Post Views: 1,187 Company: AIICO Insurance Plc Rating: Buy (Long Term) Current Market Price: N0.65 Fair Value: N1.69 By: Jeariogbe Tunde Segun (Indepe...
Company: AIICO Insurance Plc
Rating: Buy (Long Term)
Current Market Price: N0.65
Fair Value: N1.69
By: Jeariogbe Tunde Segun (Independent Stock Market Analyst- Tradelines Dotbz Inv. Ltd)
Key Financial Tickers:
• In the just concluded financial year ended 31st December, 2017, it announced a cash dividend of 5 kobo (2 kobo in 2016)
• The registrar of shareholders will be closed on 21st May, 2018. This simply implies that the qualification date for the dividend is 18th May, 2018
• Consequently, the said cash dividend will be credited into shareholders’ accounts on 25th May, 2018
• The company’s annual general meeting holds on 24th May, 2018 at Civic Center, Ozumba Mbadiwe Street, Lagos.
• AIICO Insurance Plc (formerly American International Insurance Company), is a Nigerian company engaged in life assurance and non-life insurance businesses, as well as deposit administration and financial services to organizations and private individuals.
• Its life assurance business consists of whole life, term assurance, guaranteed pensions, pure endowment pensions and mortgage endowment products, just as it offers savings protection products and other long-term contracts.
• The nonlife insurance business comprises general insurance to individuals and businesses;
• There is Multi-shield, which is a health maintenance organization for prepaid health plans to cater for the needs of individuals and staff of corporate organizations;
• AIICO Pension Manager provides pension administration services to private and public-sector contributors, while
• AIICO Capital Limited offers portfolio management services, structured investments and mutual funds for corporate and individual clients.
• Gross Premium Written mildly grew above comparable year’s figure by 18.60%, moving from N27.064 billion to N32.097 billion
• Net Premium on the other hand stood below last year by 34.42% dipping to N17.500 billion from N26.687 billion
• Net Claim Expenses of N20.774 billion was 58.63% more than what it reported for the financial year end of 2016.
• Total underwriting expenses of N23.879 billion is equally higher than the N16.356 billion that was reported in the previous year.
• As a result of the very high Claim Expenses (N23.273 billion) experienced during the 2017 financial year (2016 Claim Expenses was N14.940 billion), the company reported Underwriting Loss of N4.022 billion as against the Underwriting Profit of N12.448 billion in 2016 financial year
• Insurance Profit equally stayed below comparable year at N4.610 billion, as against N19.697 billion
• As a result of the high expenses experienced in 2017, the year’s profit stood below the previous year’s by 87.47% at N1.283 billion up from the previous N10.238 billion.
• Total Debt to Equity Ratio is very high at 70.70%, especially when compared with the industry average of 13.26%.
• Although Interest Coverage stood below the industry average at 19.37x against 33.91x, it is very healthy and safe
• Above the industry average, the company maintained a beta value of 0.55 which placed it below the market’s beta coefficient of 1.
• Agreeing with the effect of the high expenses on the company’s financial indices, Profit before and after tax margin stood below comparable year by 78.34% and 89.43%. As can be seen from the below table, both ratios are respectively 9.47% and 4.00%.
• Trying to see the true picture of the company’s profitability, we have estimated our Return on Equity (ROE), using the reported Total Comprehensive Income, rather than the Profit after Tax. Thus, it was discovered that the current year has a higher ROE.
• This is due to the high Net Loss suffered on Available for Sale financial Assets in 2016. Please note that it reported a loss of N11.341 billion which swept off the reported profit in 2016.
• Gross Premium to Total Assets ratio was stable through the two years under comparison. The ratio reduced marginally by 0.54% from 34.92% in 2016 to 34.73% in 2017.
• Financial leverage remained good at 8.79x, though below the 9.19x estimated in 2016 financials.
• Gross Premium replicated Total Equity three times over in both years compared in our analysis. This is an impressive performance.
• Outside the loss incurred on available for sale assets in 2016, the current earnings of 19k stood at 87.47% below the N1.48 earned in 2016.
• Nevertheless, Total Comprehensive Income per share for the current year was 35k, while it reported Total Comprehensive loss per share of 9k in the 2016 financial year
• The current earnings was a 28.49% yield over the current market price of 65k, which is fair and impressive
• Comparing the growth achieved within the two years on PE/Ratio from 0.38x to 3.51x, it could be said that more investors are accepting higher valuation for the share price of AIICO Insurance
• The company share price currently sells below the Book Value which has been estimated at N1.52, which is fairly below our intrinsic value of N1.69.
• Kindly see below for other investment ratios considered on AIICO Insurance Plc.
Our Valuation of AIICO has considered Dividend Discount Model with the expectation of zero growth. The value was calculated with a five-year investment period.
Thus, we arrived at N1.69 which we recommend as long-term investment TP.
We have identified a steady downtrend on the shares of AIICO Insurance Plc. Despite this position, short term positions are possible for smart investors. Please understand that it has effectively played a 4 black to 2 blue days trend. We recommend the use of Elliot Waves for traders willing to positively flow with the trend.