Direct Line Insurance Group PLC

LSE:DLG

Earnings Call Transcript 2021-Q3

[Operator]

Hello, and welcome to the DLG Third Quarter Trading Update Conference Call. My name is Juan, and I will be coordinating your call today. [Operator Instructions]I will now hand over to our CEO, Penny James, to begin with. Please, Penny, go ahead.

[Penelope Jane James, CEO & Executive Director]

Thanks, Juan. Good morning, everybody. Now I'm sure you have all read through the results. I'm conscious they're not that long. So 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 the -- I'd best summarize that as we continue to do the right things and remain disciplined while making good progress on the transformation and positioning ourselves well as we look ahead.So the first thing I'd highlight is that despite challenging market conditions, we've continued to grow own brand policies. So 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. And so whilst we continue to grow, the rate of growth has slowed. And 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 going to make is that having been at COP26 last week, it would be a 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. So we've committed, as I've told you before, to the Race to Zero, and we're working to set science-based targets covering Scopes 1, 2 and 3 emissions.But 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. And 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. So 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.And the third point I was going to 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 set in. However, in the medium term, there will 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. And that's why we've reiterated our combined operating ratio guidance of 93% to 95% over the medium term, normalized for weather, of course, and to be between 90% and 92% in 2021.Now just before I pass back to Juan to open the line for Q&A, I just want to remind everybody of our investor insight session that we'll be holding our Commercial business on the 17th of November. As I've told you before, it's an area of our business that service through its transformation, and that's driven the strong growth that you've seen in today's results and throughout this year. So we're really looking forward to giving you a bit more color and insight as to how we've achieved it.So I will pause there, and I will pass back to Juan to see whether you've got any questions on the line. Thank you.

[Operator]

[Operator Instructions] And our first question comes from James Pearse from Jefferies.

[James Pearse, Equity Associate]

I hope you're all well. Just 2 questions from me, please. So another strong quarter for Commercial. And how sustainable are those levels of growth in that business going forward?And then 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?

[Penelope Jane James, CEO & Executive Director]

Yes, sure. So Commercial, I think the first thing is what's driving the growth. And I think there are probably 3 things underpinning that growth. So the first is that we've invested in technology that's enabled us to really support customer service over the last few years. So we won another award for our kind of broker hub, electronic hub last week. And you can see both in the broker side and the customer side, the service levels and flexibility that people have is ahead of most of the market. So that's the first big win. And I think alongside that, that held up through COVID unlike some of the competitors. So 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. And that in itself has given us benefits through this year as well and has driven some of that growth.And the third thing is that the market hardened throughout this year in Commercial, to some extent in the SME space, less than other parts of the market. But what that's meant is kind of more business has been coming to market than usual.So when I look forward, I think the momentum that drives the first 2 of those continues. I think we'd expect to see the market get more competitive again as it does in a sort of natural cycle as we move into '22 and beyond. So what does that mean? So when we look at this business, we don't see something that's growing at 15% -- 12%, 15% per annum as it has done this year. We think that's probably a bit rich because it had the additional tailwind of the market. But we do see a business that can grow upper -- mid- to upper single digits going forward on a sort of continuing basis, and that's how we view it. So 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.But to give you a flavor of what's going on in severity generally, I think we've been kind of -- I think we flagged at Q1, we're probably slightly above our usual 3% to 5% range in Q2. We said it was sort of coming in just inside. Broadly, it's running around somewhere the top of that 3% to 5% range. So maybe slightly outside that, if you include some of the real COVID factors that are still having a little bit of effect. So people driving premium cars, for instance, cleaning costs, those sorts of things are still knocking around. But 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. So I think we kind of expect to see some continued inflation probably somewhere around the top end of that range as we have through this year driven by that effect and to see that for some months, yes, I think.What is 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. So we know that there are benefits from having the repair networks that come through, especially when things spike. But I can't give you the numbers for competitive reasons, I'm afraid.

[Operator]

The next question comes from Greig Paterson from KBW.

