Hello, and welcome to the DLG third quarter trading update conference call. My name is Juan, and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. Please note the questions will be kept to a maximum of two per person. I will now hand over to our CEO, Penny James, to begin with. Please, Penny, go ahead. Thanks, Juan. Good morning, everybody. Now, I'm sure you have all read the results, so I'm conscious they're not that long. Really this is about giving you a chance to ask any questions. Just while you're gathering your thoughts, what I thought I'd do is briefly pull out a few key headlines from the quarter for you. I think I best summarize that as we've continued to do the right things and remain disciplined while making good progress on the transformation, and positioning ourselves well, for as we look ahead. The first thing I'd highlight is that despite challenging market conditions, we've continued to grow own brand policies. We were really pleased to have maintained the strong growth in both commercial and Green Flag that we delivered through the first half of the year. In home, as we expected, and I think highlighted at the half year, the market has got more challenging in the second half. Whilst we continued to grow, the rate of growth has slowed. Finally, in motor, our own brand, policy count stabilized, reflecting our improved competitiveness as we began seeing some of the benefits of our new system coming through. The second point I was gonna make is that, having been at COP26 last week, it would be remiss of me not to mention the progress we're making on climate strategy, which is one part of how we're positioning the business for the future. We've committed, as we've told you before, to the Race to Zero, and we're working to set science-based targets covering Scope 1, 2 and 3 emissions. Also, I'm really clear that for all the talk of commitments, which is important, we've also got to keep it simple for customers to go green themselves. That's why we are excited to launch our new electric vehicle proposition for Direct Line. It makes the switch to electric easier for customers and builds on our already strong position in the growing EV market. Alongside the benefits that we're seeing coming through from our new motor platform, there's a real sense of momentum in the business as we head into the new year. The third point I was gonna draw out is that we're on track for the full implementation of the FCA's pricing practices review, having successfully met the product governance deadline in the third quarter. Now, as with any large regulatory change, we expect there to be volatility in the market in the first few months of next year as the new rules bed in. However, over the medium term, there'll be no changes in the attributes required to be successful in this market, such as strong brands, great customer service, and so on and so forth. So we remain confident in our outlook. So summing up, our transformation progress, delivery of new propositions, and improved competitiveness, combined with our focus on disciplined underwriting, means we're well-placed as we look ahead. That's why we've reiterated our combined operating ratio guidance of 93%-95% over the medium term, normalized for weather, of course, and to be between 90%-92% in 2021. Now, just before I pass back to Juan to open the lines for Q&A, I just wanna remind everybody of our investor insight session that we'll be holding on our commercial business on the November 17th. As I've told you before, it's an area of our business that's furthest through its transformation, and that's driven the strong growth that you've seen in today's results and throughout this year. We're really looking forward to giving you a bit more color and insight as to how we've achieved it. I will pause there, and I will pass back to Juan to see whether you've got any questions on the line. Thank you. Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. Please note, the questions will be kept to a maximum of two per person. When preparing to ask a question, please ensure your phone is unmuted locally. Our first question comes from James Pearse from Jefferies. Please, James, your line is now open. Hi. Yeah. Thanks. Hey, guys. Hey. Yeah, I hope you're all well. Just two questions from me, please. Another strong quarter for commercial. How sustainable are those levels of growth in that business going forward? The second question is, can you give us an idea of the percentage point benefit that the claims repair network gives you in terms of claims severity inflation? Or I guess put another way, what is the difference between the level of severity on claims that go through your garage network and severity inflation outside of your network? Thank you. Yeah, sure. Commercial, I think the first thing is what's driving the growth. I think there are probably three things underpinning that growth. The first is that we've invested in technology that's enabled us to really support customer service over the last few years. We won another award for our kind of broker hub, electronic hub last week. You can see both in the broker side and the customer side that the service levels and flexibility that people have is ahead of most of the market. That's the first big winner, and I think alongside that held up through COVID, unlike some of the competitors. That's been a real advantage. The second thing that's driving it is we've got pricing models in there. We've had Radar Live in for some time. It's the first part of the business that's done that, which has enabled us to really start refining the pricing in those areas. That in itself has given us benefits through this year as well and has driven some of that growth. The third thing is that the market has, you know, hardened throughout this year in commercial to some extent in the SME space, less than other parts of the market. What that's meant is kind of more business has been coming to market than usual. When I look forward, I think the momentum that drives the first two of those continues. I think we'd expect to see the market get more competitive again as it does in its sort of natural cycle as we move into 2022 and beyond. What does that mean? When we look at this business, we don't see something that's growing at, you know, 15... You know, 12%-15% per annum as it has done this year. We think that's probably a bit rich because it's had the additional tailwind of the market. We do see a business that can grow, you know, upper mid- to upper single digits going forward on a sort of continuing basis. That's how we view it. We're pretty proud of what it's done this year. The second