Shares in Direct Line Group (LON:DLG) have fallen deep into the red in today’s session, as Barclays trimmed its rating and price target on the stock, pointing to dividend risk for UK motor insurers. The comments come ahead of the blue-chip insurer’s half-year report on August 1.
As of 13:16 BST, Direct Line’s share price had lost 3.81 percent to 329.85p, underperforming the benchmark FTSE 100 index which currently stands 0.37 percent lower at 7,575.00 points. The group’s shares have lost a little over five percent of their value over the past year, as compared with about a 3.2-percent gain in the Footsie.
Barclays trims stance on Direct Line
Barclays trimmed its rating on Direct Line from ‘equal weight’ to ‘underweight,’ and lowered its price target on the shares from 420p to 357p. Proactive Investors reports that the analysts expect the group’s consensus forecast for first-half earnings per share to be cut, putting the dividend at risk.
“In our view, Direct Line is well positioned for the current soft market environment through its diversification and prudent underwriting approach, as well as balance sheet reserves that should allow further reserve releases,” the bank said, adding, however, that “as the most liquid stock in a sector dominated by a negative top-down view at present, Direct Line may find itself in an unfavourable position – despite defensive characteristics and attractive yield, investors either don’t have to own any of the motor insurers, or use DLG as an instrument to short the theme”.
Other analysts on blue-chip insurer
JPMorgan Chase & Co, which is ‘neutral’ on Direct Line, lowered its price target on the shares from 430p to 395p last week. According to MarketBeat, the blue-chip insurer currently has a consensus ‘hold’ rating and an average price target of 403.69p.