AKD Quotidian about —: AICL: 1HCY11 Result Preview

Karachi: Adamjee Insurance Company Ltd (AICL) is scheduled to finalize its 1HCY11 result tomorrow.

According to AKD Securities, they expect the company to post NPAT of PkR548mn (EPS: PkR4.35) in 1HCY11 against NPAT of PkR299mn (EPS: PkR2.41) in 1HCY10, translating into a robust growth of 80%YoY. Alongside the result, AICL is expected to announce a first interim dividend of PkR1.50/share. While net underwriting is expected to be up 14%YoY and AICL has clearly focused on admin cost control, the bulk of projected growth should be driven by a strong increase in investment income (low base last year + some Pakgen gains). This should compensate for a likely higher claims ratio (66% in 1HCY11E vs. 64% in 1HCY10). AICL has shed 26%FYTD to trade at an attractive forward PER of 5.6x (annualized 1HCY11E) which, in AKD Securities’ view, both limits further downside and offers a good investment opportunity considering full-year CY11F profits may end up 2x of CY10 profits. At current levels, AKD Securities’ target price of PkR75/share implies a Buy stance. That said, AKD Securities will look to revisit AKD Securities’ investment case post release of detailed 1HCY11 accounts.

Profit and Loss Account

 

(PkRmn)1HCY11E1HCY10YoY2QCY11E IQCY2011QoQ
Net premium revenue 3,865 3,43113%1,8801,985-5%
Net claims2,5622,18717%1,2501,312-5%
Expenses589 602 -2%298291 2%
Net commission2632505%1321310%
Underwriting result45039215%200250 -20%
Investment income39822378%2001981%
Rental Income01-54% 000%
Other Income74713% 38367%
Total Income92368834% 438484-9%
General & Admin244291 -16%12811610%
NPBT67138674%307365-16%
NPAT53829980%249 289-14%
EPS (PkR)4.352.4180%2.022.33-14%
Claim Ratio66%64% 67%66%  
Expense Ratio15% 18%16%15%  
Combined Ratio82% 81%82%81%  
Source: Company Reports & AKD Research

 

 

Investment Perspective: Since the FY12 Budget, which did not contain the expected concessions on capital gains tax, AICL has shed 28% (17% underperformance vs. the Index). Going forward, while the KSE-100 Index has shed 26%FYTD which may depress sequential investment income, AKD Securities expects AICL to post strong YoY growth in 2HCY11 as last year’s profitability was affected by the Aug10 floods (abnormally high claims). Based on annualized 1HCY11E profits, AICL trades at a forward PER of 5.6x. While AKD Securities’ target price of PkR75/share implies a Buy stance, AKD Securities will look to revisit AKD Securities’ investment case post release of detailed 1HCY11 accounts.