Direct Line Insurance Share Discussion Threads

[pojscott] 11/9/2023 17:47

Informative reply, thanks, very much my thoughts, I recently bought more L&G. Will continue to hold Direct Line for now.

[pete160] 11/9/2023 15:15

@pojscott
It depends on your attitude to risk and your time horizon for your investment, but certainly from an income point of view, there is unlikely to be much income for several years.

There is currently no dividend payable and even when it is reinstated (late 2024) the payments will almost certainly not be anywhere near the level they were before.

The recent commercial side sale has (hopefully) shored up the balance sheet, but the surplus will not be returned directly to shareholders. As others have said, the capital released should negate the risk of a fundraise, which was a major concern for many.

The main reason for an investment now, and probably the main reason why former investors are still holding, is the potential for someone else to bid for DLG.

Is that likely? not yet imho, but there will be plenty of competitors and private equity who must be running the slide rule over the books given the poor job the present /previous management have made of running the thing. Others will see opportunities and others will have the skills to deliver them.

In summary, I am an (underwater) holder but am not buying more at this price. If I didn't already hold, would I buy ? No. I would look to add to Av. Lgen, Phnx and MNG.

[pojscott] 11/9/2023 12:21

Good buy at this price??? What's your thoughts?

[smurfy2001] 08/9/2023 18:25

Price closed above the 200 day MA.

[smurfy2001] 08/9/2023 14:37

Paying a dividend now makes no sense.

If l want a dividend there's Aviva paying over 8%, what l want here is capital gains, that will far outstrip a paltry dividend.

[city1911] 08/9/2023 13:55

I guess it defeats the object of selling NIG if DLG give away a proportion of the proceeds to shareholders

[dope007] 08/9/2023 12:15

A special divi would be suicide and won't happen

[stoopid] 08/9/2023 12:00

Why would DLG pay a pay a special divi whenever they can't even pay a normal divi and are trying to rebuild a capital buffer/cushion. They can't do that by giving the cash for the sold business arm away. Makes no sense, I mean I know it wasn't a "core business" but it was allarent approx 17% of group revenue and was doing well by all accounts?It's currently a loss making business -£80m according to the media, DLG still have to pay out for the FCA judgement against them, cover any loss making policies this year etc. Inflation may return, customer losses to other providers to protect margins etc. DLG still have a whole hist of problems to work through left over from the ESG loving previous idiot CEO. I can't see them giving away money when they need it....

[skinny] 08/9/2023 11:57

Doubtful, but who knows :-

The proceeds from the Transaction will be used to enhance the capital strength of the Group and for general corporate purposes. The sale will reduce the capital requirements of the Group.On day one (being receipt of the consideration), the Transaction will, through a combination of the realised gain on sale together with the initial capital release, increase the Group's pro-forma solvency capital ratio by approximately 45 percentage points.

[city1911] 08/9/2023 11:09

On LSE they are talking about a special dividend if NIG is sold on the basis 170M will be released immediately. Are they way off with that assumption do you think?

[wba1] 08/9/2023 09:16

Shorting can make sense - but rarely on a share in a recovering market, which has just underpinned its financial position and where the sum of parts based on historic sale prices considerably exceeds market cap.

[covid 19 deal] 07/9/2023 23:49

No profit is a profit..unless cashed....if i dont take it..someone else will enjoy it...Rule number 1 in stock market casino

[lyceeuk] 07/9/2023 21:14

All the shorts full of sh#t

[boystown] 07/9/2023 17:10

Note from Hargreaves FEWIW:

Our view
As reporting season for the UK's largest insurers comes to an end, cautious optimism seems an apt way to describe sentiment amongst management teams and Direct Line has continued that trend. It's been tough recently; claims numbers have been running high, while cost inflation means underwriting profitability has been under serious pressure. Add headlines and charges around overcharging customers, and here lies a business that seriously needed some good news.

Half-year results provided just that and may mark a pivot point as the cycle looks like it might finally be turning. Motor's been the division under the cosh and makes up almost 40% of active policies. That's enough to mean unprofitable contracts written over the past 12-18 months have weighed on performance.

But things are starting to turn. Aggressive price hikes, 28% for Motor contracts, are ahead of the broader market and look to have finally caught up with inflated costs. That means policies written today look to be at levels in line with a net insurance margin of around 10% - back in the land of profit. One key thing to remember is that insurance profits are realised over the life of the policy. That means 2023 will still have unprofitable policies to roll through. It probably won't be until 2024 that we start to see the benefits of better-priced policies feed down to the profit line.

Aside from Motor, performance across other business lines has been pretty good. Home insurance is a big part of the operation and remains profitable despite an uptick in claims inflation. Price hikes are again being called on, leading to a drop in customers - not just in Home but in Motor too. That's part of the strategy though, margins are being prioritised over volumes in the current climate and is something we can get behind.

