ClearView Wealth Ltd (ASX: CVW)

CVW Details

Decent statutory profit result but impacted by lapse experience: In last one year, the stock has moved up 36.5%, as at October 09, 2017 at the back of a decent profit result for FY17 and progress on strategic goals. The group’s underlying Net Profit After Tax (NPAT) increased by 12% to $30.4 million in the year to 30 June 2017 over FY16, and represented 4.88 cents per share. However, it was noted that group’s underlying NPAT growth was impacted in short term by implementing an enhanced actuarial IP claims reserving basis and lapse experience on IP portfolio following price increases to improve long-term profitability. Primarily, the group’s move to increase income protection price as introduced in October 2016 were stated to be important for the management of margin over time, however, the same led to higher lapses in the short-term. The reported NPAT was thus down 44%.
 

FY17 Financial Result (Source: Company Reports)

Segments’ result: CVW’s Life insurance segment is the performance driver for the group. In FY17, LifeSolutions sales were up 16% to $40.3 million driven by the IFA channel. There was significant progress in building a material Wealth Management business and a high quality Financial Advice business. The group’s Wealth Management underlying NPAT also surged 44% to $3.9 million at the back of strong inflows into contemporary products. The development and roll-out of a strategic advice program in Financial Advice helped in refining client value proposition. The group’s number of financial advisers across aligned dealer groups, Matrix Planning Solutions (Matrix) and ClearView Financial Advice (CFA), rose to 243. On the other hand, ClearView closed its Direct Life operation to new business in 2H of FY17 owing to higher client acquisition costs, rising consumer expectations and regulatory scrutiny.
 

Life Insurance Segment’s Results (Source: Company Reports)

Stock performance: While the stock has rallied in last one year, the returns in last six months have been meagre 0.7% but the stock trades at a very high price to earnings ratio. Meanwhile, CVW has been targeting 5% of the long-term life insurance profit pool and aims to have a material wealth management business. Further, the group has been putting efforts to building a high quality financial advice business providing strategic advice to clients. The strategic relations with Sony Life has also proved beneficial (Sony Life acquired a 14.9% shareholding in ClearView in October 2016). The group is conducting its annual general meeting in November 2017. Given the trading scenario and some performance challenges, we put a “Sell” recommendation on the stock at the current price of $ 1.45


CVW Daily Chart (Source: Thomson Reuters)

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.