CATALANA OCCIDENTE: 9M'19 RESULTS (ANÃLISIS BANCO SABADELL)
3Q'19 vs. 3Q'18 ResultsTechnical Result: € 128.74 M (+6.8% vs. +6.8% BS(e));
EBT: € 142.1 M (+9.3% vs. +10.9% BS(e));
Net Profit: € 100.7 M (+10.7% vs. +10.3% BS(e));
9M'19 vs. 9M'18 Results
Technical Result: € 394.9 M (+6.9% vs. +6.9% BS(e));
EBT: € 432.2 M (+6.7% vs. +7.3% BS(e));
Net Profit: € 307.2 M (+10.4% vs. +10.3% BS(e));
The company has released 9M’19 results slightly above expectations in the Recurring Result, in both the Traditional business and in Credit Insurance, and fully in line on the Net profit level.
We highlight the growth in earned premiums, not only in the Traditional business (+6.3% vs. 9M’18, slightly below our estimate of +6.9% but accelerating vs. the +5.6% seen in 1H’19), but also in Credit Insurance (+7.3% vs. 9M’18, slightly below the expected +8%, but flat vs. 1H’19). Thus, total net premiums grew around +7% vs. 9M’18 (+7.4% BS(e)) and vs. +6.4% in 1H’19).
This, along with the slight improvement to the combined ratio (CR) in Traditional Insurance (slightly above our estimate of 90% and vs. 92% sector average) and the CR being kept below 76% in Credit Insurance, mean the divisions’ respective Recurring Results have risen substantially. Specifically, around +7% vs. 9M’18 (and beating our estimate of around +6%) in the former and around +16.8% (beating our estimate of 16.3%) in the latter, a growth level unseen over the past few years. All this explains the +10.4% growth on the Net Profit level, which is in line with our estimate.
These robust results should underpin the share price somewhat. The stock’s negative performance (around -8%, -6% vs. the IBEX and -28% vs. the sector) cannot be explained by the company’s cash-generating capacity, which is getting stronger and stronger. The latest acquisitions made are underpinning growth in “recurring†Net profit of between +8% and +10%. We reiterate our BUY recommendation. T.P. € 42.30/sh. (upside +36.01%). Conference Call at 16.30 (CET).
Grupo Catalana Occidente is an insurance group based in Spain. Co. is engaged in insurance and reinsurance activities, including commercial, life, disability, and automobile insurance. Co. is also engaged in the sale of annuities and pension funds. Co.'s operations are organized along two businesses: Traditional business (insurance) and Credit Insurance business. Co.'s main markets are located in Spain, Germany, United Kingdom, France and the Netherlands. Co. maintains a presence in more than 40 countries.
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