Direct Line Insurance Group PLC (LSE:DLG) has received backing from Panmure brokers on scope for further price increases ahead and after boardroom changes.
New chief executive Adam Winslow announced Lucy Johnson as the group’s motor insurance managing director earlier this month, alongside Dhruv Gahlau as strategy chief.
It’s “good to see [...] a quick set of management changes”, Panmure said in a note, also pointing to previous appointments such as new chief financial and operating officers.
Subsequent first quarter results month showed an 11% increase in gross written premiums of £892 million, analysts highlighted.
Motor Insurance premiums were up 18% at £424 million in the meantime, aided by industry-wide price increases.
“Direct Line has yet to push up prices above the market to remediate margins, hence it is still losing volumes,” Panmure said, following a 2.6% decline since the end of last year.
Given management’s assumption that claims inflation was in line with expectations at 10%, Panmure said further price increases were likely across the industry.
For Direct Line, this comes as the company eyes higher margins, which are also set to be aided by cost saving measures. Panmure noted the firm’s capital markets day was due on July 12.
“We think it would be wrong for the industry to ease off on pricing at this point in the cycle,” Panmure added, “the margins at the industry level are still under water”.
Panmure offered a 350p share price target for Direct Line, up 77% on Friday’s close, alongside a ‘buy’ rating, but added Sabre was a “preferred play” in UK motor insurance.