The life insurer with a difference

GBGI operates in niche markets and has a heavyweight partner
Thursday 12 Oct 2017 Author: David Stevenson

Guernsey-headquartered GBGI (GBGI:AIM) is a life insurance company that also offers cover for private medical treatment, disabilities and travel.

Its global footprint makes this company stand out; Angola is one of its strongest markets and it operates in 120 jurisdictions via a global network of representatives.

GBGI is a mix of insurer and managing general agent, the latter meaning it writes unusual lines of insurance which require specialised expertise.

Using analyst Canaccord Genuity’s forecasts, GBGI trades on 9.4 times 2018’s 18.7p of earnings while paying a dividend yield of 6.4%.

GBGI’s cash position more than doubled between 2014 and 2016 from $24.6m to $53.8m respectively. Canaccord concludes that ‘the history of GBGI’s cash flow implies that conversion of profits to cash has been fairly high and consistent’. This provides confidence on the dividend.

Given its product diversity and geographical spread, there are also plenty of growth opportunities for the company. It could benefit from trends such as global labour mobility and increasing middle classes in emerging markets for example.

French insurance giant AXA partners with GBGI acting as the company’s reinsurer for its health business and will also cover life and disability from January 2018.

In exchange for GBGI’s reinsurance business, AXA has agreed to cross sell business back to the company, act as a fronting partner and assisting the company in getting upgraded by insurer rating firm AM Best.

Canaccord has a price target of 200p, implying about 14% upside at the current 175.5p.

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