Aug 2007 Financial News

GHL Releases Half Year Results

Aug 14, 2007

Results for the Half Year Ended June 30, 2007

For the Half Year Ended June 30, 2007, Guardian Holdings Limited (GHL) reported an Operating Profit (before fair value losses) of $167.56 million compared to an Operating Loss (before fair value losses) of $21.89 million for HY06. Thus, HY07 on HY06 the Group saw a substantial increase of $189.45 million. Operating Profit for the second quarter of FY07 stood at $80.91 million, up $110.55 million on the corresponding quarter in FY06. However, when Q207 is compared with Q107, Operating Profit from core operations was down 6.62 per cent or $5.74 million from $86.65 million.

While GHL saw substantial growth in core earnings, these profits were nonetheless eaten away by unrealized fair value losses which amounted to $249.74 million for HY07. As such, the Group reported a diluted Loss Per Share (LPS) of $0.81 for HY07 compared to a diluted LPS of $2.67 in the corresponding period in the last financial year. However, it is interesting to note that Q207 had a fair value gain of $1.40 million and as such reported Earnings Per Share (EPS) of $0.14 compared to a LPS of $0.75 for Q206.

For the Half Year period under review Net Insurance Premium Revenue amounted to $2.06 billion, up a significant 24.09 per cent on the corresponding period in FY06. This was the result of a 10.83 per cent increase in Insurance Premium Revenue to end at $2.43 billion coupled with a 30.38 per cent decrease in Insurance Premium Ceded to Reinsurers, from $533.89 million (HY06) to $371.68 million (HY07). The growth in Insurance Premium Revenue was primarily due to the recovery of the Group’s UK operations where premiums increased by 31 per cent from $741 million to $974 million. The premium growth in the UK was as a result of several factors – increased rates, increased volume of premiums and an appreciation in the exchange rate. The fall in Insurance Premium Ceded to Reinsurers was due to a change in the product mix in the UK from property insurance to motor vehicle insurance. Q207 on Q206, Net Insurance Premium Revenue also saw a significant increase from $818.86 million to $1.03 billion, however when Q207 is compared to Q107- this figure fell by a marginal 0.47 per cent mainly due to a fall of 6.61 per cent in Insurance Premium Revenue.

The Chairman has attributed the positive performance of the Group to notable revenue growth in all classes of the business over the 2006 levels. Life Premiums increased by 20 per cent, Health Premiums by 10 per cent and Property and Casualty Premiums by 29 per cent.

Investment Income ended the Half Year at $392.72 million, up 16.89 per cent or $56.76 million on the corresponding period in FY06. While Fees and Commission income saw exceptional growth, moving from $17.58 million for HY06 to $62.87 million for HY07- a substantial increase of 257.67 per cent. Other Revenue also increased, but by a significantly smaller margin of 10.83 per cent from $103.08 million (HY06) to $114.25 million. Thus, the Group’s Total Revenue amounted to $2.63 billion for the period under review which represented growth of 24.24 per cent on the comparable period in FY06. Q207 on Q206, this figure rose by a similar margin of 25.71 per cent; however quarter on quarter, Total Revenue fell by a marginal 0.59 per cent from $1.32 billion (Q107) to $1.31 billion (Q207).

Net Insurance Benefits and Claims amounted to $1.58 billion for HY07, up a considerable 29.50 per cent or $359.67 million on the same period for FY06. Quarter on quarter, this figure fell by 5.10 per cent or $41.86 million from $820.12 million (Q107) to $778.26 million (Q207). HY07 on HY06, Expenses fell by 3.94 per cent or $36.16 million to end the period at $882.50 million. Q207 on Q206, Expenses were also controlled, however Q207 on Q107, this figure rose by 9.68 per cent or $39.83 million.

As stated previously, the Group reported an Operating Profit (before fair value losses) of $167.56 million for HY07. After deducting the Fair Value Losses of $249.74 million, the Group reported an Operating Loss of $82.18 million, which was a significant improvement on the Operating Loss of $509.03 million for HY06.

Share of Profits of Associated Companies for the period under review stood at $18.89 million, up a significant 183.06 per cent or $12.22 million on the same figure for HY06. Q207 on Q206, this figure also saw substantial growth moving from $0.002 million to $11.43 million. Finance Charges for the period totaled $74.08 million, up 12.33 per cent or $8.13 million on the corresponding period for FY06. Thus, GHL’s Loss Before Taxation was $137.37 million for HY07 compared to a Loss of $568.30 million for HY06.

Taxation for the period under review was $47.12 million compared to $32.06 million for the same period in the last financial year. Consequently, Loss After Taxation ended at $184.48 million compared to $600.36 million for HY06.

The Board has decided upon a modest interim dividend of 5 cents per share, which will be paid on August 30, 2007 to shareholders on record on August 23, 2007.

Management does not expect the passage of the first hurricane for the season, Dean, on the Group’s operations in St. Lucia, Jamaica, the Cayman Islands and Belize to have any significant impact on its results.

The shares of GHL last closed at a price of $18.76 on the local market. While the current results continue to be hampered by the depressed state of the regional markets, the Company’s core earnings for the Half Year have shown considerable growth over the corresponding period. Additionally, the Group continues to maintain a healthy Balance Sheet, with a Net Asset Value per share of $16.98 which translates into an attractive market to book ratio 1.10 times at the current price. Thus, this share is currently trading at a bargain and as such we continue to recommend a LONG TERM BUY.



Gia Singh
WISE Equity Research Team