JPMorgan turns more positive on Direct Line and Admiral

The bank resumed coverage of DLG with an 'overweight' rating, having previously been rated 'neutral', and upgraded its stance on Admiral from 'underweight' to 'neutral'.

JPMorgan said that 2022/23 results across the sector were the worst since the financial crisis, as market pricing hadn't caught up with claims inflation which increased more than of recent norms due to underlying economic inflation and supply chain issues.

"At this stage, with pricing holding firm, we expect that on a written basis, pricing has increased sufficiently to meet future claims costs with results from 2H24 onwards likely to show material improvements before we see a 'clean' year of earnings in 2025," JPMorgan said.

Meanwhile, the bank talks down the threat of regulatory intervention from the FCA which has weighed heavily on the sector following the introduction of the Consumer Duty in July 2023. "Despite the market concerns on this source of profits , we actually are less worried given the material levels of price increase that we have seen in UK motor pricing and recent momentum in UK home insurance lines," it said.

DLG shares were up 1.5% at 171.9p in afternoon trade, while Admiral gained 0.3% to 2,509p.