Berenberg slightly lowers target price on Direct Line

Berenberg said the issue with Direct Line, which also issued some disappointing guidance, remains to be its motor insurance business, where premiums were down by 9% year-on-year, as well as higher combined ratio guidance due to a delay in the settlement of bodily injury claims.

"While investment income guidance was raised, which is a positive, the biggest question mark for investors was that they could not see any evidence of price rises in Direct Line's reported numbers given that premiums are actually falling faster than policies," said Berenberg.

The German bank added: "We reduce our estimates for the new combined ratio guidance and lower our premium estimates; however, we reiterate our view that Direct Line will maintain its dividend policy. Direct Line trades on 7.7x 2023E EPS, for a 2022E dividend yield of 11.4%."

Reporting by Iain Gilbert at Sharecast.com