[Analysis] Custodian & Allied Plc 2015 Q1 results

Custodian and Allied Plc released its 2014 Q1 results showing pre-tax profits rose 40% to N1.8billion compared to N1.3billion same period 2014.

Highlights

• Gross premium income dropped 14% to N4.7billion (2014 N5.5billion) this quarter. This suggest a shrinkage in insurance business during the period under review.
• However, reinsurance cost dropped by a massive 36% ensuring that the drop in gross earnings did not affect Net premium
• The company expensed N1.9billion this quarter compared to N3billion the prior quarter. The N1billion savings helped boost bottom line. Net premium was thus N2.8billion compared to N2.5billion a year earlier.
• The increase in pre-tax profits was therefore essentially due to a lower payment to Reinsurance companies when compared to the same period in 2014.
• Claims as a percentage of Net premium income was 33% compared to 32% a year earlier.
• Underwriting profits also dropped to 64% of Gross operating profit compared to 75% a year earlier.
• Underwriting profit basically shows how profitable the company’s core insurance business is performing. A lower percentage can indicate a presence of stiff competition as insurance companies reduce premiums to attract business.
• Earnings per share was 24 kobo (2013 19kobo)

What to look out for in their next result

• Gross premium income in their H1 result and its ability to remain bullish
• Will reinsurance expenses continue to be reduced or will it increase in H1?
• Admin cost is rising (15% rise QoQ). Can it be contained to below 10%?
• Share price is set to open at N4.14 indicating a P/E of 6x