A reversal of an impairment loss on intangible assets, property,

plant and equipment or ROU assets is recognised as it arises

provided the increased carrying value does not exceed the

carrying amount that would have been determined had no

impairment loss been recognised. Impairment losses on

goodwill are not reversed.

(O) Investment property

Investment property comprises freehold and leasehold

properties that are held to earn rentals or for capital

appreciation or both. Investment property is not depreciated

but is stated at fair value based on valuations completed

quarterly by independent registered valuers, who hold

recognised and relevant professional qualifications and have

recent experience in the location and category of the

investment property being valued, and in accordance with

guidance issued by the Royal Institution of Chartered Surveyors.

Fair value is based on current prices for similar properties

adjusted for the specific characteristics of each property. Any

gain or loss arising from a change in fair value is recognised in

the statement of profit or loss.

Any significant risk of a material adjustment to the carrying

amount of the investment property portfolio within the next

financial year will be dependent on a number of factors

including the developments in the economic outlook which

could result in volatility in market prices, rental yields or

occupancy rates. Sensitivity analysis for the investment property

portfolio has been independently calculated by the Group's

registered valuers by flexing inputs of internal models to a

reasonable alternative yield to ascertain the impact on property

valuations. There are no significant sources of estimation

uncertainty in relation to climate-related matters in valuing the

investment property portfolio.

Investment property is derecognised when it has been either

disposed of or permanently withdrawn from use and no future

economic benefit is expected from disposal. Any gains or losses

on the retirement or disposal of investment property are

recognised in the statement of profit or loss in the year of

retirement or disposal.

(P) Financial instruments

Recognition and initial measurement

Financial assets and financial liabilities are recognised in the

statement of financial position when the Group becomes a

party to the contractual provisions of the instrument.

On initial recognition, financial assets are measured at fair value

net of transaction costs. Subsequently they are measured at

amortised cost, FVOCI or FVTPL, depending on the Group's

business model for managing the financial assets and whether

the cash flows represent solely payments of principal and

interest. The Group assesses its business models at a portfolio

level based on its objectives for the relevant portfolio, how the

performance of the portfolio is managed and reported, and the

frequency of asset sales. The Group reclassifies financial assets

when and only when its business model for managing those

assets changes.

Financial liabilities are initially recognised at fair value net of

transaction costs incurred. Other than derivatives which are

recognised and measured at fair value, all other financial

liabilities are subsequently measured at amortised cost using

the effective interest rate method.

Classification and subsequent measurement

Financial instruments measured at amortised cost

Financial assets that are held to collect contractual cash flows

where those cash flows represent solely payments of principal

and interest are measured at amortised cost. Interest income is

accounted for using the effective interest method. Such assets

held by the Group include some of the Group's debt security

portfolio, loans and receivables, trade and other receivables, and

cash and cash equivalents.

Financial liabilities are measured at amortised cost, except for

derivative financial liabilities, which are held at fair value.

Financial assets measured at fair value through other

comprehensive income

Financial assets that are held to collect contractual cash flows

and for subsequent sale, where the assets’ cash flows represent

solely payments of principal and interest, are recognised in the

statement of financial position at their fair value, inclusive of

transaction costs.

The Group elects at initial recognition to account for equity

instruments at FVOCI. For these investments, dividends are

recognised in the statement of profit or loss but fair value gains

and losses are not subsequently reclassified to the statement of

profit or loss following derecognition of the investment. The

Group has one equity investment which is measured at fair

value through other comprehensive income, being an

investment in unlisted insurtech-focused equity funds.

164 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Accounting policies continued

If the Group assesses the need to recognise a loss allowance on

a financial asset carried at fair value through other

comprehensive income, the loss allowance is recognised in

other comprehensive income; however, the recognition of a

loss allowance does not impact the carrying value of the asset

on the statement of financial position. Cumulative gains and

losses on equity instruments at fair value through other

comprehensive income are not recycled to the statement of

profit or loss.

Financial instruments measured at fair value through

profit or loss

Financial assets are classified as FVTPL where they do not meet

the criteria to be measured at amortised cost or FVOCI or

where they are designated at FVTPL to reduce an accounting

mismatch. The Group has elected to account for those debt

securities which back its insurance contracts as FVTPL to

reduce the accounting mismatch caused by fluctuations

in values of underlying insurance contracts due to changes

in discount rates.

Derivatives are initially recognised at fair value on the date

on which a derivative contract is entered into and are

subsequently valued at fair value at each statement of

financial position date.

Financial assets measured at FVTPL are recognised in the

statement of financial position at their fair value. Fair value

gains and losses together with interest coupons and dividend

income are recognised in the statement of profit or loss within

the investment return in the period in which they occur.

Financial liabilities are measured at FVTPL where they are

trading liabilities such as derivative financial instruments.

Financial liabilities measured at FVTPL are recognised in the

statement of financial position at their fair value. Fair value

gains and losses are recognised in the statement of profit

or loss in the period in which they occur.

The fair values of assets and liabilities traded in active markets

are based on current bid and offer prices respectively. If the

market is not active the Group establishes a fair value by using

valuation techniques.

Derecognition

A financial asset is derecognised when the contractual rights to

receive the cash flows from that asset have expired or when the

Group has transferred its rights to receive cash flows from the

asset and either the Group has transferred substantially all the

risks and rewards of ownership of the asset or the Group has

neither transferred nor retained substantially all the risks and

rewards of ownership and the Group has not retained control.

A financial liability is derecognised when the obligation under

the liability is discharged, cancelled or expires.

Derivative financial instruments

Derivative financial instruments are recognised initially at fair

value on the date the derivative contract is entered into, and

subsequently remeasured to their fair value at the end of each

reporting period. Derivative fair values are determined from

quoted prices in active markets where available. Where there

is no active market for an instrument, fair value is derived from

prices for the derivative's components using appropriate

pricing or valuation models. Gains and losses arising from

changes in the fair value of a derivative are recognised as they

arise in the statement of profit or loss unless the derivative is the

hedging instrument in a qualifying hedge .

The Group enters into a small number of immaterial cash flow

hedges and applies the hedge accounting requirements of

IFRS 9. Hedge accounting relationships are formally

documented at inception. The documentation includes the

Group’s risk management objective and strategy for

undertaking the hedge, identifying the hedged item and the

hedging instrument, the nature of the risk that is being

hedged, and the way in which the Group will assess whether

the hedging relationship meets the hedge effectiveness

requirements (including identifying potential sources of hedge

ineffectiveness).

In a cash flow hedge, the effective portion of the gain or loss on

the economic hedging instrument is recognised in other

comprehensive income. Any ineffective portion is recognised in

the statement of profit or loss.

Impairment of financial assets

The ECL model is used to calculate the impairment to be

recognised for all financial assets measured at amortised cost.

The general approach, which utilises the three-stage model,

is used for financial investment and debt securities, whilst

impairment for the remaining assets is measured using the

simplified approach.

The assessment of credit risk and the estimation of an ECL are

unbiased, probability-weighted and incorporate all available

information relevant to the assessment, including information

about past events, current conditions and reasonable and

supportable forecasts of economic conditions at the reporting

date. The forward-looking aspect of IFRS 9 requires judgement

as to how changes in economic factors affect ECLs.

The ECL three-stage model is based on forward looking

information regarding changes in credit quality since inception.

The three stages of ECL are defined and assessed as follows:

Stage 1 – no significant increase in credit risk since inception;

Stage 2 – significant increase in credit risk since inception;

Stage 3 – asset is impaired.

For assets in stage 1, the allowance is calculated as the ECLs

from events within 12 months after the reporting date.

For assets in stage 2 and 3, the allowance is calculated as the

expected credit loss from events in the remaining lifetime

of each asset.

The loss allowance reduces the carrying value of the financial

asset and is reassessed at each reporting date. ECL impairment

charges are recognised in the statement of profit or loss within

the investment return.

Note 1.3.3 explains how the Group assesses whether the credit

risk of a financial asset has increased since initial recognition

and the approach to estimating ECLs.

(Q) Cash and cash equivalents and borrowings

Cash and cash equivalents comprise cash in hand and demand

deposits with banks together with short-term highly liquid

investments that are readily convertible to known amounts

of cash and subject to insignificant risk of change in value.

The average maturity of short-term highly liquid investments

is 10 days.

Borrowings, which consist of bank overdrafts, are measured at

amortised cost using the effective interest rate method. As part

of the Group's cash management strategy, they are repayable

on demand and are therefore included within cash and cash

equivalents in the cash flow statement. Bank overdrafts

primarily arise from short-term timing differences between

transactions recorded by the Group and those processed by

the bank. In the statement of financial position, bank overdrafts

are presented within current liabilities under borrowings.

165 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

(R) Assets and liabilities held for sale

Non-current assets, including investment property, are

classified as held for sale if their carrying amount will be

recovered principally through a sale transaction rather than

through continuing use and if the sale is considered highly

probable. Investment property is measured at fair value less

costs to sell. Other non-current assets are measured at the

lower of their carrying amount and fair value less costs to sell.

An impairment loss is recognised in the statement of profit or

loss for any initial or subsequent write down of the asset to fair

value less costs to sell. A gain is recognised for any subsequent

increase in fair value less costs to sell of an asset but not in

excess of any cumulative impairment loss previously

recognised. A gain or loss not previously recognised by the date

of the sale is recognised at the date of derecognition.

Non-current assets classified as held for sale are presented

separately from the other assets in the statement of financial

position and are not depreciated or amortised.

(S) Subordinated liabilities

Subordinated liabilities comprise subordinated guaranteed

dated notes which are initially measured at fair value net of

transaction costs incurred. Subsequently, subordinated

liabilities are measured at amortised cost using the effective

interest rate method.

(T) Provisions

The Group recognises a provision for a present legal or

constructive obligation from a past event when it is more likely

than not that it will be required to transfer economic benefits to

settle the obligation and the amount can be reliably estimated.

When the Group has an onerous contract outside of the scope

of IFRS 17, it recognises the present obligation under the

contract as a provision. A contract is onerous when the

unavoidable costs of meeting the contractual obligations

exceed the expected future economic benefit.

Restructuring provisions are made, including redundancy costs,

when the Group has a constructive obligation to restructure. An

obligation exists when the Group has a detailed formal plan

and has communicated the plan to those affected .

(U) Employee benefits

Short-term employee benefits

Liabilities recognised in respect of staff bonuses and rewards

are measured at the undiscounted amount of benefits

expected to be paid in exchange for the related service.

Pensions and other post-retirement benefits

The Group provides post-retirement benefits in the form of

pensions and healthcare plans to eligible employees.

Contributions to the Group's defined contribution pension

scheme are recognised in the statement of profit or loss

when payable.

The Group's defined benefit pension scheme, as described in

note 24, was closed in 2003. Scheme liabilities are measured on

an actuarial basis, using the projected unit credit method, and

discounted at a rate that reflects the current rate of return on a

high-quality corporate bond of equivalent term and currency to

the scheme liabilities .

Scheme assets are measured at their fair value. Any surplus or

deficit of scheme assets over liabilities is recognised in the

statement of financial position as an asset (surplus) or liability

(deficit). The past service costs, together with the net interest on

the net pension liability or asset, are charged or credited to

operating expenses. Actuarial gains and losses are recognised

in full in the period in which they occur outside the statement

of profit or loss and presented in other comprehensive income

under "Items that will not be reclassified subsequently to the

statement of profit or loss".

Insurance assets resulting from a bulk annuity insurance policy

‘buy-in’ transaction result in the insurance asset exactly

matching the pension liability. A ‘buy-in’ is not a settlement and

the liability is not derecognised as the Group retains ultimate

responsibility for funding the plan.

Share-based payments

The Group operates a number of share-based compensation

plans under which it awards Ordinary Shares and share options

to its employees. Such awards are generally subject to vesting

conditions that can alter the amount of shares to which an

employee is entitled.

Vesting conditions include service conditions (requiring the

employee to complete a specified period of service) and

performance conditions (requiring the Group to meet specified

performance targets).

The fair value of options granted is estimated using valuation

techniques which incorporate exercise price, term, risk-free

interest rates, the current share price and its expected volatility.

The cost of employee services received in exchange for an

award of shares or share options granted is measured by

reference to the fair value of the shares or share options on the

date the award is granted and takes into account non-vesting

conditions and market performance conditions (conditions

related to the market price of the Company's Ordinary Shares).

The cost is expensed on a straight-line basis over the vesting

period (the period during which all the specified vesting

conditions must be satisfied) with a corresponding increase in

equity in an equity-settled award. The cost is adjusted for

vesting conditions (other than market performance conditions)

so as to reflect the number of shares or share options that

actually vest.

The cancellation of an award through failure to meet non-

vesting conditions triggers an immediate expense for any

unrecognised element of the cost of an award.

(V) Income taxes

Current tax

The tax charge or credit represents the proportion of the tax

payable and receivable arising in the current year only.

The current tax charge is based on the taxable profits for the

year as determined in accordance with the relevant tax

legislation, after any adjustments in respect of prior years.

Taxable profit differs from net profit as reported in the

statement of profit or loss because it excludes items of income

or expense that are taxable or deductible in other years and

it further excludes items that are never taxable or deductible.

Provision for taxation is calculated using tax rates that have

been enacted, or substantively enacted, by the statement

of financial position date and is allocated over profits before

taxation or amounts charged or credited to components

of other comprehensive income or equity, as appropriate.

166 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Accounting policies continued

Deferred tax

Deferred taxation is accounted for in full using the statement of

financial position liability method on all temporary differences

between the carrying amount of an asset or liability for

accounting purposes and its carrying amount for tax purposes.

Deferred tax liabilities are generally recognised for all taxable

temporary timing differences and deferred tax assets are

recognised to the extent that it is probable that taxable profits

will be available against which deductible temporary

differences can be utilised.

Deferred tax assets are reviewed at each statement of financial

position date and reduced to the extent that it is probable that

they will not be recovered.

Deferred tax assets and liabilities are calculated at the tax rates

expected to apply when the assets are realised or liabilities are

settled based on laws and rates that have been enacted or

substantively enacted at the statement of financial position

date. Deferred tax is charged or credited in the statement of

profit or loss, except when it relates to items charged or

credited to other comprehensive income or equity, in which

case the deferred tax is also dealt with in other comprehensive

income or directly in equity.

Deferred tax assets and liabilities are offset when there is a

legally enforceable right to set off current tax assets against

current tax liabilities and when they relate to income taxes

levied by the same taxation authority and the Group intends to

settle its current assets and liabilities on a net basis.

(W) Share capital

Ordinary share capital

Incremental external costs directly attributable to the issue of

new shares are shown in equity as a deduction, net of tax, from

the proceeds of the issue and disclosed where material.

Employee share trust shares

Where the Company or its subsidiaries purchase the

Company’s share capital or obtain rights to purchase its share

capital, the consideration paid (including any attributable

transaction costs net of income taxes) is shown as a deduction

from total shareholders’ equity.

Dividends

Interim dividends on Ordinary Shares are recognised in equity

in the period in which they are paid. Final dividends on Ordinary

Shares are recognised when they have been approved at the

Annual General Meeting ("AGM").

(X) Capital instruments

The Group classifies a financial instrument that it issues as a

financial liability or an equity instrument in accordance with the

substance of the contractual arrangement. An instrument is

classified as a liability if it is a contractual obligation to deliver

cash or another financial asset, or to exchange financial assets

or financial liabilities on potentially unfavourable terms, or as

equity if it evidences a residual interest in the assets of the

Group after the deduction of liabilities.

The Tier 1 notes are classified as equity as they have a perpetual

maturity and the Group has full discretion over interest

payments, including ability to defer or cancel interest payments

indefinitely.

(Y) Earnings per share

Basic earnings per share is calculated by dividing the earnings

attributable to the owners of the Company less coupon

payments in respect of Tier 1 notes by the weighted average

number of Ordinary Shares during the period, excluding

Ordinary Shares held as employee trust shares.

Diluted earnings per share is calculated by dividing the

earnings attributable to the owners of the Company less

coupon payments in respect of Tier 1 notes by the weighted

average number of Ordinary Shares during the period,

excluding Ordinary Shares held as employee trust shares,

adjusted for the dilutive potential Ordinary Shares.

(Z) Subsidiaries exemption from audit by parent

guarantee

The following subsidiaries incorporated in the United Kingdom,

are exempt from the requirements relating to the audit of

individual accounts, under s479A-479C of the Companies Act

2006. The parental guarantee is provided by Direct Line

Insurance Group plc.

– Direct Line Group Limited (Registered number: 02811437)

– Finsure Premium Finance Limited (Registered number:

01670887)

– Green Flag Holdings Limited (Registered number: 03577191)

167 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

		2024	2023
	Notes	£m	£m
Insurance revenue	3	4,567.0	3,601.7
Insurance service expenses	3	(4,185.0)	(3,806.3)
Net expense from reinsurance contracts held 1	3	(259.6)	(46.8)
Insurance service result	3	122.4	(251.4)
Total interest income calculated using effective interest rate method	4	226.6	171.8
Other interest and similar income	4	17.4	16.1
Investment fees	4	(8.8)	(9.3)
Investment income	4	235.2	178.6
Total net fair value gains on financial assets held at fair value through profit or loss	4	30.3	127.0
Net fair value gains/(losses) on investment property	4	6.6	(1.9)
Net credit impairment gains/(losses) on financial investments	4	0.2	(0.7)
Investment return	4	272.3	303.0
Net finance expenses from insurance contracts issued	4	(21.0)	(193.8)
Net finance (expenses)/income from reinsurance contracts held	4	(20.2)	28.0
Investment return and net insurance finance result	4	231.1	137.2
Other operating income		20.3	21.8
Other operating expenses	5	(135.3)	(59.6)
Other finance costs	8	(15.4)	(14.5)
(Loss)/gain on disposal of business	9	(4.7)	443.9
Profit before tax		218.4	277.4
Tax charge 2	10	(55.8)	(54.5)
Profit for the year attributable to the owners of the Company		162.6	222.9
Earnings per share:
Basic (pence)	12	11.2	15.9
Diluted (pence)	12	11.1	15.7

Notes:

1. To improve presentation, the Group has opted to combine the net income and expense from reinsurance contracts held into a single item. Prior

period amounts have been re-presented for comparability.

2. Tax on (loss)/gain on disposal of business is included in this figure.

The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.

168 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Consolidated Statement of Profit or Loss

For the year ended 31December 2024

		2024	2023
	Notes:	£m	£m
Profit for the year attributable to the owners of the Company		162.6	222.9
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gain on defined benefit pension scheme	24	0.6	0.1
Fair value gain on equity investments measured at fair value through other comprehensive income	4	1.2	3.3
Realised gain/(loss) on equity investments measured at fair value through other comprehensive income	4	0.4	(0.6)
Tax relating to items that will not be reclassified	20	(0.2)	–
		2.0	2.8
Items that may be reclassified subsequently to profit or loss:
Cash flow hedges		0.2	(0.2)
		0.2	(0.2)
Other comprehensive income for the year net of tax		2.2	2.6
Total comprehensive income for the year attributable to the owners of the Company		164.8	225.5

The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.

169 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Consolidated Statement of Comprehensive Income

For the year ended 31December 2024

		2024	2023
	Notes:	£m	£m
Assets
Goodwill and other intangible assets	15	776.3	818.6
Property, plant and equipment	16	92.7	91.6
Right-of-use assets	17	101.0	96.1
Investment property	18	287.6	277.1
Insurance contract assets	19	5.7	5.4
Reinsurance contract assets	19	1,802.1	1,346.0
Deferred tax assets	20	53.0	56.5
Current tax assets		19.9	82.8
Other receivables		21.8	35.2
Prepayments, accrued income and other assets	21	103.6	101.5
Derivative financial instruments	23	19.1	27.4
Retirement benefit asset	24	0.8	1.3
Financial investments	23	4,343.3	3,691.6
Cash and cash equivalents	25	1,156.0	1,772.2
Assets held for sale	26	12.2	13.9
Total assets		8,795.1	8,417.2
Equity
Shareholders' equity	14	2,137.9	2,058.2
Tier 1 notes	29	346.5	346.5
Total equity		2,484.4	2,404.7
Liabilities
Subordinated liabilities	30	259.1	258.8
Insurance contract liabilities	19	5,086.9	5,238.8
Reinsurance contract liabilities	19	549.5	116.6
Borrowings	25	66.8	82.4
Derivative financial instruments	23	38.7	15.4
Provisions	31	15.6	30.8
Trade and other payables	32	178.9	163.6
Lease liabilities	17	113.7	106.1
Current tax liabilities	20	1.5	–
Total liabilities		6,310.7	6,012.5
Total equity and liabilities		8,795.1	8,417.2

The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.

The financial statements were approved by the Board of Directors and authorised for issue on 3 March 2025 and were signed

on its behalf by:

Jane Poole

Chief Financial Officer

Registration No. 02280426

170 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Consolidated Statement of Financial Position

As at 31December 2024

				Equity	Foreign
	Share	Employee	Capital	investments	exchange			Tier 1
	capital	trust	reserves	revaluation	translation	Retained	Shareholders'	notes	Total
	(note 27)	shares	(note 28)	reserve	reserve	earnings	equity	(note 29)	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2023	143.1	(39.0)	1,456.9	0.9	–	283.4	1,845.3	346.5	2,191.8
Profit for the year	–	–	–	–	–	222.9	222.9	–	222.9
Other comprehensive income/(loss)	–	–	–	2.7	(0.2)	0.1	2.6	–	2.6
Total comprehensive income/(loss) for the year	–	–	–	2.7	(0.2)	223.0	225.5	–	225.5
Dividends and appropriations paid (note 11)	–	–	–	–	–	(16.6)	(16.6)	–	(16.6)
Shares acquired by employee trusts	–	(10.2)	–	–	–	–	(10.2)	–	(10.2)
Credit to equity for equity-settled share-based
payments	–	–	–	–	–	13.9	13.9	–	13.9
Shares distributed by employee trusts	–	19.3	–	–	–	(19.3)	–	–	–
Tax on share-based payments	–	–	–	–	–	0.3	0.3	–	0.3
Total transactions with equity holders	–	9.1	–	–	–	(21.7)	(12.6)	–	(12.6)
Balance at 31 December 2023	143.1	(29.9)	1,456.9	3.6	(0.2)	484.7	2,058.2	346.5	2,404.7
Profit for the year	–	–	–	–	–	162.6	162.6	–	162.6
Other comprehensive income	–	–	–	1.4	0.2	0.6	2.2	–	2.2
Total comprehensive income for the year	–	–	–	1.4	0.2	163.2	164.8	–	164.8
Dividends and appropriations paid (note 11)	–	–	–	–	–	(94.8)	(94.8)	–	(94.8)
Shares acquired by employee trusts	–	(7.2)	–	–	–	–	(7.2)	–	(7.2)
Credit to equity for equity-settled share-based
payments	–	–	–	–	–	14.6	14.6	–	14.6
Shares distributed by employee trusts	–	17.6	–	–	–	(17.6)	–	–	–
Tax on share-based payments	–	–	–	–	–	2.3	2.3	–	2.3
Total transactions with equity holders	–	10.4	–	–	–	(95.5)	(85.1)	–	(85.1)
Balance at 31 December 2024	143.1	(19.5)	1,456.9	5.0	–	552.4	2,137.9	346.5	2,484.4

The accompanying notes on pages 173 to 229 form an integral part of these consolidated financial statements.

171 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Consolidated Statement of Changes in Equity

For the year ended 31December 2024

		2024	2023
	Notes:	£m	£m
Cash (used in)/generated from operating activities before investment of insurance assets	34	(31.0)	132.0
Cash (used in)/generated from investment of insurance assets	34	(347.1)	304.4
Cash (used in)/generated from operating activities		(378.1)	436.4
Taxes received/(paid)		13.9	(30.9)
Cash flow hedges		(0.3)	(0.6)
Net cash (used in)/generated from operating activities		(364.5)	404.9
Cash flows (used in)/generated from investing activities
Payments for acquisition of intangible assets	15	(93.2)	(124.1)
Purchases of property, plant and equipment	16	(13.3)	(18.9)
Proceeds on disposals of assets held for sale		–	21.9
Proceeds from disposal of business	9	–	520.0
Net cash inflow/(outflow) from acquisition of businesses		–	(0.6)
Net cash (used in)/generated from investing activities		(106.5)	398.3
Cash flows used in financing activities
Dividends and appropriations paid	11	(94.8)	(16.6)
Other finance costs (including lease interest)		(15.1)	(14.2)
Principal element of lease payments		(12.5)	(10.8)
Purchase of employee trust shares		(7.2)	(10.2)
Net cash used in financing activities		(129.6)	(51.8)
Net (decrease)/increase financing activities		(600.6)	751.4
Cash and cash equivalents at the beginning of the year	25	1,689.8	938.4
Cash and cash equivalents at the end of the year	25	1,089.2	1,689.8

The attached notes on pages 173 to 229 form an integral part of these consolidated financial statements.

172 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Consolidated Cash Flow Statement

For the year ended 31December 2024

1. Risk management

1.1 The risk management framework

The Risk Management Framework sets out, at a high level, the Group's approach to setting risk strategy, and managing risks to the

strategic objectives and day-to-day operations of the business. Further information can be found in the Risk management section

of the Strategic report on page 38.

1.2 Risk and capital management modelling

The Board has ultimate responsibility for ensuring that the Group has sufficient funds to meet its liabilities as they fall due. The

Group carries out detailed modelling of its assets, liabilities and the key risks to which these are exposed. This modelling includes

the Group's own assessment of its solvency capital requirement ("SCR"), using its partial internal model approved by the PRA in

2016. The SCR quantifies the insurance, market, credit and operational risks that its regulated entities are undertaking.

The Board maintains an active and integral role in the SCR process and reviews, challenges and approves its results.

1.3 Principal risks from insurance activities and use of financial instruments

The Risk management section of the Strategic report sets out the material risks assessed by the Group as principal risks and

provides details of emerging risks that the Group has considered as part of its emerging risk process. Also detailed in the section

below is the Group's risk exposure arising from its insurance activities and use of financial instruments specifically in respect of

insurance risk, market risk, credit risk, operational risk and liquidity risk.

Geopolitical Risks

The global and UK economic environment remains uncertain, influenced by heightened geopolitical tensions, particularly the

ongoing conflicts in the Middle East and Ukraine. In the UK, these geopolitical risks may impact government economic policies,

with potential effects on the Group through claims inflation, rising living costs, and interest rate fluctuations affecting the Group's

investment portfolio. These factors may also influence the Group's ability to meet the evolving needs and preferences of its target

markets. The trend in claims inflation remains uncertain and continues to be closely monitored.

A geopolitical event may also increase the risk of a cyber-attack on critical infrastructure, disruption in supply chains or trigger a

need to onshore outsourced activities. Impacts on supply chains and operations could cause significant disruption to business

processes leading to an increased potential for customer and conduct risk, and a distraction from other strategic business priorities.

The Group's Investment and Treasury function continues to assess the impact of adverse economic conditions on its investment

portfolio holdings as part of its ongoing investment management oversight.

Claims inflation

The insurance sectors in which the Group operates are affected by inflation. In particular, reserves and claims from policies

underwritten are exposed to the risk of claims inflation which can increase the costs of car parts, used car prices, services, care

worker labour rates and construction materials. In recent years, there have been significant increases in the Group's claims for

motor, home and commercial property due to high levels of claims inflation. Although this has subsided, the uncertainty from

future inflation volatility and its outlook continues to be closely monitored. Details of the Group's sensitivity to claims inflation are

included in note 1.3.1.

Environmental

The Group recognises that the effects of climate change are wide-ranging, and the Group reflects the effects of climate change in

the drivers of the risks defined in the Group Risk Taxonomy. This has the effect of embedding the management of climate related

risks in the normal risk management processes for managing risks across the Group’s risk profile. In addition, the Group Risk

Taxonomy includes an environmental, social, and governance risk that provides coverage of the operational and strategic aspects

of climate change that are not addressed within other core risk types.

The Group has continued to enhance its climate risk management and governance during 2024 as it works through the actions

included in the Group Climate Action Roadmap. The roadmap sets out a range of actions, implemented by 2025 to further

integrate climate risk management across the business and to build additional capabilities in areas such as climate risk modelling

and scenario analysis.

1.3.1 Insurance risk

The Group is exposed to insurance risk as a primary consequence of its business. Key insurance risks focus on the risk of loss

due to fluctuations in the timings, amount, frequency and severity of an insured event relative to the expectations at the time

of underwriting.

The Group is mainly exposed to the following insurance risks:

Reserve risk

This is the risk of understatement or overstatement of claims reserves arising from:

– the uncertain nature of claims, in particular large bodily injury claims;

– the unexpected future impact of socio-economic trends or regulatory changes, for example changes to the Ogden discount rate;

– data issues and changes to the claims reporting process;

– operational failures;

– failure to recognise claims trends in the market including a slow-down in the processing of recoveries and liabilities with third

party insurers which increases the estimation risk of these amounts; and

– changes in underwriting and business written so that past trends are not necessarily a predictor of the future.

Understatement of reserves may result in not being able to pay claims when they fall due. Alternatively, overstatement of reserves

can lead to a surplus of funds being retained resulting in opportunity cost; for example insufficient resource to pursue strategic

projects and develop the business.

173 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.1 Insurance risk continued

Reserve risk is managed through a range of processes and controls:

– regular reviews of the claims and premiums, in line with IFRS 17 requirements for the main classes of business by the internal

actuarial team;

– the use of external actuaries to review periodically the actuarial best estimate reserves produced internally, either through peer

review or through provision of independent reserve estimates;

– accompanying reserve reviews with actuarial assessment of the uncertainties through a variety of techniques including

bootstrapping

and scenario analysis;

– use of reinsurance programmes, through motor, liability, property catastrophe and travel, which are renewable annually;

– oversight of the reserving process by relevant senior management and the Board;

– quarterly reconciliation of the data used in the actuarial reviews against general ledger data and reconciliation of the claims data

history against the equivalent data from prior reviews; and

– regular assessment of the uncertainty in the reserves to help set the risk adjustment within the liability for incurred claims.

The Group's reserves are subject to the risk of retrospective changes in judicial conditions such as changes in the Ogden discount

rate. Detailed information on the Ogden discount rate is provided in note 19.4.

Uncertainty in claims reserves estimation is larger for claims such as PPOs for which annually indexed payments are made, typically

over the lifetime of the injured party. Under IFRS 17 all claims reserves are held on a discounted basis and so are sensitive to

changes in the discount rate, however this sensitivity tends to be more significant to the Group's PPO reserves given their longer

duration.

There is the risk that claims are reserved or paid inappropriately, including the timing of such activity. However, there are claims

management controls in place to mitigate this risk, as outlined below:

– claims are managed utilising a range of IT system-driven controls coupled with manual processes outlined in detailed policies

and procedures to ensure claims are handled in an appropriate, timely and accurate manner;

– each Reserving exercise for on-going business includes meetings with Pricing, Underwriting and Claims to ensure that any

operational changes are understood with appropriate adjustments made;

– each member of staff has a specified handling authority, with controls preventing them handling or paying claims outside their

authority, as well as controls to mitigate the risk of paying invalid claims. In addition, there are various outsourced claims handling

arrangements, all of which are monitored closely by management, with similar principles applying in terms of the controls and

procedures;

– loss adjusters are used in certain circumstances to handle claims to conclusion. This involves liaising with the policyholder, third

parties, suppliers and the Claims Function;

– specialist bodily injury claims teams are responsible for handling these types of losses, with the nature of handling dependent on

the level and type of claim. Claims exceeding a certain threshold are referred to the technical and large loss teams who also deal

with all other claim types above defined limits or within specific criteria; and

– a process is in place to deal with major weather and other catastrophic events, known as the 'Surge Demand Plan'. A surge is the

collective name given to an incident which significantly increases the volume of claims reported to the Group's Claims Function.

The plan covers surge demand triggers, stages of incident, operational impact, communication and management information

monitoring of the plan.

Note:

1. See glossary on pages 238 to 241 for definitions.

174 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The table below provides a sensitivity analysis of the potential net impact of a change in a single factor (for example the illiquidity

premium ("ILP")) with all other assumptions left unchanged. Other potential risks beyond the ones described could have additional

financial impacts on the Group.

		Increase/(decrease) in profit		Increase/(decrease) in profit
		before tax and equity gross of		before tax and equity net of
	reinsurance 1,2		reinsurance 1,2
	2024	2023	2024	2023
At 31 December	£m	£m	£m	£m
Discount curve - PPOs 3
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points	87.0	95.0	38.5	39.0
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points	(115.1)	(127.8)	(51.4)	(52.1)
Discount curve - other claims 4
Impact of an increase in the ILP of the discount rate used in the calculation
of present values of 100 basis points	65.1	55.9	41.3	37.2
Impact of a decrease in the ILP of the discount rate used in the calculation
of present values of 100 basis points	(68.3)	(58.6)	(43.2)	(38.9)
Ogden discount rate 5
Impact of the Group reserving at a discount rate of 1.5% compared to 0.5%
(2023: 0.75% compared to minus 0.25%)	143.6	105.1	57.7	48.1
Impact of the Group reserving at a discount rate of minus 0.5% compared
to 0.5% (2023: minus 1.25% compared to minus 0.25%)	(204.9)	(220.6)	(73.8)	(97.0)
Claims inflation
Impact of a decrease in claims inflation by 200 basis points for two
consecutive years	129.7	112.8	73.9	71.7
Impact of an increase in claims inflation by 200 basis points for two
consecutive years	(131.7)	(114.6)	(75.0)	(72.8)
Risk adjustment (restated) 6
Impact of a risk adjustment at the 70th percentile compared to the booked
risk adjustment at the 75th percentile	52.3	52.3	26.9	28.9
Impact of a risk adjustment at the 80th percentile compared to the booked
risk adjustment at the 75th percentile	(61.4)	(60.5)	(30.2)	(33.9)

The PPO sensitivity above is calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves

as at 31 December. It does not take into account any second order impacts such as changes in PPO propensity or reinsurance bad

debt assumptions.

