OUTsurance Group shares surge 8.4% on record dividend announcement

OUTsurance Group (OGL) made a striking impact on the JSE on Monday as its share price leapt an impressive 8.4% after a stellar dividend growth announcement brought optimism to investors.

The multinational insurance firm revealed it will pay a special dividend of 33.1 cents per share, alongside a final ordinary dividend of 149 cents, resulting in a remarkable total full-year dividend of 237.6 cents. This figure marks a robust 36.2% increase compared to the previous year.

The dividend payout stems from OGL's solid financial performance for the year ending June 30, 2023. The company highlighted that a mix of contributory factors led to the special dividend. Among these were the proceeds from its sale of Youi's engagement in Blue Zebra Insurance (BZI) and the ongoing monetisation of non-core assets.

Focusing on its international reach, OUTsurance Group operates across South Africa, Australia, and Ireland, catering to over 3.4 million policyholders with a primary focus on property and casualty insurance.

CEO Marthinus Visser expressed confidence in the group’s future, stating: "Increasing geographical diversification has significantly improved our risk profile". He noted that there remains a substantial runway for organic growth, resulting in a resilient outlook for the company in its chosen markets.

The numbers tell a compelling story. Normalised earnings rocketed by 33.7% to R4.73 billion, while the company’s gross written premium increased by 16.8% to R38.78bn. This growth was primarily driven by the robust organic growth from Youi Direct in Australia and the OUTsurance South Africa segments.

However, not without challenges, the growth was somewhat offset by the strengthening of the rand against the Australian dollar and a decline in gross written premium from Youi's broker channel, which is in runoff.

OUTsurance's claims ratio displayed a promising improvement, decreasing to 53.6% from 56.8% due to better natural disaster experiences and disciplined underwriting practices. With various operating segments achieving structural efficiencies, cost-to-income ratios improved, thanks to a simplified organic growth strategy and diligent expense management.

In terms of profitability, OUTsurance Holdings experienced a significant boost, with operating profits climbing by 25.7% to R6.05bn. This growth was driven by improved performance across all segments, with the exception of the start-up phase of OUTsurance Ireland.

Despite marking an operating loss of R448m, Visser indicated that this entity is expected to reach break-even by the 2029 financial year.

Meanwhile, OUTsurance Life reported an operating profit increase of 65.9% to R438m, underpinned by lower expenses and positive new business trends in its Direct and Funeral segments. OUTsurance SA Personal and Business segments also showed robust gains, with operating profits climbing by 32.9% and 56.6%, respectively.

Recent figures also showed that Youi Personal and Business recorded significant operational profit increases of 63% and 175%, respectively, although the business segment growth was off a low base. However, challenges persisted, with the Youi CTP segment reporting operational losses attributed to increased claims.

Investment income fared well too, seeing a 49.1% increase to R2.29bn, driven by organic growth in investable assets amid favourable equity market conditions. The property and casualty new business premium growth stood at 17.1%,.

Overall, the OUTsurance Group showcased resilience and growth, a promising sign for shareholders as well as industry observers, reflected in the sharp rise of its share price, which traded at R78.42 on Monday afternoon. This price represents an impressive 42% improvement compared to the same period last year.

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