Monday, 10 February 2014

Analysis of CNP Assurances


A French insurance company

Company: CNP Assurances

Business: A French insurance company. They are active within three fields: Savings products (save for your death in France! This product makes it possible to give over 152k € to children etc. without the heavy French taxes for inheritance), Pension products (additional pension for individuals) and finally Personal risk insurance (Disability, Health and Loans).

Active: Europe to s certain extent put strongly especially in France (53% revenue). Have also established themselves in South America and specifically in Brazil that today contribute as much as 36% of the revenue and is their strongest growth market.

P/E: 9.6

contrarian values of P/E, P/B, ROE as well as dividend

The P/E for CNP is excellent with 9.6 and the P/B is also great with 0.7 which means that we receive a very clear buy signal from Graham. The earnings to sales are low with only 2% and the ROE is also not very good with only 6.7%. The book to debt is horrible also for an insurance company since it is down at a ratio of 0.04. They have however (probably mainly due to Brazil but that does not matter where it comes from) had an excellent growth in the last five years with yearly 9%! This then gives us a motivated P/E of 22 to 26 which means that the company is highly undervalued on the market today. They pay a very nice dividend of 5.4% which represents 52% of their earnings so pretty high but not unsustainable if they keep up their growth.

Conclusion: Graham gives a definitive yes to this company and I must admit that there are several things that I like! The nice P/E, P/B and dividend for instance. I also like that they are growing like crazy in Brazil but... I do not like their debt and I do not like their ROE which for me this times means that I have to say no thanks to CNP Assurance. (as a small comment: when I lived in France I had them as my insurance company. They were known to be good but were also expensive).

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2 comments:

Vatsa said...

A good expensive insurance company which is growing is a good investment, is it not?

Fredrik von Oberhausen said...

CNP Assurances does indeed look like a good investment but as I mention in the conclusion I find the debt high and the ROE I am also not so happy about so I would think twice about making the investment.