On Tuesday, UBS analyst adjusted the stock price target for Direct Line Insurance Group Plc (LON:DLGD) (DLG:LN) (OTC: DIISF), lowering it to £2.45 from the previous £2.52. Despite this change, the firm maintained its Buy rating on the stock. The revision follows the company's first-half results update, which provided several key insights into its performance and future outlook.
The analyst highlighted that Direct Line has maintained confidence in delivering its expected net interest margin (NIM). Moreover, the company has seen higher premiums, which have been largely attributed to an increase in average price rather than volume. However, management remains confident in achieving volume growth by 2025, with supporting trends in the background.
The report also mentioned that there is evidence of reserve release deferral, which could lead to more stable earnings in the future, aligning Direct Line closer to its peers' earnings release patterns. Furthermore, based on the solvency data provided, the analyst forecasts an approximate 41% all-in yield over the next three years.
The reduction in the price target to 245p, a decrease of approximately 3%, is primarily due to a one-time impact of lower expected earnings per share (EPS) for the years 2024 and 2025. This projection takes into account the first-half miss and the later benefits of cost savings that have been implemented. Moreover, the analyst has reduced the 2026 EPS estimate by 2% due to a lower assumed buyback.
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