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On Wednesday, Direct Line Insurance Group Plc (LON:DLGD). (DLG:LN) (OTC: DIISF) received an upgraded stock rating from Citi, moving from Neutral to Buy. The firm also raised its price target for the insurer's shares to £2.23, up from the previous target of £2.08.
The upgrade comes despite a recent sell-off in Direct Line's shares, which have declined approximately 12% since the end of May. Citi's analyst pointed out that the negative market reaction does not align with the firm's perspective, especially considering the positive underlying trends in the UK motor insurance sector.
Citi highlighted that the improvement in UK Motor claims is a positive sign for Direct Line. Additionally, the firm noted the significant contribution from the Non-motor segment, suggesting that the Motor Net Interest Margin (NIM) does not need to reach 13% for the group to meet its overall target.
The analyst also expressed increased confidence in Direct Line's restructuring efforts, citing the extensive changes in personnel as a promising sign for the company's future performance. In light of these observations, Citi has increased its 2026 earnings per share (EPS) estimate for Direct Line by 12%.
Citi's revised price target and stock rating reflect a more optimistic outlook for Direct Line's profitability by 2026. The firm's projections are approximately 14% higher than the consensus profit before tax (PBT) estimates for the same year.
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