OUTsurance Group, which almost doubled its interim dividend to 56.8 cents per share from 23.5c, has identified Ireland’s motor and home insurance market as a new expansion opportunity.
Ireland is “a strong strategic fit”, the group said in its results for the six months to December 31, released yesterday. Ireland had a growing insurance market, favourable distribution dynamics, historic market profitability and a familiar regulatory environment.
The market entry is subject to obtaining a non-life insurance licence from the Central Bank of Ireland. The group already sells insurance products in Australia, New Zealand and Namibia.
“While the general economic outlook is tough, we remain optimistic about growth prospects given our low market share and growth potential in newly identified markets and channels,” Outsurance Holdings CEO Marthinus Visser said in a statement. OUTsurance Holdings is the 89.7% held subsidiary of OUTsurance Group.
OUTsurance Group’s earnings base has changed since the Hastings disposal in 2021 and the unbundling of interests in Discovery and Momentum Metropolitan last year. Group earnings now mainly comprise the performance of OUTsurance Holdings.
In the interim period, normalised earnings from continued operations increased sharply by 77.7% to R1.32 billion. Gross written premium increased 17.4%, benefiting from higher premium inflation, a weaker rand to Australian dollar exchange rate and a higher revenue contribution from new business initiatives.
Annualised new business premium growth expanded 8.6% following strong growth achieved over the 2022 and 2021 financial years. The claims ratio fell to 55.3% from 58.1% due to more favourable weather-related claims experience in Australia and better attritional claims ratios from growth initiatives.
A 65.8% increase in operating profit to R1.89bn was due to the strong performances of Youi and OUTsurance.
Victor Mupunga, the head of research at Old Mutual Private Client Securities, said in a note that Youi contributed 56% of the group’s gross written premiums and 39% to normalised earnings, while the South African OUTsurance operation contributed 47% to gross premiums and 61% to normalised earnings.
“Overall, we view OUTsurance’s maiden interim results as strong and remain confident in our long-term view that the group is well placed to continue growing earnings above its peers,” said Mupunga.
The 36.3% increase in normalised earnings was lower than the increase in operating profit because of lower gains on the equity portfolios, as well as the fact that the comparative period still included some associate earnings from Hastings.
“Growth initiatives, pricing discipline and focus on operational execution have allowed for a strong operational and financial performance despite the challenging macro-economic backdrop.
“Various headwinds had to be navigated including higher reinsurance costs, high claims inflation, a fast reset of vehicle accident claim frequencies and, in South Africa specifically, higher load shedding, high vehicle theft and ongoing high storm and flood claims,” said Visser in a statement.
“Our strategic focus over the last four years has been to expand our insurance product and distribution capabilities and we look forward to driving these growth initiatives towards profitability and scale in 2023,” he said.
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