Investors in Direct Line Insurance Group PLC (LSE:DLG) have solvency at the top of their priorities list, that's according to analysts at Jefferies, so the insurer’s recent performance will reassure.
Jefferies forecasts Direct Line’s Solvency II ratio at 161% by the end of the first half, improving to 184% by FY 2025. It comes after
It’s the basis for the broker’s upgrade to ‘buy’ from ‘hold’, with a price target of 210p (up from 175p) suggesting some 25% upside to the current price of around 168p.
Significantly, Direct Line is favoured ahead of UK general insurance rival Admiral.
“In a scenario where market conditions sufficiently harden wddde expect DLG to outperform Admiral,” analyst James Pearce said in a note.
“We believe that DLG can restore its Solvency II ratio to 165% by the end of FY23, comfortably above the middle of DLG's preferred range, without having to raise equity (increasing to 184% by FY25).
“We expect that the dividend will be resumed at the FY23 results, when we forecast DLG to announce a final dividend per share of 10.0p. In 2024F, we expect a full year dividend per share of 15.8p, which is equivalent to a 10% dividend yield based on the current share price, or an 8% yield based on our price target of 210p.”
In London, Direct Line shares were up 3.05p or 1.84% to trade at 168.4p.