6 Ağustos 2012 Pazartesi

Anadolu Hayat Report - 06/08/2012


Anadolu Hayat ve Emeklilik 2Q12 Earnings Update: Soared life income with moderate pension contribution


·                     Anadolu Hayat ve Emeklilik (AHE) reported TRY 17.7mn net profit in 2Q12 (-17.0% q/q and -19.2% y/y), slightly below the market consensus estimate of TRY 18.4mn and delivered a quarterly RoE of 16.2%.
·                     1H12 net profit of the company stood at TRY 39.0mn marking 9.8% y/y expansion with a 12-m trailing RoE of 15.8%.

·                     2Q12 can be characterized for AHE with (i) strong life premium growth dominated by the term-life insurance policies supporting the life technical profitability and, (ii) moderate earnings performance in private pension side due to high operating expenses.
·                     Despite the life insurance side contributed significantly to the technical profitability of the company in the last a couple of years, the main growth area will be the private pension business in the medium-long term. Starting from 2013, the government will become direct contributor to the private pension system instead of tax benefit, which is expected to boost the fund size in the private pension system in two ways: (i) Increasing the fund size and, (ii) Lessening the outflows from the system. Therefore AHE will remain as a growth company with sustainable profitability around/over 20% RoE in medium-long term. We reiterate our Outperform recommendation for the stock with a 12-m target price of TRY 5.70/share.
·                     Term-life policies and the investment income on life funds improved the life technical profitability. Consumer loans grew faster in 2Q12 compared to the previous quarter. Therefore AHE benefited from both the consumer lending expansion and the more use of bancassurance. Therefore the life technical profitability of AHE almost doubled compared to the previous quarter and reached 11.7%. There is a very close relationship between term-life policies and technical profitability. The share of term-life premiums in total increased to ~41% in 1H12 (+16pps ytd) thus the technical profitability improved significantly. Consumer lending may further pick up in 2H12 due to the stronger economic activity compared to 1H12, which might result in further contribution from term-life policies supporting the technical profitability of AHE.
·                     As deposits interest rates increased a bit in 2Q12 the investment income on life funds soared from TRY 26mn in 1Q12 to TRY 43mn in 2Q12. Nowadays the deposit interest rates have been on a falling trend, which means that the contribution might be narrowing in 2H12.
·                     Private pension business continued its organic growth in 2Q12. After having 13.7k new pension contracts in 1Q12, AHE managed to have 19.4k new pension contracts in 2Q12. In July 2012 AHE added around 8k new contract to its portfolio in a single month, indicating strong organic growth pattern of the private pension business.
·                     Although the pension contributions remained almost unchanged in 2Q12 over the previous quarter, the private pension fund size grew by 8.2% q/q in the period (27.0% y/y). Given that the market interest rates have fallen significantly so far in 3Q12 and the stock market has risen sharply, we expect the private pension fund to grow beyond its organic pattern thanks to the marked-to-market gains. As end of July 2012 the private pension fund size reached TRY 3,821mn marking 3.4% over the end of 1H12.

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