Direct Line Insurance Group PLC (LSE:DLG)’s strong third-quarter performance went down a treat with investors today, with the online insurance firm surging to the FTSE 250 set.
The market was particularly impressed with the group’s performance in the motor insurance segment, which saw more than 115% in year-on-year growth.
Despite a noticeable headwind in the form of high-single-digit claims inflation assumptions (being the expected increase in the cost of insurance claims over time), this buoyant motor insurance market “should be more than enough to offset this, such that margins are ultimately improving”, said analysts at Jefferies.
Direct Line has also managed to offset inflation concerns through what Jefferies labelled “substantial rate increases” in the motor segment, as well as the commencement of the Motability partnership.
Direct Line’s “main objective is margin recovery”, said analysts. “As such our key takeaway is the significant rate increases that have been reported, which should support near-term loss ratio improvement. We believe this should result in a positive reaction today.”
Shares were sent 10% higher to 173.2p in the closing stages of Tuesday’s session.