Notes:

1. These sensitivities exclude the impact of taxation.

2. These sensitivities reflect one-off impacts at the statement of financial position date and should not be interpreted as predictions.

3. The sensitivities relating to an increase or decrease in the discount rate used for PPOs illustrate a movement in the time value of money. The PPO

sensitivity has been calculated on the direct impact of the change in the discount rate with all other factors remaining unchanged. The sensitivity is

calculated on the basis of a change in the discount rate used for the actuarial best estimate reserves as at 31 December. It does not take into

account any second order impacts such as changes in PPO propensity or reinsurance bad debt assumptions.

4. The sensitivities relating to an increase or decrease in the yield curve used to discount all reserves excluding PPOs illustrate a movement in the

time value of money from the assumed level at the statement of financial position dates. The sensitivity has been calculated on the direct impact of

the change in the discount curve with all other factors remaining unchanged.

5. Ogden discount rate sensitivity has been calculated on the direct impact of a permanent change in the discount rate in England and Wales with

all other factors remaining unchanged.

6. The risk adjustment sensitivities are with respect to the discounted risk adjustment at the statement of financial position dates, with the year-end

2023 sensitivities having been restated from an undiscounted basis as reported in the Group's 2023 Annual Report and Accounts.

175 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.1 Insurance risk continued

Underwriting risk

This is the risk that future claims experience on business written is materially different from the results expected, resulting in

current-year losses. The Group predominantly underwrites personal lines insurance including motor, residential property, roadside

assistance, creditor, travel and pet business. The launch of Direct Line on Price Comparison Websites ("PCWs") will increase the

Group’s existing exposure to personal lines motor business written through price comparison websites (previously obtained

through the Churchill and Privilege brands).The Group also underwrites commercial risks primarily for low-to-medium risk trades

within the small and medium-sized enterprises market. Contracts are typically issued on an annual basis which means that the

Group's liability usually extends for a 12-month period, after which the Group is entitled to decline to renew or can revise renewal

terms by amending the premium or other policy terms and conditions such as the excess as appropriate. Since 2023, the Group also

underwrites vehicle insurance under a fleet arrangement for the Motability Scheme that is reviewed and repriced every 6 months.

The Solvency II definition of underwriting risk includes catastrophe risk and the risk of loss, or of adverse change in the value of the

insurance liabilities resulting from significant uncertainty of pricing, underwriting and provisioning assumptions related to extreme

or exceptional circumstances.

The key underwriting risks relating to climate change today are UK floods and major UK windstorms. The Group recognises that

climate change may impact its business over the longer term. In particular, there is a risk that climate change affects the frequency

and severity of extreme weather events (physical risk), which may change the Group's view of underwriting risk, reinsurance and

pricing. The Group will continue to develop its risk management systems and monitoring tools over 2025 in line with the Group's

Climate Risk Roadmap. Low-frequency, high-severity weather losses are significantly mitigated by the catastrophe reinsurance

programme, the ceding of Home high flood risks to Flood Re, and the commercial direct underwriting strategy which actively

reduces high flood risk exposure. The Group expects these specific risks to materialise in the medium to longer term (see page 60

for definition). Furthermore, there is a risk that the Group's insurance products will not meet its customers' needs as a result of

changes in market dynamics and customer behaviour in relation to climate change, for example a rapid shift towards electric

vehicle usage. The Group anticipates that its continued strategic and operational response to the transition to a lower-carbon

economy will support mitigation of these risks and the associated impacts in the long term.

When underwriting policies, the Group is subject to concentration risk in a variety of forms, including:

– geographic concentration risk – the Group's business is wholly written in the UK general insurance market. The Group purchases

a catastrophe reinsurance programme to protect against a modelled 1-in-200 year windstorm/storm surge and flood losses. The

programme has been renewed on 1 January 2025 and will cover a 12 month period; and

– product concentration risk – the Group offers a diversified portfolio of products and a variety of brands sold through a range of

distribution channels to its customers.

It is important to note that none of these risk categories are independent of the others and that giving due consideration to the

relationship between these risks is an important aspect of the effective management of insurance risk.

Pricing risk

This is the risk of economic loss arising from business being incorrectly priced or inappropriately underwritten. Pricing risk may

occur due to errors in pricing models, pricing or underwriting rule change implementation or through inappropriately accepting

business. The Group manages these risks through the operational controls including controls around model build, data usage,

permitted factors and rate deployment. The effectiveness of these controls is assessed through the Risk and Control Assessment

process and control testing. Governance around pricing changes includes the Model Governance Board which approves pricing

models for use and pricing committees that approve pricing and underwriting change deployment and monitor rate performance.

Reinsurance risk

This is the risk of inappropriate selection and/or placement of reinsurance arrangements, with either individual or multiple

reinsurers, which renders the transfer of insurance risk to the reinsurer(s) inappropriate and/or ineffective.

Other risks include:

– reinsurance credit risk – the management of concentration of credit exposure to any given counterparty is controlled by the

Group Reinsurance Credit Risk Framework;

– reinsurance capacity being reduced and/or withdrawn;

– underwriting risk appetite and reinsurance contract terms not being aligned;

– reinsurance contract terms being inappropriate or ineffective resulting in classes or types of business not being

appropriately reinsured;

– non-adherence to the reinsurance policy terms and conditions, in terms of both policy management and claims not being

handled within the reinsurance contract terms and conditions, or paid on an ex-gratia basis, resulting in reinsurance recoveries

not being made in full;

– inappropriate or inaccurate management information and/or modelling being used to determine the value for money and

purchasing of reinsurance (including aggregate modelling); and

– changes in the external legal, regulatory, social or economic environment (including changes resulting from climate change)

altering the definition and application of reinsurance policy wordings or the effectiveness or value for money of reinsurance.

176 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The Group uses a range of external reinsurance to:

– protect its insurance results against the impact of major individual or catastrophic events such as windstorms, storm surge or floods;

– protect its insurance results against unexpected volumes of, or adverse trends in, individual large claims, in order to reduce

volatility and to improve stability of earnings;

– facilitate effective capital management and protection of the Group's capital position; and

– transfer risk that is not within its current risk appetite or where there is limited expertise or regulatory constraints on underwriting

that business.

The Group may also utilise reinsurance in respect of risks that are within risk appetite but where there could be other reasons

to reinsure. The Group does not have a significant exposure to a single reinsurer .

1.3.2 Market risk

Market risk is the risk of loss resulting from fluctuations in the level and in the volatility of market prices of assets, liabilities

and financial instruments.

The Group is mainly exposed to the following market risk factors:

– spread risk;

– interest rate risk;

– property risk; and

– currency risk.

The Group has clearly defined market risk policies which include a range of parameters that are subject to approval by the

Investment Committee. These policies also set out the principles to which the Group should adhere when considering investment

strategy, including risk appetites and capital efficiency.

The Group monitors its market risk exposure on a daily basis and has established an aggregate exposure limit consistent with its

risk objective to maintain capital adequacy. Interdependencies across risk factors have also been considered within the aggregate

exposure limit. The allocation of the Group's investments across asset classes has been approved by the Investment Committee.

The Committee also 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.

In 2024, the Group continued with the implementation of the proposals from a Strategic Asset Allocation exercise undertaken

during Q2 2023 and approved by the Investment Committee. This included moving excess cash exposures to increasing the

proportions invested in US credit holdings and investing in a new asset class, index linked gilts to partially match the PPOs.

The long-term PPO ALM strategy is under review and the Group may undertake additional investments to further hedge PPOs.

The investment management objectives are to:

– maintain the safety of the portfolio's principal both in economic terms and from a capital, accounting and reporting perspective;

– maintain sufficient liquidity to provide cash requirements for operations, including in the event of a catastrophe; and

– maximise the portfolio's total return within the constraints of the other objectives and the limits defined by the investment

guidelines and capital allocation.

The Investment Committee has agreed long-term targets for the investment portfolio in relation to supporting the Group's

objectives on climate change. These are: ensuring the Group's entire investment portfolio is net zero emissions by 2050 in line with

the aims of the Race to Zero campaign; and an interim target of a 50% reduction in weighted average greenhouse gas emissions

intensity by 2030 within the Group's corporate bonds portfolio, the largest part of its investment portfolio, compared to a 2020

baseline. See page 53 for more information on investment portfolio targets, exclusions and preferences and pages 51 to 53 for the

Group's approved Science-Based Targets.

The Group has a property portfolio and invests in index linked gilts and infrastructure debt to generate a real return which, from

an asset and liability matching perspective, is used to offset the liability arising from longer duration PPOs.

When setting the strategic asset allocation, the Group is subject to concentration risk in a variety of forms including:

– large exposures to individual assets (either bond issuers or deposit-taking institutions); and

– large exposures to different assets where movements in values and ratings are closely correlated.

Concentration risk on investments arises through excessive exposure to particular industry sectors, groups of business

undertakings or similar activities. The Group may suffer significant losses in its investment portfolio as a result of over-exposure

to particular sectors engaged in similar activities or having similar economic features that would cause their ability to meet

contractual obligations to be similarly affected by changes in economic, political or other conditions.

177 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.2 Market risk continued

The table below analyses the distribution of debt securities by geographical area (commercial real estate loans and infrastructure

debt are all within the UK):

		Local			Debt
	Corporate	government	Sovereign	Supranational	securities total
At 31 December 2024	£m	£m	£m	£m	£m
Australia	131.2	–	–	–	131.2
Austria	4.9	–	–	–	4.9
Belgium	30.0	12.0	–	–	42.0
Canada	90.1	–	–	–	90.1
Cayman Islands	0.4	–	–	–	0.4
China	6.6	–	–	–	6.6
Denmark	19.7	–	–	–	19.7
Finland	13.2	–	–	–	13.2
France	241.8	–	–	–	241.8
Germany	174.0	–	–	–	174.0
Hong Kong	8.2	–	–	–	8.2
Ireland	3.2	–	–	–	3.2
Italy	25.5	–	–	–	25.5
Japan	58.8	–	–	–	58.8
Luxembourg	5.1	–	–	–	5.1
Mexico	9.1	–	–	–	9.1
Netherlands	118.5	–	–	–	118.5
New Zealand	0.3	–	–	–	0.3
Norway	–	1.0	–	–	1.0
South Africa	6.4	–	–	–	6.4
Spain	57.9	–	–	–	57.9
Sweden	26.4	–	–	–	26.4
Switzerland	57.2	–	–	–	57.2
United Kingdom	813.3	–	746.0	–	1,559.3
USA	1,314.9	–	–	–	1,314.9
Supranational	–	–	–	17.9	17.9
Total	3,216.7	13.0	746.0	17.9	3,993.6

178 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The table below analyses the distribution of debt securities by geographical area (commercial real estate loans and infrastructure

debt are all within the UK):

		Local			Debt securities
	Corporate	government	Sovereign	Supranational	total
At 31 December 2023	£m	£m	£m	£m	£m
Australia	119.8	–	–	–	119.8
Austria	3.1	–	–	–	3.1
Belgium	39.3	–	–	–	39.3
Canada	48.2	–	–	–	48.2
China	0.6	–	–	–	0.6
Denmark	18.2	–	–	–	18.2
Finland	8.9	–	–	–	8.9
France	229.3	–	–	–	229.3
Germany	140.8	–	–	–	140.8
Hong Kong	0.8	–	–	–	0.8
Italy	17.4	–	–	–	17.4
Japan	20.8	–	–	–	20.8
Luxembourg	4.8	–	–	–	4.8
Mexico	7.1	–	–	–	7.1
Netherlands	105.4	–	–	–	105.4
Norway	0.5	0.9	–	–	1.4
Portugal	6.5	–	–	–	6.5
South Africa	6.4	–	–	–	6.4
Spain	66.0	–	–	–	66.0
Sweden	23.4	–	–	–	23.4
Switzerland	55.0	–	–	–	55.0
United Kingdom	745.4	–	657.1	–	1,402.5
USA	933.7	–	23.7	–	957.4
Supranational	–	–	–	25.6	25.6
Total	2,601.4	0.9	680.8	25.6	3,308.7

The table below analyses the distribution of debt securities by industry sector classifications:

	2024		2023
At 31 December	£m	%	£m	%
Basic materials	67.1	2%	43.0	1%
Communications	156.6	4%	135.7	4%
Consumer, cyclical	329.3	8%	244.2	7%
Consumer, non-cyclical	352.3	9%	216.2	7%
Diversified	16.8	0%	16.9	1%
Energy	77.9	3%	81.6	3%
Financial	1,678.8	42%	1,424.5	43%
Industrial	220.2	6%	145.8	4%
Sovereign, supranational and local government	776.9	19%	707.3	21%
Technology	97.4	2%	65.6	2%
Transport	13.1	0%	12.8	0%
Utilities	207.2	5%	215.1	7%
Total	3,993.6	100%	3,308.7	100%

179 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.2 Market risk continued

The table below analyses the distribution of infrastructure debt by industry sector classifications:

	2024		2023
At 31 December	£m	%	£m	%
Social, of which:
Education	86.7	46%	93.0	44%
Health	56.4	30%	60.5	28%
Other	41.5	22%	43.9	20%
Transport	4.1	2%	16.8	8%
Total	188.7	100%	214.2	100%

The Group uses its partial internal model to determine its regulatory capital requirements and monitors its market risk exposure

based on a 99.5% value-at-risk measure. The Group also conducts market risk stress and scenario testing to determine the

economic impact of specific severe market conditions. The results of this analysis are used to enhance the Group's understanding

of market risk. The market risk minimum control standard, which is part of the Group's Risk Policy and Minimum Control Standard

Framework, explicitly prohibits the use of derivatives for speculative or gearing purposes. However, the Group is able to and does

use derivatives to hedge its currency risk and interest rate risk exposures in some mandates.

Spread risk

This is the risk of loss from the sensitivity of the value of assets and investments to changes in the level or in the volatility of credit

spreads over the risk-free interest rate term structure. The level of spread is the difference between the risk-free rate and actual rate

paid on the asset, with larger spreads being associated with higher-risk assets. The Group is exposed to spread risk through its asset

portfolio, most notably through its investment in corporate bonds.

Net interest rate risk

This is the risk of loss from changes in the term structure of interest rates or interest rate volatility which impact assets and liabilities.

The Group's interest rate risk arises mainly from its debt, floating interest rate investments and assets and liabilities exposed to fixed

interest rates.

The Group has subordinated Tier 2 notes with fixed coupon rates with a nominal value of £260 million that were issued on 5 June

2020 and perpetual Tier 1 notes with fixed coupon rates with a nominal value of £350 million that were issued on 7 December 2017.

The Group also invests in floating rate debt securities, whose investment income is influenced by the movement of the short-term

interest rate. A movement of the short-term interest rate will affect the expected return on these investments.

The market value of the Group’s financial investments with fixed coupons is affected by the movement of interest rates. At 31

December 2024, £227.1m (2023: £419.4 million) fixed rate investment grade US dollar and Euro corporate debt securities were

hedged using interest rate swaps.

The Group is exposed to the following interest rate benchmarks within its hedging relationships: GBP SONIA, USD SOFR and

EURIBOR. The hedged items include holdings of US dollar and Euro denominated fixed rate debt securities.

Property risk

This is the risk of loss arising from sensitivity of assets and financial investments to the level or volatility of market prices, rental

yields, or occupancy rates of properties. At 31 December 2024, the value of these property investments was £287.6 million (2023:

£277.1 million). The property investments are located in the UK.

Currency risk

This is the risk of loss from changes in the level or volatility of currency exchange rates. Exposure to currency risk is generated

by the Group's investments in US dollar and Euro denominated debt bonds.

The Group maintains exposure to US dollar securities through £1,214.0 million (2023: £763.1 million) of investments in US dollar

bonds and Euro securities through £232.8 million (2023: £219.1 million) of Euro bonds. The foreign currency exposure of these

investments is hedged by foreign currency forward contracts, maintaining a minimal unhedged currency exposure on these

portfolios, as well as a low basis risk on the hedging contracts.

A limited exposure to currency risk also arises through the Group's insurance and other contractual liabilities. Currency risk is not

material at Group level.

180 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

Use of derivatives

The Group uses derivatives to hedge against interest rate and currency risk.

The tables below analyse the maturity of the Group's derivative assets and liabilities:

	Notional
	amounts		Maturity and fair value
		Less than 1
		year	1 – 5 years	Over 5 years	Total
At 31 December 2024	£m	£m	£m	£m	£m
Derivative assets
At fair value through profit or loss
Foreign exchange contracts (forwards)	907.4	14.9	–	–	14.9
Interest rate swaps	106.7	–	0.9	3.3	4.2
Designated as hedging instruments
Foreign exchange contracts (forwards)	24.0	–	–	–	–
Total	1,038.1	14.9	0.9	3.3	19.1

	Notional
	amounts		Maturity and fair value
		Less than 1
		year	1 – 5 years	Over 5 years	Total
At 31 December 2024	£m	£m	£m	£m	£m
Derivative liabilities
At fair value through profit or loss
Foreign exchange contracts (forwards)	2,007.0	36.4	–	–	36.4
Interest rate swaps	93.3	–	0.7	1.6	2.3
Total	2,100.3	36.4	0.7	1.6	38.7

	Notional
	amounts		Maturity and fair value
		Less than 1
		year	1 – 5 years	Over 5 years	Total
At 31 December 2023	£m	£m	£m	£m	£m
Derivative assets
At fair value through profit or loss
Foreign exchange contracts (forwards)	1,568.7	27.1	–	–	27.1
Interest rate swaps	49.2	0.1	0.2	–	0.3
Total	1,617.9	27.2	0.2	–	27.4

	Notional
	amounts		Maturity and fair value
		Less than 1
		year	1 – 5 years	Over 5 years	Total
At 31 December 2023	£m	£m	£m	£m	£m
Derivative liabilities
At fair value through profit or loss
Foreign exchange contracts (forwards)	908.4	8.2	–	–	8.2
Interest rate swaps	252.8	–	1.7	5.2	6.9
Designated as hedging instruments
Foreign exchange contracts (forwards)	14.2	0.3	–	–	0.3
Total	1,175.4	8.5	1.7	5.2	15.4

181 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.2 Market risk continued

Sensitivity analysis

The table below provides a sensitivity analysis of the impact on financial investments and derivatives of a change in a single factor

that is reasonably possible, with all other assumptions left unchanged. Other potential risks beyond the ones described in the table

could have an additional financial impact on the Group.

		Increase/(decrease) in profit
		before tax 1 at 31 December
	2024	2023
	£m	£m
Spread
Impact of a 100 basis points increase in spreads on financial investments 2	(80.5)	(72.1)
Interest rate
Impact of a 100 basis points increase in interest rates on financial investments and derivatives 2,3	(108.7)	(62.2)
Investment property
Impact of a 15% decrease in property markets	(43.1)	(41.6)

Notes:

1. These sensitivities exclude the impact of taxation and have not considered the impact of the general market changes on the value of the Group's

insurance liabilities. They reflect one-off impacts at 31 December and should not be interpreted as predictions.

2. The impact on profit or loss does not reflect any fair value movement in infrastructure debt, commercial real estate loans and private placement

debt securities that would not be recorded in the financial statements under IFRS 9 as they are classified as loans and receivables and private

placement respectively, which are carried at amortised cost. It is estimated that a fair value reduction in these asset categories resulting from a 100

basis points increase in credit spreads would have been £10.2 million (2023: £11.7 million) and a 100 basis points increase in interest rates would have

been £2.1 million (2023: £2.8 million).

3. The sensitivities set out above reflect one-off impacts at 31 December, with the exception of the statement of profit or loss 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.

The Group has a number of open interest rate and foreign exchange derivative positions. Collateral management arrangements

are in place for significant counterparty exposures. At 31 December 2024, the Group has pledged £8.3 million in cash (2023:

£16.6 million) to cover initial margins and out-of-the-money derivative positions. At 31 December 2024, counterparties have pledged

£7.6 million in cash (2023: £12.8 million in cash) to the Group to cover in-the-money derivative positions.

The terms and conditions of collateral pledged for both assets and liabilities are market-standard. When securities are pledged they

are required to be readily convertible to cash, and as such no policy has been established for the disposal of assets not readily

convertible into cash.

1.3.3 Credit risk

This is the risk of loss resulting from defaults in obligations due and/or changes in credit standing of either issuers of securities,

counterparties or any debtors to which the Group is exposed. The Group's credit risk policy sets out the assessment and

determination of what constitutes credit risk for the Group. The Group is mainly exposed to counterparty default risk.

Counterparty default risk

This is the risk of loss from unexpected default or deterioration in the credit standing of the counterparties and debtors of Group

undertakings, and is monitored at Group Level.

An account is deemed to have defaulted when the Group considers that a customer is in significant financial difficulty or that

the customer meets certain quantitative and qualitative criteria regarding their ability to make contractual payments when due.

This includes instances where the customer makes a declaration of significant financial difficulty, or the account has been

transferred to recoveries and the relationship is terminated.

The main sources of counterparty default risk for the Group are:

– investments – this arises from the investment of funds in a range of investment vehicles permitted by the investment policy;

– reinsurance recoveries – this represents amounts receivable from the reinsurer to cover claims paid to policyholders. PPOs have

the potential to increase the ultimate value of a claim and, by their very nature, to increase significantly the length of time to

reach final payment. This can increase reinsurance counterparty default risk in terms of both amount and longevity;

– commercial credit – this arises as brokers collect premiums on behalf of the Group; and

– consumer credit – exposure from offering monthly instalments on annual insurance contracts.

The Group cedes insurance risk to reinsurers but, in return, assumes counterparty default risk against recoveries as it remains liable

for claims payments to policyholders in case of reinsurer default. The financial security of the Group's panel of reinsurers is therefore

important and both the quality and amount of the assumed counterparty default risk are subject to an approval process whereby

reinsurance is only purchased from reinsurers that hold a credit rating of at least A– for short tail reinsurance and the majority

of long tail reinsurance is to be purchased from reinsurers rated A+ or above. Exceptions to the above or strategic reinsurance

arrangements are assessed on a case-by-case basis and follow internal credit risk processes. The reinsurance team monitors the

credit rating of the Group's current and potential reinsurance counterparties on a regular basis. The Group aims to deal with a diverse

range of reinsurers on its contracts to mitigate the credit and/or non-payment risks associated with its reinsurance exposures.

182 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The following tables analyse the carrying value of the Group's financial, insurance and reinsurance contracts assets that bear

counterparty default risk between those assets that have not been impaired by age in relation to due date and those that have

been impaired.

The Group's maximum exposure to credit risk is represented by the carrying value of financial investments, cash and cash

equivalent, the carrying value of loans and advances and the excess of reinsurance assets over amounts owed to reinsurers under

funds withheld arrangements which are settled on a net basis. In addition, the Group operates a 100% quota share reinsurance

treaty on its Brokered commercial business which was sold to RSA Insurance Limited on a funds withheld basis, which substantially

reduces credit risk, as the Group retains the cash received from policyholders. The Group does not use credit derivatives or similar

instruments to mitigate exposure.

All financial investments held at amortised cost have been assessed for impairment using the ECL model under IFRS 9.

The assessment has been made on mark to model credit ratings which would adopt similar processes to those applied by external

rating agencies on corporate debt securities.

Infrastructure debt and commercial real estate loans are categorised as loans and receivables and thus reported within the

statutory accounts at amortised cost. The credit rating of these loans are monitored regularly and are considered low risk under

IFRS 9, with the majority remaining within stage 1 and a 12 month ECL for the impairment provision. Any loans downgraded to

below BBB or any sub BBB loan that is downgraded by 1 full credit rating, are considered by the Group to have significantly

increased in credit risk, and therefore are stage 2 or stage 3 under IFRS 9. Credit ratings for Investment assets held at FVTPL are

market observable from a combination of external credit ratings agencies.

				Carrying value
				in the
	Neither past			statement of
	due nor	Past due 1 – 90	Past due more	financial
	impaired	days	than 90 days	position
At 31 December 2024	£m	£m	£m	£m
Reinsurance contract assets 1	1,785.9	8.4	7.8	1,802.1
Other receivables	16.6	2.3	2.9	21.8
Derivative financial instruments	19.1	–	–	19.1
Debt securities	3,993.6	–	–	3,993.6
Infrastructure debt	188.7	–	–	188.7
Commercial real estate loans	135.5	–	–	135.5
Cash and cash equivalents 2	1,156.0	–	–	1,156.0
Other loans	5.4	–	–	5.4
Total	7,300.8	10.7	10.7	7,322.2

				Carrying value
				in the
	Neither past			statement of
	due nor	Past due 1 – 90	Past due more	financial
	impaired	days	than 90 days	position
At 31 December 2023	£m	£m	£m	£m
Reinsurance contract assets 1	1,340.4	5.5	0.1	1,346.0
Other receivables	32.9	2.0	0.3	35.2
Derivative financial instruments	27.4	–	–	27.4
Debt securities	3,308.7	–	–	3,308.7
Infrastructure debt	214.2	–	–	214.2
Commercial real estate loans	145.9	–	–	145.9
Cash and cash equivalents 2	1,772.2	–	–	1,772.2
Other loans	3.1	–	–	3.1
Total	6,844.8	7.5	0.4	6,852.7

Notes:

1. Before the recognition of the £298.1 million (2023: £241.8 million) funds withheld amount associated with the quota share arrangement with RSA

Insurance Limited.

2. This represents money market funds with no notice period for withdrawal and cash at bank and in hand.

The Group's maximum exposure to credit risk from insurance contract assets is £5.7 million (2023: £5.4 million). The Group's

maximum exposure to credit risk from reinsurance contract assets is the excess of reinsurance assets over amounts owed to

reinsurers under funds withheld arrangements which are settled on a net basis, being £1,487.8 million (2023: £1,098.6 million).

183 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.3 Credit risk continued

The tables below analyse the credit quality of debt securities that are neither past due nor impaired:

	AAA	AA+ to AA-	A+ to A-	BBB+ to BBB-	BB+ and below	Not rated	Total
At 31 December 2024	£m	£m	£m	£m	£m	£m	£m
Corporate	69.0	221.1	1,549.5	1,074.4	301.2	1.5	3,216.7
Supranational	17.9	–	–	–	–	–	17.9
Local government	1.0	12.0	–	–	–	–	13.0
Sovereign	–	746.0	–	–	–	–	746.0
Total	87.9	979.1	1,549.5	1,074.4	301.2	1.5	3,993.6

	AAA	AA+ to AA-	A+ to A-	BBB+ to BBB-	BB+ and below	Not rated	Total
At 31 December 2023	£m	£m	£m	£m	£m	£m	£m
Corporate	56.8	152.7	1,201.6	899.6	289.2	1.5	2,601.4
Supranational	25.6	–	–	–	–	–	25.6
Local government	0.9	–	–	–	–	–	0.9
Sovereign	4.7	676.1	–	–	–	–	680.8
Total	88.0	828.8	1,201.6	899.6	289.2	1.5	3,308.7

The tables below analyse the credit quality of financial and insurance assets that are neither past due nor impaired (excluding debt

securities analysed above). The tables include reinsurance exposure, after provision. The Group's approach to reinsurance

counterparty default risk is detailed on page 182.

	AAA	AA+ to AA-	A+ to A-	BBB+ to BBB-	BB+ and below	Not rated	Total
At 31 December 2024	£m	£m	£m	£m	£m	£m	£m
Reinsurance contract assets	–	343.7	1,439.7	2.4	–	0.1	1,785.9
Other receivables	0.2	–	1.1	–	–	15.3	16.6
Derivative financial instruments	–	17.6	1.5	–	–	–	19.1
Infrastructure debt	–	–	31.0	157.7	–	–	188.7
Commercial estate loans	19.8	38.0	40.4	31.6	5.7	–	135.5
Cash and cash equivalents 1	1,019.3	44.7	86.3	0.9	–	4.8	1,156.0
Other loans	–	–	–	–	–	5.4	5.4
Total	1,039.3	444.0	1,600.0	192.6	5.7	25.6	3,307.2

	AAA	AA+ to AA-	A+ to A-	BBB+ to BBB-	BB+ and below	Not rated	Total
At 31 December 2023	£m	£m	£m	£m	£m	£m	£m
Reinsurance contract assets	–	290.5	1,047.5	2.4	–	–	1,340.4
Other receivables	0.4	1.7	4.8	0.3	–	25.7	32.9
Derivative financial instruments	–	26.4	0.4	0.6	–	–	27.4
Infrastructure debt	–	–	34.5	179.7	–	–	214.2
Commercial estate loans	12.1	47.9	51.6	28.6	5.7	–	145.9
Cash and cash equivalents 1	1,624.2	14.0	133.0	0.9	–	0.1	1,772.2
Other loans	–	–	–	–	–	3.1	3.1
Total	1,636.7	380.5	1,271.8	212.5	5.7	28.9	3,536.1

Note:

1. This represents money market funds with no notice period for withdrawal and cash at bank and in hand.

184 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

Debt instruments measured at amortised cost.

The table below shows the credit quality and the maximum exposure to credit risk per the Group's internal credit rating model.

The amounts presented are gross of ECL allowances:

		2024			2023
	12 month	Lifetime		12 month	Lifetime
	expected	expected	Total	expected	expected	Total
	credit loss	credit loss		credit loss	credit loss
	£m	£m	£m	£m	£m	£m
AA+ to AA-	11.5	–	11.5	11.5	–	11.5
A+ to A-	16.0	–	16.0	16.0	–	16.0
BBB+ to BBB-	28.6	–	28.6	33.8	–	33.8
BB+ and below	–	–	–	–	10.1	10.1
Total	56.1	–	56.1	61.3	10.1	71.4

Loans and receivables measured at amortised cost

The table below shows the credit quality and the maximum exposure to credit risk per the Group’s internal credit rating model.

The amounts presented are gross of ECL allowances:

		2024			2023
	12 month	Lifetime		12 month	Lifetime
	expected	expected	Total	expected	expected	Total
	credit loss	credit loss		credit loss	credit loss
	£m	£m	£m	£m	£m	£m
AAA	19.8	–	19.8	12.1	–	12.1
AA+ to AA-	38.0	–	38.0	47.9	–	47.9
A+ to A-	71.5	–	71.5	86.2	–	86.2
BBB+ to BBB-	190.4	–	190.4	209.4	–	209.4
BB+ and below	–	13.3	13.3	–	28.9	28.9
Not rated	–	5.9	5.9	–	3.4	3.4
Total	319.7	19.2	338.9	355.6	32.3	387.9

The Group’s Investment and Treasury team prepares internal ratings for instruments held in which its counterparties are rated

using internal grades (AAA to BB+ and below). The ratings are determined incorporating both qualitative and quantitative

information that builds on information from credit agencies, supplemented with information specific to the counterparty and other

external information that could affect the counterparty’s behaviour. These information sources are first used to determine whether

an instrument has had a significant increase in credit risk.

The tables below analyse the change in the carrying amount and loss allowance of debt securities measured at amortised cost

and the corresponding ECL.

		2024			2023
	12 month	Lifetime		12 month	Lifetime
	expected	expected	Total	expected	expected	Total
	credit loss	credit loss		credit loss	credit loss
Carrying amount	£m	£m	£m	£m	£m	£m
Amortised cost as at 1 January	61.3	10.1	71.4	88.1	10.1	98.2
Assets derecognised or matured	(15.2)	–	(15.2)	(26.8)	–	(26.8)
Accrued interest capitalised	(0.1)	–	(0.1)	–	–	–
Transfer to 12 month ECL	10.1	(10.1)	–	–	–	–
Amortised cost as at 31 December	56.1	–	56.1	61.3	10.1	71.4

		2024			2023
	12 month	Lifetime		12 month	Lifetime
	expected	expected	Total	expected	expected	Total
	credit loss	credit loss		credit loss	credit loss
Loss allowance	£m	£m	£m	£m	£m	£m
Loss allowance as at 1 January	(0.3)	(0.5)	(0.8)	(0.4)	(0.6)	(1.0)
Transfer to lifetime ECL	(0.5)	0.5	–	–	–	–
Effect of changes in assessed ECL	0.4	–	0.4	0.1	0.1	0.2
Loss allowance as at 31 December	(0.4)	–	(0.4)	(0.3)	(0.5)	(0.8)

185 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.3 Credit risk continued

The tables below analyse the change in the carrying amount and loss allowance of loans and receivables measured at amortised

cost and the corresponding ECL.

