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Capital Market: What is Safe, Insurance?

In the past year, the Israeli public has spent quite a bit of time in closures and so have its insurance policies, which have not been redeemed and have led insurance companies, along with the rises in markets, to one of the most lucrative years they have known.

Their investors, however, enjoyed relatively moderate success

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Roast Greenberg

Thursday, 05 August 2021, 15:00 Updated: 17:22

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Local insurance companies are the huge investors of the Israeli economy, but they do not always receive the same trust they give to the companies in which they invest. The price of insurance shares has risen by about 10% since the recent majority reached a pre-Corona peak during May 2019. This is when the Tel Aviv Insurance and Financial Services Index, for example, rose in that period by about 32.97% and the Tel Aviv 90 Index by about 67.39%.

It should be noted that the shares of the insurance companies were among the first to fall with the announcement of the first closure in Israel, and their future was then vague. The main concern about their activities at the time was that the public would cancel the insurance policies they had purchased, as there was an expectation that the amount of property thefts would decrease during the closures.

The expectation of a decrease in the amount of thefts came true, but did not lead to the cancellations of the policies by the insured and made the corona year one of the good years for the insurance companies, who surprised with high accounting results.

In addition, the companies' shares completed the corona declines experienced by the rest of the economy in March 2020, and even crossed their pre-corona price record while setting new records.

But the improvement is minor: the peak of the new peaks is not particularly high than the peak of the previous peaks.

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Eyal Debbie, Director of Stock Research at Leumi Capital Markets (Photo: Oren Dai)

Shortly traded stocks

"Insurance companies are trading short years," explains Eyal Debbie, research director shares in Leumi Capital Markets "and in the corona price also dropped the price was unreasonable, reflecting insolvency, none of the insurance companies neither was even close to that.

In fact, shares of insurance companies began to fall about 20% on average have been the end of September - October 2019, because of low interest rates and fears of tightened regulation, which never materialized.

companies trades at an average of 7-8 on their capital, with average multiplier of companies in the index of " A25 stands at about 19 for example. In 2020, insurance companies achieved an average return on capital of about 10% -11%, so there is an unreasonable anomaly between the price and the companies' performance.

It is true that most insurance companies have reached a new peak in their share price, but it is not much different from the peak price reached before the corona.

"Investors are apparently deterred by the volatility of insurance stocks - which depend on capital market performance, their dependence on regulation, and the inability to fully decipher and understand the insurance business by reading the financial statements."

Insurance companies' share performance during the corona period (Photo: Walla !, no)

till 120

The Phoenix insurance company, however, jumped to a 53% higher peak than the previous one reached before the pre-corona, raising the average rise in shares of the entire sector. The Phoenix fell by about 47.79% from its peak on May 22, 2019 to March 18, 2020 - with the imposition of the first corona closure in Israel, but has since risen by 192.49% - until the price on the last trading day examined (in the table). In addition, while other insurance companies have declined since the peak reached after vaccines arrived, Phoenix stock has continued to strengthen.

Alon Glazer, VP of Leader Capital Markets: The two outstanding stocks for this industry during this period are Phoenix and Menora, which enjoyed a better period in their capital market investments, which flooded them with value. "Additional transactions. And Menorah can be attributed the sale of Mivtachim, along with the sale of some of its energy company's shares to Leumi Partners, as examples of value flooding, so that they both benefited from the tide in the capital market."

Glazer is aiming for a deal to sell 44.4% of the shares of the 'Up to 120' sheltered housing chain owned by the Phoenix Company to Shafir Engineering, at a value of NIS 1.35 billion, for which the Phoenix will record a capital gain of NIS 220 million.

And to the sale of 4.9% of the shares of Menora's subsidiary, Menora Mivtachim Pension and Provident, at a company value of NIS 2.5 billion, along with the sale of 12.8% of Menora Energy, Menora's renewable energy company, to Leumi Partners, Bank Leumi's real estate investment arm, for NIS 120 million NIS, which gives the energy company a value of about NIS 940 million.

Alon Glazer, VP of Leader Capital Markets (Photo: PR)

Traditional companies enter the direct channel

Among the large insurance companies, it was Clal that achieved the lowest return - 4.51%, since the peak price reached by its pre-Corona share - NIS 62.3.

Capital market factors explain this relative shuffle, mainly due to the negative impact of past management problems that continue to hurt the company.

The insurance company Ideai, however, was the only one to paint the table in red, having fallen 35.78% since its share reached the end of January 2019 at a pre-Corona record price.

Glazer explains the decline of 'Idea' in that "direct insurance has dominated the field of direct activity, and the entry of traditional companies into its field, along with the competition it has experienced from new companies, such as Vishor, has hurt it."

The new players, issued in 2021, were well received on the stock exchange (Photo: Walla !, no)

The new actresses

The jump of two new insurance companies to the local stock market egg, in the form of the insurance companies Libra and Vishor, also did not add to greater interest from investors in the field.

Libra did indeed receive an issue at a value 10% higher than it had planned, after raising NIS 25 million in mid-June this year at a value of NIS 450 million before cash, and its share has risen by 34% since the end of its first trading day on the Tel Aviv Stock Exchange. But Vishor has climbed only about 2% since it began trading last March.

"Inshortech companies were previously considered a threat," says Debbie, "but it was clear that the insurance companies would join the move and not fight it, and even lead the digitization of the field. Harel and Phoenix now invest considerable sums in these companies, and it should be remembered that each of the traditional companies It is now possible to purchase an insurance policy via mobile phone or any other digital means.

In addition, the next thing is actually in the underwriting - the ability to most accurately characterize the risk in the policy and then tailor it precisely to each customer.

In this context, the old companies in particular have a great advantage, since they have a wide database of all types of insurance. "

Etty Eliashkov, founder and CEO of Libra. A very successful first year for the Libra share (Photo: Yachz)

Running for long distances

Does this justify turning investors' spotlight on insurance companies?

Depends on who you ask.

It should be remembered that in the capital market, stocks are not necessarily examined per se, but are also compared to investment alternatives.

Those who follow insurance stocks, believe that this is the right long-term investment.

"For those who have patience," says Debbie, "and he is a long-term investor, insurance companies can be an option as they are priced and priced, in a very deep shortfall."

Glazer warns, however, that "although we are already after the corona, it should be remembered that both the rise in the capital market and the interest rate affect the value of companies.

The full report of the "table does not lie" is published on Fridays in the "Business" issue of Maariv

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