Direct Line Insurance Share Discussion Threads

[wba1] 02/12/2024 10:26

The general insurance moat is there but limited. If you want to enter the UK GI market it is fairly easy if you have the money and your standing does not fall foul of regulators. There are two ways; buy a small existing GI insurer and make the investment to turn it into a bigger one. The only quoted route available would be to take out Sabre but there are plenty of small GI insurers not quoted on the LSE and available for the right price. Secondly, you can take the route of Premier Insurance, set up an MGA (using other peoples money and capacity) and convert it to an insurer when the time is right. It is all rather time consuming but the real moat is the expertise required. The data, pricing models and reserve management (the failure that hit DLG) are the real moats.

I am surprised at the lack of movement this morning given the weekend discussion in the media, but I suppose a 7% risk discount to the current bid is not unreasonable until the next move.

[stevensupertrader] 02/12/2024 10:20

This takeover battle s boiled down to the major shareholders of DLG as simple as that .
If DLG major shareholders believed what DLG CEO said this weekend and willing to wait for 3 to 4 years for the turnaround.
Therefore in my view , Aviva definitely needs to sweeten this offer in the coming days.

[laurence llewelyn binliner] 02/12/2024 10:12

A few holders hitting the bid this morning I see, also good to read AW comment on his team and the confidence he has in the turnaround strategy as it unfolds..

The counter argument for holding onto the share would be looking longer term and for the turnaround dividend cash cow that could be upstream from 2026 onward, expect 7/8 pence for 2025 and not a lot more..

Clearly a quality asset to attract the team AW is building, and for the bidders to spend time/money running their slide rule over.. :o)

[yump] 02/12/2024 10:04

Its not a no-moat business, otherwise I could start one tomorrow with enough money.

We keep hearing about the number of people who are not working affecting our productivity. What about the legions of commentators who are in jobs but contribute nothing to productivity.

[huckers] 02/12/2024 09:41

Just noticed this City AM artilce. Not sure it has been posted yet?... (Don't think it provides any new information).


Tensions flair at Direct Line following Aviva takeover bid

A battle is brewing within Direct Line over whether to accept any further takeover bids from Aviva, as its CEO seeks more time to turn the business around.

Talking to the Sunday Times following the rejected £3.3bn bid from Aviva last week, Direct Line CEO Adam Winslow urged shareholders to back his turnaround plan over accepting the deal from Aviva.

“We’re making excellent progress in the early stages of a significant turnaround, with a refreshed and world-class leadership team in place to deliver the strategy,” he said.

“People like to talk Direct Line down, but since arriving as CEO in March, and having received two takeover bids already, it’s clear we’re a very attractive company.”

Animosity has flared up between the two companies as Direct Line’s CEO, CFO, COO and chief risk officer all recently joined from Aviva.

Over reports of a tense relationship with Aviva CEO Amanda Blanc, Winslow said: “I respect her… she’s doing her job, but I’ve got my job to do, which is to drive value for shareholders”.

The City began bracing for a bidding war last week as speculation has spread that Aviva could mount a hostile takeover attempt, while others have discussed the possibility of a counter-bid from Belgian insurer Ageas.

Direct Line already rebuffed two approaches from Ageas this year, with the latter valuing the firm at £3.1bn. The board unanimously rejected Ageas’ approach back in March, describing it as “highly opportunistic”.

Rumours have also begun to swirl that Aviva may be contacting Direct Line shareholders directly, urging them to push Direct Line’s board into negotiations.

While the company’s board rejected the offer from Aviva, its founder Peter Wood has said the firm should accept an offer if Aviva raised its bid by 10 per cent.

Meanwhile, analysts have argued that the insurer should accept any further bids, noting that the firm has failed to deliver persistent growth in its core businesses over the last decade.

“The offer exceeds fair value estimates for Direct Line, and given the challenging targets outlined during the Capital Markets Day, accepting this deal, or a higher one, from Aviva makes sense.” said Henry Heathfield, equity analyst at Morningstar.

