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UPDATE 2-Direct Line to axe 2,000 jobs in sluggish insurance market

* Cutbacks to save co 130 mln stg annually by 2014

* Co to record 150 million pounds in restructuring costs in 2013, 2014

* Shares rise as much as 6 pct

By Richa Naidu

June 26 (Reuters) - Britain's Direct Line Insurance Group Plc, the motor insurer spun out of Royal Bank of Scotland, said it plans to axe about 2,000 positions, joining fellow insurers looking to trim costs and boost profits in a sluggish and competitive market.

The company said the cutbacks would allow it to save a further 130 million pounds ($200 million) annually by 2014, targeting a cost-base of about 1 billion pounds in 2014.

Britain's biggest car insurer, which has about 15,000 employees, has been cutting costs and avoiding high-risk drivers since 2010 to protect itself from stiff competition, and new regulation in the British motor insurance market.

"If you go back 20 years, a lot of the paperwork was done by brokers. As insurers have gone more direct and more automated, they've needed fewer and fewer people," Barnard said.

Several insurers, including Aviva Plc, AXA and Standard Life, have cut their workforce in recent months in an effort to reduce costs and prepare for new regulations that include higher capital requirements.

Direct Line, whose brands include Churchill, Privilege and the Green Flag roadside recovery service, said it continued to expect the migrating of its IT infrastructure to cost about 100 million pounds.

The company said the job cuts announced on Wednesday would include head office and support positions.

RBS in October floated almost one-third of Direct Line's shares, fulfilling conditions of a government bailout during the 2008 financial crisis, which left the bank 82 percent state-owned.

"Direct Line was very unprofitable for many years, part of the upside of the IPO was that they were going to restructure the organisation," Berenberg's Sami Taipalus said.

Last year, Direct Line said it would cut nearly 900 jobs as part of a plan to make it more profitable ahead of its stock market listing.

"It wouldn't surprise me if there'd be more (cuts) from Direct Line, but they'll probably do at most one of these a year," Oriel Securities analyst Marcus Barnard said.

Direct Line, which also offers home, travel and pet insurance, said on Wednesday it expected to record 150 million pounds of its 180 million pound restructuring costs in 2013 or 2014.

Since its October 2012 float, Direct Line's shares have gained 17 percent, giving it a market value of about 3.29 billion pounds. Direct Line's shares were up 5 percent at 230 pence at 0915 GMT on the London Stock Exchange.