Direct Line to pay 27.5p per share and consolidate shares
Insurer Direct Line said it will pay a special dividend to shareholders of 27.5p per share after completing the sale of its international division.
Direct Line Insurance Group
193.50p
16:40 19/04/24
FTSE 100
7,895.85
16:59 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
Insurance (non-life)
3,637.32
17:09 19/04/24
The FTSE 100 company, which was spun out of RBS via a flotation in 2012, agreed the sale in September of its Italian and German operations to Spanish rival Mapfre for €550m (£430.9m).
Alongside the special dividend, Direct Line has proposed a share consolidation in order to prevent disruption of the share price, earnings per share and net asset value before and after the payout, which needs the formality of a shareholder vote.
This is all in line with the group’s indication that a "substantial part" of the net proceeds would be returned to shareholders.
A shareholder meeting will be held on 29 June 2015, with the ex-div date set at 30 June and payment expected on 24 July.
Broker Shore Capital reiterated its 'sell' recommendation on Direct Line, with the claims environment "getting uglier" and the rating environment "insufficient to match the burgeoning claims costs".
"With the FCA scrutiny of ancillary income - circa 7% of Direct Line’s 2014 ongoing profits - and installment income at circa 15% likely to impact these lines for the whole industry."
Analyst Eamonn Flanagan's sum-of-the-parts valuation for DLG implies a target price of roughly 240p, well below current levels.