Disciplined Underwriting And Expansion Will Strengthen Future Prospects In Insurance Markets

Key Takeaways

• IGI's disciplined underwriting and cautious risk approach enhance net margins and stabilize earnings amidst market competition.
  
• Strategic expansion in key markets and diversified product offerings boost revenue growth and profitability potential.
  
• Increased competition and catastrophic losses, coupled with market volatility, can pressure rates, undercut revenue growth, and impact financial stability and margins.

Catalysts

International General Insurance Holdings Ltd.

• IGI has demonstrated strong discipline and focus on bottom line profitability, taking a cautious approach to risk selection and ensuring adequate rates. This focus on disciplined underwriting supports healthier net margins and stable earnings.
  
• Despite market competition and pressures on rates, IGI has continued to strategically expand its presence in key growth markets, particularly in the U.S. and Europe, which are expected to drive future revenue growth.
  
• IGI's expanded geographic reach and diversified product lines enable it to respond flexibly to new growth opportunities in different regions and sectors, contributing to potential revenue and profitability improvements.
  
• The company's prudent capital management, evidenced by a strong balance sheet and significant capital returns through dividends and share repurchases, helps enhance shareholder value and potentially increases earnings per share (EPS).
  
• With a focus on internal efficiencies by bringing outsourced services in-house, IGI can improve operating efficiencies which may lead to higher net margins and better overall earnings performance in the coming years.

International General Insurance Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming International General Insurance Holdings's revenue will grow by 3.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 24.7% today to 25.0% in 3 years time.
• Analysts expect earnings to reach $147.4 million (and earnings per share of $3.39) by about March 2028, up from $133.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.2x on those 2028 earnings, up from 8.4x today. This future PE is lower than the current PE for the US Insurance industry at 13.9x.
• Analysts expect the number of shares outstanding to decline by 0.43% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.05%, as per the Simply Wall St company report.

International General Insurance Holdings Future Earnings Per Share Growth

Risks

• Increased competition is pressuring insurance rates in many markets, which could hinder revenue growth opportunities as the company may need to reject unprofitable business. This affects revenue and net margins.
  
• The presence of significant catastrophic losses (such as wildfires and hurricanes) and high loss activity at the start of 2025 can strain underwriting margins and impact profitability, influencing net income.
  
• Exposure to loss events like the California wildfires and global risk losses could elevate claims costs, thus negatively affecting earnings and increasing volatility in net margins.
  
• Rates in the Long-tail segment are under pressure, with potential for continued rate decline, which may lead to decreased revenue from this segment and impact net income due to loss in price adequacy.
  
• Market volatility and geopolitical pressures pose risks to financial stability and profitability, possibly impacting investment income and broader financial metrics like asset and portfolio value.
  

Valuation

• The analysts have a consensus price target of $31.5 for International General Insurance Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $589.4 million, earnings will come to $147.4 million, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 10.1%.
• Given the current share price of $25.49, the analyst price target of $31.5 is 19.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.