Direct Line boss calls for more time to fend off Aviva bid

Embattled Direct Line boss Adam Winslow has delivered a rallying call to shareholders to back his embryonic turnaround, as the troubled insurer’s chief executive tries to fend off a £3.3 billion takeover approach from FTSE 100 giant Aviva.
Winslow is calling on shareholders to allow his newly assembled management team the time to prove they can reinvigorate the business behind Green Flag and Churchill. “We’re making excellent progress in the early stages of a significant turnaround, with a refreshed and world-class leadership team in place to deliver the strategy,” he told The Sunday Times, in his first public comments since news of an approach by Aviva, run by Winslow’s former boss, Dame Amanda Blanc, leaked last week.“People like to talk Direct Line down, but since arriving as CEO in March, and having received two takeover bids already, it’s clear we’re a very attractive company”, he said when asked about staff morale. “We’re a great company, we’ve got great brands, a great opportunity and we’ve got a strong standalone story and clear path to create shareholder value”.
Winslow, 45, arrived at Direct Line in March after quitting as head of Aviva’s UK and Ireland insurance business. He is aiming to boost shareholder returns by slashing costs, improving internal systems and boosting policy sales.
Direct Line’s board has rejected Aviva’s “highly opportunistic” offer on the basis that it “substantially undervalued” the business. However, Sir Peter Wood, who founded Direct Line in 1985, said that if Aviva raised its bid by 10 per cent it would be a “fair result” for shareholders. Analysts believe shareholders would be receptive to the Aviva deal at a higher price.
Winslow has already faced one takeover bid from the Belgian insurance group Ageas, which tabled an offer just as he took over in March. It is not clear if Ageas intends to revive its interest with Direct Line back in play.
Winslow, who is paid a salary of £820,000, stands to make up to £6 million over the next three years, owing to an agreement in which Direct Line pledged to buy him out of bonus share awards granted during his time at Aviva.
He has set out plans to cut £100 million of costs by the end of next year, including cutting 550 jobs from its 10,000-strong workforce, and said he had already “actioned” £50 million of savings. Winslow plans to put the Direct Line brand on price comparison websites for the first time to cut marketing costs and boost sales.
Investors have yet to be convinced of his turnaround plans to rebuild for the insurer after a series of profit warnings led to the departure of Penny James in January 2023.Direct Line’s shares were trading at close to 150p when Aviva’s bid of 250p a share leaked last week. They subsequently surged to close at 232p last Friday, valuing the insurer at £2.1 billion. Aviva’s offer was a mix of cash and shares.
Nine of the ten members of the executive committee have left since Winslow arrived. He has poached Aviva’s Jane Poole and Maz Bown to to be finance director and chief risk officer, respectively. He said: “I now have a new world-class team, which makes me more confident in our ability to deliver the plan … which will drive shareholder value.”
Amid reports of animosity with Blanc, Winslow said: “I respect her… she’s doing her job, but I’ve got my job to do, which is to drive value for shareholders”.
Aviva is said to have been sounding out Direct Line shareholders directly – many of whom own shares in both companies — to urge them to encourage the board, chaired by Danuta Gray, to enter into talks. “There’ll be a charm offensive to see whether Aviva can persuade the Direct Line holders to speak to the management to get them to engage,” said one investor.
Abid Hussain, analyst at Panmure Liberum, said it was a “good opening offer” from Aviva. Deutsche Bank analysts reckoned Aviva could raise its offer to 270p. “Our sense from talking to a wide range of investors is that shareholders of both Aviva and Direct Line are receptive to this deal,” they said.