[Greig Norman Paterson, MD, Senior VP & United Kingdom Analyst]

The -- 2 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 need -- still need to do to achieve that on a little bit more pricing.And the second thing, in Commercial lines in the third quarter, I was including NIG and the SME area [indiscernible] business, what is the net rate that you are carrying year-on-year sort of quite [ final ] rate [ minus kind ] of inflation?

[Penelope Jane James, CEO & Executive Director]

Brilliant. Thanks, Greig. So FCA pricing and where are we? So 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 gives relevance to your question. And kind of we're set for the year-end, if you like.What's happened on renewals? Now we've said over the last 3 years that we've been progressively tightening -- setting margins in the book with which we're comfortable and bringing those in. And we've set those basically at the 5-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, sort of a bit more over the course of this year, which you can sort of see in the AVP numbers. So even though -- I think the AVP on Home overall is pretty flat even though we've been putting inflation through on 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 tenure.So 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 have been doing that incrementally over a number of years. It's perhaps the best indicator I can give you. I think the remaining bit, therefore, when the pricing rules come in is it's the leveling up of the early tenures, and that's kind of the process that will happen in the early part of next year. So perhaps that gives you a feel for what's happened in that space.I think on Commercial...

[Greig Norman Paterson, MD, Senior VP & United Kingdom Analyst]

Sorry, Penny. Is that going to be dramatic? I'm just trying to -- is it something we need to be shocked by? Or is it going to be fairly second order? That's what I'm trying to figure out.

[Penelope Jane James, CEO & Executive Director]

I'm not going to make predictions; a, it's illegal for me to price indicate, so I'd at least try with a little bit of caution. But if you look back to even the kind of the FCA original business case and so on, you can see that with the -- there's a -- not insignificant correction in the number and new business numbers in the Home book when they did their modeling. So I don't think it's unreasonable if they got that modeling right to expect something. And I think the other thing that people have to think about is what's coming through in inflation, and inflation in Home has been running top end of 3% to 5% and really with one eye on what's happening in construction costs and so on. So actually, there is inflation out there.So 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. So when I say that we expect to have volatility at the beginning of next year, I think people will put their rates into the market on day 1, and then there will be a process. Remember, it takes 6 weeks or so. The renewal notices go out about 6 weeks ahead of renewal date. So there will be some time before it's clear what all the effects are on both new business and renewals and which you should expect, I think, the market to make adjustments as all those data points become clear.So I think it will be, and we're kind of flagging that there will be volatility in Q1. And 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 quarter, if that helps at all.I think the important thing when you stand back is 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 backed off a little bit as things have got competitive in the second half. So we're very comfortable with where we're coming into that process. And then we've got the levers to deal with it, and we will all see kind of what the best route through the early weeks is when everybody's prices are in the market.You -- 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 in the 3%, 4%, somewhere around there.

[Operator]

The next question comes from Freya Kong from Bank of America.

[Freya Kong, Research Analyst]

Two questions, please. So 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?

[Penelope Jane James, CEO & Executive Director]

Brilliant. Look, on Motor first, look, I think the punch line on Motor is if you look at the ABI data, the market is 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. And there are lots of good reasons that, that might be the case, so whiplash and so on and so forth that could be driving that. But however it's got there, it's kind of reduced for lower frequency. It hasn't really risen as a whole. There's variation within it, but as a whole, we've reduced the shallower amount, and we've been passing inflation through, to your point, throughout the second half of the year.So 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. But 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. And so 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. So it's very clear that our aim is to continue pricing severity through, and we wait with curiosity to see where the rest of the market -- when the rest of the market will start pushing.On Home, yes, you're right -- I mean, Home has done -- I'd like to say we've got a crystal ball, but that's not the case. But Home has done kind of exactly what we predicted it would do. We -- it's been pretty flat with relatively low inflation and relatively low premium inflation for the last few years. And it kind of remains low at the start of the year. We pushed pretty hard, and actually, we had some, what can we call, manufacturing benefits coming through, i.e. 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 part -- 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 why did we expect it? Because logically, long-term customer values increase in a post-pricing practices world. So our belief is that, that is driven by pricing practices and people's entry points into pricing practices trying to 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 -- what that does to price for them to judge rather than us.But as I say, we're pretty comfortable on Home with where we're coming in to pricing practices to be able to kind of hold rate coming through and still be holding the book flat, growing slightly after strong growth in the first half. Feeling pretty positive with that -- yes, towards that.

