CIG Pannonia - Impairments sent earnings into the red - Instant Earnings Comment from Concorde Securities Ltd. (Hungary)
CIG Pannonia – Instant Earnings Comment
Recommendation: Under revision (prev. Neutral)
Target Price (12-month): Under revision (prev. HUF 315)
Current Share Price: HUF 129
CIG Pannonia (Pannonia) reported consolidated net losses of HUF 641mn for FY2019, compared with a net income of HUF 1,794mn for FY2018. The insurer’s profit plummeted for two main reasons: 1) significant claims and related misconduct of the Italian cross-border insurance product in non-life segment with a total impact of HUF 2,390mn loss; and 2) the conversion of Konzum / OPUS shares resulting in a HUF 1,056mn exchange loss based on OPUS share price of HUF 446 as at 30 June 2019. Without these effects, Pannonia’s profit after tax for 2019 would have been HUF 2,805mn vs. HUF 1,794mn in 2018.
We note that unrealized losses on OPUS has increased by HUF 724mn by the year-end of 2019, and by a further HUF 1,085mn so far this year. Altogether, Pannonia has had (unrealized and realized) losses of HUF 2,861mn on OPUS shares ever since it purchased them.
Life GWP reached HUF 18,041mn and was 9% higher than in the comparative period. In the life segment, the new acquisition amounted to HUF 4,286mn, implying an increase of 33% compared to the previous year’s amount. Non-life GWP amounted to HUF 9,451mn, 1.8% higher than in 2018.
CIG Pannonia Eletbiztosito Nyrt. CIG Pannonia Eletbiztosito Nyrt (Cig Pannonia Life Insurance Plc) is a Hungarian-based company active in the insurance sector. The Company offers insurances for pensioners, including funeral and inheritance policy, entrepreneurs, families and recent graduates. The Company's portfolio comprises Unit-linked Life Insurance, Endowment Life Insurance, Term Life Insurance, Alkony Life Insurance and Retirement Life Insurance as well as Accidental Benefit Rider and Premium Assistance Rider. As of December 31, 2011, the Company operated four wholly owned subsidiaries, including CIG Pannonia EMABIT Ltd, Pannonia Biztositaskozvetito LLC and Pannonia PI-ETA LLC, all based in Hungary, as well as TISIA Expert Srl, based in Romania.
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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