General Accident acquisition to boost results

General Accident head quarters

The junior Market listed General Accident acquired a 55 percent stake in Motor One Insurance, a Trinidadian based company, with a large branch network throughout Trinidad.
Motor One, is said to be one of Trinidad and Tobago’s smaller general insurance companies but the acquisition provides General Accident with a ready platform expand in the Trinidad market into motor vehicle and catastrophic insurance business in the Caribbean twin-island state which is said to be over 40 percent larger than the general insurance market in Jamaica. The acquisition will provide a platform for the local company to expand in the wider region and importantly, into Guyana where the economy is already growing strongly with the country set to benefit even more from the near term production of oil but that seems a bit off for now.
The acquisition, “is an important first step in our wider regional growth strategy which we believe will increase economies of scale, spread our risk and significantly enhance shareholder value,” General Accident’s chairman, Paul Scott stated in the release announcing the purchase.
General Accident is having a good two-year run, with rising income and profit, in 2016 revenues from core business hardly changed but investment income rose and helped to push pretax profit up by a third. In 2017, net underwriting revenues grew 28 percent over 2016 and by 22.6 percent in 2018 over 2017but profit declined 42 percent for 2017 and rose 50 percent in 2018 but was still below the pretax profit delivered in 2016. The company’s profit performance in the 2019 June quarter improved 31 percent to $104 million from $80 million in 2018 after tax and for the six months period by 42 percent to $135 million from $95 million in 2018.
Gross premiums written, rose 59 percent for the quarter to $4 billion from $2.4 billion and by 41 percent for the year to date to $7 billion from $5 billion in 2018.
Net premium earned rose 25 percent in the quarter to $503 million from $403 million and climbed 29 percent for the year to date to $989 million from $767 million in 2018. Commission expense increased 15 percent in the quarter to $116 million from $100 million and by 20 percent for the year to date to $260 million from $216 million in 2018 while commission income rose 14 percent in the quarter to $170 million from $149 million in 2018 and for the half-year, it rose 21 percent to $406 million. Investment and other income fell 18 percent in the half-year to $117 million from $143 million and rose 22 percent to hit $111 million.
Management expenses increased 26 percent to $227 million in the quarter and 19 percent in the six-month period to $419 million. Claims grew 28 percent to $339 million in the quarter and 23 percent in the half-year to $633 million. Other operating expenses increased in the quarter to $23 million from $11 million in 2018 and from $21 million to $35 million for the six-month period.
Gross cash flow from operating activities brought in $922 million, but net of amounts due to reinsurers and co-insurers and other working capital movements reduced cash provided by operating activities to $363 million. General Accident paid dividends of $150 million during the year and ended with cash and investments of $3.3 billion, up from $2.7 billion at the end of June 2018. At the end of June, shareholders’ equity stood at $2.2 billion. Total assets ended the period at $7.9 billion inclusive of dues from reinsurers and co-insures of $2 billion, cash and bank balances of $190 million and liabilities of $6 million.
Earnings per share came out at 0.10 cents for the quarter and 0.13 cents for the six months. IC Insider.com is forecasting 80 cents per share for the full year for a PE of 8 times earnings.

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