Deutsche Bank has put the boot in to Direct Line Insurance Group PLC (LON:DLG), downgrading its rating for the FTSE 100-listed firm to ‘hold’ from ‘buy’ after recent results as it thinks the firm is now in a transition phase.
The German bank also reduced its target price for the Churchill brand motor and homes insurer to 400p from 440p, with Direct Line shares currently changing hands at 384.6p each, down 2.2% on Monday’s closing price.
READ: Direct Line sees full-year profit jump, big dividends hike fails to excite as both well-flagged
In a note to clients, Deutsche Bank’s analysts said: “Direct Line has consistently been our preferred UK motor player due to its attractive dividend yield which is underpinned by a conservative balance sheet.”
But, they added: “We believe Direct Line is now entering a transitory phase where the capital management story is well understood by investors (hence reflected in the current share price), whereas the benefits of positive strategic initiatives may still be a couple of years away from showing tangible benefit. “
The analysts concluded: “Also keeping in mind short-term headwinds from higher claims inflation in the Home segment, the Nationwide deal running off and pricing uncertainty in the Motor segment due to ‘whiplash reforms’, we downgrade our rating to Hold.”