Thursday, July 12, 2012

P&O dated June 2012

In the last four years prior to 2012 it has undergone a massive change in its business direction, and since then engineered a major turnaround in its fortune and profitability.

As a general insurer, P&O is now (June 2012) posting strong profits.

It is the No. 1 insurer in the market for motorcycle business. Its continuing quota share arrangement of 20% in this segment business with Hanover Re of Germany reflects sound confidence in P&O's business model.
Motorcycle insurance is the most profitable motor segment with huge growth potential leverage on the country's steady 5% growth in gross domestic product annually for 2010 to 2015. There is also an earnings upside to its claim ratio as the Government may restructure the current (June 2012) tariff and loading ceiling with an adjustment price mechanism.

Therefore, the current (2012) and next two years (2013-2014) would see the group's earnings jumping up by a three-year compounded annual growth rate of 14% in the financial year ended Sept 30, 2011 (FY11) to FY14, driven by huge profits from the group's motorcycle premium operation, which is benefiting from 2010's surge in premium rates.

Also Hanover Re could potentially return its excess profits to P&O starting from 2013 as part of its previous quota share arrangement.
It will be worth even more on a merger and acquisition (M&A) basis.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.