The Altshuler Shaham Ltd. investment house this week received a permit from the Ministry of Finance to operate as an insurance company. "Globes" last year revealed the investment house's establishment of insurance business. As part of this license, Altshuler Shaham will begin issuing life insurance policies through all the usual distribution channels. In the coming weeks, the Altshuler Shaham insurance company will also begin issuing savings and insurance policies for loss of earning power.
Yair Levinstein, CEO of Altschuler Shaham's provident and pension fund company, will now also be CEO of Altschuler Shaham Insurance. He said, "We will operate the new insurance company on the basis of the values to which we are committed in each of our business segments - excellence, professionalism, fairness, and transparency." Levinstein added that more than 250,000 clients of the Altschuler Shaham investment house, as well as additional external clients, could obtain value from the company's investment policy.
Alschuler Shaham is the second investment house to found an insurance company, after Psagot Investment House Ltd.. The company is setting up its business from scratch, thereby incurring heavy costs for selling policies, among other things, beyond the cost of founding a company and obtaining a license from the Ministry of Finance. Revenue will have to accumulate for years before the portfolio becomes profitable.
This sector is considered especially complex, and is furthermore controlled by the five major insurance companies, which benefit from economies of scale and extensive contacts with the insurance agents. The investment house, which is the fourth largest player in the provident and advanced training funds sector, is expected to preserve its work format for agents in line with the character of its existing business.
Joining others
By making this move, Altshuler Shaham is joining other large investment houses that have recently entered the insurance sector for the purpose of expanding their arsenal of long-term savings products beyond provident and pension funds. The first to enter the field was Psagot, Israel's largest investment house, which two years ago acquired the life insurance activity of Shirbit Insurance for NIS 10 million as a platform for establishing its own insurance business.
Meitav DS Holdings Ltd. (TASE:MTDS) is also engaging in insurance business, but in a different manner. The company elected not to pay the high price accompanying the founding of an insurance company, developing instead in the direction of marketing insurance products of other domestic and international insurance companies.
From the standpoint of the large investment houses, entering the insurance industry is an essential measure aimed at closing the huge gaps between them and their large competitors from the insurance market. In addition, in recent years the investments houses have been experiencing a steep drop in management fees for their various products (particularly for mutual and provident funds, and also in portfolio management), as well as a rise in management expenses. Entering the insurance market is designed to provide a future solution for this problem. Incidentally, a similar trend is now being observed in the insurance sector, meaning that these investment houses are essentially entering into a competitive field that is also undergoing significant changes.
Founded in 1990 by Kalman Shaham and Gilad Altschuler, Altshuler Shaham specializes in management of mutual funds, investment portfolios, provident funds, and pension funds. The group manages a total of NIS 64 billion in assets, with a specialty in options, shares, and bonds. Gilad Altshuler and Ran Shaham are joint CEOs of the Altshuler Shaham investment house.
Published by Globes [online], Israel business news - www.globes-online.com - on February 1, 2015
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