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Direct Line and Admiral accelerate as motor insurance prices rise

Discussion in 'Market News' started by Lily, Nov 4, 2015.

  1. Lily

    Lily Forum Member

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    Analysts positive after third quarter update from Direct Line

    A bigger than expected rise in motor insurance prices from Direct Line has seen shares in the sector accelerate. Admiral has added 22p at £16.31 while Direct Line itself is 4.5p better at 396p.

    Direct Line, whose brands in Churchill and Green Flag, said motor insurance prices rose 8.4% in the third quarter, marking a continuing revival in recent months after increased competition had put pressure on in the past few years. This was partly offset by a 0.9% dip on home insurance prices, and the company said Nationwide - one of its current partners - was reviewing its home insurance provider.

    Overall Direct Line reported a solid set of third quarter numbers with rate increases in motor confirming the third quarter data from the main motor rate indices (Confused.com/The AA). The UK Motor market is turning, however claims inflation continues to remain above average in the second half of 2015, with Direct Line warning that large bodily injury claims inflation remains ‘volatile’.

    The company continues to benefit from its efficiency drive and it is comfortable it will meet Solvency II requirements with a similar capital ratio as under its existing economic model.... Direct Line trades at a 2016 PE of 15 times, broadly in line with the sector albeit benefits from a strong capital base and a reducing cost structure. We believe the shares will be supported by a turn in the motor cycle.

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