da Intermonte – REVO INSURANCE company research report

Buon pomeriggio,

di seguito e in allegato inviamo il company research report relativo a REVO INSURANCE a cura di Intermonte.

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Un caro saluto,

Chiara Cattaneo

M: +39 344 2756238

Growth Trends Confirmed, 1H Hit by Tail of 2023 Claims

• 2Q/1H24 results in line, FY target confirmed. Tail of 2023 Nat Cat claims burdens 1H results. Revo Insurance 1H results highlight the continuation of the strong growth trend for premiums (especially in property), operating profit, and net profit, all up ~50% YoY. The tail of claims for Nat Cat incurred by clients in 2023 adversely impacted results and the combined ratio, but it should have run its course by now. Results confirm the positive trajectory toward the updated Revo GWP target of ~€300mn as early as 2024 or one year earlier than in the published business plan. In detail:
  – 2Q24 GWP at €80.3mn (+35% YoY), reported operating profit at €5.4mn (+50% YoY), and adj. operating profit at €6.8mn (+36% YoY).
  – 2Q24 consolidated net profit at €3.4mn (vs €0.5mn in 2Q23), and adj. net profit at €4.4mn (vs €1.4mn in 2Q23).
  – Solvency II ratio 200.4 % (vs 213.2% as at end-March).
  – 1H24 CoR at 84.9%, up from 81.3% in 1H23, but still below 85.8% for FY23 and still in line with the medium-term objectives in the strategic plan. The slightly deterioration of the CoR was mainly due to the higher expense ratio (55.5% vs 50.1% in 1H23), while the loss ratio was down YoY (29.4% vs 31.2% in 1H23). The YoY increase in the expense ratio was down to the higher impact of reinsurance costs (17.3% vs 8.7% in 1H23) after the revision of reinsurance fees as a result of the impact of 2023 Nat Cat.
• 2023 Nat Cat tail does not change long-term positive outlook. We broadly confirm 2024 premiums approaching the 2025 target of €300mn, a year ahead of the plan. We continue to forecast adj. operating profit at >€30mn and net profit at almost €21mn for 2024. We have slightly lowered our expectations for the combined ratio in 2024 to include the impact from the tail of 2023 claims. Solvency II is expected at ~200% at the end of 2024, in line with end-June, before an expected recovery driven by operating capital generation driving S2 >220% in 2026 despite gradually rising dividend distribution.
• BUY confirmed, target at €12.0 confirmed. Revo must continue to carefully balance strong growth with capital management and risk. The company has significant opportunities linked to its technological excellence which will be further accelerated by pervasive AI breakthroughs and a presence in new markets. Expansion in Spain is expected to gain traction in 2025, showing that the company’s platform is replicable in other markets with limited additional costs. The focus on SMEs remains a key part of the company’s DNA, with options on other innovative segments like parametric insurance. We expect the company to update targets in 2025 given the strong anticipated growth. On our current expectations, the stock trades at attractive valuations. At target, Revo would be trading at ~7.6x earnings, which we do not think reflects the value of the company. We therefore confirm our BUY rating with a target price of €12.0ps (unchanged).