Belgian insurance firm Ageas SA (AGS) has ended its pursuit of UK home and motor insurer Direct Line (DLG), and the latter’s shares took a tumble as a result on Monday.
Ageas Abandons Direct Line Takeover
The Belgian company confirmed that it won’t be making any more bids for Direct Line. This announcement came on Friday and followed two previous bids being turned down by Direct Line.
The second of those bids, which valued each share at 239p ($4.62 AUD) and was worth £3.17bn ($6.13bn AUD), was rejected by the British firm last week. Direct Line said that this offer represented a significant undervaluation of the business. In response, AGS pointed out that it couldn’t find any extra information that would justify making a significant adjustment to the offer price.
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The Belgian insurer says that it is now bowing out, with takeover rules in the UK meaning that it has until 27 March to make a firm bid or walk away from the deal. Direct Line has brands such as Privilege, Darwin and Churchill in its wider group.
Direct Line released a statement saying:
The Board believes under Adam Winslow’s leadership the company is well-positioned to drive material improvement in performance.
This takeover drama happened after Direct Line posted an operating loss for last year on Thursday. Its problems partly stem from unprofitable motor insurance policies that were taken on in 2022 and caused a -8.3% underwriting margin for 2023. Without taking motor policies into account, the insurer had a healthy margin of 12%. It has now set an underwriting target of 13%, and the management team has stated that it will be carrying out a strategic review of the business, with results to arrive in July.
