Morningstar | CNP Assurances' First Half Slightly Below Expectations; Watch Wealth; Shares Undervalued.
CNP Assurances has reported first-half financial results. The business has essentially delivered EUR 672 million in net income from its predominantly life insurance business operations. While this is a little below our expectations, the difference is marginal. We will not be changing our EUR 23 fair value estimate or our no-moat and stable trend ratings.The group's solvency coverage is OK, representing an improvement on year-end. Although solvency coverage is below 200% at 198%, up 8 points on year-end, we feel CNP Assurances is a more stable life insurance business than is reflected by this figure.
Annual premium equivalent margins improved around 70 basis points, and net operating cash flow came in at EUR 809 million. Unit-linked has been the driver of premium growth and better cash conversion, and we are definitely pleased with the progress in CNP’s wealth management segment, CNP Patrimone, doubling income. We think a good wealth management arm within life insurance is an important positive competitive attribute for these businesses to attract and retain business. For a business like CNP, we think Patrimone is going to be a unit to watch.
In place of the increase in premium income at Patrimone, CNP has witnessed a smaller decline percentage-wise, but larger in absolute terms, from La Banque Postale. We find this tough to call. We are not naturally drawn to the business coming from La Banque Postale because we think it is generally lower-quality than what the business can generate from proprietary wealth management. However, life insurance is a much more widely used savings product in France than other European countries, so it is natural to see this different balance. What we do want to see, if possible, is continued growth from Patrimone and a stabilisation of premium from La Banque Postale, or if the decline continues, a continued improvement in new business margin. The latter is the most preferable to us, and we think CNP is in a good position to build, or has a good shot at building, a nice niche business.
Administration costs and the cost/income ratio were stable.
CNP Assurances is an insurance company. Co. designs, develops, distributes and manages savings, pension & personal risk, and term creditor products. Co. offers savings products and insurance against the risks of everyday life to its customers. Co.'s operations are organized along three business segments. The Savings business concerns products enabling policyholders to build up capital which they can cash in. The Pensions business concerns products designed to enable policyholders to receive an annuity or lump sum on retirement. The Personal Risk business includes products enabling policyholders to insure against the risks of death, accident or illness, property damage or liability claims.
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