Preliminary FY10 figures as expected – stock still very attractive

– We reiterate our Buy recommendation and lift our target price to EUR 50 (from EUR 44.5). We confirm our EPS estimates for 2010-12 of EUR 3.03, EUR 3.48 and EUR 3.68, respectively. For 2013, we calculate EUR 3.95.

– Vienna Insurance Group (VIG) is still traded at very attractive multiples. According to our estimates, the forward P/E is still around 12x, despite enormous growth potential in the coming years and despite the fact that the company is still holding a EUR 1.2bn war chest for further acquisitions.

– The current share price is only marginally above our estimated Embedded Value for 2010, which will be presented on March 31, together with the full set of FY10 figures. Thus, investors are buying the share at the net asset value plus the present value of the future profits of the existing life and health insurance portfolio (value in force). Therefore, they get the future profits of the property and casualty and the CEE growth fantasy for free.

– We like the strong balance sheet of VIG, including a solvency ratio of >200% and financial assets covering the technical reserves by 116.9%. The equity ratio amounts to a healthy 12.6%.

– The company presented its preliminary unconsolidated figures, including top line growth of 6.1%. Management said that the pre-tax profit for 2010 would reach EUR 505, an increase of 15% y/y, thus beating the latest stated guidance of the company (+10%). Management is confident that they will present another 10% EBT growth in 2011.

– The market share data as of 1-3Q10 is impressive. VIG ranks number one in Slovakia, the Czech Republic, Romania and Bulgaria, with market shares of 31.5%, 30.9%, 26.9% and 17.6%, respectively. In its home market Austria, the company is also number one, with a market share of 24.7%.