Direct Line share price could be hit by landmark court ruling

Direct Line Group (DLG) could have as much as 3p wiped off its share value if the ABI fails to overturn a recent Court of Appeal decision ahead of the deadline for share orders today.

According to a report in the Financial Times, if the court’s judgment in the Simmons v Castle appeal goes against the industry, as much as 3p could be knocked off the share price valuation.

DLG is targeting between 170p and 177.5p for tomorrow’s float.

The verdict is scheduled for 10am today.

The Court of Appeal ruled in July 2012 that the 10% increases in general damages due to be implemented under the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) in April 2013 would apply to all claims settled after 1 April 2013, regardless of when the claim was made.

DLG warned in its listing prospectus issued last month that it faced a pre-tax hit of between £30m and £45m to its 2012 results if the ABI fails to overturn the court’s decision.

If that were to happen, the insurer would incur the majority of the expense in the third quarter of 2012.

Parent RBS Group told investors yesterday that it planned to price the initial public offering at between 170p and 177.5p.