OUTsurance Hits 30.8% ROE – Why Investors Are Paying a Premium
Edison Group | Mar 14, 2025 15:32
OUTsurance Group Ltd (JO:OUTJ)released H125 results on 14 March 2025, delivering 52% normalised EPS growth and return on equity (RoE) of 30.8%. South Africa (SA) property & casualty (P&C) delivered 32% earnings and 9% premium growth, while Youi (Australia) recorded 154% earnings and 22% premium growth. SA Life delivered 225% profit growth, while its Irish start-up made losses of ZAR246m (up 289%). Net asset value (NAV) per share was 870ZAc (large dividend payments over the period). It declared an interim dividend of 88.6c/share (up 44.8%). OUTsurance trades at a price to NAV of 7.5x, which is the highest level seen since its unbundling and superior to its peers.
Hard Underwriting Cycle Bolsters SA Performance
SA P&C earnings growth of 32% was supported by a strong local market with much lower weather-related claims following a period of high premium rate increases. In addition to the hard underwriting cycle, it also benefited from the J-curve for OUTsurance Business with the underwriting margin reaching 20% (from 2% in FY22). Premiums in SA were up 9% (including re-rating), and will become more dependent on new business production going forward. OUTsurance SA recorded real growth in policy count over the period, which is a strong result relative to peers.
Youi Claims Ratios Down to FY23 Levels
Youil Energy Technology Co Ltd (KQ:340930)suffered from high natural catastrophe (Nat Cat) claims in recent periods and loss ratios well over 60%. H125 was much better, with 54% for Youi Personal and 59.5% for Youi Business, supported by a benign Nat Cat environment. Very strong top-line growth, which has been a feature over recent years, continued with a 22% increase in H125. This was supported by the reduced utilisation of reinsurance in Youi Commercial and strong production from its CTP business.
Attractive Exposure to P&C Growth Markets
OUTsurance is the leading direct personal lines P&C insurer in SA and the fastest growing player in the Australian market. Its direct model has consistently delivered lower loss ratios than peers due to much lower distribution costs, sophisticated risk rating, enviable pricing power with suppliers and strong brand, supported by incentives (like cash-backs, which it introduced to the SA market). After successfully building a grassroots business in Australia, it has now entered the Irish market (posting ZAR246m of start-up losses in the period). Its SA direct life assurance business offers further diversification (225% increase in H125 earnings to ZAR185m). OUTsurance trades at a high price/NAV of 7.5x due to strong growth, superior returns, high cash conversion and diversification potential.
Get The App
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.