one on kind of the benefit of network and severity inflation generally. I'll give you a feel for what's happening in severity. I think the first thing is we know we have an advantage, because there is benchmarking done across the industry and so on, so we can very, very literally see that. We don't give that detail out, James, because it's clearly very commercially sensitive in terms of the point differential and so on. To give you a flavor of what's going on in severity, generally, I think we flagged at Q1, we're probably slightly above our, you know, usual 3%-5% range. At Q2, we said it was sort of coming in just inside. Broadly, it's running around somewhere the top of that 3%-5% range. It may be slightly outside that if you include some of the real COVID factors that are still having a little bit of effect. People driving premium cars, for instance, cleaning costs, those sorts of things are still knocking around. The biggest driver at the moment that's putting kind of upward pressure in there and will be around, I suspect, for a little while, is secondhand car costs, where you've seen a big spike because of consumer demand and lack of availability in the new car market. I think we kind of expect to see some continued, you know, inflation probably somewhere around the top end of that range, as you know, as we have through this year, driven by that effect, and to see that for some months, yes, I think. What does having a network do for us in that guide? Certainly, we have been able to manage some of those costs in a different way. We've been able to be more flexible in certain areas. We've been able to flex what we do on the repair side. We know there are benefits from having the repair networks that come through, especially when things spike. I can't give you the numbers for competitive reasons, I'm afraid. That's fair enough. That's very clear. Thank you very much. Thank you. The next question comes from Greig Paterson from KBW. Please, Greg, your line is now open. Hello, everybody. Can you hear me? Hi, Greg. How are you? No, I'm surviving. Two quick questions. One is, I wonder in home due to the FCA pricing review, you've consistently said that you're moving renewal rates down in a steady way to achieve the pricing rules by the first of next year. I was wondering, in percentage terms, how much further you still need to go to achieve that on the renewal pricing. The second thing, in commercial lines in the third quarter, including NIG and the SME area, geographical business, what is the net rate that you're carrying year-on-year, sort of premium rate minus claims inflation? Thank you. Brilliant. Thanks, Greg. So, FCA pricing and where are we? I guess and in particular kind of focused on home. Well, first thing to say is we're on track because I think that matters. Second thing is we've delivered all the product fairness elements, which I think is relevant to your question. Kind of we're set for year-end, if you like. What's happened on renewals? Now, we've said over the last three years that we've been progressively tightening setting margins in the book with which we're comfortable, and bringing those in. We set those basically at the five-year, 10-year point primarily. So as we come into this year, we've been kind of dealing with those tails each year. We've done a bit more today, a bit more over the course of this year, which you can sort of see in the AVP numbers. Even though I think the AVP on home overall is pretty flat, even though we've been putting inflation through on, you know, as we go, and that's because the other side of that is we've done a little more tightening in those margins at the end of the year. When we actually put the sort of product fairness elements in, the product governance elements of the rules in September. We didn't make a step change for that because we had been doing that incrementally over a number of years is perhaps the best indicator I can give you. I think the remaining bit, therefore, when the pricing rules come in, is the leveling up of the early 10 years. That's, you know, that's kind of the process that will happen in the early part of next year. Perhaps that gives you a feel for what's happened in that space. I think on commercial. Sorry, Penny. Is that gonna be dramatic? I'm just trying to, you know, is it something we're gonna be shocked by? Or is it going to be fairly second order? That's what I'm trying to figure out. Um- Is that? I'm not gonna make predictions. It's illegal for me to price indicate, so I'll be trying with a little bit of caution. If you look back to even the kind of the FCA original business case and so on, you can see that with the. You know, there's a not insignificant correction in the numbers, in the new business numbers in the home book when they did their modeling. I don't think it's unreasonable to, if they got their modeling right, to expect something. I think the other thing that people will have to think about is what's coming through with inflation. Inflation in home has been running, you know, top end of 3%-5% and really with one eye on what's happening in construction costs and so on. Actually, there is a bit of inflation out there. I'm not sure it's about the other thing I'd say is it will vary, but from segment to segment, brand to brand, channel to channel. When I say that, we expect some volatility at the beginning of next year, I think, you know, people will put their rates into the market on day one, and then there'll be a process. Remember, it takes six weeks or so. The renewal notices go out about six weeks ahead of renewal dates, so there'll be. It'll be some time before it's clear what all the effects are on both new business and renewals. You should expect, I think, the market to make adjustments as all those data points become clear. I think it will be, and we're kind of flagging that there'll be volatility in Q1. I wouldn't overread any particular direction that you see in that for any particular player, because I think that will all kind of even out across that, you know, across that quarter, if that helps at all. I think the important thing is when you stand back is, you know, we have the levers we need. We've got experience in this market. We're comfortable with our positioning coming in. We've been really careful in home to take our volumes early in the year before it got too competitive. We've backed off a little bit as things have got competitive in the second half. We're very comfortable with where we're coming into that process, and we've got the levers to deal with it. We will all see kind of what the best route through the early weeks is when everybody's