Deutsche Bank is bullish on Direct Line Insurance Group PLC (LSE:DLG), despite general market caution over new regulatory pricing rules.
The German bank has, in a note, upgraded its view the general insurer to a ‘buy’ rating.
Deutsche acknowledges that while pricing volatility may continue to negatively impact the price in the short-term, the long-term prospects provide optimism.
Analysts highlight medium to long-term catalysts that should help Direct Line perform well over the next 12 months.
Firstly, the bank believes Direct Line’s motor insurance pricing should help it attract high volumes should a wider market pricing recovery occur during 2022, which is what the broker expects.
It also believes the company’s present transformation programme could improve the bottom-line to the extent where management can choose to target top-line growth.
The transformation should also allow the group to secure reinsurance partnerships, which in turn could help to narrow some of the valuation gap with Admiral.