		2024			2023
	12 month	Lifetime		12 month	Lifetime
	expected	expected	Total	expected	expected	Total
	credit loss	credit loss		credit loss	credit loss
Carrying amount	£m	£m	£m	£m	£m	£m
Amortised cost as at 1 January	355.6	32.3	387.9	423.3	37.8	461.1
New assets originated or purchased	24.2	2.5	26.7	–	1.5	1.5
Assets derecognised or matured	(59.3)	(15.7)	(75.0)	(75.5)	–	(75.5)
Accrued interest capitalised	(0.8)	0.1	(0.7)	0.8	–	0.8
Transfer to 12 month ECL	–	–	–	7.0	(7.0)	–
Amortised cost as at 31 December	319.7	19.2	338.9	355.6	32.3	387.9

		2024			2023
	12 month	Lifetime		12 month	Lifetime
	expected	expected	Total	expected	expected	Total
	credit loss	credit loss		credit loss	credit loss
Loss allowance	£m	£m	£m	£m	£m	£m
Loss allowance as at 1 January	(1.1)	(23.6)	(24.7)	(1.5)	(22.3)	(23.8)
New assets originated or purchased	–	(0.2)	(0.2)	–	–	–
Assets derecognised or matured	0.1	15.6	15.7	–	–	–
Transfer to lifetime ECL	–	–	–	(0.1)	0.1	–
Effect of changes in assessed ECL	(0.1)	–	(0.1)	0.5	(1.4)	(0.9)
Loss allowance as at 31 December	(1.1)	(8.2)	(9.3)	(1.1)	(23.6)	(24.7)

1.3.4 Operational risk

This is the risk of loss due to inadequate or failed internal processes or systems, including from human error or from external events.

Material sources of operational risk for the Group include:

Change risk

Change risk is defined as the risk of failing to manage the change portfolio and associated change initiatives, within desired scope,

time, cost, quality and Group risk appetite, leading to a failure to deliver strategic benefits, good customer outcomes and possibly

causing business disruption.

Technology and infrastructure risk

Technology and infrastructure risk is defined as the risk of loss resulting from inadequate or failed information technology

processes through strategy, design, build or run components internally or externally provisioned.

Supplier management and outsourcing risk

Procurement and outsourcing is the risk an outsourcing arrangement that is deemed critical or material failing to deliver the

service provision in question to the expected levels. This includes both domestic and offshore outsourcing activities.

Cyber risk

Cyber risk arises from inadequate internal and external cyber security, where failures impact the confidentiality integrity and

availability of data.

Partnership contractual obligations

This is the risk of contractual obligations not being delivered for business partners resulting in damaged reputation, the loss

of contract at renewal, significant liability payments and/or the early termination of a partnership scheme.

The Group has in place agreed policies and standards to establish and monitor key controls relating to operational risk.

Risk concentrations and management

The Group is subject to concentration in its operational risk profile. For example, the Group's IT infrastructure and change

initiatives can expose the Group to the risk of losses in a number of scenarios such as system outages and data security breaches.

There is a dedicated resilience framework in place across the Group to mitigate operational risk concentrations.

The Group proactively manages its operational risks to mitigate potential customer harm, regulatory or legal censure, financial and

reputational impacts. The Group has in place operational processes and systems, including prevention and detection measures.

These include processes which seek to ensure the Group can absorb and/or adapt to internal or external events that could impact

customer operations and the wider business, as well as to learn from these situations to improve the Group's overall risk and control

systems moving forward .

186 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

1.3.5 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.

The measurement and management of the Group's liquidity risk is undertaken within the limits and other policy parameters

of the Group's liquidity risk appetite and is detailed in the liquidity risk minimum standard. As part of this process, the Investment

Management and Treasury team is required to put in place a liquidity plan which must consider expected and stressed scenarios

for cash inflows and outflows that is reviewed at least annually by the Investment Committee. Compliance is monitored in respect

of both the minimum standard and the regulatory requirements of the PRA.

The following table analyses the carrying value of financial investments and cash and cash equivalents, by contractual maturity,

which can fund the repayment of liabilities as they crystallise.

	Within				Over
	1 year	1 – 3 years	3 – 5 years	5 – 10 years	10 years	Total
At 31 December 2024	£m	£m	£m	£m	£m	£m
Debt securities	937.0	1,565.4	803.6	422.9	264.7	3,993.6
Infrastructure debt	17.8	33.1	34.5	76.0	27.3	188.7
Commercial real estate loans	23.7	64.2	47.6	–	–	135.5
Cash and cash equivalents 1	1,156.0	–	–	–	–	1,156.0
Other loans	–	5.4	–	–	–	5.4
Total	2,134.5	1,668.1	885.7	498.9	292.0	5,479.2

	Within				Over
	1 year	1 – 3 years	3 – 5 years	5 – 10 years	10 years	Total
At 31 December 2023	£m	£m	£m	£m	£m	£m
Debt securities	566.1	1,542.0	598.2	503.6	98.8	3,308.7
Infrastructure debt	20.4	32.8	41.2	81.8	38.0	214.2
Commercial real estate loans	46.5	55.5	43.9	–	–	145.9
Cash and cash equivalents 1	1,772.2	–	–	–	–	1,772.2
Other loans	–	0.4	2.7	–	–	3.1
Total	2,405.2	1,630.7	686.0	585.4	136.8	5,444.1

Note:

1. This represents money market funds with no notice period for withdrawal and cash at bank and in hand.

The following table analyses the undiscounted cash flows of insurance and financial liabilities, based on the future cash flows

expected to be paid out in the periods presented, and financial and other liabilities by maturity dates.

	Less than 1
	year	1 – 3 years	3 – 5 years	5 – 10 years	Over 10 years	Total	Carrying value
At 31 December 2024	£m	£m	£m	£m	£m	£m	£m
Insurance contract liabilities 1	1,446.4	1,112.7	790.7	601.5	1,686.2	5,637.5	3,900.0
Subordinated liabilities	10.4	20.8	20.8	286.0	–	338.0	259.1
Borrowings 2	66.8	–	–	–	–	66.8	66.8
Trade and other payables	176.8	16.0	0.7	–	–	193.5	178.9
Total	1,700.4	1,149.5	812.2	887.5	1,686.2	6,235.8	4,404.8

	Less than 1
	year	1 – 3 years	3 – 5 years	5 – 10 years	Over 10 years	Total	Carrying value
At 31 December 2023	£m	£m	£m	£m	£m	£m	£m
Insurance contract liabilities 1.3	1,444.3	1,052.3	643.0	517.0	1,706.6	5,363.2	3,874.0
Subordinated liabilities	10.4	20.8	20.8	296.4	–	348.4	258.8
Borrowings 2	82.4	–	–	–	–	82.4	82.4
Trade and other payables	157.4	6.1	0.1	–	–	163.6	163.6
Total	1,694.5	1,079.2	663.9	813.4	1,706.6	5,957.6	4,378.8

Notes:

1. Insurance contract liabilities represent the estimate of present value cash flows as disclosed in note 19.1 and are presented gross of reinsurance.

2. See note 25 for details of borrowings.

3. The 2023 Insurance contract liabilities numbers have been restated to correct a misallocation of amounts related to maturity dates.

187 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

1. Risk management continued

1.3 Principal risks from insurance activities and use of financial instruments continued

1.3.5 Liquidity risk continued

The following table analyses the undiscounted cash flows of derivative financial instruments, by contractual maturity.

	Within 1 year	1 – 3 years	3 – 5 years	5 – 10 years	Total	Carrying value
At 31 December 2024	£m	£m	£m	£m	£m	£m
Derivative assets	19.1	–	–	–	19.1	19.1
Derivative liabilities	(38.7)	–	–	–	(38.7)	(38.7)
Total	(19.6)	–	–	–	(19.6)	(19.6)

	Within 1 year	1 – 3 years	3 – 5 years	5 – 10 years	Total	Carrying value
At 31 December 2023	£m	£m	£m	£m	£m	£m
Derivative assets	27.6	(0.1)	(0.1)	–	27.4	27.4
Derivative liabilities	(14.4)	(1.0)	–	–	(15.4)	(15.4)
Total	13.2	(1.1)	(0.1)	–	12.0	12.0

1.4 Capital management

Group Capital

At 31 December 2024, the Group's capital position was comprised of shareholders' equity of £2,137.9 million (31 December 2023: £2,058.2

million) and Tier 1 notes of £346.5 million (31 December 2023: £346.5 million). In addition, the Group's consolidated statement of financial

position also included £259.1 million of subordinated loan capital (31 December 2023: £258.8 million) which is classified as Tier 2 for

Solvency II purposes.

The Solvency II financial information in this note is estimated, unaudited and is not part of the financial statements.

Solvency balance sheet management

The Group manages capital in accordance with the Group's capital management minimum standard, the aims of which are to

manage capital efficiently and generate long-term sustainable value for shareholders, while balancing operational, regulatory,

credit rating agency and policyholder requirements. The Group has a solvency risk appetite of 140% of the Group’s solvency capital

requirement (“SCR”). In normal circumstances, the Board expects that a solvency capital ratio of around 180% is appropriate and will

take this into account when considering the potential for additional returns, alongside expectations for future capital requirements

and other relevant factors. In the short term, the Group expects to maintain a solvency capital ratio above this level.

At 31 December 2024, the Group's (unaudited) solvency capital ratio, post dividends, was 195% (31 December 2023: 188%

Further details on the Group's capital position is included in the Group financial performance section of the Strategic Report

Capital adequacy

The Group's regulatory capital position is assessed against the Solvency II framework. From 1 July 2016, the Group gained approval

to assess its SCR using a partial internal model, including a full internal model for the U K Insurance Limited underwriting entity.

The model is calibrated to a 99.5% confidence interval and considers business written to date and one year of future written

business over a one-year time horizon, in line with Solvency II requirement, as modified by the PRA's 2024 reforms.

During the year, the Group and its regulated entities complied with all external capital requirements.

Using the Group's partial internal model, there is a capital surplus of approximately £1.11 billion above an estimated SCR of £1.16

billion as at 31 December 2024 (31 December 2023: £1.00 billion and £1.13 billion respectively). The Group's capital requirements

and solvency position are produced and presented to the Board on a regular basis. The Solvency II capital regime requires insurers

to calculate regulatory capital adequacy at both individual regulated subsidiaries and an aggregate Group level. This information

is estimated and is therefore subject to change. This paragraph is unaudited.

Note:

1. During the Group's half year results preparation, a miscalculation has been identified within the Group's audited Solvency II own funds for the year

ended 2023. Correcting for the miscalculation, the solvency capital ratio (post-dividend) at year end 2023 was 188%, which was above the Group's

risk appetite range of 140% to 180% (the previously reported solvency capital ratio was 197%). The Group has taken action to strengthen the control

environment in relation to the specific area where the miscalculation occurred.

188 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

2. Segmental information

The chief operating decision maker, being the Chief Executive Officer, regularly reviews the operating results at the segmental level

as described below and disclosed in the tables in this note to assess performance and make decisions about allocation of resources.

During 2024, the Group redefined its operating segments following changes in management responsibilities and its decision to exit

or stop investing in Non-core businesses. The redefined segments are detailed below. Data relating to previous periods has been re-

presented to reflect these changes.

Ongoing operations

Motor

This segment consists of personal Motor insurance together with the associated legal protection cover. The Group sells Motor

insurance direct to customers through its own brands Direct Line, Churchill, Privilege, By Miles and Darwin, through price

comparison websites ("PCWs") and through partnership brands, including the Group's partnership with Motability Operations, as

well as via vehicle manufacturers.

Non-Motor

Non-Motor includes three primary businesses: Home insurance, Rescue products and Commercial insurance for small and micro-

sized enterprises.

– Home insurance: The Group offers home insurance through its Direct Line, Churchill, and Privilege brands, as well as through

partnership brands such as Natwest Group. These products are also available on PCWs.

– Rescue products: Rescue services are provided primarily through the Group's Green Flag brand, sold directly to customers.

Additionally, rescue policies are available as add-ons to Motor policies and through various partnerships.

– Commercial Insurance: The Group provides Commercial insurance for small and micro-businesses through its Direct Line for

Business and Churchill brands. Both brands sell products directly to customers, while Churchill also offers products through

PCWs.

Non Ongoing Operations

The Group has aggregated the results of the Brokered commercial business and the non-core and run-off businesses and excluded

them from its ongoing results. All relevant comparatives have been restated and the segmental analysis has been amended to

reflect the changes. Results relating to ongoing operations are clearly labelled. The profit/(loss) before restructuring and one-off

costs relating to the Brokered commercial business and non-core and run-off businesses in 2024 was £33.9 million profit and £5.3

million profit (2023: £50.0 million profit and £25.0 million loss respectively).

Brokered commercial business

On 6 September 2023 the Group announced the sale of its Brokered commercial insurance business to Royal & Sun Alliance

Insurance Limited ("RSAI"). Under the terms of the agreement, the Group has retained the back book of the business written and

earned prior to 1 October 2023 (the "Risk Transfer Date"). Business written or earned on or subsequent to the Risk Transfer Date is

subject to a quota share reinsurance arrangement between the two companies with RSAI as the reinsurer. The parties are working

towards a Part VII transfer relating to the policies dealt with under the quota-share reinsurance arrangement, as envisaged in the

agreements entered into on 6 September 2023.

Non-core and Run-off

Non-core and Run-off includes the following Other Personal Lines insurance: Travel and Pet, which are sold directly to customers

through Direct Line and Churchill brands; Select, which targets mid- to high-net worth customers and is sold through Direct Line

and partnership brands; and Creditor, which is closed to new business with renewal policies written under the UKI brands. The

Group has now exited all Run-off Rescue and Travel partnerships.

Inter-segmental transactions

Where inter-segment transactions occur, transfer prices between operating segments are 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. Inter-segment revenue between segments was not material.

For each operating segment, there are no individual policyholders or customers that represent 10% or more of the Group's total

revenue.

Restructuring and one-off costs

Restructuring costs are costs incurred in respect of those business activities which have a material effect on the nature and focus of

the Group's operations. One-off costs are costs that are non-recurring in nature. These costs have not been allocated between

business segments as they relate to the business as a whole.

189 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

2. Segmental information continued

Group results and assets and liabilities by segment

The table below analyses the Group's revenue and results by reportable segment for the year ended 31 December 2024, and the

Group's assets and liabilities by reportable segment

at 31 December 2024.

			Total Group	Brokered		Restructuring
			- ongoing	commercial	Non-core	and one-off
	Motor	Non-Motor	operations 1	business 1	and Run-off 1	costs 1,2	Total Group
	£m	£m	£m	£m	£m		£m
Statement of profit or loss
Insurance revenue	2,739.0	1,020.9	3,759.9	620.4	186.7	–	4,567.0
Insurance service expenses	(2,669.9)	(868.3)	(3,538.2)	(470.2)	(172.6)	(4.0)	(4,185.0)
Net expense from reinsurance contracts held	(49.8)	(67.3)	(117.1)	(135.2)	(7.3)	–	(259.6)
Insurance service result	19.3	85.3	104.6	15.0	6.8	(4.0)	122.4
Investment return	191.2	38.1	229.3	40.6	2.4	–	272.3
Net finance income/(expense) from insurance
contracts issued	12.1	(15.4)	(3.3)	(15.0)	(2.7)	–	(21.0)
Net finance income/(expense) from reinsurance
contracts held	(14.2)	2.0	(12.2)	(8.3)	0.3	–	(20.2)
Investment return and net insurance finance result	189.1	24.7	213.8	17.3	–	–	231.1
Other operating income	0.6	17.2	17.8	1.3	1.2	–	20.3
Other operating expenses	(2.0)	(16.8)	(18.8)	0.3	(2.7)	(114.1)	(135.3)
Profit/(loss) before other finance costs	207.0	110.4	317.4	33.9	5.3	(118.1)	238.5
Loss on disposal of business							(4.7)
Other finance costs							(15.4)
Profit before tax							218.4
Assets
Goodwill	134.0	74.5	208.5	–	–		208.5
Assets held for sale	7.7	2.0	9.7	2.0	0.4		12.1
Other segment assets	4,468.2	1,280.9	5,749.1	891.1	126.5		6,766.7
Reinsurance contract assets	1,136.1	55.4	1,191.5	608.9	1.7		1,802.1
Insurance contract assets	–	–	–	–	5.7		5.7
Total segment assets	5,746.0	1,412.8	7,158.8	1,502.0	134.3		8,795.1
Liabilities
Reinsurance contract liabilities	(58.6)	(5.9)	(64.5)	(484.0)	(1.0)		(549.5)
Insurance contract liabilities	(3,338.8)	(927.6)	(4,266.4)	(718.5)	(102.0)		(5,086.9)
Other segment liabilities	(442.7)	(122.9)	(565.6)	(95.2)	(13.5)		(674.3)
Total segment liabilities	(3,840.1)	(1,056.4)	(4,896.5)	(1,297.7)	(116.5)		(6,310.7)
Segment net assets	1,905.9	356.4	2,262.3	204.3	17.8		2,484.4

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

to financial statement line items.

2. The Group incurred £118.1 million of restructuring and one-off costs in 2024, which were a result of several items including cost out and control

initiatives, non-cash impairments, as well as work carried out in relation to the takeover approach from Ageas NV and the offer from Aviva plc.

3. This segmental analysis is prepared using a combination of asset and liability balances directly attributable to each operating segment and an

apportionment of assets and liabilities managed at a Group-wide level. This does not represent the Group's view of the capital requirements for its

operating segments.

190 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The table below analyses the Group's revenue and results by reportable segment for the year ended 31 December 2023, and the

Group's assets and liabilities by reportable segment

at 31 December 2023 (restated

			Total Group	Brokered		Restructuring
			- ongoing	commercial	Non-core	and one-off
			2	1	2	3
	Motor	Non-Motor	operations	business	and Run-off	costs	Total Group
	£m	£m	£m	£m	£m	£m	£m
Statement of profit or loss
Insurance revenue	1,805.4	919.2	2,724.6	600.8	276.3	–	3,601.7
Insurance service expenses	(2,145.2)	(768.6)	(2,913.8)	(564.3)	(303.4)	(24.8)	(3,806.3)
Net expense from reinsurance contracts held	8.2	(31.0)	(22.8)	(22.6)	(1.4)	–	(46.8)
Insurance service result	(331.6)	119.6	(212.0)	13.9	(28.5)	(24.8)	(251.4)
Investment return	179.3	56.8	236.1	59.0	7.9	–	303.0
Net finance income/(expense) from insurance
contracts issued	(146.2)	(22.3)	(168.5)	(21.9)	(3.4)	–	(193.8)
Net finance income/(expense) from reinsurance
contracts held	25.5	1.9	27.4	0.4	0.2	–	28.0
Investment return and net insurance finance result	58.6	36.4	95.0	37.5	4.7	–	137.2
Other operating income	4.2	16.4	20.6	0.4	0.8	–	21.8
Other operating expenses	(5.6)	(15.5)	(21.1)	(1.8)	(2.0)	(34.7)	(59.6)
Profit/(Loss) before other finance costs	(274.4)	156.9	(117.5)	50.0	(25.0)	(59.5)	(152.0)
Gain on disposal of business							443.9
Other finance costs							(14.5)
Profit before tax							277.4
Assets
Goodwill	134.0	74.5	208.5	–	–		208.5
Assets held for sale	8.7	2.5	11.2	2.3	0.4		13.9
Other segment assets	4,356.6	1,212.8	5,569.4	1,059.6	214.4		6,843.4
Reinsurance contract assets	1,076.4	61.0	1,137.4	203.6	5.0		1,346.0
Insurance contract assets	–	–	–	–	5.4		5.4
Total segment assets	5,575.7	1,350.8	6,926.5	1,265.5	225.2		8,417.2
Liabilities
Reinsurance contract liabilities	(16.9)	(8.4)	(25.3)	(89.6)	(1.7)		(116.6)
Insurance contract liabilities	(3,305.9)	(892.7)	(4,198.6)	(866.0)	(174.2)		(5,238.8)
Other segment liabilities	(415.1)	(112.1)	(527.2)	(108.7)	(21.2)		(657.1)
Total segment liabilities	(3,737.9)	(1,013.2)	(4,751.1)	(1,064.3)	(197.1)		(6,012.5)
Segment net assets	1,837.8	337.6	2,175.4	201.2	28.1		2,404.7

Notes:

1. 2023 balances are re-presented to reflect changes in operating segments (see explanation on page 189)

2. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

to financial statement line items.

3. The Group incurred £59.5 million of restructuring and one-off costs in 2023, which were predominantly driven by work carried out in relation

to the Group’s two past business reviews, cost efficiency initiatives and impairments.

4. This segmental analysis is prepared using a combination of asset and liability balances directly attributable to each operating segment and an

apportionment of assets and liabilities managed at a Group-wide level. This does not represent the Group's view of the capital requirements for its

operating segments.

191 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

3. Insurance service result

The table below analyses insurance and reinsurance revenue and expenses that comprise the Group's insurance service result in

profit or loss:

	2024	2023
	£m	£m
Insurance revenue	4,567.0	3,601.7
Insurance service expenses
Incurred claims and other claims expenses	(3,360.4)	(2,817.5)
Past service – incurred claims	82.5	(80.9)
Other directly attributable expenses 1	(907.1)	(907.9)
Total insurance service expenses	(4,185.0)	(3,806.3)
Allocation of reinsurance premiums paid	(1,439.6)	(470.2)
Insurance claims recoverable from reinsurance contracts held
Claims recoveries	1,232.3	495.7
Past service – claim recoveries	(85.0)	(63.1)
Other directly attributable expenses 2	30.8	(3.4)
Effect of non-performance risk of reinsurers	1.9	(5.8)
Total amounts recoverable from reinsurance contracts held	1,180.0	423.4
Total insurance service result	122.4	(251.4)

Notes:

1. This includes insurance acquisition expenses of £233.0 million (2023: £292.3 million) which are fully expensed at initial recognition in accordance

with the Group's accounting policy and do not form part of the liability for remaining coverage.

2. This includes expenses recoverable under the reinsurance arrangement in place for the Brokered commercial business .

192 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

4. Insurance finance result

This note analyses the Group's finance result, including its insurance and reinsurance finance income/(expenses) in profit or loss and

other comprehensive income.

income

	2024	2023
	£m	£m
Amounts recognised in profit or loss
Interest income calculated using effective interest rate method:
Debt securities	129.8	78.9
Cash and cash equivalents	72.0	65.2
Infrastructure debt	14.7	14.8
Commercial real estate loans	10.0	12.9
Other loans	0.1	–
Total interest income calculated using effective interest rate method	226.6	171.8
Rental income from investment property	17.4	16.1
Other interest and similar income	17.4	16.1
Investment income	244.0	187.9
Investment fees	(8.8)	(9.3)
Net investment income	235.2	178.6
Net fair value gains on financial assets held at fair value through profit or loss:
Debt securities	23.9	134.1
Derivatives	6.5	(6.4)
Equity investments	(0.1)	(0.7)
Total net fair value gains on financial assets held at fair value through profit or loss	30.3	127.0
Net fair value gains/(losses) on investment property	6.6	(1.9)
Net credit impairment gains/(losses) on financial investments	0.2	(0.7)
Investment return	272.3	303.0
Insurance finance expense from insurance contracts issued:
Interest accreted to insurance contracts using current financial assumptions	(21.0)	(193.8)
Reinsurance finance (expense)/income from reinsurance contracts held:
Interest accreted to reinsurance contracts using current financial assumptions	(20.2)	28.0
Insurance and reinsurance finance expenses	(41.2)	(165.8)
Total investment return, insurance and reinsurance finance expenses	231.1	137.2
Amounts recognised in other comprehensive income
Net fair value gains on equity investments measured at fair value through other comprehensive	1.6	2.7

The table below analyses the realised and unrealised gains and losses on derivative financial instruments included in investment return.

	2024	2023
	£m	£m
Gains/(losses) on foreign exchange hedging:
Foreign exchange forward contracts 1	(11.5)	43.0
Associated foreign exchange risk	11.5	(48.5)
Total gains/(losses) on foreign exchange hedging	–	(5.5)
Interest rate swaps:
Gains/(losses) on interest rate swaps 1	6.5	(0.9)
Total gains/(losses) on foreign exchange hedging and interest rate hedging instruments	6.5	(6.4)

Note:

1. Foreign exchange forward contracts and interest rate swaps are measured at fair value through the statement of profit or loss.

The Group holds fixed rate USD and EUR denominated bonds whose fair value is exposed to movements in interest rates. In order

to economically hedge the interest rate risk of these bonds the Group enters into interest rate swaps, paying a fixed rate and

receiving a floating rate.

193 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

5. Other operating expenses

This note analyses the Group's other operating expenses in profit or loss.

	2024	2023
	£m	£m
Non-directly attributable IT and other operating expenses	92.5	33.4
Non-directly attributable staff expenses	17.9	15.7
Impairment of intangible and fixed assets	24.9	10.5
Total other operating expenses	135.3	59.6

Other operating expenses include cost efficiency initiatives, non-cash impairments of software development and response work

carried out in relation to the takeover approach from Ageas NV and the offer from Aviva plc.

6. Employee information

This note shows where the Group's staff are employed, their aggregate remuneration, analyses Directors' emoluments and the

Group's share-based payments obligations.

The table below analyses the number of people employed by the Group’s operations.

	At 31 December		Average for the year
	2024	2023	2024	2023
Insurance operations	5,941	7,015	6,480	6,743
Repair centre operations	1,709	1,715	1,731	1,620
Support	1,403	1,401	1,390	1,321
Total	9,053	10,131	9,601	9,684

The aggregate remuneration of those employed by the Group’s operations comprised:

	2024	2023
	£m	£m
Wages and salaries	452.4	421.4
Social security costs	55.6	47.7
Pension costs	30.6	28.7
Share-based payments	14.6	13.9
Total	553.2	511.7

Of the total aggregate remuneration, £17.9 million (2023: £15.7 million) relates to other operating expenses with the remainder

included in note 3, in the insurance service result, as part of other directly attributable expenses.

Aggregate Directors' emoluments

The table below analyses the total amount of Directors' remuneration in accordance with Schedule 5 to the Accounting Regulations.

	2024	2023
	£m	£m
Salaries, fees, bonuses and benefits in kind	3.9	3.7
Gains on exercise of share options	2.1	0.3
Total	6.0	4.0

Further information about the remuneration of individual current Directors is provided in the Directors' Remuneration Report.

At 31 December 2024, no Directors (2023: no Directors) had retirement benefits accruing under the defined contribution

pension scheme in respect of qualifying service. During the year ended 31 December 2024, two Directors exercised share options

(2023: one Director).

Shared-based payments

The Group operates equity-settled, share-based compensation plans in the form of a Long-Term Incentive Plan ("LTIP"),

a Restricted Shares Plan, a Deferred Annual Incentive Plan ("DAIP") and Direct Line Group Share Incentive Plans, including

both the Free Share awards and a Buy-As-You-Earn Plan, details of which are set out below. All awards are to be satisfied using

market-purchased shares.

Long-Term Incentive Plan

Executive Directors and certain members of senior management are eligible to participate in the LTIP with awards granted in the

form of nil-cost options. Under the plan, the shares vest at the end of a three-year period dependent upon continued employment

by the Group and also the Group achieving predefined performance conditions associated with total shareholder return ("TSR"),

return on tangible equity ("RoTE"), from 2022 emissions, from 2023 operating earnings per share ("Operating EPS") and from 2024

expenses ratio. The Executive Directors are subject to an additional two-year holding period following the three-year vesting period.

194 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

An award was made in the year ended 31 December 2024 of 8.1 million Ordinary Shares with an estimated fair value of £15.4 million

at the 2024 grant date (2023: 8.0 million Ordinary Shares with an estimated fair value of £10.9 million).

The estimated fair value of the LTIP share awards with market-based performance conditions was calculated using a Monte Carlo

simulation model. The table below details the inputs into the model:

	2024	2023
Weighted average assumptions during the year:
Share price (pence)	180	139
Exercise price (pence)	0	0
Volatility of share price	40%	32%
Average comparator volatility	33%	35%
Expected life	2 years	3 years
Risk-free rate	3.78 %	3.54%

Expected volatility was determined by considering the actual volatility of the Group's share price since its initial public offering

and that of a group of listed UK insurance companies.

Plan participants are entitled to receive additional shares in respect of dividends paid to shareholders over the vesting period.

Therefore, no deduction has been made from the fair value of awards in respect of dividends.

Expected life was based on the contractual life of the awards and adjusted based on management's best estimate, for the effects

of exercise restrictions and behavioural considerations.

Restricted Shares Plan

The purpose of the Restricted Shares Plan is to facilitate the wider participation in Group share-based awards of 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 up to seven years from the date of the grant, subject to continued employment. During the year

awards were made of 5.8 million Ordinary Shares (2023: 7.8 million Ordinary Shares) with an estimated fair value of £11.1 million

(2023: £11.6 million) using the market value at the date of grant.

Deferred Annual Incentive Plan

To incentivise delivery of performance over a one-year operating cycle, Executive Directors and certain members of senior

management are eligible for awards under the Annual Incentive Plan ("AIP"), of which at least 40% is granted in the form

of a nil-cost option under the DAIP with the remainder being settled in cash following year end. During the year awards were

made of 0.1 million Ordinary shares (2023: No Ordinary Shares) with an estimated fair value of £0.1 million using the market value

at the date of grant.

The awards outstanding at 31 December 2024 have no performance criteria attached; there is a requirement that the employee

remains in employment with the Group for three years from the date of grant.

Direct Line Group Share Incentive Plans

No free share awards have been granted to eligible employees since 2021.

The Buy-As-You-Earn Plan entitles employees to purchase shares from pre-tax pay for between £10 and £150 per month and

receive one nil-cost matching share for every two shares purchased.

In the year ended 31 December 2024, matching share awards were granted of 0.8 million Ordinary Shares (2023: 1.0 million Ordinary

Shares) with an estimated fair value of £1.4 million (2023: £1.7 million). The fair value of each matching share award is estimated

using the market value at the date of grant.

Under the plan, the shares vest at the end of a three-year period dependent upon continued employment with the Group together

with continued ownership of the associated purchased shares up to the point of vesting.

195 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

6. Employee information continued

Movement in total share awards

		Number of share awards
	2024	2023
	millions	millions
At 1 January	34.0	28.7
Granted during the year	14.0	13.5
Additional awards in respect of the equivalent dividend	0.8	3.3
Forfeited during the year	(6.8)	(8.1)
Exercised during the year	(7.1)	(3.4)
At 31 December	34.9	34.0
Exercisable at 31 December	4.1	3.8

In respect of the outstanding options at 31 December 2024, the weighted average remaining contractual life is 1.52 years

(2023: 1.50 years). No share awards expired during the year (2023: nil).

The weighted average share price for awards exercised during the year ended 31 December 2024 was £1.99 (2023: £1.63).

The Group recognised total expenses in the year ended 31 December 2024 of £14.6 million (2023: £13.9 million) relating

to equity-settled share-based compensation plans.

The Share-based payment reserve within Retained earnings at 31 December 2024 was £7.4 million (2023: £5.6 million).

Further information on share-based payments, in respect of Executive Directors, is provided in the Directors' Remuneration Report.

7. Auditors remuneration

This note analyses the Auditor's remuneration in respect of the Group's operations.

	2024	2023
	£m	£m
Fees payable for the audit of:
The Company's annual accounts	0.4	0.5
The Company's subsidiaries	3.2	3.3
Total audit fees	3.6	3.8
Audit-related assurance services 1	0.5	0.4
Other assurance services	–	0.2
Non-audit services 1	–	1.6
Total 2	4.1	6.0

Notes:

1. Fees of £0.5 million for audit-related assurance services have been provided in 2024 (2023: £0.4 million) in respect of reporting accountant services.

Fees of £40,000 for non-audit services have been incurred in 2024 (2023: £1.6 million) relating to agreed upon procedures.

2. Total audit fees, excluding VAT .

8. Other finance costs

This note analyses the Group's interest and other finance costs on its subordinated debt and interest expense on its lease liabilities.

	2024	2023
	£m	£m
Interest expense on subordinated liabilities	10.5	10.5
Amortisation of arrangement costs, discount on issue and fair value hedging adjustment of subordinated liabilities	0.3	0.2
Interest expense on lease liabilities	4.6	3.8
Total	15.4	14.5

9. (Loss)/gain on disposal of business

On 6 September 2023, the Group announced that it had entered into an agreement with RSAI, a wholly-owned subsidiary of Intact

Financial Corporation, to dispose of its Brokered commercial business. For further details of the transaction see the Annual Report &

Accounts 2023. During the year an additional amount of £4.7 million has been provided for relating to additional transaction costs.

There is potential for further consideration of up to £30 million contingent upon certain earn-out provisions relating to the financial

performance of the business. At 31 December 2024, based on a probability-weighted average of scenario analysis of the estimated

future profitability of the contracts, no contingent consideration has been recognised.

196 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The operations of the Brokered commercial business have not been classified as discontinued operations since they do not

represent a separate major line of business or geographical operations.