[Operator]

The next question comes from Thomas Bateman from Berenberg.

[Thomas Bateman, Analyst]

Just on the Motor pricing, I think investors particularly from the outside are seeing pricing down 7%; claims inflation, 5%. And there's a big kind of 12-point gap there. And I think there's lots of moving parts in between, driving behavior, whiplash, new cars, et cetera. But I don't know, can you help us give us some numbers to bridge the gap as to why it's not a 12-point gap for the rest of the market?And the second question is just on the transformation changes. There's a lot of good talk about the improving accuracy in the pricing. But when 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 travel policy count on both Motor and Home?

[Penelope Jane James, CEO & Executive Director]

Okay. Love the challenging tone of the second question. I'll come back to that.

[Thomas Bateman, Analyst]

I'm sorry.

[Penelope Jane James, CEO & Executive Director]

That's all right. That's fine. So 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. But what -- let me give you -- if I can fill in some components, if you like, that might be the case. So I think you're right that the answer lies between claims frequency, severity and including whiplash and preparation for pricing practices, and many other people can tell you how they're drawing those lines. But 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 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, people are calling out -- sometimes we call out lower numbers than competitors because I think what James asked, we have some benefits from the repair centers. But yes, you've got to say that it's been somewhere around the upper end of 3% to 5% for the last couple of years, and [ those 2 ] 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. So you think you've got that plus whatever is ahead still to come in some shape or form. And then offsetting that, you've got whiplash, few points depending on who you are and whether you use the government numbers. Very unclear at the moment what the benefits. It's just too early to know where the whiplash reform benefits are going to land. So again, you've got an assumption in the mix.So I think that 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. So if you take -- if you make -- if you assume that it's logical because frequency is down, it's still -- 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.So I think that's where the market really is. And people may be making choices. I think the practical point is PPR. That's the only other thing that I would sort of flag. But if you make a pricing change now, you've only got a few weeks benefit from it. So there comes a point where you kind of apply most of your pricing resource to what the 2022 look like rather than what the 2021 look like. So I'm not sure now I'd be overreading movements in the back end of this year because -- just because the volume of resource that we'll be focused on a post '22 world and anything you do now has little validity or is only valid for a few weeks.So I would say the sort of -- 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 '22. But a 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 on to delivering benefits that's currently focused on getting us over the line for pricing practices. So we're feeling pretty positive actually as we go into next year, which leads us on to transformation, which is your second question. So what's -- kind of what are the benefits and so on?So I think 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 -- pricing languages into deployment languages and so on. So you keep some granularity in that, that you didn't before. And we always thought there'd be some benefit attached to that. So 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 its way out -- ahead of anywhere. So we have a list that we are working through as model improvements that are banked up behind that, which bring in other sources, new different -- 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. But 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.And 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 to 18 months will build. And really, that's around customer self-service levels. So it enables self-service in a way that we couldn't have done on the previous platform. If I give you an example, so 100% of claims can be done self-service now, probably around 20% or something like that. So -- and there are similar effects on the sales and service side. So it enables us to start evolving that as the book goes over and migrates over. So that's the other area to look for over time. So being 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.

[Operator]

The next question comes from Alex Evans from Crédit Suisse.

[Alexander Evans, Research Analyst]

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 when I look on a new business perspective, at least, it looks like pricing for Churchill is more in line with the market and you're essentially saying pricing for the market is not taking into account inflation. So is it fair to assume that you're sort of quite materially ahead in the Direct Line brand now?And then I just wondered if it was possible to give a bit of color of 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?

[Penelope Jane James, CEO & Executive Director]

I think you're right that there is -- when I say that to the portfolio level, so will become variation underneath it. But philosophically, it's going in everywhere that we'll make some trading choices around that as well. So 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. And the offset is we've seen renewals on Direct hold up really, really well and strengthened. So as a book, probably not much story, but the new business story is definitely -- versus renewal story has definitely kind of differed between the 2 channels. I think it's the essence of the picture. So yes, pricing going through everywhere, but we do make different choices in different segments and different channels, so it's difficult to see it necessarily. And through this year, PCW stronger than Direct on new business but not so on renewals.