prices are in the market. Sorry, you asked a question on commercial as well about rate carry. Yes, I don't think we've given rate carry numbers in here, but we are carrying ahead of inflation around 6 points, something like that. Inflation running, you know, in the, you know, 3%-4%, somewhere around there. Thank you. Cheers. Thanks, Greig. Thank you. The next question comes from Freya Kong from Bank of America. Please Freya, your line is now open. Hi, good morning. Two questions, please. Firstly, given that you've talked about severity sort of getting worse since H1 driven by used car prices and market pricing remaining quite stubborn, how comfortable are you in being able to price the severity inflation going into next year? And secondly, could you comment a bit more about the competitive dynamics that you're seeing in home given the slowdown in growth that we've seen in Q3? Do you think this will continue into 2022 or is it very dependent on the FCA trading volatility? Thanks. Brilliant. Hi, good morning, Freya. Look, on motor first. Look, I think the punchline on motor is, you know, if you look at the ABI data, the market's down about 7% year-on-year. For us, we're pretty flat. So what's going on there? Well, the reality is that the market adjusted in January to lower frequency, and it hasn't really risen since. There, you know, lots of good reasons that that might be the case. So, you know, whiplash and so on and so forth that could be driving that. However it's got there, it's kind of reduced the lower frequency. It hasn't really risen, as a whole. You know, there's been variation within it, but as a whole, we've reduced a shallower amount and we've been passing inflation through, to your point, throughout the second half of the year. We lost share in the first half because we've taken a shallower route and we started pricing inflation towards the end of the first half. Actually as we've come through the second half, we've improved our competitiveness, if I could say the word, as we've started to see the pricing benefits coming from the new platform launch. Even though we've been putting inflation through, we've still seen benefits, and that's why we've kind of stabilized the policy count regardless of putting inflation through. You know, it's very clear that, you know, our aim is to continue pricing severity through, and we wait with curiosity to see where the rest of the market will start pushing. On home, yeah, you're right. Home has done, I'd like to say we've got a crystal ball, but that's not the case. Home has done kind of exactly what we predicted it would do. It's been pretty flat with relatively low inflation and relatively low premium inflation for the last few years. It kind of remains so at the start of the year. We pushed pretty hard and actually we had some what Kate would call manufacturing benefits coming through, i.e., you know, strong claims management and so on, that enabled us to grow and improve our loss ratio through the first half, which is the magic you always want to replicate. Now, as we move into the second half, it's got more competitive. We think by September, again, it was something like 7% off year-on-year the home market. Now, our read on that and You know, why did we expect it? Because logically, long-term customer values increase in a post-pricing practices world. Our belief is that that is driven by pricing practices and people's entry points into pricing practices, trying to try and drive share as we go into that. If that's the case, then logically, people will adjust that thinking as they get into the post-pricing practices world. What they do, you know, what that does to price, for them to judge rather than us. As I say, we're pretty comfortable on home with where we're coming in to pricing practices to be able to kinda hold rate coming through and still be holding the book flat, growing slightly, after strong growth in the first half. You know, feeling pretty positive with that. Yeah. Pause there. Okay. Thank you. Thanks, Penny. Thank you. The next question comes from Thomas Bateman from Berenberg. Please, Thomas, your line is now open. Hi. Morning, Penny. Hi, Thomas. Hi. Hope you're doing well. Good morning. Just on the motor pricing, I think, you know, investors are looking for, from the outside as being pricing down 7%, claims inflation 5%, and there's a big kind of 12-point gap there. I think there's lots of moving parts in between, you know, driving behavior, whiplash, new cars, et cetera. I don't know. Can you help us- Yeah. Give us some numbers to bridge the gap as to why, you know, that it's not a 12-point gap for the rest of the market. The second question is just on the transformation changes. You know, there's a lot of good talk about the improving accuracy in the pricing, but, you know, should we expect to see sort of a change in the direction of travel for both motor and home or more material change in the direction of travel policy counts on both motor and home? Okay. Love the challenging tone of the second question. I'll come back to that. Sorry. That's all right. It's fine. The market, I mean, I can only do so much to tell you why other people are pricing where they're pricing. That's for them to tell you. If I can fill in some components, if you like, that might be the case. I think you're right that the answer lies between claims frequency, severity, and, you know, including whiplash and preparation for pricing practices. Many other people can tell you how they're drawing those lines. What's happening on frequency, I think we said at half year, driving miles are pretty much up where they were pre-COVID, and that's obviously continued. Frequency remains below 2009 levels. For us, they're still trickling upwards. For us, they're kind of close to, you know, still approaching the pricing assumptions that we've been running with. So that's good. But it is a critical assumption, so there may be some variation of a few points there in people's positions. Don't know. But broadly, there is a benefit relative to 2019 levels at the moment. In terms of severity, you know, people are calling out. Sometimes we call out lower numbers than competitors because, as I think James asked, you know, we have some benefits from the repair centers. But yeah, you've got to say that it's been somewhere around the upper end of 3%-5% for the last couple of years. Those two years where the claims inflation haven't been priced yet by the market because they've been offsetting them in some sense against frequency benefits. You think you've got that plus whatever is ahead still to come in some shape or form. Offsetting