Hydrogen Economy
11 Dec 2017
Re: Driverless cars - longer term .. Essential has probably seen this from ABI (Association of British Insurers), as the link was posted on ADVFN by sufc555 but it may interest others[link]
Hydrogen Economy
14 Nov 2017
Re: Driverless cars - longer term .. EssentialGood question. I haven't seen seen analysis of the effects of autonomous cars on DLG and other motor insurers. The expectation is clearly fewer accidents and claims once a significant proportion of vehicles are AV. Until then I would think the unpredictable human driver will find plenty of opportunities for crashing into things including AVs. That would seem unlikely to be the case for at least 10 years as the existing manual drive fleet is gradually replaced, starting when, 2-5 years out? On that timescale I can't see AVs are significantly affecting valuations yet.When they do what happens? Maybe the catastrophe insurers like LRE give some idea. They had several years of no major storms or claims, so premiums fell and LRE wrote less business. That freed up a lot of capital previously required to cover potential claims and they paid a series of generous special dividends. There was also considerable consolidation in the industry, with several nice premium bids on offer. Maybe motors could see something similar as AVs took over.All above is total speculation.H2
EssentialInvestor
12 Nov 2017
Driverless cars - longer term .. I notice Buffet has warned on the longer term threat to Geicoposed by increasing antomation and ultimately driverless cars.Does anyone have a handal on how DLG might operate in this environmentwith motor insurance making up a large slug of profits?.Appreciate this will be well in to the future, however wonder if there will be agradual de-rating for the sector well in advance of this taking place?.Are we already in the very early stages of this de-rating process ...Any views appreciated, thanks in advance.
Hydrogen Economy
12 Nov 2017
Re: Special Dividend The dividend policy was update at H1 2017 as below, indicating regular dividend one third interim, two thirds final. 6.8p paid in August so expect 13.4p final total 20.4p. Key points are:- “In the normal course of events the Board will consider whether or not it is appropriate to distribute any surplus capital to shareholders once a year, alongside the full year results.”and "Group expects to operate around the middle of its solvency II capital coverage ratio risk appetite range of 140% to 180% of the Group’s solvency capital requirement, and it will take this into account when considering the potential for any special dividends."After paying Interim dividend the SCR was 173%, so depending on H2 performance, special dividend could be considered. Forecast dividends from 4-Traders and Digital Look are 27.4p and 28.51p, which would imply 7-8p special along with final, but nothing guaranteed. 7.7-8% is well up there and reflects some risks, but I recall a provision being taken when Ogden was changed, so the softening of that policy may cause some write-back and create more room for a special. H2 Dividend policyThe Group aims to manage its capital efficiently and generate long-term sustainable value for shareholders, while balancing operational, regulatory, rating agency and policyholder requirements.The Group aims to grow its regular dividend in line with business growth.Where the Board believes that the Group has capital which is expected to be surplus to the Group's requirements for a prolonged period, it would intend to return any surplus to shareholders. In normal circumstances, the Board expects that a capital coverage ratio around the middle of its risk appetite range of 140% to 180% of the Group's solvency capital requirement ("SCR"
would be appropriate and it will therefore take this into account when considering the potential for special distributions.In the normal course of events the Board will consider whether or not it is appropriate to distribute any surplus capital to shareholders once a year, alongside the full year results.The Group expects that one-third of the annual dividend will generally be paid in the third quarter as an interim dividend, and two-thirds will be paid as a final dividend in the second quarter of the following year. The Board may revise the dividend policy from time to time. The Company may consider a special dividend and/or a repurchase of its own shares to distribute surplus capital to shareholders.
EssentialInvestor
11 Nov 2017
Re: Special Dividend The conference calls make that abundantly clear, it's not be expected.
