DLG.L WACC - Weighted Average Cost of Capital
The WACC of Direct Line Insurance Group PLC (DLG.L) is 8.1%.
| Range | Selected | |
| Cost of equity | 7.6% - 9.6% | 8.6% |
| Tax rate | 21.6% - 23.0% | 22.3% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.2% - 9.0% | 8.1% |
| Category | Low | High |
| Long-term bond rate | 4.0% | 4.5% |
| Equity market risk premium | 6.0% | 7.0% |
| Adjusted beta | 0.6 | 0.66 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.6% | 9.6% |
| Tax rate | 21.6% | 23.0% |
| Debt/Equity ratio | 0.12 | 0.12 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.2% | 9.0% |
| Selected WACC | 8.1% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| DLG.L | Direct Line Insurance Group PLC | 0.12 | 1.2 | 1.1 |
| ADM.L | Admiral Group PLC | 0.14 | 0.56 | 0.5 |
| ALMB.CO | ALM. Brand A/S | 0.09 | 0.33 | 0.31 |
| ANSGR.IS | Anadolu Anonim Turk Sigorta Sti | 0.02 | 0.41 | 0.41 |
| BEZ.L | Beazley PLC | 0.08 | 1.02 | 0.96 |
| COFA.PA | Coface SA | 1.25 | 0.82 | 0.42 |
| HSX.L | Hiscox Ltd | 0.14 | 1.48 | 1.33 |
| TOP.CO | Topdanmark A/S | 0.04 | -0.03 | -0.03 |
| TRYG.CO | Tryg A/S | 0.13 | 0.22 | 0.2 |
| ARGO | Argo Group International Holdings Ltd | 0.38 | 0.15 | 0.12 |
| Low | High | |
| Unlevered beta | 0.37 | 0.45 |
| Relevered beta | 0.4 | 0.49 |
| Adjusted relevered beta | 0.6 | 0.66 |
DLG.L's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for DLG.L:
cost_of_equity (8.60%) = risk_free_rate (4.25%) + equity_risk_premium (6.50%) * adjusted_beta (0.6) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.