Our opinion on the current state of CLIENTELE(CLI)

Clientele Life (CLI) is a small insurance company that sells short- and long-term policies and underwrites insurance products. Their offerings are distributed through agents, brokers, and tele-sales. On 3rd November 2023, the company announced its acquisition of 1Life Insurance for R1.914 billion, to be paid through the issuance of 117,815,756 ordinary shares in Clientele.

In its results for the six months ending 31st December 2023, Clientele reported a 35% drop in headline earnings per share (HEPS) and a return on shareholders' interest of 9%. The company stated, "Insurance revenue is 5% lower than the previous period at R972.5 million (2022: R1 billion), mainly as a result of a lower release of the Contractual Service Margin ("CSM") and Risk Adjustment ("RA"). Higher than expected withdrawal experience in the 2023 financial year ending 30 June 2023 resulted in a downward adjustment to the CSM compared to the restated prior period."

In a trading statement for the year ending 30th June 2024, the company estimated that HEPS would fall by between 30% and 35%. However, the company noted, "As a counterpart to the negative variances above, the impact of IFRS 17 is also expected to result in an increase in the Group's Net Asset Value to between R1.8 billion and R2.4 billion. The Group remains in a sound solvency and liquidity position and has continued to generate strong positive cash flows."

The share trades on a price-to-earnings (P/E) ratio of 10.2, which seems reasonably priced. The share is also actively traded enough to attract private investors. In our view, Clientele Life continues to represent good value at the current P/E ratio and is well-positioned to benefit from any improvement in the South African economy, especially in light of the newly appointed government of national unity (GNU).