JKSB Quarterly Highlights: Asian Alliance Insurance PLC (AAIC): 2QCY16
AAIC reported a significant 346% YoY increase in earnings for 2QCY16, with a life surplus transfer of Rs. 310mn offsetting GI business losses. The company’s life and motor insurance premium revenues continued to grow at well above industry levels during the quarter. A sharp increase in underwriting and net acquisition costs (+67% YoY in 2QCY16) reflects 1) new business strain on the life insurance side (in-line with a 67% YoY increase in first year life premiums); and 2) increased commission expenses in-line with a 56% YoY increase in motor insurance GWP for the quarter.
We have increased our full year earnings projection for CY16 to Rs. 1.4bn, to account for an inflow of funds from the upcoming sale of the GI subsidiary to Fairfax Asia (Rs. 1.265bn; 1.7x P/BV), which should negate accumulated GI business losses and provide a boost to full year results. We have increased our full year earnings projection for CY16 to Rs. 1.4bn, to account for an inflow of funds from the upcoming sale of the GI subsidiary to Fairfax Asia (Rs. 1.265bn; 1.7x P/BV), which should negate accumulated GI business losses and provide a boost to full year results. At its current price of Rs. 23.20, AAIC trades at a CY16E P/E of 6.2x and a P/BV of 4.3x (based on last reported NAVPS). The share price has appreciated by 56% since publication of our report dated Feb 2016. ​
•JKSB is one of 15 founding members of the Colombo Stock Exchange with roots in share trading dating back to 1896, and is a subsidiary of John Keells Holdings PLC (JKH), the largest listed entity on the Colombo Stock Exchange with a market capitalization of US$ 1.3bn.
•JKSB’s core client base is Foreign Institutional Investors, Local Institutions and HNWI’s
•JKSB has a co-branded Research tie up with CIMB and a Research Referral agreement with Credit Suisse, along with trade execution relationships with several other global and regional securities firms.
•JKSB’s trade execution partners include Credit Suisse, CIMB, Merrill Lynch, Exotix, Daiwa, Convergex, Deutsche Asia Securities and Morgan Stanley
•JKSB is a research contributor to Bloomberg on ‘KEEL’
•The JKSB Research Universe covers 72 stocks across 15 sectors, with most Research efforts focused on approximately 45 of the more liquid counters.
•The JKSB Universe constitutes 67% of total market cap and approximately 80% of turnover at the CSE.
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