August 1, 2018 / 6:42 AM / 4 months ago

Direct Line shares sour as CEO to step down after decade at helm

(Reuters) - Britain’s largest motor insurer Direct Line (DLGD.L) said its long-standing chief Paul Geddes would step down next year, as its first-half profit took a beating from the cold winter.

Shares were 3.5 percent lower at 331.9 pence at 0802 GMT, lower than London’s FTSE Index, which was down 0.74 percent.

Geddes steered Direct Line through its split from the Royal Bank of Scotland (RBS.L) and its London listing in 2012, turning it into a blue-chip stock two years later.

“Geddes has driven the business for nearly 10 years and has done an exceptional job for shareholders over that time so news of his departure is likely to be another negative for the shares, in our view,” Shore Capital analyst Paul De’Ath, said.

Direct Line said Geddes would step down in summer 2019.

“The trigger for that is that it would be ten years for me as CEO, which I think is the right length of time for any CEO,” Geddes told Reuters.

Geddes said the company would consider internal and external candidates for his replacement. He did not talk about his plans after he left Direct Line.

“My successor inherits a lot of good things. It will require another burst of energy to realize the full potential of this business for the next five and ten years. I just think its the right point for me and the business,” he said.

Geddes, who was CEO of RBS’s mainland UK retail banking business, is also the outgoing chair of The Association Of British Insurers.

Direct Line, whose brands include Churchill, Green Flag and Privilege, reported a fall in operating profit of 15.7 percent to 303.1 million pounds for the six months ended June, hurt by the long, icy winter.

The company reported 75 million pounds ($98.3 million) of weather claims in the first half. Gross written premiums fell 5 percent to 1.61 billion pounds in the period.

Analysts were expecting an operating profit of 245 million pounds, according to company compiled consensus from 15 analysts.

“The business is still performing fairly well but we would expect the share price reaction to be more muted than the headline beat would suggest.” De’Ath said.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Amrutha Gayathri; Editing by Janet Lawrence

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