[Operator]

And our next question comes from Will Hardcastle from UBS.

[William Fraser Hardcastle, Analyst]

A quick question on Home insurance actually. Just thinking about the inflation levels and whether those have changed at all as the years gone on, I think you mentioned you're running at the top end of 3% to 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 to wider market for things like labor cost, material cost inflation, et cetera?

[Penelope Jane James, CEO & Executive Director]

Great question. So I think, look, we're 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. And I think over the course of the year, I think it's fair to say that it's been pretty -- it's run fine all the way through. We're still kind of -- 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. So a lot of Home claims are jewelry and electrical goods and carpets and so on and so forth. And although we're seeing supply chain glitches in some of those places, and the thing that's really changing that you can't maneuver around, the one I talked about in the description that is changing the face of things, and lots of things are cash-settled anyway.So really, the drive -- the question area is more around sort of construction costs, where clearly there is inflationary pressure across the markets, not just in insurance. And our sense is that we've kept it tight through this year, and we've been able to manage it within that zone. But if that pressure keeps building, then there is kind of some inflationary pressure because we are not immune.And in terms of contracts, you're right that 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, and I suspect that's the same with other significant players as well. So our sense is that there is a kind of building pressure in the market that might lift us slightly, and 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. Yes.

[William Fraser Hardcastle, Analyst]

That's really helpful. I guess just -- this is probably my naivety, but construction as a percentage of Home claims, are we talking 10%, 20%? By the sound of what you're saying, is it in that range?

[Penelope Jane James, CEO & Executive Director]

It's in that sphere. And it's quite difficult to peel apart because even within our -- even within a claim, it depends. If you have an escape of water claim, it depends on what component of that is there. So it's not even as simple as all the escape of water claims will be doing X or so on and so forth. But it will be that sphere rather than higher.

[Operator]

And the next question comes from Rhea Shah from Deutsche Bank.

[Rhea Shah, Research Associate]

Two questions from me. So the first one is on Motor mix. How has the mix been developing over the last few months? And just looking forward into the FCA's reforms, do you -- is there any danger that more established players or insurers like yourself can 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 investments income guidance looking out over the next couple of years in a rising yield environment?

[Penelope Jane James, CEO & Executive Director]

Brilliant, and I'm really excited because it means that Neil has got a question. So just on mix, I think the story on mix is really a COVID one rather than a pricing practices one at the moment. So because you saw through '20 -- just want to get my years right, 2020 and into 2021, there were less new drivers coming into the market. We saw sort of AVP do some [ strained ] shapes through last year because of that and because of less new cars in the market. Now although that's correcting but not corrected, I would say. So there are still some mix shift in the market. I don't think our book is doing anything particularly drastic compared to anybody else in that regard or I'm not consciously so. 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 how -- I don't know that there's a particular feature of what will happen to young drivers versus anything else. But certainly, I suspect you will see people have more flexibility of pricing in segments that they don't have large back books in. So you may see some movement in that space or people creating sub-brands or targeting the different channels, or that's kind of what will happen. So 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. So you may see some nimble players doing specific things, don't know. But I wouldn't overread at this stage what will happen to any one particular player. I think we'll let it settle out over the course of the next few months.Neil?

[Neil Manser, CFO & Director]

So I'll take investment income. So thanks for the question. So yes, 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. So net-net, I think I said at the half year, 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 1/3 of the portfolio each year. So it takes a while to work through the book. So I think good thing is basically underpins where we are today. I think it needs to move a bit further or to start to see credit markets moving to get a lot more upside.

[Operator]

And the next question comes from Ivan Bokhmat from Barclays.

[Ivan Bokhmat, CEEMEA Banks Analyst]

I've got a couple of questions, please. So the first one is back to the guidance in combined ratio. So for this year, you're talking about 90% to 95%. And 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. So 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?And the second question is actually on capital, so maybe also for Neil. Maybe you could give us an update on the capital generation in the second half. And just related to your comments about first quarter being very uncertain, do you think it will be appropriate to expect to return to 160% solvency ratio with your capital distribution at the year-end?

