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Research: Financials
Nürnberger Beteiligungs (NBG) was able to moderately grow its gross premiums booked on the back of a solid 10% y-o-y increase in new premiums to €266m in H119. Meanwhile, the low interest rate environment dampens NBG’s investment income, with the recent central bank rate decisions suggesting this will continue for now. We note that NBG’s relatively high exposure to unit-linked and disability products somewhat limits the impact of accommodative monetary policy. A cap on fees earned on life insurance contracts is still being discussed in Germany. If introduced, it is likely to constrain new life insurance business.
Nürnberger Beteiligungs |
Steady progress in unfavourable environment
Insurance |
Scale research report - Update
18 September 2019 |
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Nürnberger Beteiligungs (NBG) was able to moderately grow its gross premiums booked on the back of a solid 10% y-o-y increase in new premiums to €266m in H119. Meanwhile, the low interest rate environment dampens NBG’s investment income, with the recent central bank rate decisions suggesting this will continue for now. We note that NBG’s relatively high exposure to unit-linked and disability products somewhat limits the impact of accommodative monetary policy. A cap on fees earned on life insurance contracts is still being discussed in Germany. If introduced, it is likely to constrain new life insurance business.
H119 net income slightly down
NBG’s pre-tax profit was broadly stable y-o-y at €39.0m in H119, assisted by lower additions to Zinszusatzreserve (ZZR) (€39.3m vs €140.6m in H118) and c 0.9% growth in gross premiums to €1.77bn. On the other hand, as expected by management, NBG generated lower disposal gains as part of its investment income related to standard insurance contracts (€115.5m vs €146.4m in H118). Moreover, NBG’s claims expenses rose 5.3% to €1.3m in H119, while operating expenses increased 10.7% y-o-y to €301.7m. A higher effective tax rate led to net income ex-minorities of €21.3m (down 0.9% y-o-y) or €22.1m (down 6.1% y-o-y) post-minorities.
FY19 guidance reiterated
NBG confirmed its earlier net income guidance for FY19 at €55m, which implies a c 10% y-o-y decline. The company expects a slight increase in new premiums in the life insurance business, with gross premiums booked at a level similar to FY18. In property and casualty (P&C), it anticipates a significant rise in new business, driven by consistent growth in property, personal liability, accident and vehicle insurance. This should result in visibly higher gross premiums booked. At the same time, it expects a solid increase in gross premiums in the health insurance segment. The above should be assisted by broader market growth, as the German Insurance Association (GDV) expects gross premiums to increase by 3% in 2019.
Valuation: Sustained dividend payout
Based on the company’s net income guidance for FY19, NBG’s shares are trading at a c 36% premium to its peer group on a P/E ratio. Based on the recently paid dividend of €3.0 per share (which has remained stable since 2013), the shares offer a yield of c 4.3%.
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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
As there are no Refinitiv consensus estimates for NBG, our P/E calculations for 2019 are based on management’s FY19 net profit guidance of €55m. We feel it is an appropriate measure as management expectations appear relatively conservative, as exhibited by the FY18 earnings beat. Based on these figures, the company is trading at a c 36% premium to the peer group. NBG pays an annual dividend of €3 per share, implying a 4.3% yield, which is a c 14% premium to peers.
Exhibit 2: Peer group comparison
Market cap (lcy m) |
Share price (lcy) |
P/E (x) |
Dividend yield (%) |
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2019e |
2020e |
2019e |
2020e |
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UNIQA Insurance Group |
€2,618 |
8.48 |
12.1 |
11.1 |
6.5 |
6.7 |
Helvetia Holding |
6,822 CHF |
137.20 |
12.8 |
13.0 |
3.7 |
3.8 |
Baloise Holding |
8,589CHF |
176.00 |
12.5 |
12.5 |
3.6 |
3.9 |
Ageas |
€9,987 |
50.40 |
10.6 |
10.8 |
4.8 |
5.0 |
Swiss Life Holding |
16,495 CHF |
491.00 |
14.0 |
13.0 |
3.8 |
4.3 |
NN Group |
€11,349 |
33.07 |
7.6 |
7.7 |
6.2 |
6.6 |
CNP Assurances |
€11,907 |
17.36 |
8.5 |
8.1 |
5.4 |
5.7 |
AXA |
€54,850 |
22.74 |
8.4 |
7.9 |
6.4 |
6.8 |
Allianz |
€89,888 |
212.00 |
11.2 |
10.5 |
4.5 |
4.8 |
Talanx |
€9,991 |
39.52 |
10.4 |
9.7 |
3.9 |
4.2 |
Peer group average |
10.8 |
10.4 |
4.9 |
5.2 |
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Nürnberger Beteiligungs |
€806 |
70.00 |
14.7* |
N/A |
4.3** |
N/A |
Premium/(discount) |
35.8% |
N/A |
14.3 |
N/A |
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Source: Refinitiv consensus at 16 September 2019. Note: *Calculated based on management guidance (no consensus available). **Yield calculated based on dividend payment from 2018 earnings.
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Research: Industrials
Cohort’s AGM statement indicates the current year has progressed well, with order cover of sales for the year rising to 76% following recent September orders compared to 60% at the same point of FY19. The order backlog at 31 August 2019 increased by over 10% since the year end to a record £210.9m (FY19 £190.9m) and the pipeline of potential business remains healthy. We maintain our earnings estimates, which means the shares are trading on an FY21e P/E of 12.6x, a significant and unwarranted discount to UK defence peers.