The quarterly financials of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), which bring us close to the end of the reporting season in the insurance sector, present weak results: a sizeable loss both for the second quarter and the first half year, alongside a continued decline in premiums in the group's insurance business.
Clal Insurance is currently at the center of a confrontation between its controlling shareholder, Eduardo Elzstain's IDB group, on the one hand, and Supervisor of Capital Markets, Insurance and Savings Dorit Salinger and the trustee of IDB's controlling stake Moshe Tery on the other. The disagreement is over how the sale of control of Clal Insurance should take place, and the matter is now in the courts.
In the second quarter, Clal Insurance posted a comprehensive loss of NIS 293 million, which compares with a comprehensive profit of NIS 176 million in the second quarter of 2015. In the second half of 2016, Clal Insurance's comprehensive loss was NIS 542 million, compared with a profit of NIS 238 million in the corresponding period of 2015. Competitors of Clal that have reported so far posted lower losses for the first half, and profits in the second quarter.
Excluding investment profits and losses posted to capital, Clal Insurance made a net loss of NIS 355 million in the second quarter of 2016, compared with a net profit of NIS 388 million in the corresponding quarter. The net loss for the first half year was NIS 588 million, which compares with a net profit of NIS 363 million in the first half of 2015.
Clal Insurance explains the decline in its results mainly by "strengthening of the insurance reserves on account of the low interest rate environment and its effect on capitalization rates in life insurance, long-term care insurance in the health insurance sector, and in non-life insurance."
Clal also explained that its results were affected by "additional special provisions in long-term savings" as the company updated its insurance liabilities arising from members' rights."
The total effect of these three factor on the group's results, post tax, was NIS 681 million in the first half year, which compares with a total effect of NIS 150 million in the first half of 2015. In addition, the company posted a decline in investment income in comparison with the corresponding periods.
Clal Insurance's share price has fallen by some 30% in the past year, bringing the company to a market cap of NIS 2.25 billion.
Meanwhile IDI Insurance, the insurance company of the Direct Insurance group, continues to present growth in the top line of premiums, but its profit declined in the first half by 58% to NIS 40 million.
In the second quarter the company posted a net profit and comprehensive profit of NIS 17 million, 63% less than in the corresponding quarter, but this is still a not inconsiderable profit, contrasting with the trend in the larger companies. The company's share price fell 4% yesterday, but over the past year it has risen 3%, the only such rise in the insurance sector, to give a market cap of NIS 2.65 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 25, 2016
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