Date and time of the compilation: 22 March 2018, 12:06 PM ... Source: Vienna Insurance Group, Economic & Strategy Re
ECONOMIC & STRATEGY RESEARCH 22 March 2018 English version only https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer https://trading.kb.cz/en/commentsanalysis/detail/a653ba49_mifid_ii_kb_research_offer
MiFID II
Insurance
Quarterly Results
Information about our offer
Austria
VIENNA INSURANCE GROUP Better-than-expected results, dividend proposal in line with expectations VIG results for 2017
Buy
EURm
Price 22.03.18 12m target
2017
change
KB estimate
consensus
9,051
9,386
3.7%
9,413
9,323
Net earned premiums
8,191
8,510
3.9%
8,533
8,419
EUR 27.1 CZK 688
Financial result
959
924
-3.6%
978
980
EBT
407
443
8.8%
423
433
EUR 26.0 CZK 673
Net attributable profit
288
298
3.4%
279
286
Upside to TP
-4.2%
Dividend
EUR 0.9 CZK 18.1
Total return
2016
Gross premiums written
Source: Vienna Insurance Group, Economic & Strategy Research, Komerční banka, consensus made by Inquiry Financial
The 2017 company results came as a nice surprise, surpassing estimates at all levels of the income statement. Management improved its mid-term guidance and proposed a dividend of EUR0.9 per share.
-0.9%
Facts and figures: (1) Gross premiums written rose 3.7% yoy in 2017. Property and casualty
Sector stance Overweight
insurance (+7.9%) and health insurance (+11.1%) developed more or less in line with our expectations, while we were too optimistic with respect to life insurance (-2.5%) for which we estimated a milder drop. (2) VIG’s main markets reported solid results. The biggest market, Austria,
Investment type EMG markets exposure
recorded a decline of 2.4%, adversely affected by reduced single premium business, which was, however, partly compensated by higher GWP in health and P&C insurance. Romania suffered from less MTPL business due to the introduction of reference tariffs (-5.0%), but registered a
1 year performance 30
significant improvement in claims ratio, more than compensating for a deterioration in cost ratio.
28
Consolidation of AXA Life helped results in the life segment. The Czech, Slovak and Polish
26
markets disclosed a nice yoy increase. (3) It is also worth mentioning the huge increase in the
24
Baltics (+133.7%), affected positively by the consolidation of BTA. Overall, we consider
22 20 03/17
developments on other markets positively. (4) EBT went up 8.8% to EUR442.5m in 2017. All of the 06/17
09/17
12/17
03/18
Source: Bloomberg
segments contributed positively, with the exception of the Remaining CEE segment, where VIG booked impairments in Ukraine, Moldova and Albania. (5) VIG reported an improvement in a total
Trading volume (in ths of shares)
combined ratio of 96.7% from 97.3% a year ago. The negative is its increase in the Czech
500
Republic of 7.0pp to 97.5%, driven by claims ratio due to the increased number of industrial
400
claims in property, higher claims expenses in MTPL and natural disasters. Other markets
300
registered either stabilisation or improvement.
200 100 0 03/17
Management’s mid-term guidance: VIG expects a GWP volume of EUR9.5bn in 2018 and a 06/17
09/17
12/17
03/18
Source: Bloomberg
profit before taxes with a range of EUR450-470m this year, one year ahead of the previous guidance. For 2020, the company estimates GWP more than EUR10bn and a profit before taxes within a range of EUR500-520m. The combined ratio is targeted of around 95% by 2020.
Share data RIC VIGR.VI Bloom VIG AV 21.9-28.8 52-week range Market cap. (CZKbn) 88.5 Market cap. (EURm) 3487 Free float (%) 30 Performance (%) 1m 3m 12m Share -0.1 2.7 22.2 Rel. to ATX Index -2.7 0.6 -2.6 Source: Bloomberg
with our and market expectations. VIG left its dividend policy unchanged, i.e. distribution of at least 30% of group net profits after minorities. Dividend per share will track the profit development. Potential impact on share price/recommendation: Today’s figures confirm positive trends. The market consensus showed this year’s results rather at the lower border of the management guidance. Despite the low interest rate environment, economic growth
The latest analysis and report: http://bit.ly/VIG_201703
Dividend policy: The company management proposed a dividend of EUR0.9 per share, in line
remains strong in the CEE region and should continue to support the company’s
http://bit.ly/VIG_Q317res
Miroslav Frayer (420) 222 008 567
[email protected]
Please see back page for important disclaimer.