that, you've got whiplash, you know, a few points depending on, you know, who you are and whether you use the government numbers. Very unclear at the moment what the benefits of whiplash are. You know, it's just too early to know where the whiplash reform benefits are gonna land. Again, you've got an assumption in the mix. I think, but all of that kind of points you to the market is 7% down, which means it really hasn't priced a couple of years of inflation. You know, to take If you assume that it's logical because frequency is down, there's still a gap there. Whether it's 5 or 10 or whatever will depend on some of those assumptions, but there's clearly a gap. I think that's where the market really is, and people may be making choices. I think there's a practical point with PPR. That's the only other thing that I would sort of flag, you know. That if you make a pricing change now, you've only got a few weeks benefit from it. There comes a point where you kind of apply most of your pricing resource to what does 2022 look like rather than what does 2021 look like. I'm not sure now I'd be over-reading movements in the back end of this year because just because the volume of resource that will be focused on a post, you know, a post-2022 world and anything you do now has little validity or is only valid for a few, you know, a few weeks. I think the story from here is not very exciting in 2021, whatever direction it goes in because most of the energy is going on 2022. The shorthand answer to all of that is the market hasn't priced all of the inflation. We've been pricing inflation. We've got more in the kit bag to come, as we can kind of put resource back onto delivering benefits that's currently focused on getting us over the line for pricing practices. We're feeling pretty positive actually as we go into next year. Which leads us on to transformation, which is your second question. What are the benefits and so on. I think, you know, why have we got more competitive through this year, through the second half? Really because I think, and I probably flagged this way back when. When you move over to the new platform, before you even do anything with it, you gain some increase sort of fidelity in the pricing because you're no longer translating languages, you know, pricing languages into deployment languages and so on. You keep some granularity in that you didn't before. We always thought there'd be some benefit attached to that. That's part of, I think, what's improving competitiveness. We've also started the process of bringing in more external data sources. At this stage, it will be bringing us up to some of the better players in the market rather than taking us way out, you know, ahead of anywhere. We have a list that we are working through of model improvements that are banked up behind that, which bring in other sources, new different, you know, use different techniques and so on and so forth. At the moment, we are not putting many of those through because we're focused on getting pricing practices safely over the line. Those are sort of in the wings and building ready to go, which is why we're quite optimistic about the deployment opportunities as we go through 2022. Then on top of that, there are expense benefits which are attributable to the platform, which come as the book migrates over, which will be over the next 12 months-18 months we'll build. Really that's around customer self-service levels. It en`ables self-service in a way that we couldn't have done on the previous platform. You know, if I give you an example, 100% of claims can be done self-service now. Probably around 20% are, something like that. And you know, there are similar effects on the sales and service side. It enables us to start evolving that as the book goes over and migrates over. That's the other area to look for over time. Feeling pretty positive about the pricing position coming in relative to the market and lots in the kit bag to come through yet from the transformation. It's really good to hear. Thank you, Penny. Appreciate your comments. Thank you. The next question comes from Alex Evans from Credit Suisse. Please Alex, your line is now open. Hi, Penny. Morning, Alex. Thanks. Morning, Penny. Thanks for taking my questions. I just wanted to have a little bit more color on when you say pricing in line with severity claims inflation, you're meaning sort of across the total book. Because, you know, when I look from a new business perspective, at least, it looks like pricing for Churchill is, you know, more in line with the market and you're essentially saying pricing for the market is not taking into account inflation. Is it fair to assume that you're sort of quite materially ahead in the Direct Line brand there? Then I just wondered if it was possible to give a bit of color of, you know, where the key drivers of growth is coming in motor at the moment. Is that sort of more Churchill based relative to sort of the existing Direct Line? I think you're right that there is, you know, when I say that sort of portfolio level, there will be some variation underneath it, but philosophically it's going in everywhere, although we make some trading choices around that as well. It is going in on new business as well. I think the key drivers of growth, certainly we have seen PCW come back faster than direct, as we've pulled out of the pandemic. I think there's all sorts of reasons for that. The offset is we've seen renewals on direct hold up really well, and strengthen. As a book, probably not much story, but the new business story is definitely versus renewals story has definitely kind of differed between the two channels. I think it's the essence of the picture. Yeah, pricing going through everywhere, but we do make different choices in different segments and different channels, so it's difficult to see it necessarily. Through this year, PCW is stronger than direct on new business, but not so on renewals. Okay. Thank you. Our next question comes from Will Hardcastle from UBS. Please Will, your line is now open. Hey, morning everyone. Quick question on home insurance, actually. Just thinking about the inflation levels and whether these have changed at all as the year's gone on. I think you mentioned you're running at the top end of 3%-5% in home as well. I guess, do you have any procurement contracts that help to mitigate inflation risk here, or would you say you're equally exposed as the wider market to things like labor costs, material cost inflation, et cetera? Great question. I think, look, with somewhere around the upper zone, I wouldn't overread the. I think we get quite granular on whether