The table below summarises the pre-tax (loss)/gain on disposal recognised.

	2024	2023
	£m	£m
Cash consideration	–	520.0
Less: Net assets disposed of	–	(6.3)
Transaction cost	(4.7)	(50.3)
Assets written-off and impaired as part of disposal	–	(19.5)
(Loss)/gain on disposal – pre-tax impact	(4.7)	443.9

10. Tax charge

This note analyses the tax charge for the year and explains the factors that affect it.

	2024	2023
	£m	£m
Current taxation:
Charge for the year	54.9	24.3
Over-provision in respect of prior period	(4.4)	(2.6)
	50.5	21.7
Deferred taxation (note 20)
Charge for the year	3.5	29.5
Under-provision for the year-provision in respect of prior year	1.8	3.3
	5.3	32.8
Current taxation	50.5	21.7
Deferred taxation (note 20)	5.3	32.8
Tax charge for the year	55.8	54.5

The following table analyses the difference between the actual income tax charge and the expected income tax charge computed

by applying the standard rate of corporation tax of 25.0% (2023: 23.5%

	2024	2023
	£m	£m
Profit for the year	218.4	277.4
Expected tax charge	54.6	65.2
Effects of:
Previously unrecognised capital losses now offset against capital gains	–	(12.4)
Disallowable expenses	8.1	3.7
Non-taxable items	(0.3)	(0.1)
Movement in deferred tax asset/liability not recognised	0.2	(0.1)
Effect of change in corporation taxation rate 1	–	0.2
(Over)/under-provision in respect of prior year	(2.6)	0.7
Revaluation of property	–	1.2
Deductible Tier 1 notes coupon payment in equity	(4.2)	(3.9)
Tax charge for the year	55.8	54.5
Effective income tax rate	25.5%	19.6%

Notes:

1. In the Finance Act 2021, the UK Government enacted, on 10 June 2021, an increase in the UK corporation tax rate from 19% to 25% effective from

1 April 2023. As a consequence closing deferred tax assets and liabilities were recognised at the tax rates expected to apply when the temporary

differences reversed. The impact of these changes on the tax charge for the year is set out in the table above.

2. The Group is within the scope of the OECD Pillar Two Model rules and Pillar two legislation has been enacted in the UK with effect from 1 January

2024. However, in line with the position previously expressed, there is no expectation of any exposure to Pillar Two Top-up Taxes and accordingly

no accrual has been recorded in these 2024 Financial Statements.

3. The Group has applied the temporary exception issued by the IASB in May 2023 from the accounting requirements for deferred taxes in IAS 12.

Accordingly, the Group neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes.

197 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

11. Dividends and appropriations

This note analyses the total dividends and Tier 1 coupon payments paid during the year, as set out in the table below. Details are

also provided for the year's final dividend for the year, which is not accrued in the financial statements and are excluded from the

table's totals.

	2024	2023
	£m	£m
Amounts recognised as distributions to equity holders in the period:
2024 interim dividend of 2.0 pence per share paid on 11 October 2024	26.1	–
2023 final dividend of 4.0 pence per share paid on 17 May 2024	52.1	–
	78.2	–
Coupon payments in respect of Tier 1 notes	16.6	16.6
	94.8	16.6
Proposed dividends:
2023 final dividend of 4.0 pence per share		52.0
2024 final dividend of 5.0 pence per share	65.1	–

Note:

1. Coupon payments on the Tier 1 notes issued in December 2017 are treated as an appropriation of retained profits and, accordingly, are accounted

for when paid.

The proposed final dividend for 2024 has not been included as a liability in these financial statements.

The trustees of the employee share trusts waived their entitlement to dividends on shares held to meet obligations arising on the

Long-Term Incentive Plan, Deferred Annual Incentive Plan and Restricted Share Plan awards, which reduced the total dividends

paid for the year ended 31 December 2024 by £0.6 million. No dividends were paid or proposed during the year ended 31 December

2023.

12. Earnings per share

Earnings per share is calculated by dividing earnings attributable to the owners of the Company less coupon payments in respect

of Tier 1 notes by the weighted average number of Ordinary Shares during the year.

Basic earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to the owners of the Company less coupon payments in

respect of Tier 1 notes by the weighted average number of Ordinary Shares during the period, excluding Ordinary Shares held as

employee trust shares.

Diluted earnings per share

Diluted earnings per share is calculated by dividing the earnings attributable to the owners of the Company less coupon payments

in respect of Tier 1 notes by the weighted average number of Ordinary Shares during the period, excluding Ordinary Shares held as

employee trust shares, adjusted for the dilutive potential Ordinary Shares. The Company has share options and contingently

issuable shares as categories of dilutive potential Ordinary Shares. All awards are to be satisfied using market-purchased shares.

	2024	2023
	£m	£m
Earnings attributable to the owners of the Company	162.6	222.9
Coupon payments in respect of Tier 1 notes	(16.6)	(16.6)
Profit for the calculation of earnings per share	146.0	206.3
Weighted average number of Ordinary Shares in issue for the purpose of basic earnings per share
(millions)	1,300.6	1,299.0
Effect of dilutive potential of share options and contingently issuable shares (millions)	19.5	17.3
Weighted average number of Ordinary Shares for the purpose of diluted earnings per share (millions)	1,320.1	1,316.3
Basic earnings per share (pence)	11.2	15.9
Diluted earnings per share (pence)	11.1	15.7

198 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

13. Net asset value per share and net tangible asset value per share

Net asset value per share is calculated as total shareholders' equity (which excludes Tier 1 notes) divided by the number of Ordinary

Shares at the end of the period excluding shares held by employee share trusts.

Tangible net asset value per share is calculated as total shareholders' equity less goodwill and other intangible assets divided by the

number of Ordinary Shares at the end of the period, excluding shares held by employee share trusts.

The table below analyses net asset and tangible net asset value per share:

	2024	2023
	£m	£m
Net assets	2,137.9	2,058.2
Goodwill and other intangible assets 1	(776.3)	(818.6)
Tangible net assets	1,361.6	1,239.6
Number of Ordinary Shares (millions)	1,311.4	1,311.4
Shares held by employee trusts (millions)	(10.4)	(13.7)
Closing number of Ordinary Shares (millions)	1,301.0	1,297.7
Net asset value per share (pence)	164.3	158.6
Tangible net asset value per share (pence)	104.7	95.5

Note:

1. Goodwill has arisen on acquisition by the Group of subsidiary companies and on acquisition of new accident repair centres. Other intangible assets

primarily comprise software development costs.

14. Return on equity

The return on equity is calculated by using earnings attributable to the owners of the Company divided by the average

shareholders' equity for the year. The average shareholders' equity for the year is the mean average of the opening and closing

shareholders' equity.

The table below details the calculation of return on equity:

	2024	2023
	£m	£m
Earnings attributable to the owners of the Company	162.6	222.9
Coupon payments in respect of Tier 1 notes	(16.6)	(16.6)
Profit for the calculation of return on equity	146.0	206.3
Opening shareholders' equity	2,058.2	1,845.3
Closing shareholders' equity	2,137.9	2,058.2
Average shareholders' equity	2,098.1	1,951.8
Return on equity	7.0%	10.6%

199 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

15. Goodwill and other intangible assets

This note analyses the changes to the carrying amounts of goodwill and other intangible assets during the year and details the

results of impairment testing on goodwill.

		Other
		intangible
	Goodwill	assets	Total
	£m	£m	£m
Cost
At 1 January 2023	215.0	1,218.8	1,433.8
Acquisitions and additions	3.6	124.1	127.7
Disposals and write-off 1	(10.1)	(14.1)	(24.2)
At 31 December 2023	208.5	1,328.8	1,537.3
Acquisitions and additions	–	93.2	93.2
Disposals and write-off	–	–	–
At 31 December 2024	208.5	1,422.0	1,630.5
Accumulated amortisation and impairment
At 1 January 2023	–	611.6	611.6
Amortisation charge for the year	–	100.6	100.6
Disposals and write-off 1	–	(8.1)	(8.1)
Impairment losses 2	–	14.6	14.6
At 31 December 2023	–	718.7	718.7
Amortisation charge for the year	–	112.5	112.5
Disposals and write-off	–	–	–
Impairment losses 2	–	23.2	23.2
At 31 December 2024	–	854.2	854.2
Carrying amount
At 31 December 2024	208.5	567.8	776.3
At 31 December 2023	208.5	610.1	818.6

Notes:

1. Disposals and write-off of goodwill in 2023 arose from the sale of the Brokered commercial business. The sale of the Brokered commercial business

is detailed further in note 9. Disposals and write-off of other intangible assets include fully amortised intangible assets no longer utilised by the

Group in its operating activities.

2. Impairment losses in 2024 relate to capitalised software development costs for ongoing IT projects primarily relating to development of new

systems, and intangible assets no longer utilised by the Group in its operating activities. Of this amount, £23.2 million (2023: £5.4 million) is included

within Other operating expenses and £nil (2023: £9.2 million) is included within (Loss)/gain on disposal of business.

Goodwill

Goodwill arose on the acquisitions of U K Insurance Limited (£141.0 million), Churchill Insurance Company Limited (£70.0 million),

By Miles Group Limited (£2.7 million) and accident repair networks (£4.9 million), offset with the disposal of the Brokered

commercial business (£10.1 million).

Goodwill is allocated to a CGU or group of CGUs for the purpose of impairment testing. The allocation is made to those CGUs

that are expected to benefit from the business combination in which the goodwill arose and represents the lowest level at which

goodwill is monitored for internal management purposes, being the reportable segments (note 2).

Other intangible assets

Included within other intangible assets are assets still under development of £26.4 million (2023: £100.8 million). The decrease

of £74.4 million is primarily due to the building of a new Home platform and development of new capabilities for the Group's

Motor platform which is now in use. Assets under development at 31 December 2024 relate mainly to finance and core technology

projects which are expected to be ready for use in 2025. These assets are tested for impairment during the Group's annual

impairment review at each reporting date.

Other intangible assets relate mainly to internally generated software. For year ended 31 December 2024, other intangible assets

additions, which are internally generated, are £92.7 million (2023: £122.8 million).

Impairment assessments

The Group's testing for impairment of goodwill and intangible assets includes the comparison of the recoverable amount of each

CGU or group of CGUs to which goodwill and other intangible assets have been allocated with its carrying value and is updated

annually for goodwill, at each reporting date for other intangibles, and whenever there are indications of impairment .

200 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

A segment-level summary of the goodwill allocation is presented below:

	2024	2023 +
	£m	£m
Motor	134.0	134.0
Non-Motor	74.5	74.5
Total	208.5	208.5

There is no goodwill impairment for the year ended 31 December 2024 (2023: £nil).

Goodwill is tested for impairment by comparing the carrying value of the CGU or group of CGUs to which the goodwill relates

to the recoverable value of those CGUs. The recoverable amount is the value in use of the CGUs unless otherwise stated.

Value in use and sensitivity analysis

Value in use is calculated as the discounted value of expected future profits of each business, using the Group's strategic plan

covering a three year period. The long-term growth rates have been based on gross domestic product rates adjusted for inflation.

The risk discount rates incorporate observable market long-term government bond yields and average industry betas adjusted

for an appropriate risk premium based on independent analysis.

Key assumptions used in the value in use calculation and sensitivity information on the key assumptions are presented below:

		Assumptions					Change to key assumptions needed to reduce headroom to nil
	2024		2023 1
						Reduction to
					Headroom	future profits	Reduction in	Increase in
	Terminal	Pre-tax	Terminal	Pre-tax	under key	in the Groups	terminal	pre-tax
	growth rate	discount rate	growth rate	discount rate	assumptions	strategic plan	growth rate	discount rate
Segment	%	%	%	%	£m	%	% (abs)	% (abs)
Motor	1.5	14.1	1.5	11.4	833.2	30.2	7.2	5.0
Non-Motor	1.5	14.0	1.5	11.4	1,372.1	81.4	n/a 2	47.2

Notes:

1. Re-presented to reflect segmental changes.

2. No change in this metric could reduce the headroom to nil.

Management considers that no reasonably possible changes to the key assumptions would reduce a CGU’s headroom to £nil.

16. Property, plant and equipment

This note analyses the Group's property, plant and equipment.

	Land and	Other
	buildings	equipment	Total
	£m	£m	£m
Cost
At 1 January 2023	36.9	174.2	211.1
Acquisition of subsidiary	–	2.7	2.7
Additions	–	18.9	18.9
Disposals	–	(8.8)	(8.8)
At 31 December 2023	36.9	187.0	223.9
Additions	–	13.2	13.2
Disposals	–	(7.6)	(7.6)
At 31 December 2024	36.9	192.6	229.5
Accumulated depreciation and impairment
At 1 January 2023	4.6	122.8	127.4
Depreciation charge for the year	0.5	10.5	11.0
Disposals	–	(6.1)	(6.1)
At 31 December 2023	5.1	127.2	132.3
Depreciation charge for the year	0.5	11.3	11.8
Disposals	–	(7.3)	(7.3)
At 31 December 2024	5.6	131.2	136.8
Carrying amount
At 31 December 2024	31.3	61.4	92.7
At 31 December 2023	31.8	59.8	91.6

The Group is satisfied that the aggregate fair value of property, plant and equipment is not less than its carrying value.

201 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

17. Lease assets and liabilities

This note contains analysis of the Group's right-of-use assets and operating lease commitments where the Group is the lessor

and lessee.

The following table analyses the right-of-use assets relating to property and motor vehicles:

	Property	Motor vehicles	Total
	£m	£m	£m
Cost
At 1 January 2023	121.0	9.6	130.6
Additions	30.9	5.5	36.4
Disposals	(6.9)	(5.0)	(11.9)
At 31 December 2023	145.0	10.1	155.1
Additions	11.4	8.8	20.2
Disposals	(4.7)	(1.0)	(5.7)
At 31 December 2024	151.7	17.9	169.6
Accumulated depreciation and impairment
At 1 January 2023	51.3	6.3	57.6
Depreciation charge for the year	9.1	2.8	11.9
Disposals	(5.8)	(4.7)	(10.5)
At 31 December 2023	54.6	4.4	59.0
Depreciation charge for the year	9.8	5.5	15.3
Disposals	(4.7)	(1.0)	(5.7)
At 31 December 2024	59.7	8.9	68.6
Carrying amount
At 31 December 2024	92.0	9.0	101.0
At 31 December 2023	90.4	5.7	96.1

The weighted average contract duration at inception for Property is 20 years, and for Motor vehicles is three years.

Operating lease commitments where the Group is the lessor

The following table analyses future aggregate minimum lease payments receivable under non-cancellable operating leases

in respect of property leased to third-party tenants:

	2024	2023
	£m	£m
Within one year	16.7	14.8
Between 1 and 2 years	15.0	13.8
Between 2 and 3 years	13.0	12.9
Between 3 and 4 years	11.0	11.0
Between 4 and 5 years	10.6	9.1
Later than 5 years	85.4	66.8
Total 1,2	151.7	128.4

Notes:

1. In the table above, the amounts disclosed for year ended 31 December 2024 exclude total future aggregate minimum lease payments receivable

of £0.2 million (2023: £0.1 million) which relate to leases to third-party tenants on properties the Group has classified as assets held for sale.

2. At year ended 31 December 2024: £150.0 million of the total operating lease commitments where the Group is the lessor relates to the lease

of investment properties detailed in note 18 (2023: £126.5 million).

The Group's investment properties portfolio consists of 18 (2023: 18) properties in total, all based in the UK with exposure

predominantly to the South of England operating in the following sectors; retail, retail warehouse, supermarkets, industrial, hotels

and alternative sectors.

The investment properties are leased to tenants under operating leases with rental income for the majority paid a quarter in

advance with an average unexpired lease to expiry (including break clauses and tenants currently in rent free periods) of 9.9 years

(2023: 9.8 years). 55% (2023: 49%) of rental income is RPI/index linked.

Where considered necessary to reduce credit risk, the Group may obtain guarantees from parent companies for the terms

of the leases.

202 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

Other lease disclosures

The following table analyses the amounts that have been included in the consolidated statement of profit or loss for leases:

	31 Dec 2024	31 Dec 2023
	£m	£m
Depreciation of ROU assets	15.3	11.9
Loss on disposal of leases	–	1.4
Interest on lease liabilities	4.6	3.8
Short-term leases 2	2.3	2.2
Low-value leases 2	1.5	1.4
Total 1	23.7	20.7

Notes:

1. Total cash outflows in respect of leases were £20.9 million (2023: £18.2 million) which includes amounts expensed for short-term leases and leases

of low-value assets.

2. At years ended 31 December 2024 and 31 December 2023, expenses relating to short-term leases and leases of low-value assets were not included

in the measurement of lease liabilities as they were not considered significant.

Lease commitments where the Group is the lessee

Lease liabilities total £113.7 million (2023: £106.1 million). Future contractual aggregate minimum lease payments are as follows:

	2024	2023
	£m	£m
Within one year	14.0	12.7
In the second to fifth year inclusive	48.6	45.3
After five years	81.1	78.7
Sub total	143.7	136.7
Less effect of discounting and unearned interest	(30.0)	(30.6)
Total	113.7	106.1

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included

in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease

liability is reassessed.

The lease agreements do not impose any covenants other than the security interest in the leased assets that are held by the lessor.

18. Investment property

This note gives details of the properties that the Group holds for long-term rental yields or capital appreciation.

		Retail				Alternative
	Retail	warehouse	Supermarkets	Industrials	Hotels	sector	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2023	25.3	21.3	51.1	112.0	50.3	18.5	278.5
Capitalised expenditure	0.1	–	–	0.4	–	–	0.5
Fair value adjustments	(1.0)	(0.5)	(4.0)	3.3	0.2	0.1	(1.9)
At 31 December 2023 1	24.4	20.8	47.1	115.7	50.5	18.6	277.1
Capitalised expenditure	0.5	–	–	3.2	–	0.2	3.9
Fair value adjustments	(0.7)	8.5	(2.2)	2.5	(1.5)	–	6.6
At 31 December 2024 1	24.2	29.3	44.9	121.4	49.0	18.8	287.6

Note:

1. The cost included in the carrying value at 31 December 2024 is £220.9 million (2023: £217.0 million).

The investment properties are measured at fair value derived from valuation work carried out at the statement of financial position

date by independent property valuers. The valuation conforms to international valuation standards. The fair value was determined

using a methodology based on recent market transactions for similar properties, which have been adjusted for the specific

characteristics of each property within the portfolio. This approach to valuation is consistent with the methodology used in the

year ended 31 December 2023.

Lease agreements with tenants are drawn up in line with local practice and the Group has no exposure to leases that include

contingent rents .

203 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

18. Investment property continued

The following tables provide a sensitivity analysis for +/- 5 basis points and +/- 50 basis points movement in tenants' rental income

and impact on property valuation in sterling:

				Baseline as at
				31 December
2024		-50bp	-5bp	2024	+5bp	+50bp
Equivalent yield	%	5.62	6.11	6.17	6.22	6.72
Value	£m	264.7	285.1	287.6	290.1	314.9

				Baseline as at
				31 December
2023		-50bp	-5bp	2022	+5bp	+50bp
Equivalent yield	%	5.31	5.81	5.87	5.92	6.42
Value	£m	253.5	274.6	277.1	279.8	305.7

19. Insurance contract assets and liabilities - gross and reinsurance

This note analyses the following in respect of insurance and reinsurance contracts:

– carrying amount by segment;

– movements in the year;

– claims development; and

– significant judgements, estimates and assumptions.

19.1 Carrying amount by segment

The Group has presented its analyses of net assets and liabilities for insurance contracts issued and reinsurance contracts held for

remaining coverage and incurred claims for the whole Group, Motor, Non-motor and Non-ongoing operations.

			Total Group	Brokered
			- ongoing	commercial	Non-core
	Motor	Non-Motor	operations 1	business 1	and Run-off 1	Total Group
	£m	£m	£m	£m	£m	£m
2024
Insurance contract assets	–	–	–	–	5.7	5.7
Insurance contract liabilities	(3,338.8)	(927.6)	(4,266.4)	(718.5)	(102.0)	(5,086.9)
Net insurance contract liabilities	(3,338.8)	(927.6)	(4,266.4)	(718.5)	(96.3)	(5,081.2)
Reinsurance contract assets	1,136.1	55.4	1,191.5	608.9	1.7	1,802.1
Reinsurance contract liabilities	(58.6)	(5.9)	(64.5)	(484.0)	(1.0)	(549.5)
Net reinsurance contract assets	1,077.5	49.5	1,127.0	124.9	0.7	1,252.6
2023
Insurance contract assets	–	–	–	–	5.4	5.4
Insurance contract liabilities	(3,305.9)	(892.7)	(4,198.6)	(866.0)	(174.2)	(5,238.8)
Net insurance contract liabilities	(3,305.9)	(892.7)	(4,198.6)	(866.0)	(168.8)	(5,233.4)
Reinsurance contract assets	1,076.4	61.0	1,137.4	203.6	5.0	1,346.0
Reinsurance contract liabilities	(16.9)	(8.4)	(25.3)	(89.6)	(1.7)	(116.6)
Net reinsurance contract assets	1,059.5	52.6	1,112.1	114.0	3.3	1,229.4

Note:

1. See glossary on pages 238 to 241 for definitions

The following table sets out the carrying amounts of insurance and reinsurance contracts expected to be settled/(recovered) more

than 12 months after the reporting date.

	2024	2023
	£m	£m
Insurance contract liabilities	(2,496.0)	(2,828.0)
Reinsurance contract assets	1,108.3	821.6

204 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The table below analyses insurance and reinsurance contract assets and liabilities for remaining coverage and for incurred

claims by segment:

			Total Group	Brokered
			– ongoing	commercial	Non-core
	Motor	Non-Motor	operations 1	business 1	and Run-off 1	Total Group
	£m	£m	£m	£m	£m	£m
2024
Insurance contracts assets/(liabilities)
Remaining coverage	(463.2)	(362.9)	(826.1)	(125.6)	(19.8)	(971.5)
Excluding loss component	(463.2)	(362.9)	(826.1)	(125.6)	(19.8)	(971.5)
Loss component	–	–	–	–	–	–
Incurred claims	(2,875.6)	(564.7)	(3,440.3)	(592.9)	(76.5)	(4,109.7)
Estimate of present value cash flows	(2,727.3)	(537.0)	(3,264.3)	(562.6)	(73.1)	(3,900.0)
Risk adjustment	(148.3)	(27.7)	(176.0)	(30.3)	(3.4)	(209.7)
Total insurance contracts assets/(liabilities)	(3,338.8)	(927.6)	(4,266.4)	(718.5)	(96.3)	(5,081.2)
2023
Insurance contracts assets/(liabilities)
Remaining coverage	(514.7)	(326.1)	(840.8)	(289.2)	(22.5)	(1,152.5)
Excluding loss component	(514.7)	(326.1)	(840.8)	(289.2)	(22.5)	(1,152.5)
Loss component	–	–	–	–	–	–
Incurred claims	(2,791.2)	(566.6)	(3,357.8)	(576.8)	(146.3)	(4,080.9)
Estimate of present value cash flows	(2,647.6)	(538.3)	(3,185.9)	(547.1)	(141.0)	(3,874.0)
Risk adjustment	(143.6)	(28.3)	(171.9)	(29.7)	(5.3)	(206.9)
Total insurance contracts assets/(liabilities)	(3,305.9)	(892.7)	(4,198.6)	(866.0)	(168.8)	(5,233.4)

			Total Group	Brokered
			– ongoing	commercial	Non-core
	Motor	Non-Motor	operations 1	business 1	and Run-off 1	Total Group
	£m	£m	£m	£m	£m	£m
2024
Reinsurance contracts (liabilities)/assets
Remaining coverage	(58.5)	(6.0)	(64.5)	(484.0)	(1.0)	(549.5)
Excluding loss component	(58.5)	(6.0)	(64.5)	(484.0)	(1.0)	(549.5)
Loss component	–	–	–	–	–	–
Incurred claims	1,136.0	55.5	1,191.5	608.9	1.7	1,802.1
Estimate of present value cash flows	1,065.5	48.7	1,114.2	589.4	1.0	1,704.6
Risk adjustment	70.5	6.8	77.3	19.5	0.7	97.5
Total reinsurance contracts assets/(liabilities)	1,077.5	49.5	1,127.0	124.9	0.7	1,252.6
2023
Reinsurance contracts (liabilities)/assets
Remaining coverage	(16.9)	(8.4)	(25.3)	(89.6)	(1.7)	(116.6)
Excluding loss component	(16.9)	(8.4)	(25.3)	(89.6)	(1.7)	(116.6)
Loss component	–	–	–	–	–	–
Incurred claims	1,076.4	61.0	1,137.4	203.6	5.0	1,346.0
Estimate of present value cash flows	1,012.7	55.1	1,067.8	192.4	4.2	1,264.4
Risk adjustment	63.7	5.9	69.6	11.2	0.8	81.6
Total reinsurance contracts assets/(liabilities)	1,059.5	52.6	1,112.1	114.0	3.3	1,229.4

Note:

1. See glossary on pages 238 to 241 for definitions.

205 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19. Insurance contract assets and liabilities - gross and reinsurance continued

19.2 Movement in carrying amounts of insurance and reinsurance contracts

The following movements have occurred in the carrying amounts of insurance contract balances in the year:

		2024	2023
Carrying amount	Notes:	£m	£m
At 1 January		(5,233.4)	(4,608.5)
Insurance revenue	3	4,567.0	3,601.7
Insurance service expenses	3	(3,952.0)	(3,514.0)
Insurance finance expense	4	(21.0)	(193.8)
Premiums received	19.2.2	(4,386.0)	(3,758.9)
Claims and expenses paid, including investment component	19.2.1	3,944.2	3,240.1
At 31 December		(5,081.2)	(5,233.4)

The carrying amount for reinsurance contracts is recognised separately from insurance contract balances. Detailed movements

on both are included in the notes below.

The following reconciliations show how the net carrying amounts of insurance and reinsurance contracts in each segment

changed during the year as a result of cash flows and amounts recognised in the statement of profit and loss.

Judgement is required when determining the appropriate level of disaggregation for disclosure. Management have disaggregated

information by reportable segment, as defined in IFRS 8 'Operating Segments'. This is so that useful information is not obscured

either by the inclusion of a large amount of insignificant detail or by the aggregation of items that have different characteristics.

For Motor, Non-Motor and non-ongoing operations, the Group presents a table that separately analyses the movements in the

liabilities for remaining coverage and movements in the liabilities for incurred claims and reconciles these movements to the

statement of profit and loss.

206 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

19.2.1 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for incurred claims – total Group

			Insurance contracts issued - liability for			Reinsurance contracts held - amounts
			incurred claims			recovered on incurred claims	Net
	Estimate of	Risk		Estimate of	Risk
	present	adjustment		present	adjustment
	value cash	for non-		value cash	for non-
	flows	financial risk	Total	flows	financial risk	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	–	–	–	966.3	95.3	1,061.6	1,061.6
Insurance/reinsurance contract liabilities as at 1 January 2023	(3,394.3)	(218.9)	(3,613.2)	–	–	–	(3,613.2)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(3,394.3)	(218.9)	(3,613.2)	966.3	95.3	1,061.6	(2,551.6)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(3,360.6)	(72.5)	(3,433.1)	464.6	27.7	492.3	(2,940.8)
Past service – incurred claims	(165.4)	84.5	(80.9)	(21.7)	(41.4)	(63.1)	(144.0)
Effect of non-performance risk of reinsurers				(5.8)		(5.8)	(5.8)
Insurance service result	(3,526.0)	12.0	(3,514.0)	437.1	(13.7)	423.4	(3,090.6)
Insurance/reinsurance finance expenses/
income	(193.8)		(193.8)	28.0		28.0	(165.8)
Total amounts recognised in comprehensive income	(3,719.8)	12.0	(3,707.8)	465.1	(13.7)	451.4	(3,256.4)
Cash flows:
Claims and other expenses paid/recovered	3,240.1		3,240.1	(167.0)		(167.0)	3,073.1
Total cash flows	3,240.1		3,240.1	(167.0)		(167.0)	3,073.1
Insurance/reinsurance contract assets as at 31
December 2023	–	–	–	1,264.4	81.6	1,346.0	1,346.0
Insurance/reinsurance contract liabilities as at 31 December 2023	(3,874.0)	(206.9)	(4,080.9)	–	–	–	(4,080.9)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(3,874.0)	(206.9)	(4,080.9)	1,264.4	81.6	1,346.0	(2,734.9)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(3,957.7)	(76.8)	(4,034.5)	1,224.0	39.1	1,263.1	(2,771.4)
Past service – incurred claims	8.5	74.0	82.5	(61.8)	(23.2)	(85.0)	(2.5)
Effect of non-performance risk of reinsurers				1.9		1.9	1.9
Insurance service result	(3,949.2)	(2.8)	(3,952.0)	1,164.1	15.9	1,180.0	(2,772.0)
Insurance/reinsurance finance expenses/
income	(21.0)		(21.0)	(20.2)		(20.2)	(41.2)
Total amounts recognised in comprehensive income	(3,970.2)	(2.8)	(3,973.0)	1,143.9	15.9	1,159.8	(2,813.2)
Cash flows:
Claims and other expenses paid/recovered	3,944.2		3,944.2	(703.7)		(703.7)	3,240.5
Total cash flows	3,944.2		3,944.2	(703.7)		(703.7)	3,240.5
Insurance/reinsurance contract assets as at 31
December 2024	–	–	–	1,704.6	97.5	1,802.1	1,802.1
Insurance/reinsurance contract liabilities as at 31 December 2024	(3,900.0)	(209.7)	(4,109.7)	–	–	–	(4,109.7)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(3,900.0)	(209.7)	(4,109.7)	1,704.6	97.5	1,802.1	(2,307.6)

Note:

1. The amounts recognised in Insurance service result for the year of £3,952.0 million (2023: £3,514.0 million) does not include insurance acquisition

expenses of £233.0 million (2023: £292.3 million). Please see note 3.

