Share analysis: Grupo ASSA – financial Services

The Company

Grupo ASSA is a holding company listed on the Panama Stock Exchange (Bolsa de Valores de Panamá, BVP) under the ticker symbol ASSA. The group has operations across Central America in three main sectors: banking and financing activities, insurance and reinsurance, and other strategic investments, which account for 45.9%, 42.1% and 11.1% of the group’s revenues, respectively.

The company’s subsidiaries are among the leaders in their respective industries. ASSA Compañía de Seguros (Panama), for example, is the number two insurance company in the country, and received an “A” (excellent) financial strength rating and an “a” issuer credit rating from A.M. Best, which the ratings agency reaffirmed in February 2015.

ASSA Compañía de Seguros had approximately $205.5m in insurance premiums as of December 2014, representing roughly 15.8% of the Panamanian market. Its largest competitors are Compañía Internacional de Seguros and MAPFRE Panama, with market shares of 16.6% and 13.4%, respectively.

Regional Reach

Moreover, through its regional insurance subsidiaries, Grupo ASSA enjoys a 17.7% market share in Nicaragua, a 2.2% market share in El Salvador and a 3.4% market share in Costa Rica. In addition, this regional footprint helps Group ASSA to diversify its underwritten insurance premiums.

Grupo ASSA’s net income is generated across the region, with the largest share coming from Panama, at 49%, followed by Nicaragua, at 37%. The group’s Nicaraguan business is conducted by Banco de Finanzas, a subsidiary of Grupo BDF, which holds a 10% market share on the country by assets. As of December 2014, the company had $625m in total assets.

Furthermore, the bank is also a leader in the mortgage loan segment in Nicaragua, with some $145.9m in mortgages as of December 2014. Since 2010 Banco de Finanzas’ overall loan portfolio has grown at a compound annual growth rate of 14%, making it one of the fastest-growing banks in the country.

Group Assets

Grupo ASSA’s assets are divided into three non-public subsidiaries. In the insurance sector, the company holds a 100% stake in ASSA Compañía Tenedora. Meanwhile, in the financial sector, it owns 59.6% of Grupo BDF financial group in Nicaragua and 69% of La Hipotecaria Holding. Together, these three subsidiaries account for 76.5% – or $1.6bn – of Grupo ASSA’s total assets, which stood at $2bn as of December 2014.

Group ASSA’s portfolio of strategic investments, which accounted for 11.1% of the company’s total net income as of December 2014, is diversified across a variety of industries. For example, Grupo ASSA holds a 4.9% stake in BG Financial Group and a 4.6% stake in Empresa General de Inversiones, in addition to owning 6% of Corporación de Inversiones Aéreas (CIASA). Together, these three companies provided Grupo ASSA with more than $16.1m in dividends for the fiscal year ended December 2014. BG Financial Group and Empresa General de Inversiones are both publicly traded companies listed on the BVP with market capitalisations of $5.4bn and $3.8bn, respectively, as of December 2014. Meanwhile, CIASA owns 25.1% of Copa Holdings, a publicly traded company listed on the New York Stock Exchange under the ticker symbol CPA. As of December 2014, Copa Holdings had a market capitalisation of $3.4bn.

Group Performance

For the fiscal year ended December 2014, Grupo ASSA reported total revenues of $144m and combined net income of $56.6m, an 11% increase over the previous year. The company distributed around $1.1m in dividends in 2014.

In terms of its market performance, as of December 2014 the company had a total market capitalisation of $828.7m, with the group’s shares closing the year at $82. The stock was trading at a price-to-book ratio of 1.1x on controlling common equity and a price-to-earnings ratio of 16.2x on net income controlling. Although about 6% off of its 12-month high, the stock outperformed the BVP index by 1.5%.