“Direct Line is a no-moat business with a high uncertainty and poor capital allocation because of continued investments in technology, which have not resulted in a tangible business development that occurred for other firms.”

Other analysts, such as those at Panmure Liberum, have also described the bid as a “good opening offer”.

Under UK takeover rules, Aviva has until Christmas Day to announce an intention to make a firm offer or walk away.

[bargainsniper] 02/12/2024 09:21

Dlg need the scale AV can provide

[laurence llewelyn binliner] 02/12/2024 07:23

#Carpingtris, interesting views, the DLG founder has suggested it could be a 3 or 4 year turnaround story, from an investors perspective (and this 1), we could be better taking a 2nd AV bid with the 7% income share PX now or moving into other income stocks, the 6 pence or 2% income here is not really enough to keep interests locked into the share for the recovery period..?

Will our II stake holders take a similar stance and the decision out of AW hands..?

[bountyhunter] 01/12/2024 17:18

Hi Skinny, AV looks like a good hold with it's yield of 7%. I'd be quite happy if the AV bid ultimately goes through quite possibly at a slightly higher price and I end up with some AV shares. I also hold some ADM and consider them to be another possible bid target.

[jrphoenixw2] 01/12/2024 15:47

' Why Direct Line Should Accept Aviva’s Offer
Direct Line stock is up 46% this week on news of an Aviva bid, placing it above Morningstar analysts’ fair value estimate for the company. 29-Nov.

Following Direct Line’s DLG rejection of a bid from Aviva AV., we’ve taken a closer look at the firm, its management, and strategy. Aviva’s proposal comprises £1.12 per share in cash and 0.282 new Aviva shares. We would be in favor of management taking the offer or a higher one, if one is offered.

Based on the £4.88 closing price of Aviva on Nov. 18, Aviva’s offer values Direct Line at £2.50 per share. After new share issuance, Direct Line’s shareholders would more likely receive £2.35 per share. Aviva has until 5pm. on Dec. 25 to announce a firm intention.

With the announcement, Direct Line’s share price has risen to £2.20 per share, above our £2.15 fair value estimate. The firm has not delivered persistent growth in its core divisions over the last 10 years. The 2026 normalized net insurance margin target of 13% looks challenging.

The £100 million gross cost run-rate savings target from an addressable expense base of £849 million will help, but will not be enough. Direct Line has shifted its strategy to fully adopt price-comparison website distribution in search of profitable growth and pricing discipline.

Direct Line is a no-moat business with a high uncertainty and poor capital allocation because of continued investments in technology, which have not resulted in a tangible business development that occurred for other firms. We maintain our £215 fair value estimate.

Direct Line is exiting OEM affinity motor insurance partnerships and reviewing its pet, travel, and other personal lines. With the announced sale of its commercial insurance broking business in 2023, the firm is set to focus on motor insurance, home insurance, rescue, and direct commercial.

Direct Line suspended its final dividend for 2023 earnings after it had not accurately reflected rising repair and replacement costs in its pricing. The business is now able to restart paying regular dividends with about a 60% payout and additional capital returns above a new 180% solvency.
Key Morningstar Metrics For Direct Line Group DLG

• Economic Moat: None
• Morningstar Rating: 3 stars
• Fair Value Estimate: £2.15
• Morningstar Uncertainty Rating: High
• Sector: Financial Services

[skinny] 01/12/2024 15:46

Hi bounty - no although I did trade ITV about 10 years ago.

I don't currently hold DLG, but they've been on my list for obvious reasons for sometime.

I have held AV long term however.

My only dog in the sector currently is ABDN.

As for the underperformance ok the UK stock market - I'm looking at a few ITs that seem due a change of sentiment - I hold quite a few for income and current discounts have brought quite a few on the radar with their potential yields.