207 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19. Insurance contract assets and liabilities - gross and reinsurance continued

19.2.2 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for remaining coverage – total Group

	Insurance contracts issued - liability for			Reinsurance contracts held - asset for
	remaining coverage			remaining coverage			Net
	Excluding			Excluding	Loss
	loss	Loss		loss recovery	recovery
	component	component	Total	component	component	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	17.3	–	17.3	13.3	–	13.3	30.6
Insurance/reinsurance contract liabilities as at 1 January 2023	(1,012.6)	–	(1,012.6)	(13.9)	–	(13.9)	(1,026.5)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(995.3)	–	(995.3)	(0.6)	–	(0.6)	(995.9)
Insurance revenue/reinsurance expenses	3,601.7		3,601.7	(470.2)		(470.2)	3,131.5
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–			–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	3,601.7	–	3,601.7	(470.2)	–	(470.2)	3,131.5
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	3,601.7	–	3,601.7	(470.2)	–	(470.2)	3,131.5
Cash flows:
Premium received/paid	(3,758.9)		(3,758.9)	354.2		354.2	(3,404.7)
Total cash flows	(3,758.9)		(3,758.9)	354.2		354.2	(3,404.7)
Insurance/reinsurance contract assets as at 31
December 2023	5.4	–	5.4	–	–	–	5.4
Insurance/reinsurance contract liabilities as at 31 December 2023	(1,157.9)	–	(1,157.9)	(116.6)	–	(116.6)	(1,274.5)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(1,152.5)	–	(1,152.5)	(116.6)	–	(116.6)	(1,269.1)
Insurance revenue/reinsurance expenses	4,567.0		4,567.0	(1,439.6)		(1,439.6)	3,127.4
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–			–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	4,567.0	–	4,567.0	(1,439.6)	–	(1,439.6)	3,127.4
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	4,567.0	–	4,567.0	(1,439.6)	–	(1,439.6)	3,127.4
Cash flows:
Premium received/paid	(4,386.0)		(4,386.0)	1,006.7		1,006.7	(3,379.3)
Total cash flows	(4,386.0)		(4,386.0)	1,006.7		1,006.7	(3,379.3)
Insurance/reinsurance contract assets as at 31
December 2024	5.7	–	5.7	–	–	–	5.7
Insurance/reinsurance contract liabilities as at 31 December 2024	(977.2)	–	(977.2)	(549.5)	–	(549.5)	(1,526.7)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(971.5)	–	(971.5)	(549.5)	–	(549.5)	(1,521.0)

208 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

19.2.3 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for incurred claims – Motor

	Insurance contracts issued - liability for			Reinsurance contracts held - amounts
	incurred claims			recovered on incurred claims			Net
	Estimate of	Risk		Estimate of	Risk
	present	adjustment		present	adjustment
	value cash	for non-		value cash	for non-
	flows	financial risk	Total	flows	financial risk	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	–	–	–	866.5	76.3	942.8	942.8
Insurance/reinsurance contract liabilities as at 1 January 2023	(2,259.6)	(148.9)	(2,408.5)	–	–	–	(2,408.5)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(2,259.6)	(148.9)	(2,408.5)	866.5	76.3	942.8	(1,465.7)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(1,946.5)	(42.2)	(1,988.7)	302.0	17.2	319.2	(1,669.5)
Past service – incurred claims	(139.4)	47.5	(91.9)	(35.1)	(29.8)	(64.9)	(156.8)
Effect of non-performance risk of reinsurers				(5.7)		(5.7)	(5.7)
Insurance service result 1	(2,085.9)	5.3	(2,080.6)	261.2	(12.6)	248.6	(1,832.0)
Insurance/reinsurance finance expenses/
income	(146.2)		(146.2)	25.5		25.5	(120.7)
Total amounts recognised in comprehensive income	(2,232.1)	5.3	(2,226.8)	286.7	(12.6)	274.1	(1,952.7)
Cash flows:
Claims and other expenses paid/recovered	1,844.1		1,844.1	(140.5)		(140.5)	1,703.6
Total cash flows	1,844.1		1,844.1	(140.5)		(140.5)	1,703.6
Insurance/reinsurance contract assets as at 31
December 2023	–	–	–	1,012.7	63.7	1,076.4	1,076.4
Insurance/reinsurance contract liabilities as at 31 December 2023	(2,647.6)	(143.6)	(2,791.2)	–	–	–	(2,791.2)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(2,647.6)	(143.6)	(2,791.2)	1,012.7	63.7	1,076.4	(1,714.8)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(2,611.1)	(48.8)	(2,659.9)	815.7	22.8	838.5	(1,821.4)
Past service – incurred claims	29.3	44.1	73.4	(44.0)	(16.0)	(60.0)	13.4
Effect of non-performance risk of reinsurers				2.4		2.4	2.4
Insurance service result 1	(2,581.8)	(4.7)	(2,586.5)	774.1	6.8	780.9	(1,805.6)
Insurance/reinsurance finance expenses/
income	12.1		12.1	(14.2)		(14.2)	(2.1)
Total amounts recognised in comprehensive income	(2,569.7)	(4.7)	(2,574.4)	759.9	6.8	766.7	(1,807.7)
Cash flows:
Claims and other expenses paid/recovered	2,489.9		2,489.9	(707.1)		(707.1)	1,782.8
Total cash flows	2,489.9		2,489.9	(707.1)		(707.1)	1,782.8
Insurance/reinsurance contract assets as at 31
December 2024	–	–	–	1,065.5	70.6	1,136.1	1,136.1
Insurance/reinsurance contract liabilities as at 31 December 2024	(2,727.4)	(148.3)	(2,875.7)	–	(0.1)	(0.1)	(2,875.8)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(2,727.4)	(148.3)	(2,875.7)	1,065.5	70.5	1,136.0	(1,739.7)

Note:

1. The amounts recognised in Insurance service result do not include insurance acquisition expenses. Please see note 3.

209 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19. Insurance contract assets and liabilities - gross and reinsurance continued

19.2.4 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for remaining coverage – Motor

	Insurance contracts issued - liability for			Reinsurance contracts held - asset for
	remaining coverage			remaining coverage			Net
	Excluding			Excluding	Loss
	loss	Loss		loss recovery	recovery
	component	component	Total	component	component	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	–	–	–	13.3	–	13.3	13.3
Insurance/reinsurance contract liabilities as at 1 January 2023	(451.8)	–	(451.8)	–	–	–	(451.8)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(451.8)	–	(451.8)	13.3	–	13.3	(438.5)
Insurance revenue/reinsurance expenses	1,805.4		1,805.4	(240.5)		(240.5)	1,564.9
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–	–		–	–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	1,805.4	–	1,805.4	(240.5)	–	(240.5)	1,564.9
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	1,805.4	–	1,805.4	(240.5)	–	(240.5)	1,564.9
Cash flows:
Premium received/paid	(1,868.3)		(1,868.3)	210.3		210.3	(1,658.0)
Total cash flows	(1,868.3)		(1,868.3)	210.3		210.3	(1,658.0)
Insurance/reinsurance contract assets as at 31
December 2023	–	–	–	–	–	–	–
Insurance/reinsurance contract liabilities as at 31 December 2023	(514.7)	–	(514.7)	(16.9)	–	(16.9)	(531.6)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(514.7)	–	(514.7)	(16.9)	–	(16.9)	(531.6)
Insurance revenue/reinsurance expenses	2,739.0		2,739.0	(830.8)		(830.8)	1,908.2
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–	–		–	–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	2,739.0	–	2,739.0	(830.8)	–	(830.8)	1,908.2
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	2,739.0	–	2,739.0	(830.8)	–	(830.8)	1,908.2
Cash flows:
Premium received/paid	(2,687.4)		(2,687.4)	789.2		789.2	(1,898.2)
Total cash flows	(2,687.4)		(2,687.4)	789.2		789.2	(1,898.2)
Insurance/reinsurance contract assets as at 31
December 2024	–	–	–	–	–	–	–
Insurance/reinsurance contract liabilities as at 31 December 2024	(463.1)	–	(463.1)	(58.5)	–	(58.5)	(521.6)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(463.1)	–	(463.1)	(58.5)	–	(58.5)	(521.6)

210 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

19.2.5 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for incurred claims – Non-motor

	Insurance contracts issued - liability for			Reinsurance contracts held - amounts
	incurred claims			recovered on incurred claims			Net
	Estimate of	Risk		Estimate of	Risk
	present	adjustment		present	adjustment
	value cash	for non-		value cash	for non-
	flows	financial risk	Total	flows	financial risk	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	–	–	–	30.8	8.3	39.1	39.1
Insurance/reinsurance contract liabilities as at 1 January 2023	(524.6)	(34.5)	(559.1)	–	–	–	(559.1)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(524.6)	(34.5)	(559.1)	30.8	8.3	39.1	(520.0)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(677.3)	(13.3)	(690.6)	27.2	3.1	30.3	(660.3)
Past service – incurred claims	(21.2)	19.5	(1.7)	6.0	(5.6)	0.4	(1.3)
Effect of non-performance risk of reinsurers				–		–	–
Insurance service result	(698.5)	6.2	(692.3)	33.2	(2.5)	30.7	(661.6)
Insurance/reinsurance finance expenses/
income	(22.3)		(22.3)	1.9		1.9	(20.4)
Total amounts recognised in comprehensive income	(720.8)	6.2	(714.6)	35.1	(2.5)	32.6	(682.0)
Cash flows:
Claims and other expenses paid/recovered	707.1		707.1	(10.7)		(10.7)	696.4
Total cash flows	707.1		707.1	(10.7)		(10.7)	696.4
Insurance/reinsurance contract assets as at 31
December 2023	–	–	–	55.2	5.8	61.0	61.0
Insurance/reinsurance contract liabilities as at 31 December 2023	(538.3)	(28.3)	(566.6)	–	–	–	(566.6)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(538.3)	(28.3)	(566.6)	55.2	5.8	61.0	(505.6)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(748.7)	(13.2)	(761.9)	10.9	3.2	14.1	(747.8)
Past service – incurred claims	(28.2)	13.8	(14.4)	(7.1)	(2.2)	(9.3)	(23.7)
Effect of non-performance risk of reinsurers				–		–	–
Insurance service result	(776.9)	0.6	(776.3)	3.8	1.0	4.8	(771.5)
Insurance/reinsurance finance expenses/
income	(15.4)		(15.4)	2.0		2.0	(13.4)
Total amounts recognised in comprehensive income	(792.3)	0.6	(791.7)	5.8	1.0	6.8	(784.9)
Cash flows:
Claims and other expenses paid/recovered	793.6		793.6	(12.4)		(12.4)	781.2
Total cash flows	793.6		793.6	(12.4)		(12.4)	781.2
Insurance/reinsurance contract assets as at 31
December 2024	–	–	–	48.6	6.8	55.4	55.4
Insurance/reinsurance contract liabilities as at 31 December 2024	(537.0)	(27.7)	(564.7)	–	–	–	(564.7)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(537.0)	(27.7)	(564.7)	48.6	6.8	55.4	(509.3)

Note:

1. The amounts recognised in Insurance service result do not include insurance acquisition expenses. Please see note 3.

211 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19. Insurance contract assets and liabilities - gross and reinsurance continued

19.2.6 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for remaining coverage – Non-motor

	Insurance contracts issued - liability for			Reinsurance contracts held - asset for
	remaining coverage			remaining coverage			Net
	Excluding			Excluding	Loss
	loss	Loss		loss recovery	recovery
	component	component	Total	component	component	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	–	–	–	–	–	–	–
Insurance/reinsurance contract liabilities as at 1 January 2023	(292.9)	–	(292.9)	(7.8)	–	(7.8)	(300.7)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(292.9)	–	(292.9)	(7.8)	–	(7.8)	(300.7)
Insurance revenue/reinsurance expenses	919.2		919.2	(61.5)		(61.5)	857.7
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–	–		–	–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	919.2	–	919.2	(61.5)	–	(61.5)	857.7
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	919.2	–	919.2	(61.5)	–	(61.5)	857.7
Cash flows:
Premium received/paid	(952.4)		(952.4)	60.9		60.9	(891.5)
Total cash flows	(952.4)		(952.4)	60.9		60.9	(891.5)
Insurance/reinsurance contract assets as at 31
December 2023	–	–	–	–	–	–	–
Insurance/reinsurance contract liabilities as at 31 December 2023	(326.1)	–	(326.1)	(8.4)	–	(8.4)	(334.5)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(326.1)	–	(326.1)	(8.4)	–	(8.4)	(334.5)
Insurance revenue/reinsurance expenses	1,020.9		1,020.9	(72.0)		(72.0)	948.9
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–	–		–	–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	1,020.9	–	1,020.9	(72.0)	–	(72.0)	948.9
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	1,020.9	–	1,020.9	(72.0)	–	(72.0)	948.9
Cash flows:
Premium received/paid	(1,057.7)		(1,057.7)	74.5		74.5	(983.2)
Total cash flows	(1,057.7)		(1,057.7)	74.5		74.5	(983.2)
Insurance/reinsurance contract assets as at 31
December 2024	–	–	–	–	–	–	–
Insurance/reinsurance contract liabilities as at 31 December 2024	(362.9)	–	(362.9)	(5.9)	–	(5.9)	(368.8)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(362.9)	–	(362.9)	(5.9)	–	(5.9)	(368.8)

212 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

19.2.7 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for incurred claims – Non-ongoing operations

	Insurance contracts issued - liability for			Reinsurance contracts held - amounts
	incurred claims			recovered on incurred claims			Net
	Estimate of	Risk		Estimate of	Risk
	present	adjustment		present	adjustment
	value cash	for non-		value cash	for non-
	flows	financial risk	Total	flows	financial risk	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	–	–	–	69.0	10.6	79.6	79.6
Insurance/reinsurance contract liabilities as at 1 January 2023	(610.2)	(35.5)	(645.7)	–	–	–	(645.7)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(610.2)	(35.5)	(645.7)	69.0	10.6	79.6	(566.1)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(736.7)	(17.1)	(753.8)	135.4	7.4	142.8	(611.0)
Past service – incurred claims	(4.8)	17.5	12.7	7.4	(5.9)	1.5	14.2
Effect of non-performance risk of reinsurers				–		–	–
Insurance service result	(741.5)	0.4	(741.1)	142.8	1.5	144.3	(596.8)
Insurance/reinsurance finance expenses/
income	(25.3)		(25.3)	0.6		0.6	(24.7)
Total amounts recognised in comprehensive income	(766.8)	0.4	(766.4)	143.4	1.5	144.9	(621.5)
Cash flows:
Claims and other expenses paid/recovered	688.9		688.9	(15.9)		(15.9)	673.0
Total cash flows	688.9		688.9	(15.9)		(15.9)	673.0
Insurance/reinsurance contract assets as at 31
December 2023	–	–	–	196.5	12.1	208.6	208.6
Insurance/reinsurance contract liabilities as at 31 December 2023	(688.1)	(35.1)	(723.2)	–	–	–	(723.2)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(688.1)	(35.1)	(723.2)	196.5	12.1	208.6	(514.6)
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses	(598.0)	(14.7)	(612.7)	397.5	13.0	410.5	(202.2)
Past service – incurred claims	7.4	16.1	23.5	(10.7)	(5.0)	(15.7)	7.8
Effect of non-performance risk of reinsurers				(0.5)		(0.5)	(0.5)
Insurance service result	(590.6)	1.4	(589.2)	386.3	8.0	394.3	(194.9)
Insurance/reinsurance finance expenses/
income	(17.7)		(17.7)	(8.0)		(8.0)	(25.7)
Total amounts recognised in comprehensive income	(608.3)	1.4	(606.9)	378.3	8.0	386.3	(220.6)
Cash flows:
Claims and other expenses paid/recovered	660.7		660.7	15.7		15.7	676.4
Total cash flows	660.7		660.7	15.7		15.7	676.4
Insurance/reinsurance contract assets as at 31
December 2024	–	–	–	590.5	20.1	610.6	610.6
Insurance/reinsurance contract liabilities as at 31 December 2024	(635.7)	(33.7)	(669.4)	–	–	–	(669.4)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(635.7)	(33.7)	(669.4)	590.5	20.1	610.6	(58.8)

Note:

1. The amounts recognised in Insurance service result do not include insurance acquisition expenses. Please see note 3.

213 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19. Insurance contract assets and liabilities - gross and reinsurance continued

19.2.8 Roll-forward of net asset or liability for insurance contracts issued and reinsurance contracts held

showing the liability for remaining coverage – Non-ongoing operations

	Insurance contracts issued - liability for			Reinsurance contracts held - asset for
	remaining coverage			remaining coverage			Net
	Excluding			Excluding	Loss
	loss	Loss		loss recovery	recovery
	component	component	Total	component	component	Total	Total
	£m	£m	£m	£m	£m	£m	£m
Insurance/reinsurance contract assets as at 1
January 2023	17.3	–	17.3	–	–	–	17.3
Insurance/reinsurance contract liabilities as at 1 January 2023	(267.8)	–	(267.8)	(6.1)	–	(6.1)	(273.9)
Net insurance/reinsurance contract
liabilities/assets as at 1 January 2023	(250.5)	–	(250.5)	(6.1)	–	(6.1)	(256.6)
Insurance revenue/reinsurance expenses	877.1		877.1	(168.2)		(168.2)	708.9
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–	–		–	–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	877.1	–	877.1	(168.2)	–	(168.2)	708.9
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	877.1	–	877.1	(168.2)	–	(168.2)	708.9
Cash flows:
Premium received/paid	(938.2)		(938.2)	83.0		83.0	(855.2)
Total cash flows	(938.2)		(938.2)	83.0		83.0	(855.2)
Insurance/reinsurance contract assets as at 31
December 2023	5.4	–	5.4	–	–	–	5.4
Insurance/reinsurance contract liabilities as at 31 December 2023	(317.0)	–	(317.0)	(91.3)	–	(91.3)	(408.3)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2023	(311.6)	–	(311.6)	(91.3)	–	(91.3)	(402.9)
Insurance revenue/reinsurance expenses	807.1		807.1	(536.8)		(536.8)	270.3
Insurance service expenses:
Incurred claims/claims recovered and other attributable expenses		–	–		–	–	–
Losses/ loss recovery and reversal of losses
from onerous contracts		–	–		–	–	–
Insurance service result	807.1	–	807.1	(536.8)	–	(536.8)	270.3
Insurance/reinsurance finance expenses/
income		–	–		–	–	–
Total amounts recognised in comprehensive income	807.1	–	807.1	(536.8)	–	(536.8)	270.3
Cash flows:
Premium received/paid	(640.9)		(640.9)	143.1		143.1	(497.8)
Total cash flows	(640.9)		(640.9)	143.1		143.1	(497.8)
Insurance/reinsurance contract assets as at 31
December 2024	5.7	–	5.7	–	–	–	5.7
Insurance/reinsurance contract liabilities as at 31 December 2024	(151.1)	–	(151.1)	(485.0)	–	(485.0)	(636.1)
Net insurance/reinsurance contract
liabilities/assets as at 31 December 2024	(145.4)	–	(145.4)	(485.0)	–	(485.0)	(630.4)

214 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

19.3 Insurance and reinsurance contract assets and liabilities - claims development tables

The tables below illustrate how estimates of cumulative claims have developed over time on a gross and net of reinsurance basis.

Each table shows how the Group’s estimates of total claims for each underwriting year have developed over time and reconciles

the cumulative claims to the amount included in the statement of financial position. For accident years prior to 2015, the

information is aggregated into one row.

Gross insurance liabilities

	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024	Total
Accident year	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Estimate of ultimate gross
claims costs:
At end of accident year	2,135.9	2,169.8	2,226.8	2,337.6	2,085.7	1,786.5	1,912.8	2,283.2	2,755.0	3,328.3
One year later	(57.4)	(95.8)	(142.6)	(129.6)	(72.0)	(79.4)	(5.7)	132.9	166.1
Two years later	(131.5)	(63.9)	(108.8)	(48.7)	(43.5)	(13.8)	(34.7)	47.0
Three years later	(58.5)	(89.5)	(38.0)	(6.0)	3.7	35.9	(3.6)
Four years later	(28.7)	(42.9)	(20.4)	25.5	14.1	(63.6)
Five years later	(21.9)	(13.5)	1.5	23.8	13.1
Six years later	1.0	(12.0)	21.6	(42.5)
Seven years later	22.4	9.2	2.8
Eight years later	(18.2)	7.0
Nine years later	(21.1)
Current estimate of cumulative
claims	1,822.0	1,868.4	1,942.9	2,160.1	2,001.1	1,665.6	1,868.8	2,463.1	2,921.1	3,328.3
Cumulative payments to date	(1,757.5)	(1,806.4)	(1,868.2)	(2,071.3)	(1,845.6)	(1,518.5)	(1,584.3)	(1,970.1)	(1,992.3)	(1,759.0)
	64.5	62.0	74.7	88.8	155.5	147.1	284.5	493.0	928.8	1,569.3	3,868.2
2014 and prior											1,606.4
Claims handling provision											125.1
Adjustment for non-financial
risk											305.3
Effect of discounting											(1,832.5)
Other LIC											37.2
Gross liability for incurred claims included in the statement of financial position											4,109.7

Net insurance contract liabilities

	2015	2016	2017	2018	2019	2020	2021	2022	2023	2024	Total
Accident year	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Estimate of ultimate net claims
costs:
At end of accident year	1,920.1	1,934.4	2,012.0	2,141.0	1,922.8	1,623.6	1,758.1	2,184.2	2,241.9	2,002.9
One year later	(79.5)	(31.4)	(95.9)	(82.2)	(37.2)	(54.0)	2.4	168.1	(30.0)
Two years later	(63.4)	(47.2)	(61.4)	(20.7)	(40.7)	(39.2)	(13.0)	33.8
Three years later	(29.4)	(43.4)	(17.7)	(24.0)	(4.5)	50.0	(9.9)
Four years later	(21.8)	(15.2)	(27.5)	7.3	11.6	(15.3)
Five years later	(22.8)	(10.1)	(9.4)	24.1	11.2
Six years later	(1.8)	(11.6)	9.5	3.6
Seven years later	1.3	(3.8)	2.8
Eight years later	(3.6)	9.0
Nine years later	2.3
Current estimate of cumulative
claims	1,701.4	1,780.7	1,812.4	2,049.1	1,863.2	1,565.1	1,737.6	2,386.1	2,211.9	2,002.9
Cumulative payments to date	(1,687.6)	(1,753.8)	(1,780.1)	(1,995.3)	(1,786.9)	(1,464.0)	(1,542.3)	(1,966.3)	(1,575.1)	(1,117.7)
	13.8	26.9	32.3	53.8	76.3	101.1	195.3	419.8	636.8	885.2	2,441.4
2014 and prior											793.1
Claims handling provision											89.3
Adjustment for non-financial
risk											148.9
Effect of discounting											(900.0)
Due from reinsurers											(265.1)
Net liability for incurred claims included in the statement of financial position											2,307.6

215 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19. Insurance contract assets and liabilities - gross and reinsurance continued

19.4 Significant judgements, estimates and assumptions

This note gives details of the significant judgements made in applying IFRS 17, explaining the inputs, assumptions, methods

and estimation techniques used to measure insurance, participating investment and reinsurance contracts.

Accounting policy (C) sets out the critical accounting judgements and the material accounting estimates that are considered

particularly susceptible to changes in estimates and assumptions. This note provides further detail of how these are applied

in the context of IFRS 17.

Significant judgements, estimates and assumptions associated with measuring insurance products and

associated reinsurance are outlined below.

Fulfilment cash flows comprise:

– estimates of future cash flows;

– an adjustment (discount rate) to reflect the time value of money and the financial risks related to future cash flows, to the extent

that the financial risks are not included in the estimates of future cash flows; and

– a risk adjustment.

Estimates of future cash flows

In estimating future cash flows, the Group will incorporate, in an unbiased way, all reasonable and supportable information that

is available without undue cost or effort at the reporting date. This information includes both internal and external historical data

about claims and other experience, updated to reflect current expectations of future events. The estimates of future cash flows will

reflect the Group's view of current conditions at the reporting date, ensuring the estimates of any relevant market variables are

consistent with observable market prices. However, these cash flows are inherently uncertain in size, timing and are based on

probability-weighted average expectations. The Group applies the PAA to simplify the measurement of insurance contracts.

Claims

The Group makes provision for the full cost of outstanding claims from its general insurance business at the statement of financial

position date, including claims estimated to have been incurred but not yet reported at that date and associated claims handling

costs. Outstanding claims provisions net of related reinsurance recoveries at 31 December 2024 amounted to £2,307.6 million (2023:

£2,734.9 million).

Claims reserves are assessed separately for large and attritional claims, typically using standard actuarial methods of projection

such as the Chain Ladder and Bornhuetter-Furguson methods. Key sources of estimation uncertainty include those arising from

the selection of specific methods as well as assumptions for claims frequency and severity through the review of historical claims

and emerging trends. The Group factors the probability-weighted expected value outcome from the range of possible outcomes

in assessing claim liabilities, taking account of all the uncertainties involved.

The corresponding amount recoverable from reinsurance contracts held is calculated on an equivalent basis, with similar

estimation uncertainty, as discussed in policy note (J). A credit exposure exists with respect to reinsurance contracts held, to the

extent that any reinsurer is unable to meet its obligations.

Bodily injury claims

The most common method of settling bodily injury claims is by a lump sum. When this includes an element of indemnity for

recurring costs, such as loss of earnings or ongoing medical care, the settlement calculations apply the statutory discount rate

(known as the Ogden discount rate) to reflect the fact that payment is made on a one-off basis rather than periodically over time.

The current Ogden discount rate is 0.5%.

The Ogden discount rate for England and Wales has increased from minus 0.25% on 11 January 2025. For Scotland and Northern

Ireland, the bodily injury discount rate increased on 24 September 2024 to 0.5% from minus 0.75% and minus 1.5%, respectively.

The impact of potential future changes in the discount rate is shown in note 1.3.1. Since 2021, we have reduced the level of Motor

reinsurance purchased, resulting in higher net reserves for accident years 2021 to 2024.

If the claimant prefers, large bodily injury claims can be settled using a PPO. This is an alternative way to provide an indemnity for

recurring costs, making regular payments, usually for the rest of the claimant’s life. These claims are reserved for using a discount

rate, which is progressively unwound over time. As it is likely to take time to establish whether a claimant will prefer a PPO or

a lump sum, until a settlement method is agreed we make assumptions about the likelihood that claimants will opt for a PPO.

This is known as the PPO propensity.

At 31 December 2024, the real discount rate for PPOs is 1.5% (2023: 0.7%), the combination of cash flow weighted inflation and

discounting of 3.7% (2023: 3.9%), which allows for higher short-term ASHE 6115 inflation before reverting to a long term trend of 3.5%,

and a yield curve based discount rate of 5.2% (2023: 4.6%).

The table in note 19.4 to the financial statements provides an analysis of outstanding PPO claims provisions on a discounted and

an undiscounted basis at 31 December 2024 and 31 December 2023 and further details on sources of estimation uncertainty.

Details of sensitivity analysis to the discount rate applied to PPO claims are shown in note 1.3.1.

216 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The table below analyses the outstanding PPO claims provisions on a discounted and an undiscounted basis at 31 December 2024

and 31 December 2023. These represent the total cost of PPOs rather than any costs in excess of purely Ogden-based settlements.

	Discounted	Undiscounted	Discounted	Undiscounted
	2024	2024	2023	2023
At 31 December	£m	£m	£m	£m
Gross claims
Approved PPO claims provisions	506.6	1,592.5	542.6	1,603.4
Anticipated PPOs	151.1	458.9	112.5	300.7
Total	657.7	2,051.4	655.1	1,904.1
Reinsurance
Approved PPO claims provisions	(297.0)	(939.8)	(300.1)	(905.2)
Anticipated PPOs	(98.6)	(308.1)	(79.7)	(228.8)
Total	(395.6)	(1,247.9)	(379.8)	(1,134.0)
Net of reinsurance
Approved PPO claims provisions	209.6	652.7	242.5	698.2
Anticipated PPOs	52.5	150.8	32.8	71.9
Total	262.1	803.5	275.3	770.1

The provisions for PPOs have been categorised as either claims which have already been determined by the courts as PPOs

(approved PPO claims provisions) or those expected to settle as PPOs in the future (anticipated PPOs). The Group has estimated

the likelihood of large bodily injury claims settling as PPOs. The anticipated PPOs in the table above are based on historically

observed propensities adjusted for the assumed Ogden discount rate.

In the majority of cases, the inflation agreed in the settlement is the Annual Survey of Hours and Earnings SOC 6115 inflation

published by the Office for National Statistics, for which the long-term cashflow-weighted average rate is assumed to be 3.7%

(2023: 3.9%). The Group has estimated a cashflow-weighted average rate of interest used for the calculation of present values as 5.2%

(2023: 4.6%), which results in a real discount rate of 1.5% (2023: 0.7%). The Group will continue to review the inflation and discount

rates used to calculate these insurance reserves.

Claims inflation

The assessment of claims inflation, and the underlying drivers of claims inflation, remains a key consideration in deriving the

reserves. Claims inflation is correlated with price inflation but there are several individual factors that are considered in addition, for

example the salary of care workers, the price of used cars, judicial costs and repair costs. A range of general and specific scenarios

for excess inflation has been considered in the reserving process. A range of data types and methods are used with historical

comparators to assess the underlying position separate from the timing effects to mitigate the uncertainty.

Climate change

Changes in the climate can impact both frequency and severity of losses, particularly for windstorm and flood events. The impact

on reserves is only seen when major loss events occur.

Discount rates

The Group determines the risk-free discount rate using Solvency II risk-free rates sourced from the Bank of England. This results

in alignment between IFRS 17 and Solvency II and ensures consistency with the Bank of England credit risk premiums used in the

illiquidity premium calculations.

The Group has selected to apply the 'bottom up' approach to determine discount rates which requires the use of the risk free rate

curves and adding the illiquidity premium.

The illiquidity premium is determined by using a fundamental spread approach by deducting the risk-free rate and credit risk

premium from corresponding corporate bond reference portfolios. For non-PPOs, the reference portfolio is A-rated bonds with

terms of 1 to 3 years and for PPOs, the reference portfolio is BBB-rated bonds with a remaining term of 15 or more years.

Judgement is applied when determining the illiquidity premium with respect to allowances for past and future trends, considering

changes in the economic environment. Generally, the illiquidity premium is expected to be stable over time however, assessment

of the illiquidity premium assumption is reviewed periodically and adjusted where required.

Yield curves used to discount PPO and Non-PPO cash flows

As at 31 December 2024

Spot rate	1 year	3 year	15 year
PPOs	5.7	5.4	5.4
Non-PPOs	5	4.7	4.7

As at 31 December 2023

Spot rate	1 year	3 year	15 year
PPOs	6.1	5.1	4.8
Non-PPOs	4.9	3.9	3.6

217 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

19. Insurance contract assets and liabilities - gross and reinsurance continued

19.4 Significant judgements, estimates and assumptions continued

Risk adjustment

The Group estimates the probability distribution of the expected present value of the future cash flows from the contracts at each

reporting date and calculates the risk adjustment for non-financial risk as the excess of the value at risk at the target confidence

level over the expected present value of the future cash flows allowing for the associated risks over all future years. The target

confidence level is the 75th percentile for the liability for incurred claims (2023: 75th percentile). The risk adjustment is derived using

the reserve risk distribution calculated in the internal economic capital model and consequently, is subject to model and parameter

uncertainty.

Group diversification benefit is not considered at the individual insurance undertaking entity level but is considered in determining

the confidence level at a consolidated level for disclosure purposes. A sensitivity which demonstrates the impact of the confidence

level being at the 70th and 80th percentile on profit before tax is included in the note 1.3.1.

20. Tax assets and liabilities

This note analyses tax assets and liabilities that appear in the statement of financial position and explains movements in these

balances in the year.

The aggregate current and deferred tax relating to items that are credited to equity is £2.3 million (2023: £0.3 million).

The table below analyses the major deferred tax assets and liabilities recognised by the Group and movements thereon:

	Provisions and		Depreciation		Transitional	Transitional
	other	Retirement	in excess of	Share-	adjustments	adjustments
	temporary	benefit	capital	based	on adoption	on adoption
	differences	obligations	allowances	payments	of IFRS 9	of IFRS 17	Total
	£m	£m	£m	£m	£m	£m	£m
At 1 January 2023	4.6	(0.4)	(9.0)	1.8	65.4	26.6	89.0
(Charge)/credit to the statement of profit or loss	(2.9)	0.1	2.0	0.9	(6.3)	(26.6)	(32.8)
Credit direct to equity	–	–	–	0.3	–	–	0.3
At 31 December 2023	1.7	(0.3)	(7.0)	3.0	59.1	–	56.5
Credit/(charge) to the statement of profit or loss	2.1	0.3	(2.8)	1.7	(6.6)	–	(5.3)
Credit/(charge) to other comprehensive income	–	(0.2)	–	–	–	–	(0.2)
Credit direct to equity	–	–	–	2.0	–	–	2.0
At 31 December 2024	3.8	(0.2)	(9.8)	6.7	52.5	–	53.0

As at 31 December 2024, the Group has an unrecognised deferred tax asset of £0.2 million (2023: £0.1 million) in relation to capital

losses, of which £nil (2023: £nil) relates to realised losses and £0.2 million (2023: £0.1 million) related to unrealised losses.

Deferred tax assets have been recognised in respect of IFRS 9 transitional tax adjustments and other temporary differences

because it is probable that these assets will be recovered, with the exception of unrecognised capital losses where recovery is

uncertain as it is dependent on realising future capital gains. The deferred tax asset in respect of IFRS 9 transitional tax adjustments

is being relieved for tax over 10 years from the adoption of IFRS 9 on 1 January 2023 and will therefore be recovered over the next

8 years. Other deferred tax assets will be recovered over a period of 1 to 11 years.

Recovery of deferred tax assets is dependent on future taxable profits, which are expected to arise in future years. Probability of

recovery has been assessed based on the Group’s forecasts for the next 4 years, and it is assumed that sufficient profits will continue

to be realised in subsequent years for offset of the remaining future tax deductions.

21. Prepayments, accrued income and other assets

	2024	2023
	£m	£m
		restated 1
Prepayments 1	61.0	58.5
Accrued income from contracts with customers and other assets 1	42.6	43.0
Total	103.6	101.5

Note:

1. The 2023 balance has been restated to correct the classification of accrued income, which was previously misclassified as prepayments.

This reclassification has no impact on the total balance.

22. Fair value

Basis for determining fair value hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation

technique. There were no changes in valuation techniques during the year.

For disclosure purposes, fair value measurements are classified as level 1, 2 or 3 based on the degree to which fair value is observable.

218 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

Level 1 financial assets are measured in whole or in part by reference to published quotes in an active market. In an active market

quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory

agency and those prices represent actual and regularly occurring market transactions on an arm's-length basis.

Level 2 financial assets and liabilities are measured using a valuation technique based on assumptions that are supported by prices

from observable current market transactions.

Level 3 financial assets are measured using a valuation technique that includes inputs that are unobservable.

Financial instruments classified as level 2 include:

– debt securities for which pricing is obtained via pricing services, but where prices have not been determined in an active market;

– financial instruments with fair values based on broker quotes or instruments that are valued using the Group's own models

whereby the majority of assumptions are market-observable;

– derivatives valued using broker quotes or appropriate valuation models. Model inputs include a range of factors which are

deemed to be observable, including current market and contractual prices for underlying instruments, period to maturity,

correlations, yield curves and volatility of underlying instruments; and

– quoted equity investments that the Group holds for which prices are available, but where the market transactions upon which

those prices are based are not considered to be regularly occurring.

Financial instruments classified as level 3 due to unobservable inputs include:

– investment properties are measured at fair value derived from valuation work carried out at the statement of financial position

date by independent property valuers. The valuation conforms to international valuation standards. The fair value was

determined using a methodology based on recent market transactions for similar properties, which have been adjusted for the

specific characteristics of each property within the portfolio.

