INSR 18.11.2018 kl 18:04 902

ABG gjentar kjøp-ambefaling på Insr etter kvartals-rapporten denne uken:

BUY, INSRI.OL: SP, NOK 8.18; TP NOK 11.00

Repricing puts claims back on track

Q3’18 beat claims driven, IT migration drove costs
Premiums growth driven by new wholesale contracts
Adj. EPS ’18e down, ’20e up; BUY its 10.5x P/E ’20e
Q3’18 bottom line still red, but reported gross CR at ~98%
The reported bottom line for Q3’18 came in at NOK -14m, which was better than the ABGSCe of NOK -17m. The beat was driven by lower than expected gross claims, however, prior year gains improved it by ~4pp, hence the underlying gross combined ratio (CR) came in at ~102%, still 7pp better, which strengthens INSR’s turnaround story, as claims are declining after being repriced. The surprise was both higher premium growth and faster IT-migration. The latter added NOK 10m in higher costs and the former higher sales costs (NOK 10m). Stripped for the added IT migration, the underlying cost ratio was 28%, 1pp softer, but driven by the higher than expected premiums, which grew by 15% y-o-y on a gross earned basis, supporting its wholesale strategy.

Adj. EPS down for ’18e, up 2% for ’20e from higher premiums
We adjust gross earned premiums up by NOK 61m for 2018e and add NOK 50m as well for both 2019e-20e, and lower our reinsurance share for ‘19e to 37.5% and ‘20e to 25% (2.5pp and 5pp, respectively), as its profitability building during 2019e, coupled with the additional tier 1 capital, will make it possible to lower it. We improve the underlying CR for own account, marginally for ‘18e to 112%, but keep our 99% and 93% for 2019e-20e, respectively. For finalisation of the integration, we add another NOK 5m on top of the NOK 10m taken in Q3 due to extra integration costs. In sum our adj. EPS ’18e is lowered by 16%, unchanged for ‘19e and up by 2% for ‘20e to NOK 0.77.

Running costs to come down in ’19 as integration completed
Making a deeper dive into the INSR case, it is now back on track, post the previously weak quarters of claims development, as re-pricing looks to be effective. In our view, the higher short-term extra cost is a front-loading of costs, hence, reported costs should be lower during 2019. A P/E ’20e of 10.5x is attractive and we reiterate BUY

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