Specialist insurer proves it’s really going places...
The investment column that makes the most of your money
GLOBAL Benefits Group is an insurance business with a difference. It is totally focused on medical, travel, life and disability cover with an international twist, ranging from companies wanting to insure local employees in far flung places to wealthy expats wanting private medical insurance from their home country.
The business floated in February at 150p and the price has drifted to 142½p. At this level the shares are worth a closer look. The company is growing fast, dividends are expected to be extremely generous and the market in which it operates is worth more than £7billion.
Most insurers in this sector are either large multinationals, for whom international medical, travel and life cover are just a small slice of their business, or they are small, local players. GBG is large enough to have an international presence but small enough to customise insurance products so they fit customers’ specific needs.
The group has around 150,000 clients in about 150 countries, including Myanmar, Brazil, China and many parts of Africa. Most customers do not want off-the-shelf policies. Instead, they want individualised cover to suit their circumstances.
An oil business operating in Angola, for example, may want to offer medical insurance to both local employees and international workers from many different countries. Fitting them all on to a single policy requires dexterity and flexibility, which GBG provides.
The group has a growing business in China, where wealthy individuals like the idea of buying life and medical insurance from an international firm. Many want to include grandparents as dependants, but this does not fit into standard Western life cover. GBG adapts policies so elderly dependants can be included.
The firm was founded in the US in 1981 and the corporate headquarters remain there, in Orange County, California. But the company underwrites insurance in London and has offices in numerous locations, including India, the Philippines, South Africa, China and Canada.
The group also prides itself on developing an extensive network of partnerships with hospitals and medical facilities so if an insured customer falls ill in Addis Ababa, Ethiopia, for example, GBG can swiftly hook them up with a nearby health centre. They have no need to pay and the bill goes straight to GBG.
Having grown steadily for more than 30 years, the group decided to float on AIM, largely because London is home to the largest insurance market in the world, so institutional investors understand the industry.
As a public company, the group is keen to expand into new regions and develop new products. In 2015, for example, it began offering life and medical cover to international students and has already attracted annual premiums of almost $10 million (£7.7million).
The company has also started GBG Assist, a 24-hour service helping other insurers with administration around medical emergencies. The division is expected to grow rapidly over the next few years.
GBG is run by Bob Dubrish, an insurance veteran with 35 years’ experience under his belt. He joined the company in 2015 but his director of strategic planning, Andy Thorburn, has worked at the company for 18 years and ran it from 2005 to 2015. Now 73, Thorburn is a down-to-earth insurance specialist from New Jersey with a strong entrepreneurial bent and a track record of success.
Revenues for the year to the end of June are expected to rise 23 per cent to $133million, with income expected to rise almost 29 per cent to $13.4 million. The group has said it will pay a dividend of 4.7p this year, but brokers believe it will more than double to 11.2p in 2018, putting the shares on a yield of almost 8 per cent.
Dubrish and Thorburn are extremely confident about the future, expecting revenues more or less to double to about $200million over the next four years, with even stronger growth in profits.
At the moment, most of the shares are in the hands of long-term investors, who owned stock before the company floated. Over time, however, these investors will almost certainly reduce their holdings to make more shares available to other investors and boost liquidity in the stock.
Midas verdict: GBG is a fastgrowing company in an attractive market and the shares are worth a punt on the dividend alone. At 142½p, the stock is a buy.