it's 3% or 4% or 5%. It's somewhere around the top. I think over the course of the year, it's fair to say that it's been pretty fine all the way through. It's running pretty fine, inflation. We're conscious of, though, as we look at construction costs, it's only a relatively small part of the book, is the first thing to say. You know, a lot of home claims are, you know, jewelry and electrical goods and carpets and so on and so forth. Although we're seeing supply chain glitches in some of those places, nothing that's really changing, that you can't maneuver around, for want of a better description, that's changing the face of things. Lots of things cash are cash settled anyway. Really the question area is more around sort of construction costs, where clearly there is inflationary pressure across the markets, not just in insurance. Our sense is that we've kept it tight through this year, and we've been able to manage it within that zone. If that pressure keeps building, then there is kind of some inflationary pressure because we are not immune. In terms of contracts, you're right. We have contracts with suppliers that roll at certain dates, so you do get some protection for a spell that may not be there forever. I suspect that's the same with other significant players as well. Our sense is that there is a kind of building pressure in the market that might lift us slightly, that we're kind of monitoring that very closely, which is why I say we're sort of at or around the top of the range. Yeah. That's really helpful. I guess just this is probably my naivety, but you know, construction as a percentage of home claims, are we talking 10%, 20% by the sounds of what you're saying? Is it in that range? It's in that sphere, and it's quite difficult to peel apart because even within a claim, you know, it depends. If you have an escape of water claim, it depends on what component of that is, you know, is there. So it's not even as simple as all escape of water claims will be doing X or, you know, so on and so forth. Mm-hmm. It, it'll be that sphere rather than higher. Brilliant. Thanks, Penny. Thank you. The next question comes from Priya Shah from Deutsche Bank. Priya, please, the line is now open. Thanks. Thank you very much. Two questions for me. Great. Morning, Penny. The first one's on motor mix. How has the mix been developing over the last few months? And just looking forward into the FCA's reforms, is there any danger that more established players or insurers like yourself could lose out on new and younger drivers in the first few months of the year if there's kind of continued competition? And then my second question, which is slightly different, to the theme of today, but how should we be thinking about investment income guidance looking out over the next couple of years in a rising yield environment? Brilliant. I'm really excited because it means that Neil's got a question. Just on mix. I think the story on mix is really a COVID one rather than a pricing practices one at the moment. Because you saw through 2020 and into 2021, there were less new drivers coming into the market. You know, we saw sort of ABI do some strange shapes through last year because of that and because of less new cars in the market. Now, although, you know, that's correcting but not corrected, I would say, there are still some mix shifts in the market. I don't think our book is doing anything particularly dramatic compared to anybody else's in that regard, or not consciously so. I think that's probably the story on mix still correcting, if you like. I think coming into next year, I don't know that there's a particular feature of what will happen to young drivers versus anything else. Certainly, I suspect you will see people have more flexibility of pricing in segments that they don't have large back books in. You may see some, you know, some movement in that space, or people are creating sub-brands or targeting the different channels. You know, that's kind of what will happen. I don't think there's a clear outcome of automatically X, Y, and Z will happen. I still think the big players have dominant forces in this market. You may see some nimble players doing specific things. Don't know. I wouldn't overread at this stage what will happen to any one particular player. I think we let it settle out over the course of next year, you know, the next few months. I take investment income. Thanks for the question. You probably remember we ticked up the investment income guidance for this year from 1.5% to 1.6% at the half year. If I look at what's happened since then, you've clearly got a rise in risk-free rates through to now. But you've seen a kind of a consistent slight tightening on credit as we go through the second half of the year. Net-net, I think I said at the half year, we're, you know, the 1.6 for this year is pretty much a good platform for next year. If you look longer term, the impact of rates will start to feed through the book. But obviously we only... The maturity profile is that we're only kind of reinvesting a third of the portfolio each year. It takes a while to work through the book. I think good thing is rates underpins where we are today. I think it needs to move a bit further or start the credit markets moving to get a lot more upside. Great. Thank you. Thank you. The next question comes from Ivan Bokhmat from Barclays. Please, Ivan, your line is now open. Hi. Good morning. I've got a couple of questions, please. The first one is back to the guidance and combined ratio. For this year, you're talking about 90%-95%. If my math is correct, that means that for the second half you'll be at the top end of your midterm range or possibly slightly above it. I was just wondering if you could maybe try to outline the main drivers combined ratio to return back into the range for 2022. Is it mainly expenses? Do you have any particular assumptions on pricing, et cetera? The second question is actually on capital. Maybe also for Neil, you could give us an update on the capital generation second half. Just related to your comments about first quarter being very uncertain, do you think it would be appropriate to expect to return to a 160% solvency ratio with your capital distribution at the year end? Thanks. Excellent. Thanks, Christian. On the core, the simplest way to think through it is that the 90%-92% or the 3-point benefit versus the 93%-95% is all down to motor frequency in the first half. That was about, when you size that, about 3 points, kind of in inverted commas, one-off benefit. That's what's slowed through into the 90%-92%. Clearly between first half and second half, there's