Direct Line’s Penny James became the first FTSE 350 chief executive to step down in 2023 today, in a sudden departure just two weeks after the insurer warned on profits and scrapped its dividend.
The company said James was leaving the top job “with immediate effect”. She was in charge for almost four years. Its current chief commercial officer, Jon Greenwood, will take over as acting CEO during the search for a permanent successor.
Her departure cuts the number of women CEOs on the UK’s top two stock indexes to just 11. According to a report from diversity lobbying group Unleash, even before James resigned, there were fewer female CEOs than male ones with the name John.
Earlier this month, Direct Line revealed a rise in the cost of motor insurance claims, due to soaring prices of second-hand cars and longer repair times, with spare parts also more expensive and harder to find. It said the extent to which it could put up premiums was lagging behind.
There was also a rise in weather-related payouts in its home insurance from the December cold snap, with 3,000 claims for burst pipes and similar problems contributing to £90 million in costs from the pre-Christmas freeze alone. That meant it almost doubled its estimate for weather claims for 2022 to £140 million.
Dropping a dividend payment is always controversial in the City and Direct Line under James also cancelled the second half of an already announced £100 million share buyback, leading to talk today that the previous capital return left it too exposed.
Russ Mould, investment director at AJ Bell, said: “Direct Line had been happily buying back its own shares less than a year ago and left its capital buffers too bare to cope with a period of extreme weather events in 2022, which while unusual shouldn’t have been enough to put it in such a perilous position.”
The January profit warning sent Direct Line’s shares to a 10-year low and sparked a wider sell-off in the insurance sector. Richard Hunter, head of markets at Interactive Investor, said cancelling the dividend “pulled the rug from under the shares,” adding: “today’s announcement that the CEO is stepping down now adds additional concerns about leadership continuity.”
James was formerly the Bromley-based company’s chief financial officer and previously worked for the Prudential as its chief risk officer. She was paid a total £929,000 by Direct Line in 2021 in salary, shares and pension contributions. She will continue to work with its board until the end of February to help appoint the next CEO, and will then be paid a year’s notice period. She will not be entitled to a bonus for 2022 or 2023.
During James tenure, Direct Line shares fell by around 50%. They fell a further 1p today to 178p, a drop of 0.8%.