P&O posts positive earnings in latest quarter
The Star, 28 November 2000
IN THIS article investment advisory service Surf88 comments on Pacific & Orient Bhd.
LIKE most insurers, P&O's (RM3.02) results were not exciting. Most insurers have been posting losses in the July-September 2000 quarter but P&O managed to post earnings of RM1.8mil.
This was due to its relatively low exposure to equities (8% of total assets at end September 2000).
For the full year, the sharp profit decline was mainly due to:
After watching its market share eroded by more aggressive players since 1998. P&O appears to have fought back with an 8% growth in general insurance revenue in the latest financial year.
In terms of underwriting profit, we estimate that P&O was, at best, only marginally profitable as industry conditions remained tough.
We understand that car theft have been increasing at an alarming rate: a recent study shows that claims from car thefts could increase by another 22% in 2000 if the first-half trend persists.
PACIFIC & ORIENT'S RESULTS
Year End Sept. 30
Oct 98 - Sept 99
Oct 99 - Sept 00
Pre-tax Profit (RM Mil)
Net Profit (RM Mil)
Based on our estimates, P&O's claims ratio for the year ended September 2000 was 70%, up from 60% in the preceding year.
As mentioned above P&O's claims ratio was unusually low at 60% for the financial year ended September last year due to release from previous over-provisions.
P&O will continue to be exposed to the challenging industry conditions. The company has taken the painful decision to exercise financial discipline when stiff competition sent rates down to floor levels.
The raw challenge in the next few years would be to regain its make share. Note that P&O's revenue from the general insurance division is still more than 40% down from pre-crisis levels.
Price-earnings ratio valuations at 13 times in financial year ending September 2001 is reasonable.
Investors should bold P&O for its generous net dividend yield of 7%.
Excluding special dividends, P&O has paid 30 sen gross dividend per share in the past three financial years (7.5 sen per quarter) and we see this continuing.
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