Date and time of the compilation: 22 March 2018, 12:06 PM
Economic & Strategy Research
Vienna Insurance Group
performance this year. We keep our BUY recommendation. Owing to the fact that our target price at EUR26 is below the market price, we will make its update together with our new forecasts on results in the following weeks. Main risks: Natural disasters and insurance fraud are the main risks. Weaker economic trends and a longer period of a low interest rate environment would negatively influence VIG’s performance. Upcoming events: The conference call with VIG management starts today at 3 p.m. CET. The insurance company will announce its 1Q18 results on 29 May 2018. The ex-dividend date is preliminarily set on 28 May 2018. The annual general meeting should take place on 25 May 2018.
22 March 2018
2
Economic & Strategy Research
Vienna Insurance Group
KB ECONOMIC & STRATEGY RESEARCH Chief Economist and Head of Research Jan Vejmělek, Ph.D., CFA (420) 222 008 568
[email protected]
Economists Viktor Zeisel (420) 222 008 523
Marek Dřímal (420) 222 008 598
Monika Junicke (420) 222 008 509
Jana Steckerová (420) 222 008 524
[email protected]
[email protected]
[email protected]
[email protected]
Equity Analysts Miroslav Frayer (420) 222 008 567
Jiří Kostka (420) 222 008 560
Sectors David Kocourek (420) 222 008 569
[email protected]
[email protected]
[email protected]
Chief Economist of SG Poland Jaroslaw Janecki (48) 225 284 162
Head of Research of Rosbank Yury Tulinov, CFA (7) 495 662 13 00 (ext. 14836)
Chief Economist of BRD-GSG Florian Libocor (40) 213 016 869
[email protected]
[email protected]
[email protected]
Head of Fin. Markets Research BRD-GSG Carmen Lipara (40) 213 014 370
Economist Ioan Mincu (40) 213 014 472
Equity Analyst Laura Simion, CFA (40) 213 014 370
[email protected]
[email protected]
[email protected]
SG IN CENTRAL AND EASTERN EUROPE
SG GLOBAL ECONOMICS RESEARCH Head of Global Economics Klaus Baader (852) 2166 4095
[email protected]
Euro area Anatoli Annenkov (44) 20 7762 4676
Michel Martinez (33) 1 4213 3421
Yvan Mamalet (44) 20 7762 5665
United Kingdom Brian Hilliard (44) 20 7676 7165
[email protected]
[email protected]
[email protected]
[email protected]
North America Stephen Gallagher (212) 278 4496
Omair Sharif (1) 212 278 48 29
Latin America Dev Ashish (91) 80 2802 4381
Ankur Shukla (91) 80 6731 4432
[email protected]
[email protected]
[email protected]
[email protected]
China Wei Yao (852) 2166 5437
Japan Takuji Aida (81) 3 5549 5187
Kiyoko Katahira (81) 3 5549 5190
Arata Oto (81) 3 6777 8064
[email protected]
[email protected]
[email protected]
[email protected]
Korea Suktae Oh (82) 2195 7430
India Kunal Kumar Kundu (91) 80 6716 8266
Inflation Vaibhav Tandon (91) 80 6731 9449
[email protected]
[email protected]
[email protected]
SG CROSS ASSET RESEARCH – FIXED INCOME & FOREX GROUPS Global Head of Research Brigitte Richard-Hidden (33) 1 42 13 78 46
[email protected]
Head of Fixed Income & Forex Strategy Guy Stear (33) 1 41 13 63 99
[email protected]
Fixed Income Bruno Braizinha (1) 212 278 5296
Jean-David Cirotteau (33) 1 42 13 72 52
Cristina Costa (33) 1 58 98 51 71
Jorge Garayo (44) 20 7676 7404
[email protected]
[email protected]
[email protected]
[email protected]
Head of Euro Area Rates Strategy Ciaran O'Hagan (33) 1 42 13 58 60
Shakeeb Hulikatti (91) 80 2802 4380
Rates Derivative Strategy Adam Kurpiel (33) 1 42 13 63 42
[email protected]
[email protected]
[email protected]
Head of US Rates Strategy Subadra Rajappa (1) 212 278 5241
Jason Simpson (44) 20 7676 7580
Marc-Henri Thoumin (44) 20 7676 7770
[email protected]
[email protected]
[email protected]
Foreign Exchange Kit Juckes (44) 20 7676 7972
FX Derivatives Strategy Olivier Korber (33) 1 42 13 32 88
Alvin T. Tan (44) 20 7676 7971
[email protected]
[email protected]
[email protected]
Amit Agrawal (91) 80 6758 4096
Régis Chatellier (44) 20 7676 7354
Phoenix Kalen (44) 20 7676 7305
[email protected]
[email protected]
[email protected]
Head of Emerging Markets Strategy Jason Daw (65) 6326 7890
[email protected]
22 March 2018
3
Economic & Strategy Research
Vienna Insurance Group
