RE: Interested to know......13 Aug 2020 18:17
Hi Johnny,
Thanks for your message. I'm a big fan of insurance myself although funnily enough DLG is the first insurer I've invested into (AON is an insurance broker - a sector I've always found much easier to understand, value, and predict the sp movements of because brokers don't take on any risk themselves!)
DLG is a remarkably good yield stock. (In fact they give so much back to investors rather than reinvest it into the business / make acquisitions that I feel this might be part the reason why results and share price hasn't improved over the years). So yeah, if you're merely looking for a solid yield, DLG is well worth holding onto for years and years.
In response to your question:
When covid-19 eventually becomes a thing of the past thanks to a vaccine, life will return to normal, and the roads will return to normal because:
1) The night time economy will return, meaning the more severe costly claims due to it being dark / drink driving / driving when too tired, will naturally accompany this.
2) People will go back to working in offices at least 50% of the week let's say so there'll still be rush hours on the roads.
3) The amount of driving will revert back to ordinary levels in general, as high streets re-open in a way which doesn't put people off going, etc.
When this happens, motor claims frequency and severity will naturally revert to the mean. As will DLG's performance, which hasn't been too impressive in the average year.
When will this happen? Well that depends on your view of when a vaccine becomes available. I'm assuming that a vaccine will become available within 12 months from now (Russia has one already they say!) but I might be wrong.
[Needless to say, IF it appears covid-19 will last longer than anticipated I will extend the timeframe in which I intend to remain invested here.]
The only thing I'm truly confident and bullish about is the 2020 year because a vaccine won't be out before the end of it, and so DLG will continue to benefit from the roads being far quieter and consequently motor profitability being far better than it would be ordinarily. And motor is the bulk of what Direct Line do of course.
Lastly, re BREXIT, I'm actually very confident DLG will outperform the market in the event of a hard Brexit, because it's a UK insurer with such little exposure / reliance upon the EU. That's not to say I think the share price will rise as a result but I can't see if falling either.
Hope all of that makes sense, and happy to corrected, but that's my opinion based on what I know at the time of writing.
:)
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