Spanish insurers have climbed positions and are already among the most profitable in the entire national stock market, on average 8.5% between Mapfre and Línea Directa, although it has been at the expense of the latest market falls. Inflation has hit their accounts for the second quarter of the year, with the increase in repair costs, especially in the world of auto insurance, and this has been noticeable in the profitability of their business. From the maximum marked in the year, above 2 euros, Mapfre titles yield 20%. However, its shares recover 4% from the lows marked on July 27 -the day before the presentation of the group’s results-, which were levels not seen since September 2020.
In the case of Línea Directa, the revaluation has been close to 3% in the same period, despite the fact that the losses it accumulates in the year exceed 33%, taking into account that it started the year at a maximum, above 1 .60 euros. The European insurance sector falls by just over 9% in 2022. In the tailwagon are the two comparable companies of Línea Directa, Direct Line (which has suspended its buyback program) and Admirall -with a similar business profile, 100% online and focused on the automobile – which are left, on average, 35% since the first of January.
More profitability and more costs
The profitability of the dividend planned for 2022 of Mapfre marks a maximum since the Covid crisis, at 9.5%, at which time during the darkest weeks of crashes -in March 2020- it exceeded 11.5%.
This is the second most profitable payment of the Ibex 35, only surpassed by Merlin Properties, thanks to the , of 75 gross cents per share, as a result of distributing among its shareholders the capital gain from the sale of the Tree branches to BBVA for 1,987 million euros . The reit led by Ismael Clemente reaches a dividend yield of 10.5% between the extra payment and the ordinary payment, of 0.4, which raises the total remuneration for the year to 1.15 euros.
Mapfre has already exceeded the pre-Covid remuneration in 2021 with the distribution of 0.146 euros gross per share. This year, the consensus of analysts expects a slight drop in the dividend, to 0.143 euros, according to its results. The insurer chaired by Antonio Huertas will earn 660 million euros, according to forecasts, almost 14% less than the 765 million in 2021, and calls into question the objectives of its strategic plan to 2024, including a combined ratio of between 94 % and 95% and an ROE (return on capital) of 9%.
The 33% drop in Línea Directa has also led it to offer maximum dividend yields
“The increase in claims in the auto business, both due to higher prices and greater frequency, is damaging the operating margin of the non-life business. Net profit fell 4% in the second quarter, to 1,831.1 million euros, and EBITDA by 19.9% The combined non-life ratio climbed to 98.6% compared to the previous 95.9% due to this impact of inflation in different countries North America, Eurasia and South Latam reported figures above 100%, and this makes it difficult to think that it will achieve the 94-95% objective,” say analysts at Bloomberg Intelligence after learning the accounts for the first half of the year.
From Barclays they underline how “Iberia’s profit for the second quarter was 28% below estimates, due to the 4% drop in premiums affected by the car business and the loss of the joint venture it had with Bankia , with a combined ratio of 99.4% as a whole and, the auto part, at 100.5%”.
The 33% drop in Línea Directa, for its part, has also led it to offer, with equal payments, a dividend yield that is the highest in its short history as a listed company. Bankinter’s spin-off and subsequent listing took place just over a year ago. It reaches 7.4% in its return to shareholders, on the way to 8% in the following years, with one of the highest payout ratios in the entire Continuum, above 90%. Analysts forecast a net profit of about 93 million euros this year for the insurer in the hands of Patricia Ayuela, which would mean a drop of 15% compared to the previous year. As inflation has skyrocketed, estimates have been contained, mainly from April, when profits of 105 million were still expected.
In relation to the increase in costs, JP Morgan sees it as difficult to turn around the situation in view of “the problems of the supply chain and given the high levels of inflation”.
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