The recommendation in this document and/or the document itself was not disclosed to the issuer before its dissemination. This recommendation is not updated at regular intervals. The date of the next update has not yet been determined and finally will be influenced by relevant changes of the facts used as the ground for this recommendation to reflect proper development in the industry and/or the analyzed company. The main methods Komercni Banka is using for setting target price for stocks are discounted free cash flow analysis and sector comparison. Other methods may also be used if deemed appropriate by the analyst (e.g. sum of parts valuation, discounted dividend valuation, discount / premium to NAV). Target price is set for the time period of 12 months. Komercni Banka is using three grades of investment recommendation: buy, hold and sell. The recommendation is set for the time period of the next three to six months. The most important factor for setting the recommendation is the difference between actual market price and target price calculated by KB equity research. The recommendation should reflect also other factors the analyst expects to influence the stock and market in the time period of the next 3-6 months, i.e. target price substantially above current price does not automatically mean a buy recommendation for the next 3-6 months. Valuation methods and factors key for setting the recommendation are explained in the text of each analysis. The chart below shows the structure of grades of valid investment recommendations of equity research of KB Economic & Strategy Research (8 recommendations). Investment recommendations of KB equity research (as of 22 March 2018)
Sell 25%
Hold 13%
Buy 62%
Source: Economic & Strategy Research, Komerční banka
KB Equity Research ratings on a 12 month period BUY: absolute total shareholder return forecast of 15% or more over a 12 month period. HOLD: absolute total shareholder return forecast between 0% and +15% over a 12 month period. SELL: absolute total shareholder return forecast below 0% over a 12 month period. Total shareholder return means forecast share price appreciation plus all forecast cash dividend income, including income from special dividends, paid during the 12 month period. Ratings are determined by the ranges described above at the time of the initiation of coverage or a change in rating (subject to limited management discretion). At other times, ratings may fall outside of these ranges because of market price movements and/or other short term volatility or trading patterns. Such interim deviations from specified ranges will be permitted but will become subject to review by research management.
22 March 2018
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Vienna Insurance Group
Economic & Strategy Research
Overview of recommendations and relationships with particular issuers CEZ
O2 CR
Philip Morris Pegas CR Nonwovens
CME
Overview of last investment research and recommendations related to stocks of particular issuers Recommendation Buy Hold Buy Buy Sell Target Price CZK 542 CZK 270 USD 5 CZK 17546 In revision Date 20.9.2017 18.9.2017 27.7.2017 22.8.2017 16.11.2017 Overview of investment researches and recommendations for last 12M (quarterly) Recommendation Hold Hold Buy Hold Sell Target Price CZK 44 CZK 267 USD 4.2 CZK 13500 CZK 876 Date 14.9.2016 31.1.2017 27.4.2017 25.5.2017 13.9.2017 Recommendation Buy Buy Buy Buy Hold Target Price CZK 420 CZK 267 USD 3.7 CZK 13500 CZK 876 Date 12.2.2016 9.12.2016 10.3.2017 13.6.2016 19.4.2017 Recommendation Hold Buy Target Price CZK 260 CZK 863 Date 22.3.2016 20.5.2016 Recommendation Target Price Date
Vienna Insurance
Fortuna
MONETA Money Bank
Buy EUR 26 3.3.2017
Sell CZK 198 4.1.2018
Buy CZK 93 6.3.2018
Buy CZK 198 30.11.2017 In revision In revision 9.11.2017 Hold CZK 128 12.6.2017 Hold CZK 96 20.5.2016
Buy CZK 90 17.8.2017 Buy CZK 95 9.6.2017 Buy CZK 90 6.9.2016
Valuation methods
DFCF
DFCF DDM
DFCF
DDM
DFCF DDM
DDM ERM
DFCF
DFCF DDM ERM
Frequency of rec. (per year)
twice
twice
twice
twice
twice
twice
twice
twice
Direct or indirect share (5% or more) of the issuer of the registered capital of KB
no
no
no
no
no
no
no
no
Other significant financial interest of KB and/or its linked persons in the issuer
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
KB direct or indirect share (0.5% or more) of the registered capital of the no issuer. Author’s direct or indirect share (0.5% or more) of the registered capital of the no issuer. Significant financial interest in the issuer of the persons participating in no elaboration of inv. research and recom. Relationships of Komerční banka with particular issuers KB Management or co- management of public offerings in the past 12 month Agreements or contractual relations for providing investment services with the issuer Agreement with the issuer on production and dissemination of the research KB market making for common stocks of the issuer
no
KB can have concluded agreements with the issuer for providing investment services. This information is protected by bank secret and could not be disclosed. no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
no
Note: DFCF – Discounted free cash flow model, DDM – Discounted dividend model, ERM – Excess return model Source: Economic & Strategy Research, Komerční banka
We do not include our one-off short-term recommendations based on Société Générale’s analyses to this overview.