[Neil Manser, CFO & Director]

Excellent. Thanks for the question. So on the COR, so the simplest way to think through it is that the 90% to 92% or the 3-point benefit versus the 93% to 95% is all down to Motor frequency in the first half. So that was about -- the new size, that is about a 3-point kind of, [ and referred to the comments ], one-off benefit. That's what's flowed through into the 90% to 92%. Clearly, between first half and second half, there's always a split between when reserve releases come through. And don't forget, in the first half, there's no weather as well, although all these numbers are normalized. So [ frequency ] 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% to 95%. So that's the first point.Second point on capital, we -- as I said at the half year, we're looking to move back down to the middle of the range to the 160%, and 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. But let's see when we get there, what we'd like to do. But still pretty confident on the capital position generally.

[Ivan Bokhmat, CEEMEA Banks Analyst]

Maybe one follow-up. Would you consider another buyback if you're well above the range?

[Neil Manser, CFO & Director]

So of course, any decision we take with our year-end, you know our track record, which is if we think we have excess capital, we will -- we have consistently returned to shareholders. And I think given where we are today, we're buying back stock, we think it's a very attractive price in the marketplace.

[Operator]

Our next question comes from Ming Zhu from Panmure Gordon.

[Ming Zhu, Analyst]

Two questions, please. And 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. So I'm just wondering whether you could give some color on this, and also, when do you suppose this will settle at some point?And second is share buyback. And I think you've always commented on you're buying back the share at quite attractive price, good ROE. But if I look at your buyback program, which started on the 9th of March, your share price was GBP 3.20. And then if I look at the share price now, even adjust the interim dividend, it just shows your buyback hasn't really done anything to the share price. I mean, at the full year, would you reconsider going back to the special dividend because that seems to be the preferred way to income holders?

[Penelope Jane James, CEO & Executive Director]

Whiplash, I mean, not much to add really. I think whilst -- so when it was effective 31st of May, I think whilst 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. So we saw a sort of slowdown through the summer while things work through the system, if you like. So I think at this stage, nothing that meaningfully we would flag out. And we'll give a little bit more color at year-end, but hopefully which time it will be clear on what's happening, whether there are any trends of note in there.

[Neil Manser, CFO & Director]

Yes. And on the share price, I'll take 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 the buyback is the best approach. I'm not sure that either necessarily will be driving the share price today. And the part -- the return of capital is a long-term game. We're returning capital because it's the right thing to do to accrete value in the long term. So I'm not sure it's necessarily such a driver of short-term share price.

[Operator]

The next question comes from Gordon Aitken from RBC.

[Gordon Aitken, Analyst]

Yes. So a couple of questions, please. First, what do you think happens to the price comparison channel post 1st of January '22? And maybe you can talk about next year but also talk about over the medium term, given that it's going to take customers a while to change what they do.And 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. And if it is, do you then need to -- or the beauty of it is you don't need to raise new business rates as fast as others. So is this an opportunity to either gain share or to gain margin?

[Penelope Jane James, CEO & Executive Director]

Thanks, Gordon. So PCW, I think perhaps the way -- if the FCA achieved what they set out to do, it will reduce the amount of movement in the market. So in that sense, you may -- you would -- 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 customer -- 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 -- well, any acquisition channel, including the PCW. So that said, I think there are many things that drive people to move, insurance products, service, changes in lifestyle and so on and so forth. So I think there's still plenty of ammunition left in the PCW channel as well. So it's not the only thing driving it. So it's probably the position on PCW.In terms of pricing review, I'm not going to predict or tell you what I think our pricing will do versus other people's. But we have yet taken the action that we think we need to take on the tail. So we are not coming into 1st of January 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. So I'd be pretty confident that people have been moving that books. You'd have to ask them how fast and to what degree.So you're right that 1st of January is much more about leveling up pricing in the early tenures of -- than kind of dealing with any tail issues. So that's where the focus will be. I don't have a crystal ball as to where the others sit in that path, so whether our movements will differ from theirs and to what degree.

[Operator]

Our next question comes from James Shuck from Citi.

