Clal Insurance 2015 comprehensive income down 21%

Izzy Cohen
Izzy Cohen

CEO Izzy Cohen: Regulation is eroding our profits.

The capital market's volatility in 2015 caused Clal Insurance Enterprises Holdings Ltd.'s (TASE: CLIS) comprehensive income for the year to fall 21% to NIS 285 million. The company's results, the first to be published by a major Israeli insurance company, indicate a mediocre year for the sector, even though its net profit shot up 115% to NIS 477 million. In explanation, Clal Insurance said, "The drop in comprehensive income during the reported period was mainly a result of lower investment profits in the nostro account and a decrease in variable management fees in 2015 from the portfolio of participating life insurance policies." The company added, "The insurance reserves were strengthened during the reported period, given the lower estimated rate of return on the portfolio of assets held as security for the insurance liabilities."

Clal Insurance cut its financing expenses by 36% to NIS 139 million. In the fourth quarter, the company reported improved profits as a result of the variable management fees from participating policies, with comprehensive income growing 278% to NIS 156 million, and net profit rising 72%.

Clal Insurance CEO Izzy Cohen said, "I am happy about the results, in view of the very difficult environment in which we operate, the drop in investment profits, the near-zero interest rate, and the decrease in variable management fees. To this should be added a regulatory environment that continually makes it difficult for us to improve our profit margin. A total drop of 20% in profit margins, while we are improving our underwriting results, gives me a good feeling."

"Globes": What is it about regulatory policy that is causing problems?

Cohen: "The regulatory measures are coming at a very sensitive time, when we are approaching a new capital regime - Solvency 2. This is a good capital regime that will suit the capital of business companies, but the sector in general does not have a very high capital ratio in comparison to Europe, and what source are we to use in order to increase our capital? The profit that is not distributed as a dividend. So we are being asked on the one hand to strengthen our capital, while on the other hand all the regulatory measures are in the other direction of eroding our profit margins in the coming years. In any case, we have to accept that the sector is in a new era, and prepare for it."

Published by Globes [online], Israel business news - www.globes-online.com - on March 23, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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