Morgan Stanley reaffirms overweight rating for Direct Line

Morgan Stanley upgraded Direct Line Group's target price from 423.00p to 451.00p in a research report on the insurer on Thursday.

The bank's analysts were pleased by Direct Line's focus on growing its own-brand policies and that the company's business mix would lead to higher margins and customer retention rates.

Morgan Stanley also cited enhanced safety features on vehicles as a factor that would likely decrease long term risks to providers in the UK insurance industry.

Its recommendation remained at 'overweight' due to both of the firm's own brands, Direct Line and Churchill, performing well on a service-led basis, rather than a price-led on, believing it would continue to actively return excess capital as the in house policies increased and partnership business declined, leading to a fall in the commission ratio.

Analysts also noted the company's receptiveness to a comprehensive overhaul of its IT architecture as a significant differentiator over time.

Few European insurance companies have actively sought to rebuild the legacy IT systems they operate on, which could position Direct Line ahead of the curve.

As of 1645 BST, shares had remained stable, up just 0.66% to 388.86p.