[James Austin Shuck, Director & Head of the EMEA Insurance Sector]

Just on frequency, I think 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 going to remain below 2019 levels? If so, how much? And then kind of same theme of claims inflation, are you seeing any trends to kind of repairing cars rather than titling them and hence, putting more people through your garage networks, but then maybe that is leading to a bit more of a backlog because then you have to fix the cars and that might be affecting that promoter scores? Just any comments around that might help.And then secondly, lots of commentary again around FCA reforms and pricing practice. Interested to get your take around the duty of care, which I believe has led us at the time line now from parliament. So interested to get your thoughts around add-ons and any other things we should be considering around that.

[Penelope Jane James, CEO & Executive Director]

I love that. I'm sure that's 3 questions than 2. So frequency, I think we said -- so I think we said at half year and is still the case that 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 -- and why are we assuming that? Because when we look at the different kind of mileage is largely commuter traffic changing shape. And 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 -- where that point will end up. So there clearly is still judgments in that. But 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. So it feels as though we're starting to move into the sort of the endpoint territory. So -- and that will be a little below what it was in 2019. But you're still susceptible to increase in lockdowns or actually on the other side, increase in confidence over time.But when we look at this from an operational perspective rather than a frequency perspective, and we look at our -- to our people, there really is a move to hold on to a sort of mixed model way of working. And I think lots of businesses are seeing at that. So I think it's reasonable to assume that there is a structural long-term benefit there. The exact amount to that, it will zero in on that over time. So I think that claims frequency.The second part of the question was the severity, yes, so it was around what are we doing in the repair centers and what opportunities and what risks are there. So you're right, there's a number of factors kind of evolved in a kind of the severity question. So supply chains, for instance, we're seeing bits and pieces. Sometimes there are delivery issue. Sometimes there are particular parts issues. All of them at the moment seem to be kind of smoothable out rather than crisis levels, if you like, rather than creating real strain, with the 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. So there are some -- like everywhere, there are skill shortages at the moment. You're seeing that across pretty much every industry. So there is some of that happening in the repair network beyond them, not just ours. But 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. So 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, so certainly the case. What all that works out to in terms of our inflation relative to others, too early to tell. Say -- we would say we're at the top end of the range, somewhere around there, and I'll let [ at this call ] what they're seeing separately.And the third question was[Audio Gap]could be tether introduction -- to introduce the relationships and so on that we have, and we traditionally have done. And we've got good insights because for some years, we've been doing that. And so that's given us insight on repair around EV over a number of years.What are we doing for customers? So obviously, we're 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 network, discounts on that, help with getting subsidies, education online to different cars, ranges, different attributes. So we've teamed up with a startup called Electrify, who do a lot of that research content and are super engaging around that, access for people to come and set up charging points when you drive and so on and so forth. So 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.So 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. And it's not just EV, it's actually a lot of the technology that goes in cars, modern cars around that as well, so that we can be leading edge. And as time moves on and our pricing capabilities improve, then we would seek to bring those. Today, there's not much ability for us to use that knowledge in our pricing. But at the time, we see that as a real opportunity as well. So there's a package of reasons why we think we kind of have the right to be successful in EV, building on the start that we already have. And this proposition for customers is one piece of that jigsaw.Brilliant. So is that the last question, Juan?

[Operator]

Yes. We currently have no further questions. I will now hand over to you, Penny James, for any final remarks.

[Penelope Jane James, CEO & Executive Director]

Brilliant. Thank you. Wow, wealth of questions of 1.5 page release. But look, I'd just leave you with, I think, we feel well positioned in the markets at the moment. We're on track for pricing practices. We're positive about how we're positioned both in the Motor market, given its challenges and in Home coming into PPR. And we know we've got a number of levers up, partly -- some of which you're already aware of and some that transformation will bring us beyond that. So we feel positive about how we're set as we look ahead.And the final thing I will do is a plug for November 17 for anyone who wants to understand a little bit more about our Commercial business and what's been driving the growth there. But other than that, I should stop there and thank you all for joining us. Have a good day.

[Operator]

This concludes today's call. Thank you so much for joining. You may now disconnect your lines, and enjoy the rest of your day.

[Penelope Jane James, CEO & Executive Director]

Thanks, Juan.