always a split between when reserve releases come through. Don't forget the first half, there's no weather as well, although all these numbers are normalized. Fixing the part is the one-off benefits from low frequency in the first half. It shouldn't, you shouldn't take anything from that guidance that is inconsistent with the medium term 93%-95%. That's the first point. Second point on capital. We, as I said at half year, we're looking to move back down to the middle of the range to the 160%. Still the position today. Of course, any uncertainty, we will generally take into account within the SCR for that type of risk rather than within the range. Let's see when we get there, what we decide to do. Still pretty confident on the capital position generally. Maybe one follow-up. Would you consider another buyback if you're well above the range? Of course, any decision we take on that will be done at year end. You know our track record, which is if we think we have excess capital, we have consistently returned to shareholders. I think, you know, given where we are today, you know, we're buying back stock we think is a very attractive price in the marketplace. Thank you. Thank you. Our next question comes from Ming Zhu from Panmure Gordon. Please, Ming, your line is now open. Thank you. Good morning. Thank you for taking my call. Two questions, please. First question is around whiplash. What have you seen so far? I think Penny had a comment earlier saying it's still early days to see where it will land. I just wondering whether you could give some color on this and when. Also, you know, when do you suppose this could settle at some point? Second is share buyback. I think you've always commented on, you know, you're buying back the share at quite attractive price, good ROE. If I look at your buyback program, which started on the ninth of March, your share price was GBP 3.20. If I look at the share price now, even at just the interim dividend, it just shows your buyback hasn't really done anything to the share price. I mean, at the full year, you know, would you reconsider going back to the special dividend? Because that seems to be the preferred way to income holders. Thank you. Whiplash. I mean, not much to add really. I think while so when it was effective May 31st, while the industry was ready, I'm not sure that all the solicitors and claims management firms and so on had got their heads around the process. We saw a sort of slow down through the summer while you know things worked through the system, if you like. I think at this stage nothing that, meaning you know, meaningfully we would flag out. We'll give a little bit more color at year end by hopefully which time it'll be clearer on what's happening whether there are any trends of note in there. On the share buyback, this specialty question, I guess we're open-minded. We don't have a kind of we have to do one or the other. We look at the position at the time with the evidence we've got. At the moment, we think a buyback is the best approach. I'm not sure that either necessarily would be driving the share price today. You know, the return on capital is a long-term game. We're returning capital 'cause it's the right thing to do to create value in the long term. I'm not sure it's necessarily such a driver of short-term share price support. Thank you. Thank you. The next question comes from Gordon Aitken from RBC. Please, Gordon, your line is now open. Morning. Oh, very quiet. Hi, Gordon, are you there? Hey, Penny. How are you doing? Hey A couple of questions, please. First, what do you think happens to the price comparison channel post first of January 2022? Maybe you can talk about next year, but also talk about over the medium term, given that it's gonna take customers a while to change what they do. Also, another question on the pricing review. From what you've said, my sense is that you think you've repriced your back book probably maybe to a slightly greater extent than others, if you can say if that's right. If it is, do you then need to raise new business rates as fast as others? Well, the beauty of it is you don't need to raise new business rates as fast as others. Is this an opportunity to either gain share or to gain margin? Thanks. Thanks, Gordon. PCWs, I think perhaps the way to if the FCA achieve what they set out to do, it will reduce the amount of movement in the market. In that sense, you may, you know, you would expect. Actually some of the things that you are seeing in the market now around home pricing and people trying to take share and so would again suggest that customers, people believe that customers will stay around for longer in this set of scenarios. In which case, you would see less volume moving logically through any acquisition channel, including the PCW. That said, I think there are many things that drive people to move insurance products, service, changes in life, you know, lifestyle and so on and so forth. I think there's still plenty of ammunition left in the PCW channels as well. It's not the only thing driving it. That's probably the position on PCWs. In terms of pricing review, I'm not gonna predict or tell you what I think our pricing will do versus other people's. But we have, yes, taken the action that we think we need to take on the tail. We are not coming into J anuary 1st trying to make those adjustments. Those have already kind of gone through the book, if you like. I would imagine that others with large books have been making moves as well, but that's a question for them rather than for me. I would say that a lot of those players sit around the ABI table, which had, long before pricing practices came onto the horizon, had set themselves some guidance as to how they'd address this. I'd be pretty confident that people have been moving their books. You know you'd have to ask them how fast and to what degree. You're right that first of January is much more about leveling up pricing in the early 2010s of you know than kind of dealing with any tail issues. That's where the focus will be. I don't have a crystal ball as to where others sit in that path. Whether our movements will differ from theirs and to what degree. Great. Thanks. Thank you. Our next question comes from James Shuck from Citi. Please, James, your line is now open. Thanks. Good morning. Morning, James. Good morning. Just on frequency, I think, you know, lots of comments about the 2021 experience. Just interested to get your take on how much of the frequency improvement is actually sustainable. People are using cars in different ways, different times of the day. Do you think we're gonna remain below 