Alongside results came the announcement that the group intends to sell its brokered commercial insurance business, NIG. It's been a strong performer, so the logic behind the sale is strategic rather than forced. One key advantage will be rebuilding the capital buffer, which was a little low.

We would urge caution on the forward dividend yield; restoring the dividend requires the NIG deal to go through, and continued signs of improving Motor profitability. Both look more likely than not, but even so, we'd expect early 2024 to be the earliest management start talking dividends again. There's uncertainty, though, which adds risk and remember, no returns are guaranteed.

We think other names in the sector have managed recent times a little better. But all in, the picture looks better than it has for some time and at current valuations, there's plenty of scope for re-rating should conditions play out favourably. Investors should prepare for the rest of the year to be challenging.

[wba1] 07/9/2023 17:07

I should have added to my previous post that the sale provides an interesting benchmark for values locked up in other insurers. The obvious one is Aviva. If £520m GWP (in 2022) is worth £500m it suggests the value of the £2.9bn of Aviva commercial GWP in the same period is at least £2.5bn. Add in £1.5bn for Canadian commercial account and you get the Aviva commercial GWP business accounting for 40% of their market cap - which is madness unless they are undervalued or the price paid by RSA is too high (which I do not believe it is). Obviously this is a crude approach but still .......

[wba1] 07/9/2023 16:53

cwa1; we will not know for a while but any kitchen sinking could be at the behest of existing management or Winslow as I assume no sane person would have taken the post without a close look at matters and the chance to provide some input. But strengthening motor reserves further so soon after previous reserve increases can only mean they got it wrong last time or have established a bit of slush for future use.

As for cupboards; there are no end of those, with headline reserve actions being only the most obvious. Winslow will not have been able to probe them in detail and is bound to want a forensic analysis when he takes the reins, probably by either an outside actuarial outfit or someone he brings in. But even then we are unlikely to find out any detail (barring big nasties) as an insurer CEO can then choose how to deal with what he finds (good or bad) over an extended period. The accounts of an insurer only tell part of the story.

[cwa1] 07/9/2023 15:37

Do "we" think there has been a pre-appointment of new CEO "kitching sinking" job done in these results-and we can assume there are no known skeletons rattling about now? Or will the new CEO still have plenty of cupboards to poke around in for further skeletons to appear from?

[laurence llewelyn binliner] 07/9/2023 14:55

#wba1 - my thanks for your considered inputs here, I have been invested 3 years and could have timed my entry a whole lot better by the look of it, but given the cyclical nature of a lot of businesses it is fairer to measure results over a decade, and on a total return basis, if we only miss 1 years of dividends holders will have to take it with a pinch of salt, the other 9 years matter more and the average achieved along with the share price at the end..It is the turnaround story and recovery potential which keeps us invested, so we will have to wait and see what strategy and appointments our new CEO brings in over 2024..

[wba1] 07/9/2023 14:35

A few more comments;

Is the rest of DLG attractive to an acquirer? There are certainly parts which are very attractive. Several insurers would love to get their hands on the pet account as an example. But it would be silly to sell such an asset as it provides another arm to retail and cross sell opportunities. As with everything the attraction of the core operation depends on price and who is looking. The likely interested parties fall into 2 camps - large trade and private equity. In the past I would have seen Allianz as a possible but they acquired LV retail 3 or 4 years ago and have probably satisfied their interest in UK retail. That leaves the likes of Axa, Zurich and Aviva as UK operations which could benefit from adding scale and with the firepower and the likes of Generali if considering companies that may look at entering UK retail. I am not sure any are currently looking. Esure was bought by private equity (Bain) in 2018 for £1.2bn, despite being half the size of DLG, having even worse problems and not owning any valuable fringe assets. On this basis you would think DLG is on PE radar.

Those (rightly) concerned about motor performance need to factor in 2 things
* H1 2023 result includes only 15% written in 2023. The rest is all earnings on business written in 2022. H2 2023 will include circa 50% from business written in 2023 and the comparison of H1 and H2 loss ratio will give the first indication of the impact or not of rerating. However, it will still be heavily weighted to older business (2022 and Q1 2023) so H1 2024 will be a better guide.
* the motor result includes £60m of prior year strengthening. They may not expect releases in line with historic trends going forward due to inflation, but they should not expect further strengthening unless they have made a complete mess of reserving. I do wonder if they have further kitchen sinked in order to protect 2024 results from inflation persisting longer than expected.

I note the calls to sell. If you have bought at 140 I can understand the attraction (I have some myself from that level) but I prefer a longer view. For the reasons given above I expect motor to show rapidly improving results over 2024 and into 2025. Beyond that time span I am more wary, not because I doubt the business but simply because the UK regulation of motor insurance is making it less attractive in the long term.

[dope007] 07/9/2023 13:40

Big risk if they do as there is no easy way out for them. they should be closing now and taking the substantial profits they likely already have

[covid 19 deal] 07/9/2023 13:15

They will short it to hell

[covid 19 deal] 07/9/2023 12:13

Nothing but short killing...