AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Insurance
Insurance provides a cover towards a contingent event through a contract intended to manage the risk arising out of the possibility of occurrence of the contingent event. In the year 2018, the insurance industry was benefitted by sustained economic growth, rising interest rates, and higher investment income. Status quo appears that economic growth is slowing, interest rates are coming down, and the insurers experienced a decent rally in the markets until the end of July 2019.
Insurance Australia Group Limited (ASX: IAG)
Insurance Australia Group Limited is a leading provider of general insurance products to individuals and businesses in Australia. It also has operations in New Zealand along with interests in general insurance JVs in Asian countries including Malaysia and India. On 1 October 2019, the company announced a change in the direct and indirect interest of Hugh Fletcher, one of its directors, after he acquired 887 ordinary shares at a consideration of $7,091.80.
RES Redemption
Recently, the company announced to the market that its outstanding Reset Exchangeable Securities (RES) would redeem on the reset date of 16 December 2019. Subject to terms of RES, the holders of these securities are entitled to a face value of $100 along with the final interest payment of $0.9656 per RES to the holders in records as on 6 December 2019.
The last date of trading these securities is 4 December 2019, and the total redemption payable is $550 million.
FY2019 Performance Highlights
In FY2019 ended 30 June 2019, the group reported insurance margin of 16.9% within its provided guidance. However, the insurance margin was lower against the margin of 18.3% in the previous year, primarily attributed to an adverse net natural peril claims cost outcome, lower reserve release in the previous year, and an adverse credit spread movement. The company witnessed a gross written premium growth of 3.1% to $12,005 million in FY2019 compared to $11,647 million in the previous year, largely driven by the favourable foreign exchange movement in New Zealand.
In June 2018, the company entered into sale agreements for its consolidated operations in Thailand, Indonesia and Vietnam. The combined profit from discontinuing operations was $205 million, including a gain of $208 million on the sale of an asset from Thailand. IAG intends to complete the agreed sales of operations in Indonesia and Vietnam in the first half of FY2020. In June 2019, the company confirmed regarding negotiations with interested parties for the sale of its 26% interest (all or part) in SBI General Insurance Company in India.
The company delivered a net profit after tax of $1,076 million in FY2019 compared to $923 million in the previous year. Further, the profit was inclusive of a 13% fall in pre-tax profit, attributed to adverse natural peril, reserve release and credit spread movements, in addition to a $70 million increase in investment income due to a robust rally in equity markets during the second half of the period. It also included a significant contribution from the sale of one of the discontinued operations and reduction in the amortisation & impairment expense.
Additionally, IAG delivered a reported insurance profit of $1,224 million for the period compared to $1,407 million in the previous year.
On 2 October 2019 (AEST 10:59 AM), the stock of IAG was trading at $7.820, down by 1.387% relative to the last close. Over the past one year, the stock has delivered a return of +11.18%, while in the past three months, the return of the stock is -5.14%.
Suncorp Group Limited (ASX: SUN)
Catering to the markets of Australia and New Zealand, Suncorp Group Limited is a provider of products and services related to insurance, banking and wealth. It serves retail, corporate and commercial customers.
Deal with AMA Group
On 1 October 2019, the company notified regarding reaching a binding agreement for the sale of its repair and parts arms to AMA Group (ASX: AMA). The smash repair business in Australia and New Zealand - Capital S.M.A.R.T - would be sold for a consideration of $420 million, with SUN retaining a 10% stake in the segment. PAT related to the sale of the repair business is anticipated to be between $275 million and $295 million.
In addition, the company has penned a 15-year contract with the repair business to enable its customers to use services provided by Capital S.M.A.R.T., and the company has two five-year extension options in place, following the completion of the 15-year period.
Further, the company has agreed to sell the parts business â ACM Parts for a consideration of $20 million in cash, which is in line with the book value. However, ACM Parts would continue to provide parts to the companyâs repairer network.
FY2019 Annual Report
According to its Annual Report for the period ended 30 June 2019, the companyâs profit after tax had a composition of 48% from Insurance (Australia), 30% from Banking & Wealth, 20% from New Zealand, and 2% from Australian Life Business.
In FY2019, Insurance (Australia) delivered a profit after tax of $588 million, down by 13.7% due to higher natural hazard claims compared to the previous year. However, the second half result improved due to aggregate reinsurance cover and BIP benefits.
Further, the gross written premium increased by 1.5% to $8,104 million, excluding FSL. However, the growth in GWP was 3.3%, excluding CTP and commercial portfolio exits. Home & Motor GWP increased by 2.4%, attributed to average written premium increases, which was offset by a contraction in units.
Net incurred claims increased by 7.7% due to higher natural hazard costs and impact of risk-free rate movements and claims inflation. This was partially offset by benefits from BIP initiatives and lower claims costs in CTP post reform.
In FY2019, total investment income went up by 51.9%, attributed to mark-to-market gains due to significant reduction in bond yields during the year, and a rebound in equity markets in the second half of the year. However, the gains were partially offset by the underperformance of inflation-linked bonds.
In the New Zealand business, the company achieved a profit after tax of $261 million, up by 76.4% over the previous year. The NZ general insurance business delivered a profit after tax of $217 million, up 99.1% over the previous year, driven by disciplined portfolio management, favourable working claims experience, and favourable natural hazard experience.
Further, the gross written premium increased by 8.4% to $1,670 million due to premium increases across all portfolios, and unit growth in the direct business. Net claims incurred for the period were $697 million, down 5.7% over the previous year. Operating expense for the period increased by 9.9% due to an increase in commissions.
The New Zealand life insurance business had delivered a profit after tax of $44 million, up by $5 million over the previous year. Besides, the companyâs digital program was impacted positively by replacing key customer pain points with digital solutions.
On 2 October 2019 (AEST 11:03 AM), the stock of SUN was trading at $13.690, down by 0.653% relative to the last close. Over the past one year, the return of the stock is +0.42%. In the year-to-date period, the return of the stock has been +15.26%.
Disclaimer
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.
