Singapore Reinsurance Corp. Sees 81% Jump In Profits

Singapore Reinsurance Corp (SGX: S49) is the only reinsurance company listed in Singapore’s stock market. Besides reinsurance, the company also organises conferences and provides consultancy, publishing, and advertising services as its secondary businesses.

Business performance

For the year of 2013, the company’s revenue had grown by 7.4% to S$147 million while profits were up 81% to S$20.4 million.

During the year, Singapore Reinsurance Corp was able to underwrite its insurance business profitably, unlike in 2012. Compared with 2012’s S$5.24 million worth of losses from insurance underwriting, the underwriting pre-tax profit of S$1.9 million in 2013 has been a nice improvement. This came about mainly due to the company having to set aside S$2.2 million in expenses in 2012 for the allowance of bad-debts; in 2013, this allowance had become a gain of S$390,000 instead.

Meanwhile, the company’s pre-tax net income from investment from its reinsurance operations is up 17.2% to S$12.5 million.

Elsewhere, Singapore Reinsurance was able to improve its pre-tax profits by 9.8% to S$8.2 million for its other businesses outside of reinsurance.

Balance sheet

Singapore Reinsurance’s balance sheet was relatively similar at the end of 2013 as compared to a year ago though the company’s book value per share had managed to grow from S$0.348 to S$0.372. The company continues to utilize the funds earned from insurance operations as a source of capital for its other businesses.

What comes next?

Even though the company was able to achieve much better results for 2013, it warned of competition heating up in the reinsurance space, leading “inevitably”  to an “erosion” of premium rates it can charge for its insurance operations. Meanwhile, the company also sees higher operating expenses going forward along with a “highly challenging” investment outlook stemming from “geopolitical economic and climatic uncertainties globally.”

Foolish Summary

Companies such as Great Eastern Holdings (SGX: G07) tend to get all the attention when we talk about insurance companies in Singapore. But, it is worth noting that although Singapore Reinsurance might be a smaller player in the huge reinsurance market, it has still managed to survive for more than 40 years in a very competitive landscape. This goes some way in showing a certain degree of strength in the company’s management and business.

Shares of the company have almost doubled in price from S$0.145 at the start of 2009 to S$0.28 currently. It will be interesting to watch how the company fares in the future.

At its current price, Singapore Reinsurance’s valued at 0.75 times book value.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.