Stock Watch: Jubilee Holdings Limited

Jubilee Holdings Limited announced their unaudited results for the period ended 31st December 2014 on 25th March 2015.

Recommendation: HOLD, Fair value 510.53

Dominant Industry Player in Life and General insurance business: 52% growth in Net Earned Premiums to KES 16.3 Billion

Gross written premiums increased by 30% to KES 30.3 Billion with net earned premiums for the year accounting for 67% of total income earned with a growth of 52% to KES 16.3 Billion. Ceded reinsurance premiums declined by 6.42% showing an increase in insurance policy risk uptake by the company as well as reflecting robust growth in the long term life business. Growth in premium earned is attributed to increased medical underwriting business of 21%.

Non-alarming rise in claims by 44.7%

The claims rose by 44.47% to KES 15.8 billion. This should not be too alarming for the claims margin remained below the net earned premiums margin at 65.11%, despite an increase of 4.22% in the claims margin and fell below premium growth within a similar period indicative of the firms superior claims risk management. Total expenses rose by 24% to KES 5.98 Billion; however the total expenses margin declined by 2.20% as a result of improved revenue generating capacity. Customer acquisition costs rose by 22.86% in tandem with increased insurance covers.  Investment income provided a reliable buffer following 30.74% growth to KES 4.83 Billion (KES 3.69 FY13) primarily from rental income, returns on quoted & unquoted equity and interest earned on fixed income securities.

24% Rise in Net profit Attributed to Strong Premium Growth

Net profit rose to KES 3.1 Billion (KES 2.5 Billion FY13). Increased medical business and good growth of the net earned premiums contributed to the rise in profit.  Earnings per share (EPS) grew by 26% to KES 48 per share. The stock is trading at 11.88x earnings with a high return on equity (ROE) of 23.26% and p/b of 2.56x.

Outlook: The firm has declared a final dividend of KES 7.5 including a bonus issue of 1 for every 10 shares bringing the total dividends to KES 8.5 which yields 1.49%. Book closure for the dividend will be on 8^th June 2015 and the dividend is to be paid on or about 24^th July 2015.  Management of Jubilee Insurance are focused on aggressive growth of the company stating interests to expand its local market share through acquisitions. In addition, there have been increased investments in properties in Uganda and Tanzania.