OUTsurance Group Limited (JSE: OUT) has recently unveiled its highly-anticipated earnings report for the twelve months concluding on June 30, 2023. Operating across South Africa, Australia, and Ireland, the company is making waves in its South African and Australian markets. Furthermore, its strategic expansion into Ireland promises exciting opportunities for further growth in its thriving business. With a laser focus on cost efficiencies and enhancements in claims ratios, OUTsurance has skilfully navigated its growth sectors toward greater profitability. This remarkable progress underscores OUTsurance’s commitment to sustainable growth, even in the face of a challenging macroeconomic landscape.
In its latest report, higher premium inflation and a weaker rand contributed to a 21.1% expansion in its gross written premium to R28.49Bn, while its annualized new business premiums increased by 17.2% to R8.27Bn. Operating profit was up 41.5% to R4.07Bn, with normalized earnings expanding 39.8% to R3.24Bn. Aiding the operating profit expansion was the reduction in the claims ratio from 56.1% to 53.6%. The strong growth in its bottom line is reflected in its ROE, expanding from 22% to 29.8%. At the same time, its solvency multiple of 2.2 remains well above the 1.5 target, suggesting resilience in the company’s balance sheet and ability to pay its claims sufficiently.
Technical
On the 1D cart, a high-volume selloff broke the dynamic support of the ascending channel, but the breakdown turned out to be unsustainable. A subsequent reversal in the price action has brought the share price back within the channel, and with the 25-SMA (green line) trading above the 50-SMA (blue line), the momentum remains on the buyer’s side.
However, after a surge in buying momentum on Tuesday and Wednesday, the share price retraced and broke below the daily pivot point at R42.90 and the subsequent support at R42.27. The price action is now approaching the dynamic support of the channel once more, and the support at R40.72 could be crucial for the longer-term momentum.
A breakdown at R40.72 could result in the formation of a new downtrend toward R39.54 before retesting the prior demand zone at R39.81. A movement below this zone would send the share price below the 50-SMA, confirming the trend reversal toward neckline support at R36.94. However, if the channel support holds, a continuation in the current ascending channel could occur, ultimately leading the share price toward R44.14 (R1) and R44.47 (R2) in the longer term.
Summary
Despite building some momentum after its latest earnings report, OUTsurance is showing signs of exhaustion atop the uptrend as the share price retraces some of the weekly gains. With support established at R40.72, the share price could pivot to continue within the ascending channel toward R44.14 in the longer term.
Sources: Koyfin, Tradingview, OUTsurance Group Limited
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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