Zacchaeus
11 Nov 2017
Special Dividend There is no guarantee that the special dividend - 10p a share (I think) will be paid. A decent yield on the ordinary is still a tempter at these levels
Hydrogen Economy
08 Nov 2017
Re: Direct Line - On track for the full ... Rhigos "These all suggest to me that SP will rise. Attractive as an income investment with a good chance of capital gain IMO."I agree and have a decent chunk of these for that reason. The issues which have affected the profitability and valuation included increased claims in homes business (implied false or inflated claims) which they claim to have addressed through revised claims procedures. The Ogden formula impact (discount rates on awards for long term care required due to accidents). Discount rate was revised up from -0.75% to 0-1% is September, I'm not sure if that has come into effect but will reduce claims exposure. I was expecting a recovery on that basis but it fizzled out.The yield is excellent, cover not great, forecast at 1.2 in 2017. The 2016 adjusted EPS was 21.2p, with forecast 32.51p in 2017 and 31.27p in 2018 so cover is an ongoing concern.DLG have a strong competitive position and brand covering a range of insurance business areas, road recovery etc. Their volume and own brands should protect against tough times.I have enough of these at ~4.5% so will not be adding unless price gets much lower but plan to hold.H2
Rhigos
07 Nov 2017
Re: Direct Line - On track for the full year The fall of 13% in SP since August looks overdone given forecast PE of 10.9%. A forecast yield of 7.9% covered x1.2 and forecast growth of 54% in pre-tax profit. These all suggest to me that SP will rise. Attractive as an income investment with a good chance of capital gain IMO. Broker consensus is buy.
Kingel
07 Nov 2017
Direct Line - On track for the full year In-force policies across all segments increased slightly to 15.8m at the end of the third quarter, of which 6.8m were Direct Line own brands, 5.1% higher than this time last year. The group expects its full year combined operating ratio to be in the middle of its 93-95% target range. The shares fell 1% following the announcement.Our View Highly competitive with broadly generic products; few companies can maintain any semblance of pricing power in personal insurance. That tends to drive combined operating ratios (the percentage of premiums that are paid out as claims or expenses) closer to 100% as companies are forced to attract customers through cutting their prices. Price comparison websites haven't helped.Fortunately for Direct Line (DLG), the strength of its brands mean it's able to bypass price comparison sites altogether, while also supporting high levels of customer retention. That has helped keep pricing and margins strong. As the market leader, DLG enjoys access to more information on claims and customer behaviour than competitors, helping it to price more accurately, while scale provides opportunities for cost cutting.The decision to upwardly rebase the dividend at the half year was welcome, not only for the immediate cash infusion but because of the confidence it implies in the long term future of the business. Recent results have benefited from bumper reserve releases, but those are unlikely to continue forever. Improving operating expenses and higher in-force policies are more important to the group's long term future.Looking ahead to the full year, investors will be eyeing Direct Line's improved Solvency II ratio with interest. Even after dividend payments, it sat at 173% at the half year. Management say they are looking to operate in the middle of the 140% to 180% range in the normal course of business, so there's scope for a healthy special dividend. Analysts are forecasting a prospective yield of 7.6% for 2018 - although as ever there are no guarantees where dividends are concerned.Direct Line is delivering a respectable underwriting performance in a sector which is currently enjoying a bit of a let up in pricing pressure. If it can maintain its brand position, and resulting price advantage, then the group should continue to generate strong returns.Third Quarter Results Total gross written premiums at the end of the third quarter stood at £907m, up 2.8%. That reflects particular strength in the group's own brands, which saw gross premiums rise 8.3% to £607m. Motor was by far the strongest segment, with gross written premiums rising 7.1% to £462m. That reflects an increase in own brand policies as well as premium growth. Commercial and Rescue & Other Personal Lines also delivered positive performances. However, Home continues to struggle, with gross written premiums falling 3.9% to £217m. The group investment portfolio has generated a return of 2.8% so far this year, up 0.1 percentage point on last year.Direct Line continues to expect a combined operating ratio of between 93-95% in the medium term, and is targeting a Return on Tangible Equity of at least 15%.Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.[link]
Hydrogen Economy
18 Sep 2017
Deutsche Bank -Direct Line 'buy'. [link] insurance pricing is set to hold steady as companies benefit from another shift in the sector's dynamics, Deutsche Bank said as it recommendation on Admiral and kept Direct Line and Esure at 'buy'.Direct Line is the preferred stock in the UK motor space for its attractive yield and long-term growth prospects of 2-3% leading to a 10%-plus total shareholder return. "We also like its relative defensive position against the UK motor pricing cycle due to its control over distribution and relative diversification of its business."
