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Samuel Hutchinson and David Walsh go large
Transcript of Samuel Hutchinson and David Walsh go large
Making an Investment Decision By :
David Walsh Group 1 In this presentation we will be looking
at the attractiveness of the Life Insurance
sector and also at each of the following
Legal And General
Chesnara What is Life Insurance? Insurance that pays out a sum of money either on the death of the insured person or after a set period. Sector Properties: The Global Life Insurance Sector in 2009 was worth $2.332 Trillion US Dollars.
The EU is the largest market for Life Insurance
The average European and USA life expectancy is 75 years + We will now examine the attractiveness
of the sector using:
Porter's 5 Forces
and the PESTEL Analysis 1.New Competitors
A huge Problem for large corporations! Needs to be analysed in detail
Life insurance sector fortunately is dominated by experienced, larger companies, no likelihood of another company coming in to steal business. Also, bigger companies offer greater variety of products for cheaper,
larger companies employ the best experts, this then eliminates competition from small providers 2. Supplier Power:
Another huge force in that it describes the amount of force a supplier actually has within an industry.
Within the life insurance sector, much of the power belongs to the Insurance provider, the price of products, the services they offer, and the decisions they make.
Attractive for an investor in that the company controls its' actions which are always in the company's benefit! 3. Buying Power:
Customers are still in their right to refuse this product. This however is limitedby the government as many companies are forced to provide life insurance for their employees.
Good for investors-always money to be made!! 4. Competitive Rivalry
Low Cost Culture
Means that the industry can
be a ferocious place to be! 5. Threat of Substitutes
Mutual Bonds Threat of New Entrants to the Market
Moderate Barriers to Entry
Indian / Asian Markets
Lack of coherent Regulation Now we will begin to look at a PESTEL analysis of the industry. This is important for an investor as it shows how an industry is organised. Political
Government Influence Environmental
Increasingly important Sociocultural
Cultural Problems Technological Used in all aspects of the industry
Reduces cost and used to sell products Economical
Used in all aspects of the industry
Lower costs, lower premiums
Competitive companies Legal
Huge penalties, bad reputations
Under strict legal policies
Provision of correct training
Regular assessment of companies compliance Legal & General
One of the UK's highest rated companies for financial strength
Facilitators of people through financial hardship
Expertise are hard to match, 170 years experience! They offer superior value with their wide range of products
They span the market at a competitive rate
Government policies and new schemes introduced into this company's sector has boosted its' overall performance. Legal & General Ratios: Old Mutual
Sharp Rise in Stock Price since early December (118.50-145.70p)
Company currently valued at £8bn
Overpriced?? Environmental Factors
Rising EU Interest Rates
Sold American subsidiary
Hugely competitive market
Based in 33 countries
166 year history - Trusted Name Earnings Per Share
Predicted EPS of 16.73p in 2011
2010 EPS was -6.50p
Likely to underperform Aviva Life Insurance
Aviva has 53.4 million customers worldwide.
£47.1 Million worldwide sales.
Operating profit of £2.55 Billion Pounds. Future Expectations
Aims to be in the top five of key markets across the world.
Promises to withdraw from any market where top five positioning is not possible.
This may affect their revenue as most markets are already very competitive and will result in missed opportunities. Aviva Ratios:
Return on Capital Employed - 0.57%
Return on Assets – 0.31%
Net Profit – 1.84%
Return on Equity – 9.40%
Return on Investment - 0.31%
With Exception of ROE are disappointing, however reflect difficult conditions. Hansard Global Plc
Flexible, efficient products.
Ability to change as the industry changes.
Dedication to excellence will continue.
However... Strength – Hansard Online
Day-to-day running of business
Update to date information
Impersonal Future Prospects:
New to London Stock exchange
Unknown name, lack of confidence
Bad for business
Trustworthy company for the future. Ratios/Financial Strength
Earnings per share 0.29
Price/Earn 855.17 Future Prospects
Expansion into Europe
Strong position But...
Risky Investment Price earnings (P/E) Ratio=6.12
Profit after tax after preference dividend / No. of Ordinary Shares= 14.82
Gross Profit Margin=0.89 After Looking at all of the above, we believe that we can now draw to an easy concluscion about the industry and each of the companies... Firstly, the industry itself looks like an attractive market sector to be in if you decide to invest in the right company. This is mostly because:
Experience counts towards success,
and new competitors are not a huge problem. We can also rank our companies in the following order, based on their ratios, company structure and future expectations:
1. Legal & General
4.Hansard Global Plc
5. Chesnara And Finally to conclude;
Based on Legal & General's current ratios, future expectations and structure as a company, we believe this company is a "hold." This is because of the current economic downturn which could mean less people taking out life insurance. The sector however is stable!