SGX: Trio Of Insurance Plays Averaged Three-Year Returns Of 30%

• Singapore’s three active insurance plays Great Eastern Holdings, United Overseas Insurance and Singapore Reinsurance Corporation have averaged a 1.5% decline in total returns year to date, which has taken their average 3 year total return to 30.1%.
• The trio maintain P/E and P/B ratios of 13.8 and 1.1 respectively, and a dividend yield of 3.5%. This compares to a median P/E of 9.8 across the regions primary listings of Insurance stocks. The region’s median P/B ratio is the same at 1.1 and indicative dividend yield is similar at 3.6%.
• All three stocks have recently reported their 2015 FY results with Singapore Reinsurance Corporation the most recent to report on 26 February.

There are three primary listed Insurance stocks on Singapore exchange (SGX), which are further categorised to the following sub-industries: Life & Health Insurance, Property & Casualty Insurance, and Reinsurance. This is based on the Global Industry Classification Standard (GICS®) which is also used to categorise stocks on SGX StockFacts.

In the year thus far, the trio of tocks averaged a total return of negative 1.5%, which brought their three-year return to 30.1%. All three stocks generated returns over the three year period as tabled below.

Source: SGX, Bloomberg & SGX StockFacts (data as of 26 February 2016)

Please note table above does not include Prudential PLC

The three insurance plays currently trade at price-earnings and price-to-book ratios of 13.8 and 1.1 respectively, and maintain an indicative yield of 3.5%. The P/E ratio shows what share price investors are willing to pay for every dollar the company earns while the P/B ratio is used to compare a stock's market value to its book value. The valuations compare to a median P/E of 9.8 across the regions primary listings of Insurance stocks. The regional insurance sector median P/B ratio is the same at 1.1 and indicative dividend yield is similar at 3.6%.

The Asia Pacific region lists over 130 primary listings that represent the Insurance Sector, with a median total return of 0.6% in the year thus far bringing the median 3 year total return to 12.1%.

Recent Reports

Singapore Reinsurance Corporation reported its full year financial results after the on 26 February close. Click here for the announcement. For FY15, the Group reported net profit  before income tax fell 41.1% to S$12.1 million, stating a highly challenging reinsurance market and a volatile investment environment compared to the S$20.6 million net profit before income tax achieved a year earlier. The Group’s revenue decreased by 11.9% to S$135.4 million due to lower premium reported by cedants and timing difference in the booking of certain accounts.

Great Eastern Holdings reported its full year financial results on 16 February. Click here for more on the announcement. For FY15, its non-operating profit was S$2.5 million compared with S$145.2 million last year against a backdrop of vastly different financial market conditions. In 2014, interest rates fell and equity markets rallied, giving rise to significant mark-to-market gains from the valuation of assets and liabilities. In contrast, interest rates rose and credit spreads widened in 2015, negatively impacting non-operating profit. Meanwhile for FY15, net profit from Shareholders’ Fund’s Investments of S$263.4 million was 29% higher than last year. The main contributor was the gain from sale of part of the Group’s investment in New China Life Insurance Company Ltd in Q2-15 and foreign exchange gains from US Dollar-denominated investments.

United Overseas Insurance reported its full year financial results on 5 February. Click here for more on the announcement information. For FY15 Underwriting profit was S$20.1 million compared to S$16.0 million a year ago. Non-underwriting income was S6.5 million compared to S$19.5 million a year ago. Profit before tax was S$26.6 million compared to S$35.6 million a year ago. The company noted that gross premiums decreased mainly due to the qualitative pruning of portfolio by management to sustain profitability.  

The table below details the three Insurance stocks, and is sorted according to market capitalisation. Click on each stock to visit its profile page on SGX StockFacts. One other insurance stock that has a secondary listing on SGX is Prudential PLC

Source: SGX, Bloomberg & SGX StockFacts (data as of 26 February 2016)

Please note Prudential PLC has been excluded due to its secondary listing status

Great Eastern Holdings

Great Eastern Holdings provides financial advisory services and insurance products in Singapore, Malaysia, and other Asian countries. It operates through Life Assurance, General Assurance, and Shareholders segments. The Life Assurance segment provides life, long-term health and accident, annuity, and unit-linked insurance products. The General Assurance segment offers short term property and casualty products, including fire or burglary insurance contracts and/or business interruption contracts, and public liability insurance contracts; and short term medical and personal accident general insurance products. The Shareholders segment provides fund management services for absolute return/balanced mandates; and manages various products, including Asia Pacific equities, and Asian and global fixed income securities portfolios for Singapore statutory boards, government-linked corporations, public and private companies, insurance companies, and charity organisations. For the financial statement of the financial year ended 31 December 2015, click here.

The company website is: https://www.greateasternlife.com/

United Overseas Insurance

United Overseas Insurance engages in the underwriting of general insurance and reinsurance in Singapore, ASEAN countries, and internationally. The company offers personal insurance products that include travel, personal accident, home protection, foreign domestic worker, and motor insurance products. It also provides commercial general insurance, such as fire, business interruption, machinery/equipment all risks, burglary and theft, money, marine cargo, fidelity guarantee, plate glass, public liability, work injury compensation, and group personal accident insurance. For the financial statement of the financial year ended 31 December 2015, click here.

The company website is: http://www.uoi.com.sg/

Singapore Reinsurance Corporation

Singapore Reinsurance Corporation operates as a general reinsurer company in Singapore and other Asian countries. The company operates through two segments, Reinsurance and Non-Reinsurance. It underwrites professional indemnity, directors' and officers' and products' liability insurance products. The company also provides information technology (IT) services, which include applications and infrastructure support, as well as IT system development and support services for various insurance-related systems; and underwriting support to the insurance sector. For the financial statement of the financial year ended 31 December 2015, click here.

The company website is: http://www.singre.com.sg/