– debt securities which do not trade on active markets are valued using discounted cash flow models designed to appropriately

reflect the credit and illiquidity of these instruments. The key unobservable input elements from the discount rate used across

private debt securities is the credit spread which is based on the credit quality of the assets and the illiquidity premium;

– infrastructure debt, commercial real estate debt and other loans are loans which do not trade on active markets. Valuations are

derived from external asset managers’ credit assessment and pricing models. These aim to take into account movements in

broader credit spreads and are aligned to varying degrees with external credit rating equivalents; and

– equity fund partnerships are valued as the proportion of the Group’s holding in the net asset value of the partnership based on

external valuation reports prepared by a third-party fund manager using International Private Equity and Venture Capital

Valuation Guidelines. Fair values of investments held by the partnerships that are not quoted in an active market are determined

primarily using discounted cash flow models. Unobservable inputs include projected cashflows, and the liquidity and credit and

risk premium are incorporated within the discount rate.

Carrying value and fair value of financial instruments

The carrying amounts of financial assets and liabilities are set out in the following table:

	Carrying value	Level 1	Level 2	Level 3	Fair value
At 31 December 2024	£m	£m	£m	£m	£m
Assets held at fair value through profit or loss:
Investment property	287.6	–	–	287.6	287.6
Derivative assets	19.1	–	19.1	–	19.1
Debt securities	3,937.9	746.0	3,190.4	1.5	3,937.9
Listed equity investments	–	–	–	–	–
Unlisted equity investments	0.7	–	–	0.7	0.7
Assets held at fair value through other comprehensive income:
Equity investments	19.4	–	–	19.4	19.4
Assets held at amortised cost:
Debt securities	55.7	–	16.3	34.5	50.8
Infrastructure debt	188.7	–	–	190.5	190.5
Commercial real estate loans	135.5	–	–	134.8	134.8
Other loans	5.4	–	–	5.4	5.4
Total	4,650.0	746.0	3,225.8	674.4	4,646.2
Liabilities held at fair value through profit or loss:
Derivative liabilities	38.7	–	38.7	–	38.7
Other financial liabilities:
Subordinated liabilities	259.1	–	229.0	–	229.0
Total	297.8	–	267.7	–	267.7

219 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

22. Fair value continued

	Carrying value	Level 1	Level 2	Level 3	Fair value
At 31 December 2023	£m	£m	£m	£m	£m
Assets held at fair value through profit or loss:
Investment property	277.1	–	–	277.1	277.1
Derivative assets	27.4	–	27.4	–	27.4
Debt securities	3,238.1	680.8	2,555.8	1.5	3,238.1
Listed equity investments	0.1	–	0.1	–	0.1
Unlisted equity investments	0.7	–	–	0.7	0.7
Assets held at fair value through other comprehensive income:
Equity investments	18.9	–	–	18.9	18.9
Assets held at amortised cost:
Debt securities	70.6	–	16.2	49.4	65.6
Infrastructure debt	214.2	–	–	213.9	213.9
Commercial real estate loans	145.9	–	–	145.4	145.4
Other loans	3.1	–	–	3.1	3.1
Total	3,996.1	680.8	2,599.5	710.0	3,990.3
Liabilities held at fair value through profit or loss:
Derivative liabilities	15.4	–	15.4	–	15.4
Other financial liabilities:
Subordinated liabilities	258.8	–	212.8	–	212.8
Total	274.2	–	228.2	–	228.2

Differences arise between carrying value and fair value where the measurement basis of the asset or liability is not fair value (for

example; assets and liabilities carried at amortised cost). Fair values of the following assets and liabilities approximate their carrying

values:

– cash and cash equivalents;

– borrowings; and

– trade and other payables, including insurance payables.

The movements in assets held at fair value and classified as level 3 in the fair value hierarchy relate to investment property and

unquoted equity investments. Investment property is analysed in note 18 along with further details on the Group's valuation

approach. A summary of realised and unrealised gains or losses in relation to investment property at fair value are presented

in note 4.

There were no changes in the categorisation of assets between levels 1, 2 and 3 for assets and liabilities held by the Group since

31 December 2023.

The significant unobservable inputs used in the fair value measurements categorised within Level 3 of the fair value hierarchy, as at

31 December 2024 and 2023 are shown below:

	Fair value		Valuation	Unobservable	Range
	£m		technique	input	(weighted average)
	2024	2023			2024	2023
				Equivalent yield	5.00% – 13.50%	4.50% – 7.96%
Investment property 1	287.6	277.1	Income		(average 6.17%)	(average 5.77%)
			capitalisation	Estimated rental value	£7.50 – £35.00	£7.00 – £35.00
				per square foot	(average £19.85)	(average £16.38)
Debt securities	34.5	49.4	Discounted	Credit spread	80.87 – 190.02	65.44 – 272.02
			cash flow		(average 126.83)	(average 143.24)
			Credit		SONIA + 0.88% -	SONIA + 0.88% -
Infrastructure debt	190.5	213.9	assessment	Credit spread	2.98% (average	2.98% (average
			and pricing		SONIA + 1.33%)	SONIA + 1.36%)
			models
			Credit		SONIA + 230bps –	SONIA + 230bps –
Commercial real estate	134.8	145.4	assessment	Credit spread	325bps (average	525bps (average
loans			and pricing		SONIA +270bps)	SONIA +284bps)
			models

Note:

1. The methodology of valuation reflects commercial property held within U K Insurance Limited.

220 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The table below analyses the movement in assets carried at fair value classified as level 3 in the fair value hierarchy.

		Unquoted	Unquoted
		equity	equity
	Investment	investments	investments
	property	held at FVOCI	held at FVTPL
	£m	£m	£m
At 1 January 2024	277.1	18.9	0.7
Additions	3.9	2.5	–
Increase in fair value in the period	6.6	1.6	–
Disposals	–	(3.6)	–
At 31 December 2024	287.6	19.4	0.7

23. Financial instruments

This note analyses the Group's financial instruments by type and amounts arising from expected credit losses.

	2024	2023
	£m	£m
Debt securities measured at fair value through profit or loss
Corporate	3,161.0	2,530.8
Supranational	17.9	25.6
Local government	13.0	0.9
Sovereign	746.0	680.8
Total	3,937.9	3,238.1
Debt securities measured at amortised cost
Corporate	55.7	70.6
Total	55.7	70.6
Total debt securities	3,993.6	3,308.7
Of which:
Fixed interest rate 1	3,992.8	3,307.5
Floating interest rate	0.8	1.2
Loans and receivables measured at amortised cost
Infrastructure debt	188.7	214.2
Commercial real estate loans	135.5	145.9
Other loans	5.4	3.1
Total loans and receivables	329.6	363.2
Equity investments measured at fair value through other comprehensive income
Interest in unconsolidated structured entities	19.4	18.9
Total	19.4	18.9
Equity investments measured at fair value through profit or loss
Unquoted equity investments	0.7	0.7
Quoted equity investments	–	0.1
Total equity investments	20.1	19.7
Total	4,343.3	3,691.6

Note:

1. The Group swaps a fixed interest rate for a floating rate of interest on its US dollar and Euro corporate debt securities by entering into interest rate

derivatives. The hedged amount at 31 December 2024 was £227.1 million (2023: £419.4 million).

Within the analysis of debt securities above are bank debt securities at 31 December 2024 of £1,135.0 million (2023: £973.7 million)

that can be further analysed as: secured £4.2 million (2023: £11.1 million); unsecured £935.4 million (2023: £770.6 million); and

subordinated £195.4 million (2023: £192.0 million).

Financial instruments measured at amortised cost

The Group has a portfolio of financial investments measured at amortised cost, primarily comprising infrastructure debt and

commercial real estate loans (total 31 December 2024: £329.6 million; 31 December 2023: £363.2 million). During the year the effect

of changes in assessing the ECL relating to financial investments amounted to £0.1 million (2023: £0.9 million).

The Group has a small portfolio of debt securities measured at amortised cost (31 December 2024: £55.7 million; 31 December

2023: £70.6 million). During the year the effect of changes in assessing the ECL on these securities amounted to £0.4 million

(2023: £0.2million).

221 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

23. Financial instruments continued

Unconsolidated structured entities

The Group invests in structured entities, being insurtech-focused equity fund partnerships, whose primary activity is to invest in

unquoted insurtech entities. These structured entities are not consolidated where the Group has determined it does not have control.

On initial recognition the Group made an irrevocable election to classify these equity investments as FVOCI given the instruments

are strategic in nature, and are not held for trading.

The insurtech-focused equity investments are valued based on external valuation reports received from a third-party fund manager

using International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines. Fair values for investments that are not quoted

in an active market are determined primarily using discounted cash flow models. Unobservable inputs, such as projected

cashflows, and the liquidity and credit and risk premium incorporated within the discount rate are regularly reviewed.

The maximum loss that the Group is exposed to at the period end date, before consideration of mitigating actions, is the carrying

value. Once the Group has disposed of its partnership interest, it ceases to be exposed to any risk from that partnership. The Group

has committed to further funding of £10.2 million which may increase the maximum loss exposure in future.

The Group's holdings in the partnerships are less than 20% and as such the net asset value of the structured entities is significantly

higher than the carrying value of the Groups asset.

Amounts arising from ECL: financial investments measured at amortised cost

The table below shows the gross carrying value of financial investments and ECL in stages 1 to 3:

	Gross carrying		Carrying	Carrying	Carrying
	amount	ECL allowance	amount	amount	amount
	2024	2024	2024	31 Dec 2023	1 Jan 2023
	£m	£m	£m	£m	£m
Stage 1	375.7	(1.5)	374.3	415.5	509.6
Stage 2	5.9	(0.5)	5.4	12.6	17.9
Stage 3	13.3	(7.7)	5.6	5.7	7.0
Total	394.9	(9.7)	385.3	433.8	534.5

The following table shows the Group's updated ECL allowances for financial investments measured at amortised cost should there

be a three-notch downgrade. This reflects an immediate downgrade on the issuers' current credit ratings. The key driver of such a

scenario could be a change in the economic outlook which could impact the portfolio as a whole, or a response to an unexpected

negative event, for a specific company or industry.

		3-notch		3-notch
		immediate		immediate
	ECL	downgrade	ECL	downgrade
	2024	2024	2023	2023
	£m	£m	£m	£m
Infrastructure debt	(1.0)	(3.8)	(16.6)	(19.2)
Commercial real estate loans	(7.8)	(11.3)	(7.7)	(10.5)
Debt securities held at amortised cost	(0.3)	(1.7)	(0.8)	(2.7)
Other loans	(0.6)	(0.5)	(0.4)	(0.4)
Total	(9.7)	(17.3)	(25.5)	(32.8)

Derivative financial instruments

The table below shows the carrying values of the Group's derivative financial assets and liabilities.

	2024	2023
	£m	£m
Derivative assets
At fair value through profit or loss:
Foreign exchange contracts (forwards)	14.9	27.1
Interest rate swaps	4.2	0.3
Designated as hedging instruments:
Foreign exchange contracts (forwards) 1	–	–
Total	19.1	27.4
Derivative liabilities
At fair value through profit or loss:
Foreign exchange contracts (forwards)	36.4	8.2
Interest rate swaps	2.3	6.9
Designated as hedging instruments:
Foreign exchange contracts (forwards) 1	–	0.3
Total	38.7	15.4

Note:

1. Foreign exchange contracts (forwards) are designated as cash flow hedges in relation to supplier payments.

222 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

24. Retirement benefit obligations

Defined contribution scheme

The pension charge in respect of the defined contribution scheme for the year ended 31 December 2024 was £30.6 million

(2023: £28.7 million).

Defined benefit scheme

The Group's defined benefit pension scheme was closed in 2003, although the Group remains the sponsoring employer for

obligations to current and deferred pensioners based on qualifying years' service and final salaries. The defined benefit scheme is

legally separated from the Group with a trustee who is required by law to act in the interests of the scheme and of all the relevant

stakeholders. The trustee of the pension scheme is responsible for the investment policy with regard to the assets of the scheme.

The weighted average duration of the defined benefit obligations at 31 December 2024 is 15 years (2023: 16 years) using

accounting assumptions.

The table below sets out the principal assumptions used in determining the defined benefit scheme obligations:

	2024	2023
	%	%
Rate of increase in pension payment	2.5	2.5
Rate of increase in deferred pensions	2.6	2.5
Discount rate	5.2	4.5
Inflation rate	3.1	3.1

No assumption has been made for salary growth as there are no obligations in the scheme that are linked to future increases

in salaries.

Post-retirement mortality assumptions

	2024	2023
Life expectancy at age 60 now:
Males	86.8	87.0
Females	88.9	89.0
Life expectancy at age 60 in 20 years' time:
Males	88.3	88.9
Females	90.3	90.8

The table below analyses the fair value of the scheme assets by type of asset.

	2024	2023
	£m	£m
Insurance policies 1	46.7	51.8
Index-linked bonds	0.5	0.5
Government bonds	0.3	0.3
Defined contribution section funds 2	1.0	1.4
Other	0.5	1.7
Total	49.0	55.7

Notes:

1. Insurance policies are valued at the present value of the related obligations.

2. The defined contribution section funds relate to members in that section who have a defined benefit underpin that exceeds the value of the

defined contribution funds. The investments are largely in a diversified growth fund. The corresponding liability is included in the defined benefit

scheme obligation (see the movement in net pension surplus table below).

The majority of debt instruments held directly or through the liquidity fund have quoted prices in active markets.

223 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

24. Retirement benefit obligations continued

Movement in net pension surplus

		Present value of
	Fair value of	defined benefit
	defined benefit	scheme	Net pension
	scheme assets	obligations	surplus
	£m	£m	£m
At 1 January 2023	53.4	(51.8)	1.6
Statement of Profit or Loss:
Net interest income/(cost) 1	2.5	(2.4)	0.1
Administration costs	(0.5)	–	(0.5)
Statement of Comprehensive Income:
Remeasurement gains
Return on plan assets excluding amounts included in the net interest on the defined benefit asset	2.7	–	2.7
Actuarial losses on defined benefit scheme
Experience losses	–	(1.3)	(1.3)
Gains from change in demographic assumptions	–	0.4	0.4
Losses from change in financial assumptions	–	(1.7)	(1.7)
Benefits paid	(2.4)	2.4	–
At 31 December 2023	55.7	(54.4)	1.3
Statement of Profit or Loss:
Net interest income/(cost) 1	2.4	(2.4)	–
Administration costs	(1.1)	–	(1.1)
Statement of Comprehensive Income:
Remeasurement gains
Return on plan assets excluding amounts included in the net interest on the defined benefit asset	(5.2)	–	(5.2)
Actuarial gains on defined benefit scheme
Experience gains	–	0.1	0.1
Gains from change in demographic assumptions	–	0.3	0.3
Gains from change in financial assumptions	–	5.4	5.4
Benefits paid	(2.8)	2.8	–
At 31 December 2024	49.0	(48.2)	0.8

Note:

1. The net interest income/(cost) in the statement of profit or loss has been included under other operating expenses.

The table below details the history of the scheme for the current and prior years:

	2024	2023	2022	2021	2020
	£m	£m	£m	£m	£m
Present value of defined benefit scheme obligations	(48.2)	(54.4)	(51.8)	(96.1)	(98.7)
Fair value of defined benefit scheme assets	49.0	55.7	53.4	108.2	107.7
Net pension surplus	0.8	1.3	1.6	12.1	9.0
Experience gains/(losses) on scheme liabilities	0.1	(1.3)	0.3	(5.8)	2.4
Return on plan assets excluding amounts included in the net
interest on the defined benefit asset	(5.2)	2.7	(53.3)	2.2	9.0

224 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

Sensitivity analysis

The sensitivity analysis has been calculated by valuing the pension scheme liabilities using the amended assumptions shown

in the table below and keeping the remaining assumptions the same as disclosed in the table above, except in the case of

the inflation sensitivity where other assumptions that depend on assumed inflation have also been amended correspondingly.

The pension cost has been determined allowing for the estimated impact on the scheme's assets. Following the purchase of the

insurance policy to cover the benefits of the defined benefit section members, the scheme’s asset and liabilities move by the same

amount in respect of these members, hence has no impact on pension cost. The selection of these movements to illustrate the

sensitivity of the defined benefit obligation to key assumptions should be viewed as illustrative, rather than providing a view

on the likely size of any change.

		Impact on present value
		of defined benefit
		scheme obligations
	2024	2023
	£m	£m
Discount rate
1.0% increase in discount rate (2023: 1.0% increase in discount rate)	(6.0)	(7.4)
1.0% decrease in discount rate (2023: 1.0% decrease in discount rate)	7.0	8.7
Inflation rate
1.0% increase in inflation rate (2023: 1.0% increase in inflation rate)	2.4	2.7
1.0% decrease in inflation rate (2023: 1.0% decrease in inflation rate)	(2.3)	(2.7)
Life expectancy
1-year increase in life expectancy	1.1	2.4
1-year decrease in life expectancy	(1.1)	(2.4)

DL Insurance Services Limited, as the Principal Employer of the Direct Line Group Hybrid Scheme and the only Employer in

relation to the Scheme, gave written notice to the Trustee of the Scheme that the Scheme is to commence winding-up with effect

on and from 30 December 2024. This action has removed the requirement to obtain technical provisions funding valuations

in relation to the Scheme.

Once the winding-up of the Scheme has been completed, it is expected that the Group will have no further defined

benefit obligations.

At the date of signing these financial statements, no contributions are expected to be payable in 2025 (2024: £nil).

25. Cash and cash equivalents and borrowings

This note provides detail of the Group's cash position as disclosed in the consolidated cash flow statement.

	2024	2023
	£m	£m
Cash at bank and in hand	101.3	148.0
Short term deposits with credit institutions 1	1,054.7	1,624.2
Cash and cash equivalents	1,156.0	1,772.2
Bank overdrafts 2	(66.8)	(82.4)
Cash and cash equivalents and borrowings	1,089.2	1,689.8

Notes:

1. This represents money market funds.

2. Bank overdrafts represent short-term timing differences between transactions posted in the records of the Group and transactions flowing

through the accounts at the bank.

The effective interest rate on short-term deposits with credit institutions for the year ended 31 December 2024 was 5.26% (2023:

4.57%) and average maturity was 10 days (2023: 10 days).

Of the total amount of short-term deposits with credit institutions of £1,054.7 million (2023: £1,624.2 million), £298.1 million (2023:

£241.8 million) is invested within money market funds under the 100% quota share reinsurance treaty for the Brokered commercial

business, which is operated on a funds withheld basis and is retained as security against the reinsurer's obligations.

225 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

26. Assets held for sale

This note analyses the Group's assets held for sale.

	2024	2023
	£m	£m
Property, plant and equipment	12.2	13.9
Total assets held for sale	12.2	13.9

The Group has been able to reduce the number of office sites it needs by changing the way it uses its premises so that they support

collaboration, training and teamwork rather than being an everyday place of work for most people.

Assets held for sale at 31 December 2024 and 31 December 2023 relate to an office site in Leeds (including retail space within the

property) that is no longer required.

A net impairment loss of £1.8 million (2023: £5.1 million) is included within operating expenses (as part of restructuring and one-off

costs) for the write down of the carrying value of properties to their held for sale values.

27. Share capital

This note gives details of Direct Line Insurance Group plc's ordinary share capital.

Issued and fully paid: equity shares		2024			2023
			Capital			Capital
	Number of		redemption	Number of		redemption
	shares	Share capital	reserve	shares	Share capital	reserve
Ordinary Shares of 10 10/11 pence each 1	millions	£m	£m	millions	£m	£m
At 1 January and 31 December	1,311.4	143.1	6.9	1,311.4	143.1	6.9

Notes:

1. The shares have full voting, dividend and capital distribution rights (including on wind-up) attached to them; these do not confer any rights of

redemption.

Additional information including the number of shares authorised for issue is available in the Directors' Report which starts

on page 142.

Employee trust shares

The Group satisfies share-based payments under the Group's share plans primarily through shares purchased in the market

and held by employee share trusts.

At 31 December 2024, 10,431,842 Ordinary Shares (2023: 13,688,971 Ordinary Shares) were owned by the employee share trusts at

a cost of £19.5 million (2023: £29.9 million). These Ordinary Shares are carried at cost and at 31 December 2024 had a market value

of £26.6 million (2023: £24.9 million).

28. Other reserves

This note analyses the Group's other reserves.

Capital reserves

	2024	2023
	£m	£m
Capital contribution reserve	100.0	100.0
Capital redemption reserve	1,356.9	1,356.9
Total	1,456.9	1,456.9

Capital contribution reserves arose on the cancellation of a debt payable to a shareholder.

Capital redemption reserves of £1,350.0 million arose on the reduction of nominal value of each share in issue with a corresponding

transfer to capital redemption reserve with the remainder arising when shares repurchased through buybacks were cancelled.

No further additions were made in 2024 (2023: nil).

226 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

29. Tier 1 notes

The carrying amount of Tier 1 notes at 31 December was:

	2024	2023
	£m	£m
Tier 1 notes	346.5	346.5

On 7 December 2017, the Group issued £350 million of fixed rate perpetual Tier 1 notes with a coupon rate of 4.75% per annum.

The Group has an optional redemption date of 7 December 2027. If the notes are not repaid on that date, a fixed rate of interest per

annum will be reset. The notes are direct, unsecured and subordinated obligations of the issuer ranking pari passu and without any

preference amongst themselves.

The Tier 1 notes are treated as a separate category within equity and the coupon payments are recognised outside of the profit after

tax result and directly in shareholders' equity.

The Group has the option to cancel the coupon payment. Cancellation becomes mandatory if the Solvency condition

is not met

at the time of, or following, coupon payment; there is non-compliance with the SCR or the minimum capital requirement; the

Group has insufficient distributable reserves; or the relevant regulator requires the coupon payment to be cancelled.

Note:

1. All payments shall be conditional upon the Group being solvent at the time of payment and immediately after payment. The issuer will be solvent

if (i) it is able to pay its debts owed to senior creditors as they fall due and (ii) its assets exceed its liabilities.

30. Subordinated liabilities

The carrying amount of subordinated liabilities at 31 December was:

	2024	2023
	£m	£m
Subordinated Tier 2 notes	259.1	258.8

On 5 June 2020, the Group issued subordinated Tier 2 notes at a fixed rate of 4.0%. The notes have a redemption date of 5 June 2032

and may be redeemed at the option of the Group commencing on 5 December 2031 until the maturity date.

The notes are unsecured and subordinated obligations of the Group and rank pari passu and without any preference among

themselves. In the event of a winding-up or of bankruptcy, they are to be repaid only after the claims of all other senior creditors

have been met and will rank at least pari passu with the claims of holders of other Tier 2 capital.

The Group has the option, in certain circumstances, to defer interest payments on the notes but to date has not exercised this right.

31. Provisions

Movement in provisions during the year

	Restructuring	Other 1	Total
	£m	£m	£m
At 1 January 2024	29.5	1.3	30.8
Additional provision	11.2	2.3	13.5
Utilisation of provision	(23.3)	–	(23.3)
Released to the Statement of Profit or Loss	(5.2)	(0.2)	(5.4)
At 31 December 2024	12.2	3.4	15.6

Note:

1. Other includes a number of individually immaterial provisions.

None of the above amounts are due to be settled outside of 12 months (2023: £nil).

Restructuring costs include several programmes across the Group, such as office site closures, staff restructuring and an impairment

charge. There are no material uncertainties regarding the timings, amounts or assumptions used.

32. Trade and other payables

This note analyses the Group's trade and other payables at the end of the year:

	2024	2023
	£m	£m
Accruals	161.6	141.6
Trade creditors	0.8	2.2
Other taxes	7.4	12.3
Other creditors	1.2	1.1
Deferred income	7.9	6.4
Total	178.9	163.6

227 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

33. Commitments and contingent liabilities

The Group did not have any material commitments and contingent liabilities at 31 December 2024 (2023: none).

The PRA has given notice of its intention to investigate the miscalculation identified within the Group’s audited Solvency II own

funds for the year ended 2023, as announced on 23 August 2024. The process is at an early stage and the outcome is uncertain. No

provision has been recognised in the financial statements on grounds of likelihood and it is not practicable, at this time, to reliably

estimate any financial penalty or other regulatory action. The Group is cooperating fully with the PRA.

Commitments to unconsolidated structured entities are detailed in note 23.

34. Notes to the consolidated cash flow statement

This note gives further detail behind the figures in the statement of cash flows

			2024	2023
		Notes	£m	£m
Profit for the year			162.5	222.9
Adjustments for:
Net Investment return excluding investment fees		4	(281.1)	(312.3)
Finance costs		8	15.3	14.5
Net defined benefit pension scheme expense		24	0.4	0.4
Equity-settled share-based payment charge			14.6	13.9
Tax Charge		10	55.8	54.5
Depreciation and amortisation charge			139.5	123.5
Impairment of intangible assets		15	23.1	5.4
Impairment on assets held for sale		26	1.8	5.1
Loss on disposal of property, plant and equipment and ROU assets			0.6	4.1
Transaction costs paid on disposal of business			–	(25.1)
Loss/(profit) on disposal of business		9	4.7	(443.9)
Operating cash flows before movements in working capital			137.2	(337.0)
Movements in working capital:
Net increase in reinsurance contract assets 1			(456.2)	(271.2)
Net (increase)/decrease in insurance contract assets 1			(0.3)	11.9
Net increase in reinsurance contract liabilities			432.9	102.7
Net (decrease)/increase in insurance contract liabilities			(151.9)	613.0
Net increase/(decrease) in other receivables			13.5	(0.6)
Net (increase)/decrease in accrued income and other assets			(2.2)	3.2
Net (decrease)/increase in trade and other payables			(4.0)	10.0
Cash (used in)/generated from operations before investment of insurance assets			(31.0)	132.0
Interest received			208.2	176.7
Rental income received from investment property		4	17.4	16.1
Purchase of investment property		18	(3.8)	(0.5)
Proceeds on disposal/maturity of financial investments measured through profit or loss			1,131.0	1,062.4
Proceeds from maturity of debt securities measured at amortised cost			15.2	26.5
Advances made for commercial real estate loans			(24.2)	(5.4)
Repayments of infrastructure debt and commercial real estate loans			60.5	81.8
Proceeds from equity investments			3.2	–
Purchase of equity investments			(2.5)	(3.0)
Purchase of financial investments measured at fair value through profit or loss			(1,749.6)	(1,049.0)
Advances for other loans			(2.5)	(1.1)
Cash (used in)/generated from	investment of insurance assets		(347.1)	304.4

Note:

1. 2023 cashflows have been re-presented to show Impairment provision movements on non-performance reinsurance contracts within Net increase

in reinsurance contract assets.

228 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the financial statements continued

The table below details changes in liabilities arising from the Group's financing activities:

	Leases		Subordinated liabilities
	2024	2023	2024	2023
	£m	£m	£m	£m
At 1 January	106.1	81.6	258.8	258.6
Interest paid on subordinated liabilities	–	–	(10.4)	(10.4)
Lease repayments	(17.1)	(14.6)	–	–
Financing cash flows	(17.1)	(14.6)	(10.4)	(10.4)
Additions from acquisition of business	–	0.8	–	–
Additions/disposals of leases	20.1	34.5	–	–
Interest on lease liabilities	4.6	3.8	–	–
Amortisation of arrangement costs and discount on issue of subordinated	–	–	0.3	0.2
liabilities
Accrued interest expense on subordinated liabilities	–	–	10.4	10.4
Other changes	24.7	39.1	10.7	10.6
At 31 December	113.7	106.1	259.1	258.8

35. Related undertakings

The principal subsidiary undertakings of the Group, over which it exercises 100% voting power, are shown below. Their capital

consists of Ordinary Shares which are unlisted. All subsidiaries (a full list of which is included in note 2 of the Parent Company's

financial statements) are included in the Group's consolidated financial statements.

	Company
	registration	Place of incorporation
Name of subsidiary	number	and operation	Principal activity
DL Insurance Services Limited	3001989	United Kingdom	Management services
U K Insurance Limited	1179980	United Kingdom	General insurance

The Group did not acquire any subsidiaries in the year ended 31 December 2024, (31 December 2023: four subsidiary entities

acquired: By Miles Group Limited, By Miles Limited, By Miles Payment Services Limited and By Miles Technology Services Limited).

By Miles Payment Services Limited was dissolved on 1 October 2024, (31 December 2023: no subsidiaries disposed).

Transactions between the Group's subsidiary undertakings, which are related parties, have been eliminated on consolidation and

accordingly are not disclosed.

Subject to the preceding sentence, there were no sales or purchases of products and services to or from related parties in the year

ended 31 December 2024 (2023: £nil).

Compensation of key management

	2024	2023
	£m	£m
Termination benefits	1.5	1.0
Short-term employee benefits	8.5	6.6
Post-employment benefits	0.2	0.2
Share-based payments	6.4	2.5
Total	16.6	10.3

For the purposes of IAS 24 'Related party disclosures', key management personnel comprise the Directors and Non-Executive

Directors and the members of the Executive Committee.

36 Post balance sheet events

No events have occurred since the reporting date that materially impact these financial statements.

229 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

(A) Basis of preparation

Direct Line Insurance Group plc, registered in England and Wales (company number 02280426), is the ultimate parent company

ofthe Group. The principal activity of the Company is managing its investments in subsidiaries, providing loans to those

subsidiaries, raising funds for the Group and the receipt and payment of dividends.

The address of the Company's registered office is Churchill Court, Westmoreland Road, Bromley, BR1 1DP.

The Company's financial statements are prepared on the historical cost basis except for derivative financial instruments, which are

measured at fair value.

In accordance with the exemption permitted under section 408 of the Companies Act 2006, the Company's Statement of Profit

orLoss and related notes have not been presented in these separate financial statements.

The Company's financial statements are prepared in accordance with FRS 101 'Reduced Disclosure Framework'.

The Company has taken advantage of the following FRS 101 disclosure exemptions:

– FRS 101.8 (d): the requirements of IFRS 7 'Financial Instruments: Disclosures' to make disclosures about financial instruments;

– FRS 101.8 (e): the disclosure requirements of IFRS 13 'Fair Value Measurement';

– FRS 101.8 (g): the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 111, and 134 to 136 of IAS 1 ‘Presentation of Financial

Statements’ to produce a cash flow statement and to make an explicit and unreserved statement of compliance with IFRSs,

additional comparative information and capital management information;

– FRS 101.8 (h): the requirements of IAS 7 'Statements of Cash Flows' to produce a cash flow statement and related notes;

– FRS 101.8 (i): the requirements of paragraphs 30 and 31 of IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'

to include a list of new IFRSs that have been issued but that have yet to be applied; and

– FRS 101.8 (k): the requirements of IAS 24 'Related Party Disclosures' to disclose related party transactions entered into between

two or more members of a group, provided that any subsidiary which is party to a transaction is wholly owned by such a member.

Adoption of new and revised standards

Full details of the new and revised standards adopted by the Company are set out in note (A) to the consolidated financial

statements.

(B) Investment in subsidiaries

Investments in subsidiaries are stated at cost less any impairment.

The following subsidiaries incorporated in the United Kingdom, are exempt from the requirements relating to the audit of

individual accounts, under s479A-479C of the Companies Act 2006. The parental guarantee is provided by Direct Line Insurance

Group plc.

– Direct Line Group Limited (Registered number: 02811437)

– Finsure Premium Finance Limited (Registered number: 01670887)

– Green Flag Holdings Limited (Registered number: 03577191)

230 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Parent Company Accounting Policies

2024 2023

Re-presented

Notes £m £m

Non-current assets

Investment in subsidiary undertakings 2 3,460.9 3,445.2

Other receivables 3 18.0 16.9

Total non-current assets 3,478.9 3,462.1

Current assets

Other receivables 3 6.8 6.5

Current tax assets 4 11.4 14.1

Derivative financial instruments 5 – 0.3

Cash and cash equivalents 6 177.3 118.8

Total current assets 195.5 139.7

Total assets 3,674.4 3,601.8

Equity

Shareholders' equity 2,810.5 2,693.6

Tier 1 notes 8 346.5 346.5

Total equity 3,157.0 3,040.1

Non-current liabilities

Subordinated liabilities 9 259.1 258.8

Total non-current liabilities 259.1 258.8

Current liabilities

Borrowings 6 257.5 301.7

Derivative financial instruments 5 – 0.3

Deferred tax liabilities 4 0.8 0.9

Total current liabilities 258.3 302.9

Total liabilities 517.4 561.7

Total equity and liabilities 3,674.4 3,601.8

Prior period comparatives have been re-presented to be based on classification rather than on liquidity.

The attached notes on pages 233 to 235 form an integral part of these separate financial statements.

The profit for the year net of tax was £213 .5 million (2023: £21.2 million). There were no other components of recognised income

orexpense in either period and, consequently, no statement of other comprehensive income has been presented.

The financial statements were approved by the Board of Directors and authorised for issue on 3March 2025.