2019 levels? If so, how much? And then kind of same theme, claims inflation. Are you seeing any trends to kind of repairing cars rather than totaling them and hence putting more people through your garage networks, but then maybe this is leading to a bit more of a backlog because then you have to fix the cars and that might be affecting Net Promoter Scores? Just any comment around that might help. Secondly, lots of comments around FCA reforms around pricing practices. I'm interested to get your take around the duty of care, which I believe has led to sort of the timeline now from Parliament. Keen to get your thoughts around add-ons and any other things we should be considering around that. Thank you. I love that. I'm sure that's three questions in two. Frequency. I think we said it half year, and it's still the case that you know, driving miles definitely back up to pre-pandemic levels. Frequency still below, and I think we are assuming that it remains below. I won't give you the exact number, but. Why are we assuming that? Because when we look at the different kind of mileage, it's largely commuter traffic changing shape. When we look at our business and other businesses, we think the mixed model ways of working and so on will continue in some shape or form. Now, the thing that's difficult to predict is exactly what you know, where that point will end up. There could be years till judgments in that. That movement, although still increasing, is kind of the frequency levels, although increasing, are kind of trickling up rather than having stopped moving or shooting up. It feels as though we're starting to move into you know the sort of the endpoint territory. That will be a little below what it was in 2019. You know you're still susceptible to you know increase you know lockdowns or actually you know on the other side increase in confidence over time. When we look at... When we look at this from an operational perspective rather than a frequency perspective, and we look at our you know talk to our people, there really is a move to hold on to a sort of mixed model way of working. I think lots of businesses are seeing that. I think it's reasonable to assume that there is a structural long-term benefit there. The exact you know amount of that you know we will all zero in on over time. I think that's claims frequency. The second part of the question was the severity. Yes. It was around you know what are we doing in the repair centers and what opportunities and what risks are there. You're right. There's a number of factors kind of involved in kind of the severity question. Supply chains, for instance, we're seeing bits and pieces. Sometimes there are delivery issues, sometimes there are particular parts issues. All of them at the moment seem to be kind of smooth-able out rather than crisis, you know, levels, if you like, rather than creating real strain, with exception of the one I flagged, which is secondhand car prices. You're right that we can flex in the repair centers, especially with frequency down. There are some, you know, like everywhere, there are skill shortages at the moment. You're seeing that across pretty much every industry. There is some of that happening in the repair network beyond ours, not just ours. Actually, with the frequency levels that they are, we're able to do a greater proportion in-house, and so that gives us a benefit overall. I think it's fair to say that having a repair network is an advantage, especially when severity is spiking, especially when it's spiking for the reasons it is. Certainly the case. What all that works out to in terms of what, you know, our inflation relative to others, too early to tell. Say, we would say we're at the top end of the range, something somewhere around there. I'll let others call what they're seeing separately. The third question was a duty of care question, so completely different. I think duty of care. A few things, and not everyone on the call may be as close to it as you are, but yes, definitely the FCA will do something to bring a duty of care or something of that nature in. Legislation requires them to do so. I think over the course of next year, next summer. When you talk to the FCA, how do they think about it? They think about it as they consider in GI that they have done a lot of the things that they want to do. They see duty of care as raising the bar across all kinds of areas of financial services. The fact that they've done pricing practices, vulnerable customers, in our industry, and they've done IDD before that on the distribution side, they're kind of saying or literally saying, actually, we think we've covered the bases in GI. Until you see the detail, and they're not due to consult on it until December, no one will know exactly what that means. I'm confident that it's not aimed at GI, if you like, and I'm confident that we'll be less impacted than some other industry areas, and we'll wait and see. It's got a long way to go before we know what the exact path that is. Okay. That's very helpful, Penny. Just one point of clarification. Because of the price of secondhand cars, are you repairing them more than you are writing them off? Is that not leading to any backlog in your repair networks? You did ask that question, and I forgot to answer it. We will be. It will change the point of that judgment absolutely. No, we're not seeing more of a backlog of repairs, and yes, NPS scores are holding up and customer services is there. Wonderful. Very clear. Thank you very much. Thank you. Our next question comes from Faizan Lakhani from HSBC. Please, Faizan, your line is now open. Good morning. I just had a few questions. Could you potentially look to run off your most profitable distribution channels to maintain margins on your back book? That was question 1. Question 2, we've talked a fair bit about inflation in households, but some commentators have pointed to a benefit from COVID from lower levels of burglaries and, you know, being more aware at home. Could you potentially quantify what benefit, if any, you've had from COVID over the past nine months? The final one is a cheeky small question. Could you provide a split between the businesses that are in the short tenure versus sort of the tail that you've already dealt with? Thank you. I didn't quite catch the last one, but let me do the first two first. Runoff is an extreme word. So, not planning to put any parts of the business into runoff, if that's the question. I think the real essence of this is you know, when we look at our book segment by segment, cohort by cohort, we can make choices about where we hold prices. In areas where it's