Falcom recommends overweight on Bupa, fair value at SAR 101.22

Falcom Financial Services recommended an “overweight” rating on Bupa Arabia for Cooperative Insurance, setting the stock’s fair price at SAR 101.22.

The insurer’s growth is expected to surpass risks arising from the current financial competition and delayed implementation of the unified health insurance in the Kingdom, the brokerage firm said in a recent report.

Bupa’s Q3 2017 performance implied lower subscriptions, due to a rise in net claims and a decline in premiums, when compared to the same period of 2016.

The company’s claims are one of the highest in the sector, after increasing at a compound annual growth rate (CAGR) of 42 percent from 2013 to 2016.

Loss ratio is likely to remain high between 79 percent and 80 percent, Falcom added.  

The company is expected to increase its market share to 24.2 percent by the end of 2018, thanks to a potential rise in insurance penetration rate and merger deals.

Bupa is projected to post net profit of SAR 743 million in 2017.

Cost rationalization and improved operating efficiency are the main strengths, the report added.