Like Israel's other insurance companies, Israel Phoenix Assurance (TASE:PHOE1; PHOE5) had a good year in 2003, thanks to the bullish capital market. According to Israel Phoenix's financial reports for the fourth quarter and full-year 2003, net profit for 2003 rose by 91.6% from 2002 to NIS 231.77 million, and its net profit for the fourth quarter of the year was NIS 60.4 million - 4.7 times the net profit for the corresponding quarter in 2002.
Israel Phoenix executives shared in the celebrations. The aggregate salaries of the company's top five executives doubled in 2003 to NIS 16 million. Israel Phoenix general manager Bar-Kochva Ben-Gera raised his salary 36% to NIS 4.42 million, including bonuses. His total salary cost rose 70% in 2003 to NIS 6.67 million. Israel Phoenix controlling shareholder Mayer's Cars and Trucks managing director Jacob Shachar is paying Ben-Gera, his boyhood friend, more than 50% more the Ben-Gera's peers: Clal Insurance (TASE:CLIS) president and managing director Avigdor Kaplan (NIS 4.27 million), and Migdal Insurance (TASE:MGDL) CEO Izzy Cohen (NIS 3.95 million).
A major change in strategy is behind the improvement in Israel Phoenix's bottom line. After years of doing nothing, in 2003, Israel Phoenix launched campaigns to win market share. At a time when sales of life insurance policies declined at almost all the insurance companies, Israel Phoenix posted an increase of 0.56%, compared with 2002. Under the leadership of Ben-Gera and Israel Phoenix executive VP insurance business Boaz Linenberg, the company ran very hard to stay in place, and carried out an aggressive sales policy for life insurance policies. The strategy succeeded very well, and Israel Phoenix's share of new policies rose from 15% in 2002 to 21% in 2003.
Israel Phoenix has paid a price for its strategy. Its commissions to agents jumped by NIS 90 million during 2003, a high price to pay for increasing output by NIS 144 million. Another cost was its net profit: Israel Phoenix's net profit was half those of its competitors Migdal (NIS 440 million) and Clal Insurance (NIS 427 million), while Harel Insurance (TASE:HARL1; HARL5) has not yet published its financial reports. Israel Phoenix's net profit was similar to that of Menorah Holdings (TASE:MORA1; MORA5), which is a third smaller.
Israel Phoenix's equity, as calculated according to Ministry of Finance regulations, reached NIS 1.24 billion, 131% of the mandated minimum. The company has therefore exceeded the dividend requirement imposed by the Shahar-Kass group when it acquired the company (130%). Israel Phoenix's new owners can start servicing the debt they took to finance the acquisition by withdrawing dividends. The maximum permissible dividend, under the minimum capital restriction, is NIS 126 million. However, Ben-Gera claims that there is no plan to distribute a dividend this year. "The capital is intended for company development and future investments," he said.
Israel Phoenix's equity totaled NIS 1.02 billion as of December 31, 2003, 27.6% more than on December 31, 2002. Its balance sheet total was NIS 21.32 billion as of December 31, 2003. Revenue from non-insurance business totaled NIS 39.68 million, reflecting a 3.86% return on nostro investments.
Published by Globes [online] - www.globes.co.il - on March 14, 2004