May 2007 Financial News

GHL Releases First Quarter Results

May 08, 2007

Results for the First Quarter Ended March 31, 2007

For the First Quarter Ended March 31, 2007, Guardian Holdings Limited (GHL) reported an Operating Profit (before fair value losses) of $86.65 million compared to $7.75 million in the corresponding period of FY06, a substantial increase of $78.89 million. Additionally, the Operating Profit (before fair value losses) reported for the quarter was also up by a considerable 25.31 per cent on the same figure for the entire fiscal year for 2006. However, while the Group saw a substantial increase in Operating Profit (before fair value losses), these profits were once again erased by fair value losses amounting to $251.14 million ($408.03 million in Q106). Thus, the Group reported a diluted Loss Per Share (LPS) of $0.95 compared to a LPS of $1.92 in the corresponding period for FY06.

For the quarter under review, Net Insurance Premium Revenue stood at $1.03 billion and was up by a significant 22.78 per cent or $191.46 million on the comparable quarter for FY06. This was the result of an 11.71 per cent increase in Insurance Premium Revenue to end at $1.26 billion coupled with a 20.98 per cent decrease in Insurance Premium Ceded to Reinsurers, from $284.66 million (Q106) to $224.95 million (Q107). The Chairman has noted in his statement to shareholders that the Life companies’ Premium Income showed strong growth, up 10 per cent on the corresponding period in 2006, while the Property and Casualty business was up by 28 per cent on the same period. He also stated that the UK Property and Casualty business had produced significant growth in both Gross and Net Premiums and recorded its first operating profit since 2005.

Investment Income closed the quarter at $175.35 million, up 9.07 per cent or $14.59 million on the corresponding period in 2006. While Fees and Commission income saw exceptional growth, moving from $19.36 million in Q106 to $30.73 million for Q107- a 58.72 per cent increase. Other Revenue also saw an outstanding increase, up 52.09 per cent from $52.78 million in the comparable quarter to end the current period at $80.28 million. Thus, the Group’s Total Revenue amounted to $1.32 billion for the quarter which represented growth of 22.81 per cent on the same figure for Q106.

The Group paid out $820.12 million in Insurance Benefits and Claims for the period under review, an increase of 28.87 per cent on the same period for FY06. This increase was the main result of the Group’s subsidiary, Fatum General Insurance N.V, having to pay out claims for four fires which occurred in Curacao; in addition to claims for two storms experienced in Europe. However, GHL managed to control Expenses, as this figure fell by 4.12 per cent from $429.31 million for Q106 to $411.62 million for Q107. This was due to introduction of stringent management controls on expenses in addition to the fact that Q106 had one off expenses from the restructuring of the UK. The gap is expected to widen going forward for fiscal 2007.

As stated previously, the Group reported an Operating Profit (before fair value losses) of $86.65 million and after deducting the Fair Value Losses of $251.14 million, the Group reported an Operating Loss of $164.49 million. This figure however, showed a significant improvement on the Operating Loss of $400.28 million for Q106.

Finance Charges for Q107 stood at $34.49 million and was up by 9.70 per cent or $3.05 million on the same figure for Q106 ($31.44 million). While, Share of Profits of Associated Companies amounted to $7.46 million, up by 11.79 per cent on the corresponding period for 2006. Thus, Loss Before Taxation was $191.52 million for Q107 compared to a Loss of $425.04 million for Q106. Taxation for the period under review was $25.06 million compared to $16.79 million for the same period last financial year. Consequently, Loss After Taxation totaled $216.57 million compared to $441.83 million for Q106.

The shares of GHL last closed at a price of $20.00 on the local market. While, the Group’s bottom line still lies in negative territory, the Chairman is optimistic about 2007 and believes that GHL is well placed to continue the growth path previously established. Additionally, the Group continues to maintain a healthy Balance Sheet, with a Net Asset Value per share of $16.80. This translates to an attractive market to book ratio 1.19 times based on the current price. Thus, at the relatively low price of $20.00 this share is trading at a bargain and we continue to recommend a LONG TERM BUY.

Gia Singh
WISE Equity Research Team