What Investors Need to Know About United Overseas Insurance Limited’s Latest Earnings

Yesterday, United Overseas Insurance Limited (SGX: U13), or UOI, announced its financial results for the fourth quarter and full year ended 31 December 2017. Here are 10 things investors should know from the earnings announcement:

1. Gross premiums written for the fourth-quarter slipped by 0.6% year-on-year to S$21.32 million. For the full year, gross premiums written fell by 3.0% to S$103.74 million.

2. Underwriting profit, however, soared 32.2% year-on-year to S$11.47 million in the reporting quarter. For 2017, underwriting profit grew 2.9% to S$25.25 million.

3. Non-underwriting income (income from the company’s investment operations) came in at S$2.72 million for the fourth-quarter of 2017, up from a negative S$0.55 million seen a year ago. In 2017, non-underwriting income surged 405.5% to S$13.30 million.

4. Net profit for 2017 came in at S$32.9 million, up by 42.5% year-on-year.

5. For the whole of 2017, the combined ratio came in at 76%, slightly lower than 2016’s 77%.

6. UOI ended the year with a leverage ratio (total assets over total equity) of 1.71. A year ago, the insurer’s leverage ratio was 1.81, so there has been an overall improvement.

7. Cash and investments collectively accounted for 74.5% of UOI’s total assets at the end of 2017.

8. The board had proposed a final dividend of S$0.14 per share and a special dividend of S$0.05 per share for the fourth-quarter of 2017. Including the interim dividend of S$$0.03 per share, the total dividend for 2017 would be S$0.22 per share. This is a 29% increase from 2016’s dividend of S$0.17 per share.

9. UOI ended the year with a net asset value of S$6.17 per share, increasing 3.4% from the third-quarter of 2017, and up a healthy 12.6% from 2016.

10. The insurance firm had the following outlook in its earnings release:

“Despite improving economic outlook locally and regionally, the general insurance market is not expected to benefit to any extent in light of continued intense competition resulting from unabated growth in worldwide market capacity. Premium rates are likely to continue its slide as to render it difficult to underwrite profitably in many lines of business. Digitised online service will increasingly become an essential part of insurance operations. It will add to the business cost but may not contribute substantially to non-life business growth initially.

On the investment front, the operating environment may become more conducive. However, many uncertainties remain globally, particularly in the area of geopolitics. Prudence will continue to be the best policy.”

Using yesterday’s closing price of S$7.25, UOI has a price-to-book ratio of 1.18 and a dividend yield of 3%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of United Overseas Insurance Limited. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.