22 March 2018
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Economic & Strategy Research
Vienna Insurance Group
Disclaimer The information herein is not intended to be an offer to buy or sell, or a solicitation of an offer to buy or sell any securities. All information and opinions have been obtained from or are based on sources believed to be reliable, but their completeness and accuracy are not guaranteed by Komerční banka, a.s., even though Komerční banka, a.s. believes them to be fair and not misleading or deceptive. The views of Komerční banka, a.s. reflected in this document may change without notice. Komerční banka, a.s. and its affiliated companies may from time to time deal in, profit from the trading of, hold or act as market makers of securities, or act as advisers, brokers or bankers in relation to securities or derivatives thereof emitted by persons, firms or entities mentioned in this document. Employees of Komerční banka, a.s. and its affiliated companies, or individuals connected to them including the authors of this report, may from time to time have a position in or be holding any of the investments or related derivatives mentioned in this document. Komerční banka, a.s. and its affiliated companies are under no obligation to provide any services to their clients on the basis of this document. Komerční banka, a.s. does not accept any liability whatsoever arising from the use of the material or information contained herein beyond what is required by law. This research document is primarily intended for professional and qualified investors. Should a private customer obtain a copy of this report, they should not base their investment decisions solely on the basis of this document and should seek independent financial advice. The investors must make their own informed decisions regarding the appropriateness of their investments because the securities discussed in this report may not be suitable for all investors. The performance attained by investment instruments in the past may not under any circumstance serve as an guarantee of future performance. The estimates of future performance are based on assumptions that may not be realized. Investment instruments and investments are connected with different investment risks, the value of any investment can rise and fall and there is no guarantee for the return of the initial invested amount. Investment instruments denominated in foreign currencies are also subject to fluctuations caused by changes in exchange rates, which can have both positive and negative influences particularly on the prices of the investment instrument and consequently on the investment return. This publication is issued by Komerční banka, a.s. which is a bank/stockbroker according to the applicable legislation and thus regulated by the Czech National Bank. Komerční banka, a.s. applies various measures to prevent conflict of interests in the process of creating investment recommendations, such as the implementation of an appropriate internal separation including information barriers between different departments of Komerční banka, a.s. in compliance with the requirements imposed by applicable regulation. The employees of Komerční banka, a.s. proceed in accordance with the internal regulations governing conflict of interest. The evaluation of employees creating investment recommendations is never by any means tied with the volume or profit of the trades with instruments mentioned in this document done by Komerční banka, a.s., or the trades of Komerční banka, a.s. with the issuers of such instruments. However, the evaluation of the authors of this document is linked to the profits of Komerční banka, a.s. which also partially include the results of trading with investment instruments. The recommendations mentioned in this document are intended for the public and the document before its publication is not available to persons not involved in the creation of this document. As per our practice, the issuers usually do not receive a copy of research reports prior to their publication. Each author of this research report hereby states that (i) the views expressed in the research report accurately reflect his or her personal views about any and all of the securities or issuers at stake. This document and its contents is not designed for persons with permanent residence or seat in the United States of America and to persons who are deemed as “U.S. persons”, as defined in Regulation S under the US Securities Act of 1933, as amended. The authors of this document are not allowed to purchase shares of the issuers mentioned in this document prior to a public offering of such shares. Please refer to our website http:\\www.trading.kb.cz for more details.
22 March 2018
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