sensible to do so, we'll make the choice basically that protects shareholder value within the bounds of being comfortable that it delivers fair outcomes for customers. As I said, we've already been through the latter question, so our focus will be on what delivers the most value for shareholders, and we will dial in and out of segments with different brands and different channels as appropriate to get there. You know, we're not putting any parts of the book into runoff. Inflation in home, I think was the second one. It's all very muted now and pretty much back to COVID levels. There are some mixed differentials, so you're getting, you know, escape of water claims costs are lower because people identify them faster, largely because they're in their homes. We're possibly seeing some increase in things like drains, which might be to do with the number of houses that, you know, are having surveys because the housing market's been more buoyant. We're seeing more claims on things like kind of damage in the home because there are more people in there. Mix shifting overall pretty much dialing where it was pre-COVID. I didn't catch all of the cheeky third question. Uh, um- Sorry. You mentioned you've done a lot of work around the tail in terms of sorting out the issues. Yes Prior to the FCA pricing review, there's still some work to be done on the shorter tenures. That will probably happen in January. Could you potentially provide a split in terms of what you categorize as long tail and short tail in your back book, roughly as a percentage? No, the way we think about it is, over a five-year tenure, we check every customer policy price. That's the way we think about it. I don't have the number, because I don't think it's that relevant to say it's X% or Y%. It's more the path every customer goes on. Great. Thank you very much. Thanks. Thank you. Our last question comes from Alan Devlin from Goldman Sachs. Please, Alan, your line is now open. Hi, guys. Thank you very much. Hi, Alan. Morning. A couple questions from me. First of all, just a follow-up from your answer to Gordon's question. You know, if the FCA is successful in increasing retentions, lowering churn, how does that change your kind of view on, you know, your view of marketing? How much money you spend marketing? What is gonna be acquisition cost for the Direct Line brand going into next year? And then the second question on your EV proposition, I'm wondering if you could give some more color on what you're doing there and, you know, what is your market share of the EV business higher than the overall business? And, you know, what kind of advantages does your claims network give you in the EV, given you spend a lot of money training people to fix these vehicles? Thanks. Brilliant. I'm not gonna give you a direct answer on what we're gonna do on marketing, 'cause that's in a competitive zone, Alan. I'll say this. Over time, the way we think about the amount of marketing spend that we do is linked to the amount of value that we see in customers. We will, as we see what customer behavior does through this and what retention levels do, reassess the overall long-term value equation for each customer, and that will set the parameters on the acquisition costs we're prepared to pay. It kind of works the other way around. We do have a view as to what we'll do on day one, but really it's much less important than that overriding point that it will flex over time dependent on how customer behavior settles in the new market. EV. Yes. Fantastic. We believe there aren't published market share numbers on the EV segment, so proving something is different. We believe we punch beyond our weight in terms of share, partly because the Tesla introduction introduced the relationships and so on that we have, and we traditionally have done, and we've got good insight because for some years we've been doing that. That's given us insight on repair around EVs over a number of years. What are we doing for customers? Obviously we're, you know, offering an insurance product, but we're also offering a package of things around that to help customers make the transition, including access to various charging networks, discounts on that, help with getting subsidies, education online as to different cars, ranges, different attributes, access for people to come and set up, you know, charging points in your drive, and so on and so forth. We've teamed up with a startup called electrifying.com, who do a lot of that research content and are super engaging around that. The full kind of package of things that an individual customer will have to go through to move to an EV, and the aim is just to make it in line with the brand as easy as we can for people to make that transition. That's really kind of the aim. We continue, as you say, to invest in the training of our mechanics and our engineers, to get them all EV. It's not just EV, it's actually a lot of the technology that goes in cars, modern cars that are around that as well, so that we can be leading edge. As time moves on and our pricing capabilities improve, then we would seek to bring those. You know, today, there's not much ability for us to use that knowledge in our pricing, but over time, we see that as a real opportunity as well. There's a package of reasons why we think we kind of have a right to be successful in EV building on the start that we already have. This, you know, proposition for customers is one piece of that jigsaw. Cool. Thanks. Thanks for your answer. Brilliant. Is that the last question, Juan? Yeah, we currently have no further questions. I will now hand over to you, Penny James, for any final remarks. Brilliant. Thank you. I mean, thank you. Wow. A wealth of questions off a one and a half page release. Look, I'll just leave you with, I think, you know, we feel well-positioned in the markets at the moment. We're on track for pricing practices. We're positive about how we've positioned both, you know, in the motor market, given its challenges, and in home coming into PPR. We know we've got a number of levers up our sleeve, some of which, you know, you're already aware of, and some that transformation will bring us beyond that. We feel positive about how we're set as we look ahead. The final thing I will do is a plug for November 17th, for anyone who wants to understand a little bit more about our commercial growth, business and what's been driving the growth there. Other than that, I shall stop there and thank you all for joining us. Have a good day. This concludes today's call. Thank you so much for joining. You may now disconnect your lines and enjoy the rest of your day.