Shares of Direct Line Insurance Group PLC (GB:DLG) fell 1.5% as of writing, despite the company swinging to a profit in the first half of 2024 from a loss in the comparable period of the previous year. The company’s operating profit increased to £64 million in H1 2024, reversing the £93.7 million loss in the first half of the previous year. However, shares moved in the opposite direction as the operating profit missed the consensus estimate of £85 million.
Additionally, Direct Line Insurance declared an interim dividend of 2p per share, which was also below the analysts’ expectations of 2.6p.
Direct Line Insurance Group is an insurance company in the UK, with brands like Churchill, Green Flag, and Darwin.
DLG Sees Profit Growth with Premium Expansion
In the first half, DLG’s gross written premiums from continuing operations surged over 53% year-over-year to £1.8 billion. This resulted in a pre-tax profit of £61.6 million, reversing the previous year’s loss of £76.3 million. The higher premiums were mainly driven by the Motability partnership that started a year ago. Excluding this partnership, the premium growth would have been 11.4%.
The company’s Motor margins improved in the first half, with the written net insurance margin estimated to have stayed above 10%. In the Non-Motor sector, DLG achieved premium growth of 13.7% and surpassed its target, while delivering an attractive margin of 11.6%.
Moving forward, Direct Line aims to generate 7% to 10% compound annual growth in gross written premiums for Non-Motor lines from 2023 to 2026. Moreover, it is targeting at least £100 million in gross cost savings by the end of 2025. The company also seeks to achieve a 13% net insurance margin in 2026.
Are Direct Line Shares a Good Buy?
According to TipRanks, DLG stock has received a Moderate Buy consensus rating, backed by two Buy and three Hold recommendations. The Direct Line share price forecast is 217.80p, which is 13.8% above the current trading level.
