On paper, Israel's insurance companies had a bumper year: Migdal recorded NIS 1 billion in profits, and Clal, NIS 885 million. A large share of those profits, however, are one-off accounting calculations stemming from a directive from the Supervisor of the Capital Market, Insurance, to cancel provisions for special-risk reserves and transfer all or practically all of the accumulated sum to equity.
Without those "profits," Israel's five largest insurance companies recorded 10% less profits in 2007 than in 2006, with a combined total of NIS 1.9 billion.
The second half of last year was bad for the insurance companies, and all of them issued profit warnings on their third quarter results. Inflation and the change in the dollar/shekel exchange rate increased financing expenses and affected general insurance. Declines in the stock market also eroded the companies' revenues from management fees on profit-sharing policies.
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Still, the reforms in the long-term savings industry brightened the picture, and the companies are now recording profits from managing provident funds, mutual funds and the profits from the pensions sector are rising.
Revenues from the premiums charged by the five big insurers grew 4.5% in 2007, to NIS 29.6 billion, spurred mainly by the 5.5% forward momentum in the Israeli economy. Migdal Insurance, controlled by the European Generali Group, is the only company to net over half a billion shekels from current operations, finishing 2007 with NIS 594 million on its bottom line.
Profits at Clal Insurance, controlled by IDB Holding Company, were down 17.5% from 2006 and totaled NIS 427 million, not counting the one-off profits from the floating of Clal Finances and the sale of a software company.
Clal continues to maintain very low profits in relation to the high premiums the company charges, netting just NIS 427 million on NIS 8.3 billion in premiums. Migdal, on the other hand, raked in NIS 594 million in profits on NIS 6.8 billion in premiums. Harel Insurance, controlled by the Hamburger family, collected much less than Clal in premiums - NIS 6.4 billion, and had a slightly better profit ratio, with NIS 401 million on the bottom line.
Business tycoon Yitzhak Tshuva's Phoenix Insurance suffered the greatest decline in profits - 21%, netting just NIS 300 million in 2007. Menorah Mivtachim, controlled by businessman Menahem Gurevitch, closes the list with NIS 221 million in net profits from current operations.
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