[laurence llewelyn binliner] 01/12/2024 13:59

We have to take the rough with the smooth in the business of building a portfolio out over 10/20/30 years, no one ever gets it right every time, measure the results over time at PF level not on an individual share level, by contrast, I picked up BATS this spring/summer after waiting nearly 5 years for the opportunity, which looked like the sale of the decade to me as vaping seems mainstream now..

See what the week brings for us here.. :o)

[bountyhunter] 01/12/2024 13:53

Sometimes that happens, it's easy to get locked into a share especially with the underperformance of the UK market. I must admit I jumped in here first thing on Thursday morning at an average of 217p after reading about the rejected bid on Wednesday evening and doing some research on DLG and AV.

[laurence llewelyn binliner] 01/12/2024 13:28

#Bountyhunter, bought in 2020/2021 here so this has been a poor investment for me, on a total return measure I am about scratch, so 265/275 would at least be a few crumbs to walk away with or PX for AV stock..

Held onto the share as I believed a TO bid could come along, AGS was not quite strong enough, but see how this 1 goes.. :o), sometimes getting away at evens or with some crumbs is a result, the 150 pence level was ugly to look at but was going to attract some outside interests and worth waiting a year, IF the chance comes along to trade in for 7% AV stock..

[bountyhunter] 01/12/2024 13:19

Very likely I think LLB, hopefully it will be this week and if so it's agreed, or if that's not the case that AV tells us about it sooner rather than later. I suspect they would as they've been reportedly talking to major shareholders already.

[laurence llewelyn binliner] 01/12/2024 13:15

2nd bid coming this week from AV..? 265/275 pence.. :o)

I do not see that they would go to the length and expense of engaging advisers to evaluate the synergies, cost savings, value and the offer price just to walk away on 1st knock back without going to a 2nd bid, we know AGS did the same..

[yump] 01/12/2024 12:58

Nice being concerned from your mansion in a different country isn’t it?

[bountyhunter] 01/12/2024 12:26

Are you in ITV as well Skinny? There's suddenly a few potential bids around presumably encouraged by the underperformance of the UK stock market, and for foreign potential bidders the weakening of the pound.

[gazzer33] 01/12/2024 11:03

Now that's news, not!

[bountyhunter] 01/12/2024 10:22

That's worth 247p now at AV's closing price.

[sajad37] 30/11/2024 22:40

Direct Line founder Sir Peter Wood says Aviva must raise its offer


Updated 21:50, 30 Nov 2024
By ALEX BRUMMER CITY EDITOR
Amanda Blanc needs to raise her bid for insurer Direct Line by 'several hundred million pounds' if the Aviva boss is to secure control of its rival, founder Sir Peter Wood says.

Speaking to The Mail on Sunday from his Palm Beach mansion in Florida, near to Donald Trump's Mar-a-Lago, he also expressed frustration at Direct Line losing its way.

'I made it the world's most efficient insurance company', he said, describing how he eliminated the middleman in the form of the insurance broker.

'It's sad it's been run so badly. After I left, the HR department multiplied ten times. It didn't develop a female brand, multi-car or multi-family policies, and just seemed to go backwards.' Wood says staying off comparison websites was a mistake, adding: 'They should have made Direct Line a premier product, where people answer the phone immediately and you got an individual giving you personal attention.'

He expressed sympathy for chief executive Adam Winslow's effort to turn it around, saying: 'He is trying to do a good job, but it's a three or four year job.'

On Thursday, Direct Line rejected Aviva's £3.3 billion bid, whereby shareholders would receive £1.12p a share in cash and 0.28 of a new Aviva share for every Direct Line share held.

[bountyhunter] 30/11/2024 20:54

Volume was very high yesterday (as well as obviously on Thursday)...

[jrphoenixw2] 30/11/2024 11:28

Stats from Friday...
+4.7%, 224.40 to 234.80p
Hi/Lo (London Stock Exchange pxs): 235.00 / 226.60
Volume (^same source): 18.4Mln
Yahoo can be different on volume, but they also show an Average volume figure:
Volume 18.4Mln Average 3.27Mln, 5.6 times the average.(Thursday was 6.6*)