Does Direct Line Insurance Group plc’s (LON:DLG) CEO Pay Reflect Performance?

Simply Wall St

Paul Geddes has been the CEO of Direct Line Insurance Group plc (LON:DLG) since 2009. This analysis aims first to contrast CEO compensation with other companies that have similar market capitalization. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.

See our latest analysis for Direct Line Insurance Group

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How Does Paul Geddes’s Compensation Compare With Similar Sized Companies?

At the time of writing our data says that Direct Line Insurance Group plc has a market cap of UK£4.8b, and is paying total annual CEO compensation of UK£4.3m. (This figure is for the year to December 2017). We think total compensation is more important but we note that the CEO salary is lower, at UK£807k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of UK£3.0b to UK£9.1b. The median total CEO compensation was UK£2.5m.

It would therefore appear that Direct Line Insurance Group plc pays Paul Geddes more than the median CEO remuneration at companies of a similar size, in the same market. However, this fact alone doesn’t mean the remuneration is too high. A closer look at the performance of the underlying business will give us a better idea about whether the pay is particularly generous.

You can see a visual representation of the CEO compensation at Direct Line Insurance Group, below.

LSE:DLG CEO Compensation, March 24th 2019

Is Direct Line Insurance Group plc Growing?

Over the last three years Direct Line Insurance Group plc has grown its earnings per share (EPS) by an average of 7.5% per year (using a line of best fit). In the last year, its revenue is down -1.6%.

I would argue that the lack of revenue growth in the last year is less than ideal, but I’m happy with the EPS growth. These two metric are moving in different directions, so while it’s hard to be confident judging performance, we think the stock is worth watching. You might want to check this free visual report on analyst forecasts for future earnings.

Has Direct Line Insurance Group plc Been A Good Investment?

With a total shareholder return of 15% over three years, Direct Line Insurance Group plc shareholders would, in general, be reasonably content. But they probably don’t want to see the CEO paid more than is normal for companies around the same size.

In Summary…

We compared total CEO remuneration at Direct Line Insurance Group plc with the amount paid at companies with a similar market capitalization. Our data suggests that it pays above the median CEO pay within that group.

One might like to have seen stronger growth, and the shareholder returns have failed to inspire, over the last three years. So it’s certainly hard to argue that the CEO is modestly paid, although we don’t see the remuneration as an issue. Shareholders may want to check for free if Direct Line Insurance Group insiders are buying or selling shares.

If you want to buy a stock that is better than Direct Line Insurance Group, this free list of high return, low debt companies is a great place to look.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.