Migdal: Profit remained stable, return on equity stood at 22.4%
Insurance company Migdal presented a 5% growth in core profit, but the interest rate cut eroded the total profit, which stood at approximately 575 million shekels at the end of the quarter. The long-term savings sector continued to enjoy growth.
The insurance company Migdal finished the second quarter of the year with a slight growth of about 1% in total profit, which stood at approximately 575 million shekels. Migdal's return on equity remained high and stood at about 22.4%.
Profit from core operations grew by about 5% and stood at approximately 731 million shekels. The growth in core profits was mainly due to an improvement in underwriting profit in the long-term savings and health sectors. On the other hand, the decline in the interest rate curve led to an increase in insurance liabilities and eroded the excess financial profit. These factors hurt the total profit despite the high yields in the markets.
Migdal's volume of assets under management stood at approximately 631 billion shekels at the end of the quarter. The increase in the volume of assets was mainly due to the positive yields achieved during the quarter and an increase in net accumulation in pensions and provident funds, alongside growth in financial services assets (mainly mutual funds).
Improvement in core profits
In the life insurance sector, premiums of about 1.6 billion shekels were recorded, a decrease of about 5% compared to the corresponding period last year. However, the bottom line for the sector recorded a 379% jump in total profit, which stood at about 281 million shekels. This growth was mainly due to an improvement in core profits and excess financial profit, due to an increase in the yields achieved by the company in the capital markets.
In the health insurance sector, premiums totaled about 557 million shekels, an increase of about 6% compared to the figure recorded last year. However, the sector recorded a total profit (before tax) of about 64 million shekels, a decrease of about 51% compared to last year's figure. The decrease in profit was mainly due to a reduction in excess financial profit due to the decline in the interest rate curve and its negative impact on insurance liabilities.
In the general insurance sector, Migdal also recorded an erosion in profit, which stood at about 148 million shekels, a decrease of about 40% compared to the corresponding quarter last year. This was mainly due to a decrease in core profits in the automotive sectors, as well as a decrease in excess financial profit resulting, as mentioned, from the impact of the change in the interest rate curve on insurance liabilities.
In the long-term savings sector, Migdal benefited from the positive trend in the markets. Pension fund contributions grew by about 13% and totaled about 3.73 billion shekels. An even larger increase was recorded in provident funds, which showed growth of about 41% in contributions, which totaled about 1.35 billion shekels.
Migdal Insurance and Finance CEO, Ronen Agassi, stated:
"We are concluding the first half with a record profit from core operations, which is the result of strict implementation of our business strategy across all lines of activity. We are presenting a growth of about 20% in premiums and contributions, alongside consistent growth in revenues and profitability. Our main growth engines continue to yield strong results, primarily the pension activity which grew by 16%, alongside a 38% jump in the provident fund sector. Migdal is currently establishing its position as the fastest-growing pension fund in Israel, benefiting from positive and consistent migration."
