AXA Mansard is one of the few insurance firms, optimally positioned to meet the new capitalization and solvency requirements by the National Insurance Commission (NAICOM). The company is our stock pick for the week.
About the company
AXA Mansard was incorporated on 23 June, 1989 as a private limited liability company called “Heritage Assurance Limited” and was issued a composite insurance license by the National Insurance Commission (NAICOM) in March 2004.
The company’s name was changed to Guaranty Trust Assurance Limited in September 2004, following the acquisition of a majority shareholding by Guaranty Trust Bank Plc, and changed again to Guaranty Trust Assurance Plc in March 2006.
In November 2009, the company was listed on the Nigerian Stock Exchange. Guaranty Trust Bank divested from the firm in 2012, following CBN guidelines for banks to either divest from non-banking subsidiaries or form holding companies. Mansard was then bought by Assur Africa Holdings.
In December 2014, AXA acquired Assur Africa Holdings. The Company modified its name and corporate identity to AXA Mansard Insurance Plc in July 2015.
Recent results
Results for the period ended June 2018 show that gross premium written increased from N17.9 billion in 2017 to N23.5 billion in 2018. Profit before tax, however, dropped from N2.3 billion in 2017 to N1.8 billion in 2018. Profit after tax also dropped from N2.1 billion in 2017 to N1.5 billion in 2018.
Pricing
Current Share Price: N2.55
Year High: N2.94
Year Low: N2.02
Year to Date Return: 32.12%
One Year Return: 37.64%
Price Outlook
Chances of the stock going up in the medium to long-term are quite low. The stock has outperformed the All Share Index which is down 7.13% year to date. Market sentiments in the last few weeks have been largely negative, save for last week.
Valuation
Mansard is trading at a PE ratio of 13.31 times earnings, much higher than the average PE ratio on the Nigerian Stock Exchange (NSE) and its peers such as AIICO which is trading at 2.49 times earnings and even Custodian Investments Plc, the most expensive stock in the sector, which is trading at 4.4 times earnings.
The stock has traditionally traded at a premium, due to its foreign ownership.
Outlook
The insurance space will witness a flurry of activities in the months to come, due to the new tier-based capitalization system announced by the National Insurance Commission (NAICOM).
By virtue of its shareholders’ funds, Mansard would operate in the tier one space for composite insurance companies which require firms to have shareholders’ funds of at least N15 billion.
Results for the half year ended June 2018 show that Mansard (the company) has shareholders’ funds of N17.1 billion. The company may have to raise further funds however in order to meet tier one solvency requirements. In view of its foreign ownership, this would not be an issue. NAICOM has stated that it would communicate with each firm on the shortfalls and we expect some clarity from management on this.
On a company-specific basis, FY 2018 results could come in lower than the prior year, due to a drop in investment income, occassioned by lower net gains on property revaluation.