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Research: Financials
Nürnberger Beteiligungs (NBG) continues to operate in a challenging interest rate environment limiting its net investment income and translating into higher additions to the Zinszusatzreserve (ZZR) despite the regulatory changes to its calculation introduced some time ago. Nevertheless, it was able to post solid results in FY19, with net profit ahead of management expectations. Consequently, management proposed a 10% increase in the dividend to €3.3 per share. Uncertainty around the impact of the coronavirus outbreak on the economy limits future earnings visibility.
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Nürnberger Beteiligungs |
FY19 earnings ahead of guidance
Insurance |
Scale research report - Update
6 April 2020 |
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Nürnberger Beteiligungs (NBG) continues to operate in a challenging interest rate environment limiting its net investment income and translating into higher additions to the Zinszusatzreserve (ZZR) despite the regulatory changes to its calculation introduced some time ago. Nevertheless, it was able to post solid results in FY19, with net profit ahead of management expectations. Consequently, management proposed a 10% increase in the dividend to €3.3 per share. Uncertainty around the impact of the coronavirus outbreak on the economy limits future earnings visibility.
Solid FY19 results assisted by new premiums growth
NBG reported net income, excluding minorities, of €67.4m, which is visibly ahead of management guidance of €55m. This was assisted by better than expected earnings in the P&C and banking services divisions, as well as a slightly higher result in life insurance. New premiums at group level grew by a healthy 6.8% y-o-y to €592.4m, assisted in particular by life and P&C insurance. Consequently, gross premiums booked went up by 1.1% y-o-y to €3.52bn. At the same time, NBG’s combined ratio improved to 91.0% from 91.4% in FY18. We also note the lower effective tax rate of 15.4% compared to 37.5% in FY18.
FY20 outlook marred by COVID-19
In NBG’s annual report, management highlighted that it expects gross premiums booked to slightly increase at group level in FY20, with life insurance remaining stable while P&C and health insurance post visible growth in gross premiums. It anticipates a slight increase in new premiums this year. Overall, management expects a clear increase in net income, assisted by earnings outside its core operating segments, attributable to valuation reserves and the launch of Nürnberger Asset Management at the start of 2020. However, we note that the above guidance assumed limited changes in interest rates, as well as positive capital markets development on average and a lack of meaningful defaults. The current turbulent environment amid the COVID-19 outbreak means these conditions may not be met throughout 2020.
Valuation: Proposed dividend increase
Based on Nürnberger’s reported net income in FY19, its shares trade at a c 54.9% premium to its peers. We note that management has proposed a dividend of €3.3 per share (up 10% y-o-y), which currently implies a yield of 5.1%.
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Historical financials
Source: NBG accounts |
Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.
Valuation
There are no Refinitiv consensus estimates for NBG and management has not yet quantified its earnings expectations for 2020. Consequently, we have made a peer comparison based on FY19 net income. NBG is trading at a 54.9% premium on FY19 P/E vs its peers. Management proposed paying an annual dividend of €3.3 per share from 2019 earnings, up from €3 per share in the previous year. This implies a 5.1% yield and compares with 8.0% for its peers.
Exhibit 2: Peer group comparison
Market cap (lcy m) |
Share price (lcy) |
P/E (x) |
Dividend yield (%) |
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2019 |
2020e |
2019 |
2020e |
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UNIQA Insurance Group |
€2,089 |
6.76 |
8.9 |
9.6 |
7.8 |
8.3 |
Helvetia Holding |
CHF3,881 |
78.05 |
7.4 |
7.9 |
6.1 |
6.6 |
Baloise Holding |
CHF6,056 |
124.10 |
8.3 |
9.6 |
4.8 |
5.4 |
Ageas |
€7,026 |
35.42 |
7.0 |
7.4 |
6.2 |
7.4 |
Swiss Life Holding |
CHF10,267 |
305.60 |
8.4 |
7.9 |
5.4 |
7.0 |
NN Group |
€7,830 |
22.79 |
5.8 |
5.9 |
9.5 |
10.1 |
CNP Assurances |
€5,541 |
8.07 |
4.1 |
4.0 |
11.0 |
12.1 |
AXA |
€33,766 |
13.96 |
5.4 |
5.1 |
9.6 |
10.7 |
Allianz |
€62,292 |
149.32 |
7.9 |
7.9 |
6.4 |
6.7 |
Talanx |
€7,341 |
29.04 |
8.0 |
7.8 |
5.0 |
5.5 |
Peer group average |
7.1 |
7.3 |
7.2 |
8.0 |
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Nürnberger Beteiligungs |
€743 |
64.50 |
11.0 |
N/A |
4.7 |
5.1* |
Premium/(discount) |
54.9% |
N/A |
(35.4%) |
(35.9%) |
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Source: Refinitiv consensus at 6 April 2020. Note: *Yield calculated based on dividend payment from 2019 earnings.
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