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HNB Assurance [HASU]: HOLD

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  • HNB Assurance [HASU]: HOLD

    HASU reported 1Q CY19 EPS of LKR 2.38, up 10.5% on a like-for-like basis after adjusting for the surplus transfers in 1Q CY18. At the group level, the investment result (+8.8% YoY) partially absorbed a drop in the underwriting result (-6.1%), while higher LI maturities resulted in a lower transfer to the life fund. Looking ahead, we expect higher surrenders in LI business as the income levels would see a negative impact from a general economic slowdown (low tourism and general business slowdown). The GI business would see growth from non-motor side, as more businesses will opt for enhanced protection. However, the motor side will continue to see slow growth with subdued vehicle imports. Overall, we believe CY19E would be a tough year, and expect HASU to trade at 0.8x CY19E BV with a TP of LKR 105.00 (-6.1% upside; +1.1% TSR) and maintain our HOLD rating.
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