Investment Insights - OUTsurance Group (OUT)

START - R75.50 | FINISH - R88.50

1. HORIZON: 0 - 5 months (Medium-Term)

2. FROM: 23 October 2025 | UNTIL: 23 March 2026

3. MANAGEMENT ASSESSMENT: 18.8% growth

4. RECOMMENDATION: BUY

5. PROJECTION BASED ON: R15 000

TRADING PLAN

●     Potential entry: We are looking for an entry within the recent consolidation zone, specifically targeting the R74.50 to R75 price range for buying opportunities.

●     Risk Management: To protect against a failed breakout, a stop-loss should be placed at R68. This level is positioned below the recent lows and represents a calculated downside risk of 8.8%.

●     Profit Target: The primary upside objective is set at R88.50. Reaching this target would secure 18.8% profit from the suggested entry point.

WHY THESE SHARES HAVE POTENTIAL FOR PROFIT

●     Surprising performance in a tough climate: Despite difficult economic challenges marked by high inflation and severe weather events, OUTsurance has demonstrated operational resilience and profitability. In its latest financial results for the year ended June 2025, the company reported an impressive 33.7% increase in normalised earnings to R4.73 billion. This exceptional growth highlights the strength of its business model and disciplined underwriting in a challenging market.

●     The success of Youi: Youi, OUTsurance's Australian operation, has solidified its position as the foundation of the group's success and a primary engine for growth. The subsidiary's normalised earnings for FY2025 surged by an outstanding 45.5% to R2.29 billion, showcasing its growing market share and powerful brand recognition in Australia. This geographical diversification provides a crucial hedge against the volatility of the South African market and exposes the group to a more developed and stable economy.

●     Clear strategy for future growth: OUTsurance is actively pursuing growth beyond its core South African personal lines business. Key strategic initiatives include: 

●     OUTsurance life & business insurance: Growing these divisions will allow the company to leverage its strong brand and direct model to capture more market share in the life insurance and SME commercial sectors.

●     International expansion: Following the success of Youi in Australia, the group has launched OUTsurance Ireland, marking a strategic entry into the European market and creating new long-term growth.

TECHNICAL INDICATORS

The recent price action suggests that the share price may be establishing a significant bottom, with several key indicators pointing towards a potential reversal and a shift to upward momentum.

●     Successful test of major support: The share price has pulled back to a critical support zone, successfully testing both its long-term 200-day simple moving average (SMA) and a horizontal support level around R71. This confluence of support reinforces the strength of this price area.

●     Bullish reversal pattern: At this key support level, the share has formed a double bottom pattern, with the price recently closing above the R71 mark. A double bottom is a classic bullish reversal pattern that indicates selling pressure has been exhausted and buyers are beginning to take control.

●     Imminent volatility expected: The Bollinger Bands are contracting or squeezing. This narrowing of the bands signals a period of low volatility and consolidation. Often, such a squeeze is followed by a sharp price movement and given the other bullish signals, it suggests an imminent surge in momentum is likely.

●     Weakening downward momentum: The moving average convergence divergence (MACD) indicator is showing bullish divergence. This occurs when the share price makes a new low, as it did in forming the double bottom, while the MACD indicator forms a higher low. This divergence is a strong signal that the downward momentum is weakening and that a reversal to the upside is becoming more probable.

RISKS

●     Exposure to the South African consumer: The company's largest segment remains its South African operations, making it highly exposed to the health of the local consumer. High unemployment, low economic growth and inflationary pressures squeeze disposable incomes, which can lead to higher policy lapses and increased pressure on premium affordability.

●     Intense competition: The South African insurance market is fiercely competitive, with major players like Santam, Discovery and MiWay all competing for market share. This intense competition puts constant pressure on margins and demands significant marketing expenditure to maintain brand visibility.

●     Climate change and catastrophe risk: As an insurer, OUTsurance is directly exposed to the financial impact of climate change. The increasing frequency and severity of weather-related events, such as floods and storms, lead to higher claims costs. While managed through reinsurance, major catastrophic events can still cause significant earnings volatility.

SOURCES

●     Audited financial results PDF

●     OUTsurance lists on the JSE,after rebrand from RMI

●     OUTsurance boss says human touch beats AI

●     OGL results announcement SENS_16 September PDF

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** This article was prepared by BROKSTOCK analyst Maboko Seabi