Direct Line has provided an update regarding dividend payments amid the coronavirus pandemic.
The group said it noted the guidance in the Prudential Regulation Authority’s (PRA) letter of 31 March, which requested that insurance companies remain prudent in their approach to dividends.
In addition, the company also noted the EIOPA statement of 2 April 2020 which urged insurers to temporarily suspend all discretionary dividend distributions and said that this suspension should be reviewed as the economic impact of Covid-19 starts to become clearer.
Notwithstanding the group’s strong capital position, in recognition of the regulatory guidance and heightened uncertainty in the macroeconomic environment, the board has decided it will no longer be recommending to shareholders the final dividend for the year ended 31 December 2019.
Acknowledging the importance of dividends to shareholders the board will review this position alongside half year results and on an ongoing basis once it is possible to have a better understanding of the impacts of Covid-19 on customers and the business. Meanwhile, the resolution for the final dividend will be withdrawn from the Annual General Meeting.
Penny James, group chief executive officer, said:”Covid-19 presents an unprecedented global challenge. For DLG, whilst our capital position remains strong and at the upper end of our risk appetite range, we note the letter from the PRA and the guidance to preserve the group’s strong balance sheet during this period of heightened uncertainty. It is too early to assess the impact of changes in customer behaviour that will arise given the broader consequences of Covid-19.
“We know that dividend income from DLG is important to our investors and through them the people who may look to that income to support their pensions and savings, but we have taken the prudent and difficult decision to withdraw the full year 2019 dividend.”
She added: “We understand that these are challenging times for everyone in the country and we will continue to make the decisions needed to protect the long-term interests of the Group for the good of our customers, our people and our investors.”