Report
Esther Castro
EUR 100.00 For Business Accounts Only

CATALANA OCCIDENTE: FY2019 RESULTS (ANÁLISIS BANCO SABADELL)

4Q'19 vs. 4Q'18 Results:
Premiums: € 1.171 Bn (+7.4% vs. +7.6% BS(e));
Technical Result: € 143.3 M (+38.1% vs. +35.5% BS(e));
EBT: € 124.0 M (+5.1% vs. -5.7% BS(e));
Net Profit: € 78.7 M (+5.5% vs. +5.5% BS(e));
FY2019 vs. FY2018 Results:
Premiums: € 4.467 Bn (+2.8% vs. +2.8% BS(e));
Technical Result: € 538.2 M (+13.8% vs. +13.2% BS(e));
EBT: € 556.2 M (+6.3% vs. +3.8% BS(e));
Net Profit: € 385.9 M (+9.6% vs. +9.2% BS(e));

The company has released FY2019 results that were completely in line with our estimates on the premiums level, and better than expected in the two main businesses. Net Profit grew more than 9% vs. 2018. Thus, the recurring result in the Traditional business has grown +8.4% vs. 2018 (vs. +6.7% BS(e)), whereas Credit insurance has risen +18.6% (vs. +16.9% BS(e)).
In the Traditional business, acquired premiums’19 show accelerating growth to +7% vs. 2018 (vs. +7.2% BS(e) and vs. +6.3% in 9M’19), although they were boosted by the almost full incorporation of Antares. This, along with the improvement to the combined ratio (CR) to 90.4% in 2019 (fully in line with our estimate and vs. 91.21% in 2018), explains the improvement in the recurring result. We should point out that in all the business lines (Motor, Multi and Miscellaneous) there is better cash generation thanks to the higher technical margin (lower associated claims levels, but also strong cost reduction capacity).
In the Credit insurance business, the cycle is at an excellent point (stronger risk perception in companies in view of the economic downturn that does not translate into an increase in claims). Thus, GCO has shown growth in billed premiums starting at +6.5% in 1Q’19, which gradually rose to +8% in 2019 vs. 2018 (in line with our estimate). All this comes against a backdrop in which the CR reached lows over the past 5 years of 73.4% (vs. 74.5% BS(e) and even below the 75.5% reached in 2018). Furthermore, the company has leeway. Currently the reinsurance transfer ratio is at a low (38%) given the low real claims level and the strong Solvency II ratio (213% vs. 207% in 2018). In a context of a rising CR, the company could once again increase this transfer rate and bring it to previous levels (closer to 45%). BUY. T.P. € 42.30/sh. (upside +45.61%).
Underlying
Grupo Catalana Occidente S.A.

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.

Provider
Sabadell
Sabadell

Analysts
Esther Castro

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