Hydrogen Economy
07 Sep 2017
BBC - Accident Compensation Changes "Insurers' victory in battle over motor accident compensation"Not yet certain that this change will happen but is presumably behind today;s rise in DLG. H2[link] partial reversal in a change affecting personal injury payouts has been proposed - marking a victory for insurers but potentially reducing compensation for accident victims.In March, the government introduced a new formula for calculating compensation payments for those who suffer long-term injuries.The Ministry of Justice decided to reduce the discount rate from 2.5% to minus 0.75% - a move which it said was determined by existing law.... Now the government is planning to change the rules. The Ministry of Justice said that, if the rate were set today under the new approach, it might end up within the range of 0% to 1%.
Hydrogen Economy
04 Sep 2017
Re: DLG a buy on the dip? Hi Rhigos"SharePad gives a forecast yield of 5.5% and forecast PE of 13.8. Digital figures you quote seem a bit over optimistic to me."Could well be, although I note 4-Traders and DL are forecasting very similar numbers for 2017 consensusEPS at 32.4p and 32.5pDivi at 26.9p and 26.8pThese numbers were both updated recently with substantial increases from forecasts early Aug. DL EPS was 29.3p Div 23.1p , I don't use Sharepad so not sure how often they update.The point of my post however was less the absolute numbers than that the EPS and dividend estimates have been significantly raised. If that is how it plays out, it seems it should be supportive moving forward. That's why I like to keep track of how the forecasts are moving.Broker estimates tend to be erratic, but consensus numbers close to the end of current year tend not to be too far from the mark so I am inclined to add and watching for a good point to buy.GLAH2
Rhigos
04 Sep 2017
Re: DLG a buy on the dip? Hydrogen Economy,SharePad gives a forecast yield of 5.5% and forecast PE of 13.8. Digital figures you quote seem a bit over optimistic to me.I have held DLG since IPO in Oct 2012 and topped up 5 times since then. Now 4.5% by value of my share portfolio. I feel I have a large enough holding now but if that were not true I would be topping up again at current price.
deepsleeves
03 Sep 2017
Re: DLG a buy on the dip? HydrogenHave held these for 2.5 years now and enjoyed dividends in that time of over 20% in addition to a 7% book profit.Agree with the first 2 risks and agree that Ogden could be a [Big] upside.Autonomous vehicles could also be positive news - there are an awful lot of very poor drivers on our roads and I would expect accident rates to fall before premiumsAs with any UK centric stock the potential impact of a "hard" Brexit could be painful.The other upside is that as it changes culture from being part of a bank I would expect it to become more profitableDeep
Hydrogen Economy
03 Sep 2017
DLG a buy on the dip? SP spiked well in August after the good results but have drifted back down from 411 to 380p.I see that the Digital Look forecast EPS and DPS has been raised since the results 2017 forward PE falling from 12.9 to 11.8 and foreward yield forecast to rise to 7%, detail below.I have been looking to increase holding in solid yield stocks, I hold just over 3% here, built over the last year, moderately up on capital and divs, and am minded to raise that. I guess the risks are -Pension which seems not quite nailed down, but feels manageable-Investment returns any major slump would hurt, but then it would hit most assets. I don't have a clear picture here but my impression is that they invest more in fixed interest which would seem a reasonable position at present. -Ogden seems like an upside risk as (if) interest rates are ever restored to normal -Autonomous vehicles- who knows what impact this would have (I guess the aim is lack of impacts), but can't see this one being material for some time to come. Anyone see any other big risks or issue here?H2EPS 17/18Early Aug Latest 29.36p : 32.5130.38p : 31.27DPS223.11p : 26.83p25.80p : 27.83 p
