JKSB: Quarterly Highlights: HNB Assurance PLC (HASU): 1QCY19
HASU reported a steep 83% decline in quarterly earnings for 1QCY19, largely due to i) a 45% YoY increase in net insurance claims and benefits as a result of an increase in life insurance maturities; we expect increasing maturities and surrender payouts in the next few years, ii) a 31% YoY increase in the transfer to the Life Fund; the Life Fund grew by 6% during the quarter compared to 12% in CY18, iii) a one-off transfer of Rs. 381mn from the life fund to the shareholders’ fund in the comparable quarter last year. While earnings for the quarter shrunk through lower contributions from the LI segment, the GI segment’s profitability grew by 11% YoY in 1QCY19 (PAT of Rs.45mn in 1QCY19 vs. Rs.41mn in 1QCY18). Group interest & dividend income grew by 16% YoY during the quarter from the continuous growth in the Life Fund and General Fund.
We project full year earnings of Rs. 926mn for CY19 (-66% YoY). Our current earnings projection has been revised to reflect the expected reduced earnings contributions from the general insurance (motor insurance will maintain flat growth due to high vehicle prices) and life insurance (disposable income remains low and increased number of policy maturities) segments. At its current price of Rs. 106.50, HASU trades at a P/BV of 0.94x (based on NAVPS as at end March 2019) at a discount to the JKSB insurance coverage universe.
•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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