They were signed on its behalf by:

Jane Poole

Chief Financial Officer

Direct Line Insurance Group plc

Registration No. 02280426

231 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Parent Company Statement of Financial Position

For the year ended 31December 2024

capital

(note 7)

Capital

reserves

(note 7)

Share-

based

payment

reserve

Retained

earnings

Shareholders

equity

Tier 1 notes

(note 8) Total equity

£m £m £m £m £m £m £m

Balance at 1 January 2023 143.1 1,456.9 1.1 1,094.6 2,695.7 346.5 3,042.2

Profit for the year – – – 21.2 21.2 – 21.2

Total comprehensive income for the year – – – 21.2 21.2 – 21.2

Dividends and appropriations paid

(note 10) – – – (16.6) (16.6) – (16.6)

Credit to equity for equity-settled share-based

payments – – 12.6 – 12.6 – 12.6

Shares distributed by employee trusts – – (19.3) – (19.3) – (19.3)

Total transactions with equity holders – – (6.7) (16.6) (23.3) – (23.3)

Balance at 31 December 2023 143.1 1,456.9 (5.6) 1,099.2 2,693.6 346.5 3,040.1

Profit for the year – – – 213.5 213.5 – 213.5

Total comprehensive income for the year – – – 213.5 213.5 – 213.5

Dividends and appropriations paid

(note 10) – – – (94.8) (94.8) – (94.8)

Credit to equity for equity-settled share-based

payments – – 15.8 – 15.8 – 15.8

Shares distributed by employee trusts – – (17.6) – (17.6) – (17.6)

Total transactions with equity holders – – (1.8) (94.8) (96.6) – (96.6)

Balance at 31 December 2024 143.1 1,456.9 (7.4) 1,217.9 2,810.5 346.5 3,157.0

The attached notes on pages 233 to 235 form an integral part of these separate financial statements.

232 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Parent Company Statement of Changes in Equity

As at 31December 2024

1. Risk management

The risks faced by the Company, arising from its investment in subsidiaries, are considered to be the same as those in the

operations of the Group. Details of the key risks and the steps taken to manage them are disclosed in note 1 to the consolidated

financial statements. The Company also holds, on behalf of its subsidiaries, designated hedging instruments which relate to foreign

currency supplier payments.

2. Investment in subsidiary undertakings

2024 2023

£m £m

At 1 January 3,445.2 3,332.6

Additional investment in subsidiary undertakings 15.7 112.6

At 31 December 3,460.9 3,445.2

The subsidiary undertakings of the Company are set out in the table below. Their capital consists of Ordinary Shares which are

unlisted. In all cases, the Company owns 100% of the Ordinary Shares, either directly or through its ownership of other subsidiaries,

and exercises full control over their decision making.

Name of subsidiary

Company

registration

number

Place of incorporation

and operation Principal activity

Directly held by the Company:

Direct Line Group Limited

02811437 United Kingdom Intermediate holding company

DL Insurance Services Limited

03001989 United Kingdom Management services

Finsure Premium Finance Limited

01670887 United Kingdom Non-trading company

Inter Group Insurance Services Limited

02762848 United Kingdom Dormant

UK Assistance Accident Repair Centres Limited

02568507 United Kingdom Motor vehicle repair services

UK Assistance Limited

02857232 United Kingdom Dormant

U K Insurance Business Solutions Limited

05196274 United Kingdom Insurance intermediary services

U K Insurance Limited

2,3

01179980 United Kingdom General insurance

Indirectly held by the Company:

Brolly UK Technology Limited

10134039 United Kingdom Dormant

By Miles Group Ltd

12270837 United Kingdom Intermediate holding company

By Miles Ltd

09498559 United Kingdom Business support services

By Miles Payment Services Ltd 12190473 United Kingdom Dissolved

By Miles Technology Services Ltd

12189384 United Kingdom Software development

Churchill Insurance Company Limited

02258947 United Kingdom General insurance

Direct Line Insurance Limited

01810801 United Kingdom Dormant

DL Support Services India Private Limited

See

footnote 4

India

Support and operational

services

DLG Legal Services Limited

08302561 United Kingdom Legal services

DLG Pension Trustee Limited

08911044 United Kingdom Dormant

Farmweb Limited

03207393 United Kingdom Dormant

Green Flag Group Limited

02622895 United Kingdom Intermediate holding company

Green Flag Holdings Limited

03577191 United Kingdom Intermediate holding company

Green Flag Limited

01003081 United Kingdom Breakdown recovery services

Intergroup Assistance Services Limited

03315786 United Kingdom Dormant

National Breakdown Recovery Club Limited

02479300 United Kingdom Dormant

Nationwide Breakdown Recovery Services Limited

01316805 United Kingdom Dormant

The National Insurance and Guarantee Corporation

Limited

00042133 United Kingdom Dormant

UKI Life Assurance Services Limited

03034263 United Kingdom Dormant

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 is registered as a foreign company in the Republic of South Africa and had a branch in Ireland (deauthorised February 2025).

4. Registered office at: Max House, Level 5, Okhla Industrial Estate Phase-III, New Delhi, 110020, India. Company registration number:

U74140DL2014FTC265567.

5. These entities have not been audited, in accordance with the exemptions available for dormant entities under section 480 of the Companies Act 2006.

6. These entities have not been audited, in accordance with the exemptions available for subsidiaries under section 479A of the Companies Act 2006.

7. By Miles Payment Services Ltd was dissolved on 1 October 2024.

233 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the Parent Company Financial Statements

At 31December 2024, the carrying amount of the Company’s net assets of £3,157.0 million (2023 £3,040.1 million) exceeded the

Group’s market capitalisation of £2,386.1 million (2023: £2,902.1million). The Group has performed an impairment test in line with the

requirements of IAS 36 ‘Impairment of Assets’ and concluded that no impairments were required to any of the Company’s

investments in its subsidiaries.

The recoverable amounts of each investment were based on the higher of the value-in-use test, using the strategic plan, and the

fair value which was deemed to be equal to the subsidiaries’ net asset values. For each investment in subsidiary the recoverable

amount was greater than the carrying value of the cost of investment resulting in no impairment required for the year ended

31December 2024 (2023: £nil).

3. Other receivables

2024 2023

£m £m

Loans to subsidiary undertakings

18.0 16.9

Trade receivables due from subsidiary undertakings 5.7 6.0

Other debtors 1.1 0.5

Total² 24.8 23.4

Notes:

1. Loans to subsidiary undertakings are not expected to be settled within 12 months and as such are classified as non-current. Loan balances are held

at their recoverable amount

2. Trade receivables due from subsidiary undertakings and Other debtors are classified as current.

4. Tax assets and liabilities

2024 2023

£m £m

Per Statement of Financial Position:

Current tax assets 11.4 14.1

Deferred tax liabilities (0.8) (0.9)

The deferred tax liability is in respect of temporary differences in Tier 1 notes.

5. Financial instruments

This note shows the carrying values of the Company's derivative financial assets and liabilities

Notional

amount Fair value

Notional

amount Fair value

2024 2024 2023 2023

£m £m £m £m

Derivative assets

Designated as hedging instruments:

Foreign exchange contracts (forwards)

24.0 – 14.5 0.3

Total 24.0 – 14.5 0.3

Derivative liabilities

Designated as hedging instruments:

Foreign exchange contracts (forwards)

24.0 – 14.5 0.3

Total 24.0 – 14.5 0.3

Notes:

1. The derivative assets and liabilities are both classified as level 2 within the Group's fair value hierarchy set out in note 23 of the consolidated

financialstatements.

2. The foreign exchange cash flow hedges have been entered into on behalf of the Group's subsidiary companies.

234 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Notes to the Parent Company Financial Statements continued

6. Cash and cash equivalents and borrowings

This note provides detail of the Company's cash position.

Cash and cash equivalents

2024 2023

£m £m

Cash at bank and in hand – 0.3

Short-term deposits with credit institutions

177.3 118.5

Total 177.3 118.8

Note:

1. This represents money market funds.

Borrowings

2024 2023

£m £m

Loans from fellow subsidiaries within the Group

257.5 301.7

Note:

1. All loans from fellow Group subsidiaries are repayable by 31 December 2024 and automatically extend by a year on 1 January 2025. Interest is

charged at the bank of England base rate plus 1%.

7. Share capital, capital reserves and distributable reserves

Full details of the share capital and capital reserves of the Company are set out in notes 27 and 28 to the consolidated financial

statements.

Of the Company's total equity, £1,217.9 million (2023: £1,099.2 million), being the total of its retained earnings, is considered to be

distributable reserves.

8. Tier 1 notes

Full details of the Tier 1 notes of the Company are set out in note 29 to the consolidated financial statements.

9. Subordinated liabilities

2024 2023

£m £m

Subordinated Tier 2 notes 259.1 258.8

Full details of the Company's subordinated Tier 2 notes are set out in note 30 to the consolidated financial statements.

The aggregate fair value of subordinated guaranteed dated notes at 31December 2024 was £229.0 million (2023: £212.8 million).

10. Dividends

Full details of the dividends paid and proposed by the Company are set out in note 11 to the consolidated financial statements.

11. Share-based payments

Full details of share-based compensation plans are provided in note 6 to the consolidated financial statements. The Company

isthesponsoring entity and the employees of a subsidiary are the participants of the schemes.

12. Employees, Directors and key management remuneration

The Company has no employees. The Directors and key management of the Group and the Company are the same. The aggregate

emoluments of the Directors are set out in note 6 to the consolidated financial statements, the compensation for key management

is set out in note 35 to the consolidated financial statements and the remuneration and pension benefits payable in respect of the

highest-paid Director are included in the Directors' Remuneration Report in the Governance section of the Annual Report and

Accounts.

235 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Annual General Meeting

The 2025 AGM will be held at Riverbank House, 2 Swan Lane,

London, EC4R 3AD on Wednesday 14May 2025, starting at

10:30 am. All shareholders will receive a separate notice

convening the AGM. This will explain the resolutions to be put

to the meeting.

The Articles of Association of the Company and the letters

ofappointment of the Executive Directors, the Chair and the

Non-Executive Directors will be available at the venue for the

annual general meeting (Riverbank House, as referred to in

theparagraph above).

Market

The Company has a listing on the UK Listing Authority's Official

List. The Company's Ordinary Shares (EPIC: DLG) are admitted

to trading on the London Stock Exchange.

Share ownership

Share capital

You can find details of the Company's share capital in note 27

tothe consolidated financial statements.

Dividends

The Company pays its dividends in sterling to shareholders

registered on its register of members at the relevant record

date.

Shareholders can arrange to receive their cash dividend

payments in a bank or building society account by completing

a dividend mandate form. This is available from the Company's

registrar, Computershare Investor Services Plc ("Registrar"), in

the UK. You can find the Registrar's contact details on page 255.

Alternatively, shareholders can access their shareholdings

online and download a dividend mandate form from the

Investor Centre. You can find details of this below.

Dividend Reinvestment Plan

The Company offers a Dividend Reinvestment Plan.

Thisenables shareholders to use their cash dividends to buy

theCompany's Ordinary Shares in the market. You can find

more details on the Company's website.

Shareholder enquiries

Shareholders with queries about anything relating to their

shares can contact our Registrar.

Shareholders should notify the Registrar of any change in

shareholding details, such as their address, as soon as possible.

Shareholders can access their current shareholding details

online at www.investorcentre.co.uk/directline. Investor Centre is

a free-to-use, secure, self-service website that enables

shareholders to manage their holdings online. The website

allows shareholders to:

– check their holdings;

– update their records, including address and direct credit

details;

– access all their securities in one portfolio by setting up

apersonal account;

– vote online; and

– register to receive electronic shareholder communications.

To access information, the website requires shareholders to

quote their shareholder reference number. Shareholders can

find this number on their share certificates.

Corporate website

The Group's corporate website is www.directlinegroup.co.uk.

Itcontains useful information for the Company's investors and

shareholders. For example, it includes press releases, details

offorthcoming events, essential shareholder information,

adividend history, a financial calendar, and details of the

Company's AGM. A microsite containing documents relevant to

the recommended offer by Aviva plc for Direct Line Insurance

Group plc can be found on the corporate website. You can also

subscribe to email news alerts.

Shareholder warning

Fraudsters use persuasive and high-pressure tactics to lure

investors into scams. They may offer to sell shares that prove to

be worthless or non-existent, or they can offer to buy shares at

an inflated price in return for you paying upfront. They promise

high profits. However, if you buy or sell shares in this way, you

will probably lose your money.

236 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Shareholder information

How to avoid share fraud

– Remember that FCA-authorised firms are unlikely to contact

you unexpectedly offering to buy or sell shares.

– Do not converse with them. Note the name of the person and

firm contacting you, then end the call.

– To see if the person and firm contacting you are authorised

by the FCA, check the Financial Services Register at

www.fca.org.uk/register.

– Beware of fraudsters claiming to be from an authorised firm;

copying its website; or giving you false contact details.

– 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.

– If the firm does not have contact details on the Register

orthey tell you the details are out of date, call the FCA

on0800 111 6768.

– Search the list of unauthorised firms to avoid at

www.fca.org.uk/consumers/unauthorised-firms-individuals.

– Remember that if you buy or sell shares from an

unauthorised firm, you cannot access the Financial

Ombudsman Service or Financial Services Compensation

Scheme.

– Get independent financial and professional advice before

handing over any money.

– If it sounds too good to be true, it probably is.

Report a scam

If fraudsters approach you, tell the FCA using the share fraud

reporting form at www.fca.org.uk/consumers/report-scam-

unauthorised-firm. You can also find out more about

investment scams on the same web page.

You can call the FCA Consumer Helpline on 0800 111 6768.

If you have already paid money to share fraudsters, call Action

Fraud on 0300 123 2040.

Tips on protecting your shares

– Keep all your certificates in a safe place. Alternatively, consider

holding your shares in the UK's electronic registration and

settlement system for equity, called CREST, or via a nominee.

– Keep correspondence from the Registrar that shows your

shareholder reference number in a safe place, and shred

unwanted correspondence.

– Inform the Registrar as soon as you change your address.

– If you receive a letter from the Registrar regarding a

changeof address and you have not recently moved, contact

them immediately.

– Find out when your dividends are paid and contact the

Registrar if you do not receive them.

– Consider having your dividends paid direct into your bank

account. You will need to complete a dividend mandate form

and send it to the Registrar. This reduces the risk of cheques

being stolen or lost in the post.

– If you change your bank account, inform the Registrar of your

new account details immediately.

– If you are buying or selling shares, only deal with brokers

registered in the UK or in your country of residence.

– Be aware that the Company will never call you

concerninginvestments.

Electronic communications and voting

The Group produces various communications. Shareholders

can view these online, download them, or receive paper copies

by contacting the Registrar.

Shareholders, who register their email address with our

Registrar, or at the Investor Centre, can receive emails with

news on events, such as the AGM. They can also receive

shareholder communications electronically, such as the Annual

Report and Accounts and Notice of Meeting.

Dealing facilities

Shareholders who wish to buy, sell or transfer their shares may

do so through a stockbroker or a high street bank; or through

the Registrar's share-dealing facility.

You can call or email the Registrar regarding its share-dealing

facility using this contact information:

– for telephone sales, call +44 (0)370 703 0084 between 8.00

am and 6.00 pm, Monday to Friday, excluding public holidays,

and

– for internet sales, go to www.investorcentre.co.uk/directline.

You will need your shareholder reference number, as shown

on your share certificate, or your welcome letter from

theChair.

Dividend tax allowance

The dividend tax-free allowance is £500 across an individual's

entire share portfolio for the tax years 2024 to 2025 and beyond.

Above these amounts, individuals will pay tax on their dividend

income. The rate of this tax depends on their income tax

bracket and personal circumstances. The Company will

continue providing registered shareholders with a confirmation

of the dividends paid. Shareholders should include this with

anyother dividend income they receive when calculating

andreporting total dividend income received to HMRC. The

shareholder is responsible for including all dividend income

when calculating tax requirements. If you have any tax queries,

please contact your financial adviser.

237 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Actuarial best estimate

("ABE")

The probability-weighted average of all future claims and cost scenarios. It is calculated using

historical data, actuarial methods and judgement. A best estimate of reserves will therefore

normally include no margin for optimism or, conversely, caution.

Acquisition costs Costs that arise from activities of selling, underwriting and starting a group of contracts that are

directly attributable to the portfolio of contracts to which the group belongs.

Annual Incentive Plan

("AIP")

This incentivises the performance of Executive Directors and employees over a one-year

operating cycle. It focuses on the short- to medium-term elements of the Group's strategic aims.

Assets under management

("AUM")

This represents all assets managed or administered by or on behalf of the Group, including those

assets managed by third parties.

Association of British

Insurers ("ABI")

The trade body that represents the insurance and long-term savings industry in the UK.

ASHE index The Annual Survey of Hours and Earnings ("ASHE") provides information about the levels,

distribution and make-up of earnings and paid hours worked for employees in all industries and

occupations. The ASHE tables contain estimates of earnings for employees by sex and full-time or

part-time status.

Bootstrapping A statistical sampling technique used to estimate reserve variability around the Actuarial Best

Estimate. Results produced from bootstrapping historical data are used to set and inform the risk

margin incorporated in the Liability for Incurred Claims.

Brokered commercial

business ("NIG")

The Brokered commercial insurance business of U K Insurance Limited which it was announced

on 6 September 2023 was being sold to Royal & Sun Alliance Insurance Limited. The Group has

retained the back book of the business written and earned prior to 1 October 2023 (the "Risk

Transfer Date"). Business written and earned on and subsequent to the Risk Transfer Date is

subject to a quota share arrangement between the two companies.

The term Brokered commercial business does not meet the criteria of a discontinued operation

as defined under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' and has

not been accounted for as such.

Buy-As-You-Earn Plan The HM Revenue & Customs approved Buy-As-You-Earn Share Incentive Plan gives all employees

the opportunity to become shareholders in the Company.

Capital The funds invested in the Group, including funds invested by shareholders and Tier 1 notes. In

addition, the subordinated liabilities in the Group's statement of financial position are classified as

Tier 2 capital for Solvency II purposes.

Carbon/operational

emissions:

Scope 1

Scope 2

Scope 3

Scope 1 – covers direct emissions from owned or controlled sources, including fuels used in office

buildings, accident repair centres and owned vehicles.

Scope 2 – covers indirect emissions from the generation of purchased electricity, steam, heating

and cooling for office buildings and accident repair centres.

Scope 3 – includes all other indirect emissions that occur in the Group's value chain,such as from

purchased goods and services.

Claims frequency The number of claims divided by the number of policies per year.

Clawback The Group's ability to claim repayment of paid amounts both cash and equity-settled share-

based payments.

Combined operating

ratio

The sum of the net insurance claims, net acquisition costs and net expense ratios. The ratio

measures the amount of claims costs, acquisition and operating expenses, compared to net

insurance revenue. A ratio of less than 100% indicates profitable underwriting. The ratio and the

comparative are calculated on an IFRS 17 basis and are not comparable to combined operating

ratios that were calculated on an IFRS 4 'Insurance Contracts' basis published previously. (See

appendix A – Alternative performance measures on pages 242 to 245.)

Current-year attritional

net insurance claims ratio

The loss ratio for the current accident year, excluding the movement of claims reserves relating

to previous accident years and claims relating to major weather events. See appendix A –

Alternative performance measures on pages 242 to 245)

Deferred Annual

Incentive Plan ("DAIP")

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.

Employee Representative

Body ("ERB")

The forum that represents all employees, including when there is a legal requirement to consult

employees.

Effect of change in yield

curve

Reflects the effect of changes in discounting, due to movements in the PRA risk-free yield curve

and ASHE index, on claims previously recognised.

Event weather ratio The loss ratio for claims relating to major weather events. (See page 60 - Alternative Performance

Measures.) (See appendix A – Alternative performance measures on pages 242 to 245.)

Events not in data

("ENIDs")

Events not in data allow for short- and long-term risks not reflected in other actuarial inputs,

including uncertainties in relation to the actuarial best estimate.

Term Definition and explanation

238 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Glossary and Appendices

Fair value through profit or

loss ("FVTPL")

A financial asset or liability where at each Statement of Financial Position date the asset or

liability is remeasured to fair value and any movement in that fair value is taken directly to the

Statement of Profit or Loss.

Fair value gains/(losses) Includes fair value gains/(losses) on financial assets held at FVTPL, fair value gains/(losses) on

investment property and net expected credit losses on financial investments. (See note 4

Insurance finance result.)

Financial leverage ratio Tier 1 notes and financial debt (subordinated Tier 2 notes) as a percentage of total capital

employed.

Financial Reporting

Council

The UK's regulator for the accounting, audit and actuarial professions, promoting transparency

and integrity in business.

Gross written premium

and associated fees

The total premiums from insurance contracts that were incepted during the period including the

impact of a contractual change to Green Flag premium such that a portion of income that was

historically included in gross written premium is included in service fee income.

Gross written premium is included for the Motability contract for the following six months at the

commencement of each six month pricing period.

Incremental borrowing

rate ("IBR")

The rate of interest that a lessee would have to pay to borrow, over a similar term and security,

the funds necessary to obtain an asset of a similar value to the ROU asset in a similar economic

environment.

In-force policies The number of policies on a given date that are active and against which the Group will pay,

following a valid insurance claim.

Investment income

yield

The investment return, excluding funds withheld interest income divided by the average AUM

(excluding funds withheld assets). The average AUM derives from the period’s opening and

closing balances for the total Group. (See appendix A – Alternative performance measures on

pages 242 to 245.)

Investment return Total investment return recognised through the Statement of Profit or Loss, earned from the

investment portfolio, including investment fees, fair value gains and losses and impairments.

Investment return

yield

The investment return divided by the average AUM (excluding funds withheld assets). The

average AUM (excluding fund withheld assets) derives from the period’s opening and closing

balances. (See appendix A – Alternative performance measures on pages 242 to 245.)

Long-Term Incentive

Plan ("LTIP")

Awards made as nil-cost options or conditional share awards, which vest to the extent that

performance conditions are satisfied after a period of at least three years.

Malus An arrangement that permits unvested remuneration awards to be reduced or forfeited, when

the Company considers it appropriate.

Minimum capital

requirement ("MCR")

The minimum amount of capital that an insurer needs to hold to cover its risks under the

Solvency II regulatory framework, as amended by the PRA's 2024 reforms. If an insurer's capital

falls below the MCR then authorisation will be withdrawn by the regulator unless the insurer is

able to meet the MCR within a short period of time.

Net acquisition costs ratio The ratio of acquisition costs divided by net insurance contract revenue. (See appendix A –

Alternative performance measures on pages 242 to 245.)

Net asset value The difference between the Group's total assets and total liabilities, calculated by subtracting

total liabilities (including Tier 1 notes) from total assets.

Net expense ratio The ratio of operating expenses divided by net insurance contract revenue. (See appendix A –

Alternative performance measures on pages 242 to 245.)

Net insurance claims ratio The ratio of net insurance contract claims divided by net insurance contract revenue.

(Seeappendix A – Alternative performance measures on pages 242 to 245.)

Net insurance margin The ratio of insurance service result divided by net insurance contract revenues. The normalised

net insurance margin adjusts net insurance claims and acquisition costs for event weather.

(Seeappendix A – Alternative performance measures on pages 242 to 245.)

Net insurance revenue

The total insurance contract revenue (consisting of gross written premium and associated fees,

instalment income and movement in liability for remaining coverage) less expenses from

reinsurance contracts held (consisting of reinsurance premium paid and movement in asset for

remaining coverage).

Net promoter score

("NPS")

This is an index that measures the willingness of customers to recommend products or services

to others. It is used to gauge customers' overall experience with a product or service, and

customers' loyalty to a brand.

Term Definition and explanation

239 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Non-core businesses The Group has excluded the results of Other personal lines products, including three

partnerships that were previously disclosed as being exited, from its ongoing operations and has

restated all relevant comparatives across this review. Other personal lines is made up of Pet,

Travel, Creditor and Select, our insurance targeted at Mid- to high-net worth customers. Pet is the

largest product within Other personal lines. As announced at the Group’s Capital Markets Day in

July 2024, the decision was taken to pause investment in these products. Other personal lines

represented around £130 million of gross written premium and associated fees in 2023.

Ogden discount rate The discount rate set by the Lord Chancellor and used by courts to calculate lump sum awards in

bodily injury cases.

Ongoing operations The Group's ongoing operations include Motor and Non-Motor (comprising: Home, Commercial

Direct and Rescue) segments and excludes the Brokered commercial business, Non-core and

Run-off businesses. Please also refer to Brokered commercial business, Non-core businesses and

Run-off partnerships.

The use of the term ongoing operations is not considered equivalent to continuing operations as

defined under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' as the

Brokered commercial business and Run-off partnerships do not meet the criteria of discontinued

operations and have not been accounted for as such. (See appendix A – Alternative performance

measures on pages 242 to 245.)

Operating earnings/(loss)

per share

The operating earnings attributable to the owners of the Company. Operating profit from

ongoing operations is adjusted to include other finance costs and coupon payments in respect of

Tier 1 notes and is divided by the weighted average of Ordinary Shares outstanding in the

relevant financial period, excluding Ordinary Shares held by as employee trust shares, adjusted

for the dilutive potential Ordinary Shares. The Group's Long-term Incentive Plan outcomes are

partly based on this metric.

Operating profit The pre-tax profit that the Group’s activities generate, including insurance and investment

activity, but excluding fair value gains/(losses), change in yield curve, other finance costs,

restructuring and one-off costs and (loss)/gain on disposal of business which are not considered

by the Group to be operating costs/income. The Group uses an adjusted operating profit in its

operating RoTE and operating earnings/(loss) per share calculations, where Other finance costs

and Coupon payments in respect of Tier 1 notes (charged directly to equity in the Group's

financial statements) are added to operating profit, in line with the Group's view of calculations

from a management view perspective. Normalised operating profit is operating profit adjusted

for event weather. Current-year operating profit is calculated using the operating profit

adjusted for prior-year reserve movements. (See appendix A – Alternative performance measures

on pages 242 to 245.)

Operating return on

tangible equity ("RoTE")

This is adjusted operating profit from ongoing operations divided by the Group’s average

shareholders’ equity less goodwill and other intangible assets. Operating profit after tax is

adjusted to include other finance costs and the Tier 1 coupon payments. It is stated after charging

tax using the UK standard rate of 25.0% (2023: 23.5%). (See appendix A – Alternative performance

measures on pages 242 to 245.)

Other finance costs The cost of servicing the Group's external borrowings and including the interest on right-of-use

assets.

Other operating expenses These are the expenses relating to business activities excluding restructuring and one-off costs

and those included within the insurance service result. (See See Appendix B - Expenses, on page

251.)

Own Risk and Solvency

Assessment ("ORSA")

A forward-looking assessment of the Group's risks and associated capital requirements, over the

business planning period.

Periodical payment order

("PPO")

These are claims payments as awarded under the Courts Act 2003. PPOs are used to settle

certain large personal injury claims. They generally provide a lump-sum award plus inflation-

linked annual payments to claimants who require long-term care.

Prudential Regulation

Authority ("PRA")

The PRA is a part of the Bank of England. It is responsible for regulating and supervising insurers

and financial institutions in the UK.

PRA risk-free yield curve Schedules of risk-free interest rates in a number of currencies produced by the Bank of England.

These rates are used to calculate the present value of the expected future costs of honouring

insurance companies' obligations to policyholders.

Prior-year reserves

development ratio

The loss ratio relating to the movement of claims reserves relating to previous accident years.

(See appendix A – Alternative performance measures on pages 242 to 245.)

Restructuring and one-off

costs

Restructuring costs are costs incurred in respect of those business activities which have a

material effect on the nature and focus of the Group's operations. One-off costs are costs that are

non-recurring in nature.

Return on equity

This is calculated by dividing the (loss)/profit attributable to the owners of the Company after

deduction of the Tier 1 coupon payments by average shareholders' equity for the period.

Term Definition and explanation

240 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Run-off partnerships

The Group has exited three partnerships which will reduce its exposure to low margin packaged

bank accounts so it may redeploy capital to potentially higher return segments. The Run-off

partnerships relate to a Rescue partnership with NatWest Group that expired in December 2022

and Travel partnerships with NatWest Group and Nationwide Building Society which expired in

the first half of 2024. Although the Nationwide partnership contract ended during H1 2024,

upgrades on existing policies will continue to be underwritten by the Group until 30 April 2025.

The term Run-off partnerships does not meet the criteria of a discontinued operation as defined

under IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' and has not been

accounted for as such.

Science-Based Targets

("SBT")

Science-Based Targets are a set of goals developed by a business to provide it with a clear route

to reduce greenhouse gas emissions. An emissions reduction target is defined as "science-based"

if it is developed in line with the scale of reductions required to curb a global temperature rise to

well below 2°C above pre-industrial levels and ideally to limit to a 1.5°C rise.

Solvency capital ratio

The ratio of Solvency II own funds to the solvency capital requirement.

Solvency capital

requirement ("SCR")

The SCR is the amount of capital the regulator requires an insurer to hold to meet the

requirements under the Solvency II regulatory framework, as amended by the PRA's 2024

reforms. The Group uses a partial internal model to determine the SCR.

Tangible equity

This shows the equity excluding Tier 1 notes and intangible assets (for comparability with

companies which have not acquired businesses or capitalised intangible assets) (See appendix A

– Alternative performance measures on pages 242 to 245.)

Tangible net assets per

This shows the amount of tangible equity allocated to each ordinary share (for comparability with

companies which have not acquired businesses or capitalised intangible assets). (See appendix A

– Alternative performance measures on pages 242 to 245.)

Task Force on Climate-

related Financial

Disclosure ("TCFD")

Established by the Financial Stability Board, the TCFD developed a set of disclosure

recommendations on the risks and opportunities presented by climate change. The TCFD aims

to improve and increase climate-related disclosure by organisations and promotes the provision

of clear, comprehensive and high-quality information.

Total Shareholder

Return ("TSR")

Compares share price movement with reinvested dividends as a percentage of the

share price.

Unwind of discounting of

claims

Comprises insurance finance income and expenses arising from the release of the effect of

discounting as projected cash flows move one period closer. The discount unwind is calculated

every quarter on opening reserves on a period-to-period basis. (See appendix A – Alternative

performance measures on pages 242 to 245.)

Term Definition and explanation

241 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Appendix A – Alternative performance measures (unaudited)

The Group has identified Alternative Performance Measures ("APMs") in accordance with the European Securities and Markets

Authority's published Guidelines. The Group uses APMs to improve comparability of information between reporting periods and

reporting segments, by adjusting for either uncontrollable or one-off costs which impact the IFRS measures, to aid the user of the

annual report and accounts in understanding the activity taking place across the Group. These APMs are contained within the

main narrative sections of this document, outside the financial statements and notes, and may not necessarily have standardised

meanings for ease of comparability across peer organisations.

Further information is presented below, defined in the glossary on pages 238 to 241 and reconciled to the most directly reconcilable

line items in the financial statements and notes. Note 2 on page 189 of the consolidated financial statements presents a

reconciliation of the Group's business activities on a segmental basis to the consolidated statement of profit or loss. All note

references in the table below are to the notes to the consolidated financial statements on pages 173 to 229.

Combined

operating ratio

Insurance

service result

Combined operating ratio is defined in

the glossary on pages 238 to 241 and

reconciled in appendix B on pages 246

to 249.

This is a measure of underwriting profitability and

excludes non-insurance income, whereby a ratio of

less than 100% represents an underwriting profit

and a ratio of more than 100% represents an

underwriting loss.

Current-year

attritional

insurance claims

ratio

Net insurance

claims

Current-year attritional loss ratio is

defined in the glossary on pages 238 to

241 and is reconciled to the loss ratio

(discussed below) on pages 246 to 249.

Expresses claims performance in the current

accident year in relation to net insurance revenue.

Event weather

ratio

Net insurance

claims

Event weather ratio is defined in the

glossary on pages 238 to 241 and is

reconciled to the loss ratio (discussed

below) on pages 246 to 249.

Expresses claims performance with respect to

weather events experienced in relation to net

insurance revenue.

Gross written

premium and

associated fees

Insurance

revenue

Gross written premium and associate

fees is defined in the glossary on pages

238 to 241 and reconciled appendix B

on pages 246 to 249.

The IFRS 17 profit or loss account disclosures reflect

revenue earned from service provided, compared

to a premium written basis under IFRS 4. The

Group will continue to provide detail on trading

volumes on a written basis as an alternative

performance measure.

Investment

income yield

Investment

income

Investment income yield is defined in

the glossary on pages 238 to 241 and is

reconciled on page 244.

Expresses a relationship between the investment

income and the associated opening and closing

assets adjusted for portfolio hedging instruments.

Investment

return yield

Investment

return

Investment return yield is defined in

the glossary on pages 238 to 241 and is

reconciled on page 244.

Expresses a relationship between the investment

return and the associated opening and closing

assets adjusted for portfolio hedging instruments.

Net acquisition

costs ratio

Other directly

attributable

expenses

Net acquisition costs ratio is defined in

the glossary on pages 238 to 241 and is

reconciled in appendix B on pages 246

to 249.

Expresses acquisition costs in relation to net

insurance contract revenue.

Net expense ratio Other directly

attributable

expenses

Net expense ratio is defined in the

glossary on pages 238 to 241 and is

reconciled in appendix B on pages 246

to 249.

Expresses underwriting and policy expenses in

relation to net insurance revenue. Note that

restructuring and one-off costs are not considered

as underwriting costs and are not included in

expense ratio calculations.

Net insurance

claims ratio

Net insurance

claims

Net insurance claims ratio is defined in

the glossary on pages 238 to 241 and is

reconciled in appendix B on pages 246

to 249.

