Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) posted a 68% drop in net profit to NIS 113 million for the first quarter of 2011 from NIS 356 million for the corresponding quarter of 2010, due to lower capital market returns in the first quarter than in the corresponding quarter, which resulted in a drop in variable management fees on participating portfolios and lower investment income from non-life and health insurance. Migdal's total profit, weighted for changes in the value of assets available for sale, fell 80% to NIS 76 million for the first quarter from NIS 384 million for the corresponding quarter.
"The first quarter was all in all a very good quarter in terms of sales and premiums," Migdal CEO Yonel Cohen told "Globes". He added, however, "Obviously, the capital market affected us, as usual. We're a company that is very strongly affected in both directions in line with the market."
"Globes": We're at the start of a year that could be very significant for the capital market, possibly mainly for geopolitical reasons. What effect will these tensions have?
Cohen: "For many years, Migdal has diversified its investments internationally, as the numbers show. We aim for this diversification to be such that the risk in any one country will be small. As far as we're concerned, the spread is more important than the return here or there."
Migdal's strong point - long-terms savings - offered an optimistic angle, with 13% growth in premiums and fees to NIS 2.97 billion. They continued to provide the company with a stronger foundation than income from variable management fees on, which fell 87% to NIS 57 million for the first quarter from NIS 215 million for the corresponding quarter. Income from pension funds rose 46% to NIS 19 million and income from provident funds rose 33% to NIS 8 million.
Losses from non-life insurance totaled NIS 7 million for the first quarter, compared with a profit of NIS 79 million for the corresponding quarter, mainly because of lower investment income. Profits from health insurance fell 14% to NIS 24 million.
Financial services income fell to NIS 69 million for the first quarter from NIS 83 million for the corresponding quarter, due to lower profits on marketable securities, mostly in nostro investments in corporate bonds by Migdal Capital Investments. The company ended this activity in the fourth quarter of 2010. Pretax profit from financial services fell to NIS 11 million for the first quarter from NIS 21 million for the corresponding quarter.
Migdal's estimated value (EV) for its life and health insurance and pensions was NIS 11.62 billion in 2010, 85% higher than the company's market cap, and 6% more than the EV of NIS 10.96 billion in 2009. Migdal's EV is 21% than the EV of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS).
Migdal's share price rose 4.4% today to NIS 6.24, giving a market cap of NIS 6.3 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on May 26, 2011
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