Direct Line Group: the analysts' view

A new era dawned on the UK’s largest personal lines insurer as it rebranded from Royal Bank of Scotland Insurance to Direct Line Group.
 
With its shiny new D-shaped rainbow-coloured logo, all the indications are that Direct Line Group will list on the stock exchange.
 
As the company sets sail for these unchartered waters, waving goodbye to its long-standing banking parent, Insurance Times speaks to analysts to get their views on the latest developments and what the City will be expecting from Direct Line Group.
 
Jefferies analyst James Shuck

Shuck says analysts will want to see evidence that Direct Line Group has cut back in underperforming areas, is well reserved and that there has been investment in the business.
 
“They are aggregating all the brands together, which means we are going to get one Direct Line Group number, so you want to be able to see what the profitability of Churcill or Direct Line is or whatever. They have to give three years’ worth of data in the prospectus, so that’s really our main source. A lot will depend on the level of detail they give in the prospectus. Reserving is a key issue.
 
“To be honest, it’s going to be a tough sell because you think to yourself: What is the value of the Direct Line brand when everyone is selling through aggregators these days? That is questionable. That is why people just aren’t interested in the trade sale of an iconic brand. It’s all down to risk selection these days on aggregator sites rather than driving internet traffic to your own website.”
 
Oriel Securities analyst Marcus Barnard

“They’re still part of RBS. They’ll have to be careful that they do not interfere with the bank’s message. Personally, I’d like to see separate results presentations to get any idea of how trading is going and understand what the size of the business is.”
 
Collins Stewart analyst Ben Cohen

“It is probably good in that there is another company that is quoted. Hopefully, from a shareholder point of view, it means all of the focus is on getting a decent return on the motor business. That should also be good for the competitive environment.”