Expresses claims performance in relation to net

insurance revenue.

Net insurance

margin ("NIM")

Insurance

service result

Net insurance margin is defined in the

glossary on pages 238 to 241 and is

reconciled in Appendix B on pages 246

to 249.

This is a measure of underwriting profitability and

excludes non-insurance income. A ratio greater

than 0% represents an underwriting profit and a

ratio of less than 0% represents an underwriting

loss.

Normalised net

insurance

margin

Insurance

service result

Normalised net insurance margin is

defined in the glossary on pages 238 to

241 and reconciled in appendix B on

pages 246 to 249.

This is a measure of underwriting profitability

excluding the variances of actual weather from our

assumptions. It also excludes non insurance

income. A ratio greater than 0% represents an

underwriting profit and a ratio of less than 0%

represents an underwriting loss.

Group APM

Closest equivalent

IFRS measure Definition and/or reconciliation Rationale for APM

242 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Ongoing

operations (see

also Brokered

commercial

business, Non-

core businesses

and Run-off

partnerships)

Multiple -

rationale for

APM

Ongoing operations, Brokered

commercial business and run-off

partnerships are defined in the

glossary on pages 238 to 241 and

reconciled in appendix B on pages 246

to 249.

The Group's ongoing operations result excludes the

results of the Brokered commercial business, that it

sold to RSA Insurance Limited in 2023, and its Non-

core businesses, announced at the Group's 2024

Capital Markets Day, and three Run-off

partnerships that the Group completed its exit

from in H1 2024.

The purpose of this is to give the reader a clearer

view of the Group's ongoing activities and activities

that it is seeking to exit from.

Operating

earnings/(loss)

per share

Diluted

earnings per

Operating earnings/(loss) per share is

defined in the glossary on pages 238 to

241 and reconciled on page 244.

This is a measure of profitability. A three-year

cumulative operating earnings per share (the sum

of the amounts for the three years starting with the

year that the award is made) is used in long-term

incentive plan ("LTIP") calculations.

Operating profit Profit before

tax

Operating profit is defined in the

glossary on pages 238 to 241 and

reconciled in note 2 on page 189.

This shows the underlying performance (before tax

and excluding net fair value gains/(losses), effect of

the change in the yield curve in insurance finance

expenses, finance costs, gains on disposal of

businesses and restructuring and one-off costs) of

the business activities.

Operating return

on tangible

equity

Return on

equity

Operating return on tangible equity is

defined in the glossary on pages 238 to

241 and is reconciled on page 244.

This shows performance against a measure of

equity that is more easily comparable to that of

other companies.

Other operating

expenses

Other directly

attributable

expenses

Other operating expenses is defined in

the glossary on pages 238 to 241 and

reconciled in Appendix B on pages 246

to 249.

This shows the expenses relating to business

activities excluding restructuring and one-off costs

and those included within the insurance service

result.

Prior-year

reserves

development

ratio

Net insurance

claims

Prior-year reserves development ratio

is defined in the glossary on pages 238

to 241 and is reconciled to the net

insurance claims ratio in Appendix B

on pages 246 to 249.

Expresses claims performance relating to the

movement in prior-year reserves in relation to net

insurance revenue.

Tangible equity Equity Tangible equity is defined in the

glossary on pages 238 to 241 and is

reconciled in note 13 on page 199.

This shows the equity excluding Tier 1 notes and

intangible assets for comparability with companies

which have not acquired businesses or capitalised

intangible assets.

Tangible net

asset value per

Net asset value

per share

Tangible net asset value per share is

defined in the glossary on pages 238 to

241 and reconciled in note 13 on

page199.

This shows the equity excluding Tier 1 notes and

intangible assets per share for comparability with

companies which have not acquired businesses or

capitalised intangible assets.

Group APM

Closest equivalent

IFRS measure Definition and/or reconciliation Rationale for APM

243 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Investment income and return yields

FY 2024 FY 2023

Notes

£m £m

Investment income 4 244.0 187.9

Less: Funds withheld interest (13.8) 0.0

Investment fees 4 (8.8) (9.3)

Realised and unrealised gains 4 37.1 124.4

Adjusted total investment return 258.5 303.0

Opening investment property 277.1 278.5

Opening financial investments 3,691.6 3,696.4

Opening cash and cash equivalents (excluding funds withheld asset) 1,530.4 1,003.6

Opening borrowings (82.4) (65.2)

Opening derivatives asset

12.4 1.6

Opening assets under management (excluding funds withheld asset) 5,429.1 4,914.9

Closing investment property 287.6 277.1

Closing financial investments 23 4,343.3 3,691.6

Closing cash and cash equivalents (excluding funds withheld asset)

857.9 1,530.4

Closing borrowings 25 (66.8) (82.4)

Closing derivative (liability)/asset

(19.6) 12.4

Closing assets under management (excluding funds withheld asset) 5,402.4 5,429.1

Average assets under management (excluding funds withheld asset)

5,415.8 5,172.0

Investment income yield

4.1% 3.5%

Investment return yield

4.8% 5.9%

Notes:

1. See glossary on pages 238 to 241 for definitions.

2. See notes to the consolidated financial statements.

3. Excludes cash withheld under funds withheld arrangement, see note (J).

4. See page 29 (Investment holdings).

5. Mean average of opening and closing balances.

Operating return on tangible equity

2024 2023

£m £m

Operating profit/(loss) - ongoing operations 205.0 (189.9)

Other finance costs (15.4) (14.5)

Coupon payments in respect of Tier 1 notes (16.6) (16.6)

Adjusted operating profit/(loss) - ongoing operations before tax 173.0 (221.0)

Tax (charge)/credit (2024 UK standard tax rate of 25.0%, 2023 UK standard tax rate of 23.5%) (43.3) 51.9

Adjusted operating profit/(loss) - ongoing operations after tax 129.7 (169.1)

Opening shareholders' equity 2,058.2 1,845.3

Opening goodwill and other intangible assets (818.6) (822.2)

Opening shareholders' tangible equity 1,239.6 1,023.1

Closing shareholders' equity 2,137.9 2,058.2

Closing goodwill and other intangible assets (776.3) (818.6)

Closing shareholders' tangible equity 1,361.6 1,239.6

Average shareholders' tangible equity

1,300.6 1,131.4

Operating return on tangible equity 10.0% (14.9%)

Notes:

1. See glossary on pages 238 to 241 for definitions.

2. Mean average of opening and closing balances.

244 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Operating earnings/(loss) per share

2024 2023

£m £m

Operating profit/(loss) - ongoing operations 205.0 (189.9)

Other finance costs (15.4) (14.5)

Coupon payments in respect of Tier 1 notes (16.6) (16.6)

Adjusted operating profit/(loss) - ongoing operations before tax 173.0 (221.0)

Tax (charge)/credit/(2024 UK standard tax rate of 25.0%, 2023 UK standard tax rate of 23.5%) (43.3) 51.9

Adjusted profit/(loss) for the year attributable to the owners of the Company 129.7 (169.1)

Weighted average total shares (number of Ordinary Shares (millions)) 1,311.4 1,311.4

Weighted average of Share Trust owned shares (millions) (10.8) (12.4)

Weighted average number of Ordinary Shares in issue (millions) 1,300.6 1,299.0

Effect of dilutive potential of share options and contingently issuable shares (millions) 19.5 17.3

Weighted average number of Ordinary Shares for the purpose of operating earnings per share

(millions)

1,320.1 1,316.3

Operating earnings/(loss) per share 9.8 (12.8)

Note:

1. See glossary on pages 238 to 241 for definitions.

Insurance and reinsurance finance expenses

2024 2023

£m £m

Insurance finance expense from insurance contracts issued:

Unwind of discounting of claims (185.6) (189.8)

Of which:

Ongoing operations

(156.3) (161.5)

Brokered commercial business

(25.9) (24.4)

Non-core and Run-off

(3.4) (3.9)

Effect of change in yield curve

164.6 (4.0)

Insurance finance expense from insurance contracts issued (21.0) (193.8)

Reinsurance finance expense from insurance contracts issued:

Unwind of discounting of claims

69.6 49.5

Of which:

Ongoing operations

57.4 45.0

Brokered commercial business

11.9 4.3

Non-core and Run-off

0.3 0.2

Effect of change in yield curve

(75.4) (21.5)

Interest expense on funds withheld liabilities (14.4) –

Reinsurance finance expense from insurance contracts issued (20.2) 28.0

Net insurance finance expense:

Unwind of discounting of claims

(116.0) (140.3)

Of which:

Ongoing operations

(98.9) (116.5)

Brokered commercial business

(14.0) (20.1)

Non-core and Run-off

(3.1) (3.7)

Effect of change in yield curve

89.2 (25.5)

Interest expense on funds withheld liabilities (14.4) –

Net insurance finance expense (41.2) (165.8)

Note:

1. See glossary on pages 238 to 241 for definitions.

245 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Appendix B – Management view statements of profit or loss, claims development tables, expenses,

average premiums, gross written premium and associated fees and in-force policies (unaudited)

Management view Statement of Profit or Loss – year ended 31December 2024

The table below analyses the Group’s management view results by reportable segment for the year ended 31December 2024

Motor Non-Motor

Total Group -

ongoing

operations

Brokered

commercial

business

Non-core

and Run-off

Total Group

Notes £m £m £m £m £m £m

Gross written premium and associated fees

2,700.1 1,031.6 3,731.7 436.9 178.4 4,347.0

Instalment income

69.9 26.9 96.8 1.9 – 98.7

Movement in liability for remaining coverage

(31.0) (37.6) (68.6) 181.6 8.3 121.3

Insurance revenue 3 2,739.0 1,020.9 3,759.9 620.4 186.7 4,567.0

Expenses from reinsurance contracts held

3 (830.8) (72.0) (902.8) (532.4) (4.4) (1,439.6)

Net insurance revenue 1,908.2 948.9 2,857.1 88.0 182.3 3,127.4

Incurred claims - including losses from onerous

contracts and other directly attributable claims

income

(2,209.8) (571.8) (2,781.6) (364.9) (127.4) (3,273.9)

Amounts recoverable from/(payable on) reinsurers 3 781.0 4.7 785.7 397.2 (2.9) 1,180.0

Net insurance claims (1,428.8) (567.1) (1,995.9) 32.3 (130.3) (2,093.9)

Of which:

Prior-year reserves development 20.5 (23.7) (3.2) (2.3) 10.0 4.5

Acquisition costs (87.3) (92.0) (179.3) (47.7) (6.0) (233.0)

Operating expenses (372.8) (204.5) (577.3) (57.6) (39.2) (674.1)

Other directly attributable expenses 3 (460.1) (296.5) (756.6) (105.3) (45.2) (907.1)

Insurance service result 3 19.3 85.3 104.6 15.0 6.8 126.4

Investment income 4 168.0 32.3 200.3 33.6 1.3 235.2

Unwind of discounting of claims

4 (78.9) (20.0) (98.9) (14.0) (3.1) (116.0)

Other operating income and expenses (1.4) 0.4 (1.0) 1.6 (1.5) (0.9)

Operating profit/(loss) 107.0 98.0 205.0 36.2 3.5 244.7

Net fair value gains

4 37.1

Effect of change in yield curve

89.2

Interest expense on fund withheld liabilities (14.4)

Restructuring and one-off costs

1,2

(118.1)

Other finance costs 8

(15.4)

(Loss)/gain on disposal of business

(4.7)

Profit before tax

218.4

Key performance indicators – year ended 31December 2024

Motor Non-Motor

Total Group -

ongoing

operations

Total Group

Net insurance margin

1.0% 8.9% 3.6%

4.0%

Combined operating ratio

99.0% 91.1% 96.4% 96.1%

Net expense ratio

19.5% 21.6% 20.2% 21.6%

Net acquisition costs ratio

4.6% 9.7% 6.3% 7.5%

Net insurance claims ratio

74.9% 59.8% 69.9% 67.0%

– current-year attritional

76.0% 52.8% 68.3% 65.7%

– prior-year reserves development (1.1%) 2.5% 0.1% (0.1%)

– major weather events N/A 4.5% 1.5% 1.4%

Effect of weather

Net insurance claims ratio

N/A (1.9%) (0.6%) (0.6%)

Net acquisition costs ratio

N/A 0.0% 0.0% 0.0%

Net insurance margin normalised for event weather

N/A 7.0% 3.0% 3.4%

246 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Additional data to support key performance indicators – year ended 31December 2024

Motor Non-Motor

Total Group -

ongoing

operations

Total Group

£m £m £m £m

Net insurance claims (1,428.8) (567.1) (1,995.9) (2,093.9)

Attritional net insurance claims (1,449.3) (500.3) (1,949.6) (2,055.3)

Prior-year reserves development 20.5 (23.7) (3.2) 4.5

Major weather events N/A (43.1) (43.1) (43.1)

Normalised operating profit

– year ended 31December 2024

Total Group

- ongoing

operations

£m

Operating profit 205.0

Effect of:

Ogden discount rate –

Normalised weather - claims (19.2)

Normalised weather - profit share –

Normalised operating profit 185.8

Prior-year adjustments

Prior-year reserves development (3.2)

Prior-year normalised operating loss (3.2)

Current-year normalised operating profit 189.0

Current-year normalised operating profit ratio 102%

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

tofinancial statement line items.

2. Restructuring and one-off costs include £4.0 million expenses included in the Group insurance service result as disclosed in note 4.

247 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Management view Statement of Profit or Loss – year ended 31December 2023

The table below analyses the Group’s management view results by reportable segment for the year ended 31December

2023(restated).

Motor Non-Motor

Total Group -

ongoing

operations

Brokered

commercial

business

Non-core

and Run-off

Total Group

Notes £m £m £m £m £m £m

Gross written premium and associated fees

2,047.8 929.8 2,977.6 665.8 278.5 3,921.9

Instalment income 66.1 24.8 90.9 1.9 — 92.8

Movement in liability for remaining coverage

(308.5) (35.4) (343.9) (66.9) (2.2) (413.0)

Insurance revenue 3 1,805.4 919.2 2,724.6 600.8 276.3 3,601.7

Expenses from reinsurance contracts held

3 (240.5) (61.5) (302.0) (163.4) (4.8) (470.2)

Net insurance revenue 1,564.9 857.7 2,422.6 437.4 271.5 3,131.5

Incurred claims - including losses from onerous

contracts and other directly attributable claims

income

(1,743.5) (524.1) (2,267.6) (356.8) (249.2) (2,873.6)

Amounts recoverable from reinsurers

3 248.7 30.5 279.2 140.8 3.4 423.4

Net insurance claims (1,494.8) (493.6) (1,988.4) (216.0) (245.8) (2,450.2)

Of which:

Prior-year reserves development (138.4) (6.1) (144.5) 32.2 (11.8) (124.1)

Acquisition costs (89.6) (76.3) (165.9) (116.3) (10.1) (292.3)

Operating expenses (312.1) (168.2) (480.3) (91.2) (44.1) (615.6)

Other directly attributable expenses 3 (401.7) (244.5) (646.2) (207.5) (54.2) (907.9)

Insurance service result 3 (331.6) 119.6 (212.0) 13.9 (28.5) (226.6)

Investment income 4 107.7 31.4 139.1 35.2 4.3 178.6

Unwind of discounting of claims

4 (94.3) (22.2) (116.5) (20.1) (3.7) (140.3)

Other operating income and expenses (1.4) 0.9 (0.5) (1.4) (1.2) (3.1)

Operating (loss)/profit (319.6) 129.7 (189.9) 27.6 (29.1) (191.4)

Net fair value gains

4 124.4

Effect of change in yield curve

(25.5)

Restructuring and one-off costs

1,2

4 (59.5)

Other finance costs 8 (14.5)

Gain on disposal of business 443.9

Profit before tax 277.4

Key performance indicators – year ended 31December 2023

Motor Non-Motor

Total Group -

ongoing

operations

Total Group

Net insurance margin

(21.1%) 14.0% (8.7%) (7.2%)

Combined operating ratio

121.1% 86.0% 108.7% 107.2%

Net expense ratio

19.9% 19.6% 19.8% 19.7%

Net acquisition costs ratio

5.7% 8.9% 6.8% 9.3%

Net insurance claims ratio

95.5% 57.5% 82.1% 78.2%

– current-year attritional

86.7% 53.7% 75.0% 73.3%

– prior-year reserves development 8.8% 0.7% 6.0% 4.0%

– major weather events N/A 3.1% 1.1% 0.9%

Effect of weather

Net insurance claims ratio

N/A (3.8%) (1.3%) (1.6%)

Net acquisition cost ratio N/A 0.0% 0.0% 0.0%

Net insurance margin normalised for event weather

N/A 10.2% (10.0%) (8.8%)

248 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Additional data to support key performance indicators – year ended 31December 2023

Motor Non-Motor

Total Group -

ongoing

operations

Total Group

£m £m £m £m

Net insurance claims (1,494.8) (493.6) (1,988.4) (2,450.2)

Attritional net insurance claims

(1,356.4) (460.8)

(1,817.2) (2,297.9)

Prior-year reserves development (138.4) (6.1)

(144.5) (124.1)

Major weather events

N/A (26.7)

(26.7) (28.2)

Normalised operating profit

– year ended 31December 2023

Total Group -

ongoing

operations

£m

Operating loss (189.9)

Effect of:

Normalised weather - claims (32.7)

Normalised weather - profit share –

Normalised operating loss (222.6)

Prior-year adjustments

Prior-year reserves development (144.5)

Ogden discount rate –

Prior-year normalised operating loss (144.5)

Current-year normalised operating loss (78.1)

Current-year normalised operating loss ratio 35%

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

tofinancial statement line items.

2. Restructuring and one-off costs include £24.8 million expenses included in the Group insurance service result as disclosed in note 4.

249 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Insurance and reinsurance contract assets and liabilities – claims development tables (discounted PPO basis)

The claims development tables disclosed in note 19.3 have been re-presented on an undiscounted PPO basis, this is more in line

with how the Group manages its insurance and reinsurance contract assets and liabilities.

Gross insurance liabilities

Accident year

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total

£m £m £m £m £m £m £m £m £m £m £m

Estimate of ultimate gross claims

costs:

At end of accident year

2,066.5 2,124.8 2,178.0 2,280.7 2,059.9 1,767.3 1,905.5 2,252.1 2,721.5 3,229.4

One year later (35.1) (78.5) (118.2) (92.3) (57.3) (66.4) (11.1) 157.9 134.9

Two years later (113.2) (52.7) (93.7) (38.8) (37.5) (28.7) (29.9) 22.2

Three years later (57.2) (80.4) (32.1) (3.4) (8.1) 36.7 (14.7)

Four years later (20.5) (39.8) (18.2) 4.1 15.0 (63.6)

Five years later (16.5) (12.0) (1.2) 20.9 5.4

Six years later 5.3 (18.6) 11.0 (33.1)

Seven years later (5.9) 8.6 (8.6)

Eight years later (16.6) 0.1

Nine years later (6.2)

Current estimate of cumulative

claims

1,800.6 1,851.5 1,917.0 2,138.1 1,977.4 1,645.3 1,849.8 2,432.2 2,856.4 3,229.4

Cumulative payments to date

(1,757.5) (1,806.4) (1,868.2) (2,071.3) (1,845.6) (1,518.5) (1,584.3) (1,970.1) (1,992.3) (1,759.0)

Gross liability recognised in the

statement of financial position

43.1 45.1 48.8 66.8 131.8 126.8 265.5 462.1 864.1 1,470.4 3,524.5

2014 and prior 556.2

Claims handling provision

125.1

Adjustment for non-financial risk

305.3

Effect of discounting

(438.7)

Other Liabilities for Incurred

Claims

37.2

Total 4,109.6

Net insurance contract liabilities

Accident year

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total

£m £m £m £m £m £m £m £m £m £m £m

Estimate of ultimate net claims

costs:

At end of accident year

1,912.3 1,931.8 2,009.2 2,137.8 1,921.4 1,622.7 1,761.1 2,180.7 2,237.7 1,985.7

One year later (75.5) (30.3) (95.1) (80.1) (36.3) (49.2) (1.5) 170.5 (47.5)

Two years later (61.9) (46.7) (60.2) (20.0) (36.9) (42.6) (12.6) 22.2

Three years later (29.2) (42.9) (17.2) (18.2) (7.7) 48.3 (17.1)

Four years later (21.0) (14.8) (26.8) 3.5 9.9 (22.4)

Five years later (22.0) (8.0) (10.2) 20.8 3.0

Six years later 5.0 (13.2) 7.9 (2.1)

Seven years later (5.2) (4.9) (2.6)

Eight years later (7.4) 2.9

Nine years later 4.5

Current estimate of cumulative

claims

1,699.6 1,773.9 1,805.0 2,041.7 1,853.4 1,556.8 1,729.9 2,373.4 2,190.2 1,985.7

Cumulative payments to date

(1,687.6) (1,753.8) (1,780.1) (1,995.3) (1,786.9) (1,464.0) (1,542.3) (1,966.3) (1,575.1) (1,117.7)

Gross liability recognised in the

statement of financial position

12.0 20.1 24.9 46.4 66.5 92.8 187.6 407.1 615.1 868.0 2,340.5

2014 and prior 352.8

Claims handling provision

89.3

Adjustment for non-financial risk

148.9

Effect of discounting

(358.5)

Other Liabilities for incurred

claims

(265.1)

Total 2,307.9

250 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Operating expenses – ongoing operations

FY 2024 FY 2023

Insurance

service result

Other

expenses

(note 5)

Total

expenses

Insurance

service result

Other

expenses

(note 5)

Total

expenses

£m £m £m £m £m £m

Commission expenses (121.2) N/A (121.2) (104.8) N/A (104.8)

Marketing (58.1) N/A (58.1) (61.1) N/A (61.1)

Acquisition expenses (179.3) N/A (179.3) (165.9) N/A (165.9)

Staff costs

(225.2) 0.7 (224.5) (185.1) (5.5) (190.6)

IT and other operating expenses

2,3

(104.4) – (104.4) (93.2) (5.3) (98.5)

Insurance levies (104.1) N/A (104.1) (79.1) N/A (79.1)

Depreciation, amortisation and impairment of

intangible and fixed assets

(143.6) (19.5) (163.1) (122.9) (10.3) (133.2)

Other expenses

(577.3) (18.8) (596.1) (480.3) (21.1) (501.4)

Total operating expenses - ongoing operations

(756.6) (18.8) (775.4) (646.2) (21.1) (667.3)

Total expenses - Brokered commercial business

(105.3) 0.3 (105.0) (207.5) (1.8) (209.3)

Total expenses - Non-Core and Run-off

(45.2) (2.7) (47.9) (54.2) (2.0) (56.2)

Total expenses – Restructuring and one-off costs

N/A N/A (118.1) N/A N/A (59.5)

Total expenses

(907.1) (21.2) (1,046.4) (907.9) (24.9) (992.3)

Net acquisition costs ratio – ongoing operations

6.3% 6.8%

Net acquisition costs ratio – total Group

7.5% 9.3%

Net expense ratio - ongoing operations

20.2% 19.8%

Net expense ratio - total Group

21.6% 19.7%

Notes:

1. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

tofinancial statement line items.

2. Staff costs and other operating expenses attributable to claims handling activities are allocated to the cost of insurance claims.

3. IT and other operating expenses include professional fees and property costs.

4. Includes right-of-use assets ("ROU") and property, plant and equipment. For the year ended 31December 2024, there were no impairment charges

which relate solely to own occupied freehold property (2023: no impairments).

Motor and Home average premium (£)

FY 2024 FY 2023 Q42024 Q3 2024 Q2 2024 Q1 2024 Q4 2023

New business 583 551 592 557 588 599 594

Renewal 508 441 499 505 514 515 513

Motor own brands

530 470 524 521 536 541 537

New business 259 206 278 266 255 238 212

Renewal 278 249 287 284 276 261 259

Home own brands 274 242 286 281 272 257 249

Note:

1. Excluding the By Miles brand.

251 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Gross written premium and associated fees

FY 2024 FY 2023

£m £m

Own brands

1,2

1,554.9 1,601.3

Partnerships

1,145.1 446.5

Motor 2,700.0 2,047.8

Own brands

480.3 408.8

Partnerships 156.5 142.7

Home 636.8 551.5

Rescue: Green Flag 88.7

85.1

Rescue: Linked

27.2

36.6

Rescue: Partners and other

16.9

15.6

Rescue 132.8 137.3

Commercial direct

262.3 241.0

Non-Motor 1,031.9 929.8

Ongoing operations

3,731.9 2,977.6

Non-Core and Run-off

178.3 278.5

Of which: Run-off partnerships 60.8 150.1

Brokered commercial insurance 436.9 665.8

Total gross written premium and associated fees 4,347.1 3,921.9

Notes:

1. Own brands include gross written premium for Motor under the Direct Line, Churchill, Darwin, Privilege and By Miles brands, Home under the

Direct Line, Churchill and Privilege brands and Commercial Direct under the Direct Line for Business and Churchill brands.

2. Gross written premiums for the By Miles brand which were previously reported within Motor partnerships have been reallocated to own brands.

There is no impact on in-force policies.

3. Motor partnerships includes the Motability partnership, which started on 1 September 2023, and resulted in significant growth in the third quarter

of 2023. From 2024, the majority of Motability gross written premium is recognised twice a year on 1 April and 1 October.

4. A reclassification between Rescue Partners and other and Rescue Linked has been made to reflect how these businesses are managed.

5. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation

tofinancial statement line items.

252 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

In-force policies (thousands)

31 Dec

2024

31 Dec

2023

Own brands

2,927 3,373

Partnerships

904 808

Motor 3,831 4,181

Own brands

1,729 1,706

Partnerships 732 738

Home 2,461 2,444

Rescue: Green Flag 985 1,048

Rescue: Linked

574 604

Rescue: Partners and other

221 313

Rescue 1,780 1,965

Commercial direct

1,4

755 749

Non-Motor

4,996 5,158

Ongoing operations

4,5

8,827 9,339

Non-core and Run-off

4,5

256 2,431

Of which: Run-off partnerships

4,5

83 2,224

Brokered commercial insurance

174 286

Total in-force policies

9,257 12,056

Notes:

1. Own brands include in-force policies Motor under the Direct Line, Churchill, Darwin, Privilege and By Miles brands. Home under the Direct Line,

Churchill and Privilege brands and Commercial Direct under the Direct Line for Business and Churchill brands.

2. Motor partnerships includes the Motability partnership, which started on 1 September 2023, and resulted in significant growth in the third quarter

of 2023. From 2024, the majority of Motability gross written premium is recognised twice a year on 1 April and 1 October. As the Motability contract

is a fleet contract, customer numbers are used to allow a more representative presentation of the Group's in-force policies.

3. A reclassification between Rescue Partners and other and Rescue Linked has been made to reflect how these businesses are managed.

4. Total in-force policies have been adjusted as follows: policies associated with borderaux business in Commercial Direct have been added across

both periods.

5. See glossary on pages 238 to 241 for definitions and appendix A – Alternative performance measures on pages 242 to 245 for reconciliation.

253 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

This Annual Report & Accounts has been prepared for, and

onlyfor, the members of the Company as a body, and no

otherpersons. The Company, its Directors, employees, agents

or advisers do not accept responsibility to any other person

towhom this document is shown, or into whose hands it

maycome, and any such responsibility or liability is

expresslydisclaimed.

Certain information contained in this document, including any

information as to the Group's strategy, plans or future financial

or operating performance, constitutes "forward-looking

statements". These forward-looking statements may be

identified by the use of forward-looking terminology, including

the terms "aims", "ambition", "anticipates", "aspire", "believes",

"continue", "could", "ensures", "estimates", "expects", "guidance",

"intends", "may", "mission", "outlook", "over the medium term",

"plans", "predicts", "projects", "propositions", "seeks", "should",

"strategy", "targets", "vision", "will" or "would" or, in each case,

their negative or other variations or comparable terminology, or

by discussions of strategy, plans, objectives, goals, future events

or intentions. These forward-looking statements include all

matters that are not historical facts. They may appear in several

places throughout this document and include statements

regarding intentions, beliefs or current expectations, including

of the Directors, concerning, among other things: the Group's

results of operations, statement of financial position, financial

condition, prospects, growth, net insurance margin, insurance

service result, strategies, the industry in which the Group

operates and the Group's approach to climate-related matters.

Examples of forward-looking statements include financial

targets with respect to return on tangible equity, solvency

capital ratio, net insurance margin, combined operating ratio,

percentage targets for current-year contribution to operating

profit, prior-year reserve releases, cost reductions, reduction in

net expense ratio, investment income yield, net realised and

unrealised gains, capital expenditure and risk appetite range;

and targets, goals and plans relating to climate and the Group's

approach and strategy in connection with climate-related risks

and opportunities. By their nature, all forward-looking

statements involve risk and uncertainties because they relate to

events and depend on circumstances that may or may not

occur in the future and/or are beyond the Group's control and/

or they rely on assumptions that may or may not transpire to be

correct. Forward-looking statements are not guaranteeing

future performance.

The Group's actual results of operations, financial condition and

the development of the business sector in which the Group

operates may differ materially from those suggested by the

forward-looking statements contained in this document, for

example directly or indirectly as a result of, but not limited to:

– changes to law, regulation or regulatory approach following

any change in government;

– United Kingdom ("UK") domestic and global economic

business conditions, and changes of a geo-political and/or

macro-economic nature;

– the terms of the trading and other relationships from time to

time between the UK and the EU and between the UK and

other countries, and their implementation;

– the impact of the FCA's GIPP regulations and Consumer

Duty regulations and of responses by insurers, customers and

other third parties and of interpretations of such rules by any

relevant regulatory authority;

– market-related risks such as fluctuations in interest rates,

exchange rates and credit spreads, including those created

or exacerbated by the war in Ukraine following the Russian

invasion and/or conflict in the Middle East;

– the policies and actions and/or new principles, rules and/or

regulations, of regulatory authorities and bodies, and of

changes to, or changes to interpretations of, principles, rules

and/or regulations (including changes made directly or

indirectly as a result of Brexit or related to capital and

solvency requirements or related to the Ogden discount

rates) and of changes to law and/or understandings of law

and/or legal interpretation following the decisions and

judgements of courts;

– the impact of competition, currency changes, inflation and

deflation;

– the timing, impact and other uncertainties of future

acquisitions, disposals, partnership arrangements, joint

ventures or combinations within relevant industries; and

– the impact of tax and other legislation and other regulation

and of regulator expectations, requirements, interventions,

enforcements, fines and requirements and of court,

arbitration, regulatory or ombudsman decisions, judgements

and awards in the jurisdictions in which the Group and its

affiliates operate.

In addition, even if the Group's actual results of operations,

financial condition and the development of the business sector

in which the Group operates are consistent with any forward-

looking statements contained in this document, those results

or developments may not be indicative of results or

developments in subsequent periods.

The forward-looking statements contained in this document

reflect knowledge and information available as at the date of

preparation of this document. The Group and the Directors

expressly disclaim any obligation or undertaking to update or

revise publicly any forward-looking statements, whether

because of new information, future events or otherwise, unless

required to do so by applicable law or regulation. Nothing in

this document constitutes or should be construed as a profit

forecast or estimate for any period.

Neither the content of Direct Line Group's website nor the

content of any other website accessible from hyperlinks on the

Group's website is incorporated into, or forms part of, this

document.

254 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Forward-looking statements disclaimer

Registered office

Direct Line Insurance Group plc

Churchill Court

Westmoreland Road

Bromley

BR1 1DP

Registered in England and Wales No. 02280426

Company Secretary: Roger C Clifton

Website: www.directlinegroup.co.uk

Registrars

Computershare Investor Services Plc

The Pavilions

Bridgwater Road

Bristol

BS99 6ZZ

Shareholder helpline: +44 (0)370 873 5880

Shareholder fax: +44 (0)370 703 6101

Website: www.computershare.com

Investor Centre

To find out more about Investor Centre, go to

www.investorcentre.co.uk/directline

Auditor

KPMG LLP

15 Canada Square

London

E14 5GL

Telephone: +44 (0)20 7311 1000

Website: www.kpmg.com

Legal advisers

Allen Overy Shearman Sterling LLP (A&O Shearman)

One Bishops Square

London

E1 6AD

Telephone: +44 (0)20 3088 0000

Website: www.aoshearman.com

Slaughter and May

One Bunhill Row

London

EC1Y 8YY

Telephone: +44 (0)20 7600 1200

Website: www.slaughterandmay.com

Principal banker

NatWest Group plc

250 Bishopsgate

London

EC2M 4AA

Telephone: +44 (0)20 7833 2121

Website: www.natwestgroup.com

Corporate brokers

Morgan Stanley & Co. International plc

25 Cabot Square

Canary Wharf

London

E14 4QA

Telephone: +44 (0)20 7425 8000

Website: www.morganstanley.com

RBC Europe Ltd (trading as "RBC Capital Markets")

100 Bishopsgate

London

EC2N 4AA

Telephone: +44 (0)20 7653 4000

Website: www.rbccm.com

255 | Direct Line Group Annual Report and Accounts 2024 Strategic Report / Governance / Financial statements

Contact Information