PRA fines Aviva £10.6m for historic Direct Line solvency reporting

(Sharecast News) - The Prudential Regulation Authority has fined Aviva £10.63m related to historic prudential reporting miscalculations by Direct Line Group, which was acquired by the insurer last summer. The financial penalty imposed on UK Insurance Limited, a subsidiary and principal underwriter of DLG, is in connection to a miscalculation of its Solvency II balance sheet during 2023 and 2024.

The regulator said the miscalculation was a result of "ineffective preventative and detective controls and resourcing issues in its finance and actuarial functions", which went undetected by DLG for a significant period. This led to UKI Limited overstating its solvency to the PRA and to the market.

Aviva said it was aware of the issue before the DLG purchase, and agreed to resolve the matter quickly, thereby qualifying for a 50% reduction in the fine, which otherwise would have been £21.25m.

"We rely on accurate and reliable data from firms in order to be able to supervise them effectively. This penalty reflects the importance of firms getting their prudential reporting right," said Sam Woods, the PRA's chief executive.

"DLG and Aviva's proactive engagement with the PRA, via the Early Account Scheme, shows how enforcement action can be more efficient when firms are open, candid and accept responsibility for failings at an early stage."

After the DLG acquisition, Aviva said it took "extensive action to enhance the financial reporting control environment" within the former DLG part of the business.

"Aviva was fully aware of this matter prior to agreeing the terms of the acquisition of DLG and the outcome is fully provided for in the acquisition balance sheet," Aviva said in a statement.

"The resolution of this matter has no impact on the integration of DLG into Aviva, which is proceeding well, and no impact on the expected financial benefits arising from the acquisition."

Aviva shares were trading 1.3% lower at 617.65p by 1130 GMT.