Insurance companies lick first quarter wounds

Migdal CEO Ran Oz, Clal Insurance Co CEO Yoram Naveh / Photo: PR, Kadia Levy

Plunging stock markets led to huge losses on investment portfolios, while the fear is that customers' positions will worsen.

2020 began with widespread flooding in Israel that led to unusually high insurance claims. But in the end, that phenomenon had a marginal effect on the very negative bottom line for the first quarter of the insurance industry as a whole. The effect of the coronavirus crisis made it forgettable.

The lockdown and the plunge in stock markets locally and worldwide following the outbreak of the virus led to an aggregate loss of NIS 2.85 billion by the independent insurance companies in the first three months of 2020. This compares with aggregate profits of NIS 1.98 billion in the corresponding period of 2019. In addition, the aggregate value of the assets managed by the companies shrank by nearly 9% over the three months.

The companies' reports were accompanied by personal disputes at the top of two major companies, disputes that are still not fully resolved. Since the beginning of the year, Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) has been rocked, not for the first time, by a struggle between controlling shareholder Shlomo Eliahu and a senior manager appointed by him, in this case Migdal Insurance chairman Nir Gilad, Meanwhile, at the Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) group, Clal Insurance Company chairman Dan Naveh sought to unseat the company's CEO Yoram Naveh (no relation). Both attempted ousters have not succeeded, because of the firm opposition of the regulator. Dan Naveh has already said that he will not seek a further term as Clal Insurance Company chairman, and he will thus leave by the end of the year.

The effects of the coronavirus outbreak are far from being limited to one quarter. The insurance companies' financials indicate that, alongside redemptions and withdrawals in some areas of activity, there is the fear that the positions of many customers will worsen.

On the positive side, the reports contain a reassuring message, at least as far as the companies' results on the capital market are concerned. Aggregation of the figures of the thirteen independent insurance groups, both public and privately held (excluding small digital insurance company weSure, which has yet to release reports) shows that the companies' total assets grew by almost 7% from the end of the first quarter to the dates on which their financials were released in May-June, as the markets staged a partial recovery.

All of the veteran insurance companies switched to losses in the first quarter. Aggregate losses on investments were NIS 41.4 billion, which compares with aggregate profits of NIS 16.9 billion in the first quarter of 2019. Management fee income fell by 31% in the major publicly traded insurance groups to NIS 1.4 billion in the first quarter this year from NIS 2.1 billion in the first quarter last year.

Thus all five of the large insurance groups that are active in long-term savings posted net losses in the hundreds of millions of shekels. The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) lost NIS 577 million in the first quarter; Migdal lost NIS 564 million; Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) lost NIS 555 million; Clal Insurance lost NIS 483 million, Menorah Mivtachim Holdings Ltd. (TASE: MORA) lost NIS 341 million, and the much smaller Ayalon Holding Ltd. (TASE: AYAL) lost NIS 144 million.

Among the publicly traded companies, only one posted a fairly minor loss: IDI Insurance (known to the public as Direct Insurance), which lost just under NIS 9.5 million.

Published by Globes, Israel business news - en.globes.co.il - on June 22, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Migdal CEO Ran Oz, Clal Insurance Co CEO Yoram Naveh / Photo: PR, Kadia Levy
Migdal CEO Ran Oz, Clal Insurance Co CEO Yoram Naveh / Photo: PR, Kadia Levy
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