Vienna Insurance Group: An European Dividend Stock With A Regional Growing Moat

Summary

  • On 28th of November, Vienna Insurance released its Q3 2018 results.
  • The company succeeded to combine commercial expansion with underwriting margin improvement.
  • Nonetheless, the year-to-date post-tax profit dropped slightly to €207 million because of the impacts related to the non-controlling interests.
  • However, the company confirmed its 2018 targets in terms of both premium volume and operating profit.
  • Implicitly, the company confirmed as well its intention to increase the yearly dividend.

Author's note: December 7, 2018, 8:45 a.m.: EUR/USD conversions have been corrected from the original version, where they had been incorrectly calculated.

Notes for readers

Vienna Insurance Group (OTCPK:OTCPK:VNRFY) is primarily traded on the Vienna Stock Exchange under the ticker VIG:AV. I will be referring to the Austrian symbol for the article. Amounts are in euro (€) unless mentioned otherwise. EUR-USD 1.330. Price of 1 euro in USD as of November 30, 2018. Furthermore, most of the figures are based on the financial reports of Vienna.

Executive Summary

On 28th of November, Vienna Insurance released its Q3 2018 results. Affected adversely by the fluctuations related to the non-controlling interests, the company recorded a declining post-tax profit, while the operating profit before the non-controlling interests was higher than last year for the first nine months of the year. The combined ratio improved by 1.0 percentage point to 96.3%, and the gross written premiums grew by 2.9% to €7.4 billion ($9.8 billion). The company continued to opt out of the single life business and to focus its commercial expansion on the health, non-life and regular life insurance businesses.

Furthermore, the insurer confirmed its 2018 targets, with a premium volume of 9.5 billion ($12.6 billion) and a pre-tax profit of €450-€470 million ($598-$625 million). Implicitly, the insurance company confirmed as well its intention to increase its dividend, as the firm would have the financial flexibility to raise it without deteriorating its capital adequacy. In my opinion, the dividend per share will be increased to €1.0 ($1.33), or an 11% year-to-year growth. Furthermore, on a mid-term horizon, the company will have the capacities to increase the dividend distributed to the shareholders, thanks to a portfolio expansion combined with high underwriting standards. Even if the company will undoubtedly not become a worldwide giant like its European peers (e.g., AXA (

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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