Guardian Holdings, an insurance group primarily involved with life insurance underwriting, reported after tax profit of US$11 million compared to $15 million earned in the first quarter last year. Last year’s results were bolstered by an exceptional foreign exchange gain of $3 million and this quarter’s outcome was impaired by the loss of $5 million derived from participation in Jamaica’s National Debt exchange (NDX). Excluding these two items, the after tax profits results would have grown 29 percent to $16 million.
Premium Income | Gross premiums grew 25 percent from $214 million in first quarter 2012 to $268 million in this first quarter. Excluding $12 million generated from a new acquisitions, gross premiums written grew by 20 percent.
Net results from insurance activities improved 52 percent to reach $20 million from $13 million in the previous year’s quarter. New acquisitions contributed $1 million, in line with management’s expectations.
The new Netherlands-based broker, Thoma, contributed $2 million in fee income. Investment income, excluding the loss relating to the NDX, came in at $36 million compared to $37.7 million in 2012 (exceptional foreign exchange gains are included 2012 figures). The new acquisitions resulted in increased operating expenses and finance charges increasing by 21 percent and moving costs from $32 million in 2012 to $38 million in this year’s quarter.
Segment Results | Premiums written in the Life, Health and Pensions business increased by 16 percent over the comparable period. The Property and Casualty segment’s top line was bolstered by the recent acquisition of Globe Insurance, the quarterly results of which were consolidated into the Group’s figures for the first time, and by low-risk fronting arrangements from which fee income was received. Net premiums written, which are premiums after deducting fronting premiums and reinsurance costs, grew $5 million or 17 percent over the comparable quarter.
Operating profit, while still strong at $7 million for the first quarter, declined $2 million from the 2012 figure due to increased claims activity and the one-off effect of this segment’s portion of the NDX.
Integration | The company’s management said, “they have moved diligently with the integration of Globe and West Indies Alliance and are quite pleased with the achievements obtained to date. Thoma has been fully consolidated into our reporting and contributed $0.65 million to after tax profits this quarter. Although it has occurred after the reporting period, I am pleased to reveal that we have now received all necessary regulatory approvals for our acquisition of Royal & Sun Alliance, Antilles (RSA). Details will be given in the report for the ensuing quarter.
“The Asset Management business contributed $1 million in operating profits for the quarter, down from the $2 million earned in the same quarter last year. This decline is attributable to lower fair value gains in this quarter due to the weak investment climate persisting across the territories in which we do business.”
Assets & Equity | Guardian has the size and equity base to expand and grow profits. As of March, total assets amounts to $3.6 billion with shareholder’s equity of $500 million.
Stock outlook | Earnings per share last year came in at US22 cents or TT$1.40, which is fetching a stock price of TT$17 on the Trinidad stock market giving it an historical PE ratio of 12. Investor’s Choice projects US30 cents per share for 2013 putting the PE at just 9. Compare that to West Indian Tobacco with a rich PE of 27 or Republic Bank with 15 times. It would appear that dividend yield is a major force for the PE differential. WITCO yields around 3.30 percent while Treasury bill rates are under one percent. Guardian has a yield of 3.7 percent.
A buy | Guardian is a good long term investment for a stock that is clearly undervalued in a market where price earnings ratio tend to be much higher than the level Guardian is priced at.
