Are Direct Line shares worth buying ?

1jacks64

I have seen a lot in the press about the floatation of Direct Line. Does anyone think these shares are worth buying ? Apparantly they are the biggest home and motor insurer in the UK but there is much competition out there with other companies in the same industry.

Would it be better to buy shares in RBS instead ? Some are suggesting that those who buy Direct Line shares are being sold a pup ? If you look on the web there are also several unhappy customers and Direct Line have recently made many redundancies so will this affect customer service further. So is this share a buy or a don't buy ?

TDPIX

Surely it'd depend on its float price? I'm staying clear though - a big IPO usually means overhype and thus overprice.

sabretoothtigger

Did they talk about a dividend on it, alot of insurance companies pay well. Might be worth looking at those already available

Apparantly they are the biggest home and motor insurer in the UK

I'd be more enthusiastic about a company with foreign business and possible growth outside the UK. Not sure I'd want to be tied to UK right now

1jacks64

Looking at their website it appears they have fingers in lots of pies. They supply all Nationwide Building Society home and motor insurance and they also supply all home and motor insurance for Sainsburys Bank customers as well as Prudential and several others.

I can't help feeling though that their reason for being in number one position is the slick advertising they do. They advertise on the tv all the time and in newspapers and magazines and on the back of the Yellow Pages and leaflets that come with Royal Mail. I just think that with the amount of competition there is how much growth can there be in this industry.

It is often also stated that insurance don't make any money selling car insurance. Another point is this is a forced sale by RBS due to EU directives.

alanq

1jacks64 wrote: »

Direct Line have recently made many redundancies so will this affect customer service further.

"It employs some 15,000 staff in the UK, but is planning 900 redundancies as part of plans to make £100million of cost savings by the end of 2014."
So are those 900 jobs in addition to the ones that you are referring to?

http://js.dailymail.co.uk/money/markets/article-2203148/RBS-offload-Direct-Line-market-float-year.html

sabretoothtigger

Thats a jump in thinking that isnt true exactly. Ideally you want a business with low costs and does not need to employ many people.
The whole direct line innovation was efficency, via phone at first but it could be they using computers more now thereby requiring less people.
This is ideal for a business to reduce costs, maximise revenue and potential profits

There is a Luddite argument used in the usa presidental debates that more jobs is always best. Its actually quite probably a good thing that DL has cut staff. Ideally there should be efficiency, more people is usually a potential liability going forward all depends on their skills as assets

Obviously people without income is bad in an economy but even worse is an uncompetitive business, definitely when owning or looking to buy it

Lokolo

I think they would be quite good, however the one thing that gets me is that they refuse to go onto comparison websites.

More and more people use them every year and I can't help but feel they are losing business out of this.

Reaper

Lokolo wrote: »

I think they would be quite good, however the one thing that gets me is that they refuse to go onto comparison websites.

More and more people use them every year and I can't help but feel they are losing business out of this.

I agree. They make a big thing about it claiming this saves money by not paying a middle man, but the argument strikes me as being rubbish. Particularly as they have to spend extra on advertising to make up for not being listed, which they do very heavily.

As to whether the float is worth going for that is impossible to tell until the details and price are released. Big IPOs do not have a very good recent track record (hence some say it stands for "It's Probably Overpriced") and I am currently already rather too heavily invested in the insurance sector, but I will keep an eye on it.

wastedtalent

They also own Churchill, Green Flag and their own garage network.

I never touch IPO though, usually wait for the prices to level out.

Glen_Clark

Lokolo wrote: »

I think they would be quite good, however the one thing that gets me is that they refuse to go onto comparison websites.

I get my van insurance direct from Churchill online for FAR less than quoted on comparison websites.
Although I have never made an insurance claim in my life I prefer to deal direct with the insurance company instead of a broker, because it would presumably be simpler if you do have to make a claim.

Glen_Clark

Reaper wrote: »

I agree. They make a big thing about it claiming this saves money by not paying a middle man, but the argument strikes me as being rubbish. Particularly as they have to spend extra on advertising to make up for not being listed, which they do very heavily.
.

So do comparison websites, plus the extra administration of dealing through somebody else, with a hefty mark up on top. Dragon Peter Jones has made a fortune from comparison websites. Who do you think that has come from?