Phoenix Holdings Ltd. Publishes Financial Results for Q2 2023, With Continued Improvement in Income From Core Activities

Phoenix Holdings Ltd., a leading Israel-based financial, insurance, and investment group (TASE:PHOE) (“Phoenix,” the “Group,” or the “Company”), today reported its results for the second quarter of 2023.

Highlights

• Total comprehensive income in the second quarter of the year amounted to NIS 217 million, compared to NIS 184 million last year, reflecting 9% return on equity. Total comprehensive income in the first half of the year amounted to NIS 298 million, compared to NIS 537 million last year, reflecting 6% return on equity
• Total comprehensive income from core activities in the insurance, asset management, distribution and credit businesses in the second quarter amounted to NIS 357 million, reflecting a core (normalized) return on equity of 15%, and in the first half of 2023 - NIS 650 million, reflecting a core (normalized) return on equity of 13%
• The Company announced a dividend distribution of NIS 120 million for the first half of 2023. This distribution highlights the group’s financial strength, with Shareholder Equity of NIS 10 billion as of June 30, 2023, after the NIS 177 million dividend distribution in April 2023
• The negative impact post-tax of capital market effects, interest rate effects (reduced illiquidity premium), and special items totaled NIS 140 million in the second quarter and NIS 352 million in the first half
• Total assets under management as of June 2023 grew to NIS 417 billion, compared to NIS 371 billion at the end of 2022, including organic growth as well as assets from Psagot and Epsilon acquired this year. The Phoenix regards its investment management capabilities across savings and investment activities as a source of significant competitive advantage, and these acquisitions create meaningful synergies and fit the Group’s growth strategy
• During the second quarter, global credit rating agency Moody's issued an A2 international credit rating with a stable outlook to subsidiary Phoenix Insurance. Phoenix Insurance is the first insurance company in Israel to receive an international rating from Moody's. According to the rating agency’s review, the Group has a relatively low exposure to market risks due to its high return on equity and high growth activities, which enable the group to generate cash flow and strengthen its capital base. The Group’s financial strength is also reflected in Maalot’s upgrade of the Phoenix Insurance rating to ilAAA
• The capital adequacy ratio of subsidiary Phoenix Insurance remains high and reflect its capital ratio and liquidity balances. The Solvency ratio as of March 31, 2023 was 208% including transitional measures, compared to 212% as of the end of 2022, after distributing to Phoenix Holdings approximately NIS 555 million in dividends year-to-date (including a NIS 350 million dividend declared in August 2023). The Phoenix sees its substantial financial resilience and liquidity as a source of distinctive competitive advantage in advancing its strategic goals and continuing to generate excess returns and capture business opportunities
• The group strives to continue implementing and revising its strategic plan, while continuing to invest in organizational, administrative and technological infrastructures for the benefit of the group's customers
• The Company reviews transactions and acquisitions on an ongoing basis for compatibility with its strategy and targets. In this context, the Company published a tender offer for the shares of Gama
• In July 2023, the Company published its Sustainability Report for 2022

Eyal Ben Simon, CEO of Phoenix Holdings:

"The results of the group's core activities in the second quarter of 2023 reflect the continued execution of our growth strategy in the insurance, asset management, distribution and credit businesses, and reflect the benefits inherent in our broad product and service offerings, even in changing market conditions.

The financial results are affected by volatility in the markets, especially in the Israeli capital market; however, to date in the third quarter of the year capital market conditions are more favorable. The Group's achievements and financial strength allow us to distribute a semi-annual dividend of NIS 120 million to our shareholders, which constitutes approximately 40% of the Group's comprehensive income in the first half of the year.

As one of Israel’s largest financial institutions, the Phoenix is focused on ensuring the best value proposition for its clients and on creating and maximizing value for investors. Our investment in expanding the Group's range of solutions, in creating a high-quality customer experience and in the constant pursuit of excellence and achievements - both at the personal and group levels - is what makes the Phoenix Israel’s leader in this space.

We will continue to focus on activities with high returns on equity and on active management in order to best exploit our existing business opportunities. In light of recent changes in the capital markets, we are also working to improve our cost structure in order to deepen the Group’s competitive advantage. The Phoenix has a robust capital structure, high profitability and a leading market position. These strengths support the continued execution of our strategic plan and ability to meet our mid-term business targets.

I am proud that subsidiary Phoenix Insurance is the first large insurance company in Israel to receive global credit rating - A2 with a stable outlook - by Moody's. This rating is similar to those of the large Israeli banks, positioning the Phoenix in the same high-quality set of companies for foreign investors who recognize the high potential of Israel’s financial sector.

I would like to thank the Group's clients, employees, business partners and members of its board of directors for our joint work in continuing the Phoenix’s journey towards success."

Below are financial statement highlights:

Comprehensive income attributable to shareholders -

The comprehensive income attributable to shareholders in the second quarter of 2023 amounted to NIS 217 million, reflecting a return on equity of 9% for the shareholders. This compares with NIS 184 million in the corresponding period in 2022. In the first half of 2023, the comprehensive income attributable to shareholders amounted to NIS 298 million, reflecting a return on equity of 6%, compared with NIS 537 million last year. The lower income in the first half compared to the corresponding period last year is mainly due to non-operating capital market and interest rate effects.

Core Income from activities -

Core income from activities in the second quarter of 2023 amounted to NIS 357 million, which reflects a 15% core (normalized) return on equity. This compares with NIS 348 million in the corresponding period last year.

Core income from activities increased and amounted in the first half of 2023 to a total of NIS 650 million, reflecting a 13% core (normalized) return on equity, compared to NIS 578 million in the corresponding period last year, mainly due to the increase in income in the P&C segment. The profit was offset by a negative effect of NIS 140 million in the second quarter and NIS 352 million in the first half of the year due to non-operating capital market and interest rate effects.

Equity capital and total assets under management

Shareholders equity

The equity attributable to Company’s shareholders amounted to NIS 10 billion as of June 30, 2023.

Assets under management

Assets under management by the group crossed the NIS 400 billion threshold, reaching NIS 417 billion as of June 30, 2023.

Below are the main financial results of the group's operating segments:

(For more details regarding the changes in the financial results, see the Report of the Board of Directors on the State of the Corporation's Affairs and the Analyst Presentation)

P&C insurance

The comprehensive income before tax for the second quarter of 2023 amounted to NIS 97 million, compared to a comprehensive loss of NIS 92 million before tax in the corresponding period last year. The comprehensive income before tax for the first half of 2023 amounted to NIS 173 million, compared to a comprehensive loss of NIS 234 million before tax in the corresponding period last year. The higher profitability is mainly due to an increase in the underwriting profit, primarily in motor insurance. Phoenix reports an improvement in the loss ratio in the CASCO subsegment, despite the higher incidence of vehicle theft.

Health insurance (includes long-term care, medical, dental, travel, and foreign workers insurance)

The comprehensive loss before tax for the second quarter of 2023 amounted to NIS 77 million, compared to a comprehensive income of NIS 188 million before tax in the corresponding period last year. The comprehensive income before tax for the first half of 2023 amounted to NIS 73 million, compared to a comprehensive income of NIS 843 million before tax in the corresponding period last year. The decrease in profit is mainly due to the change in the risk-free interest rate curve and a decrease in the illiquidity premium during this period compared to the corresponding period last year.

Life insurance and savings

The comprehensive loss before tax for the second quarter of 2023 amounted to NIS 6 million, compared to a comprehensive income of NIS 314 million before tax in the corresponding period last year. The comprehensive loss before tax for the first half of 2023 amounted to NIS 83 million, compared to a comprehensive income of NIS 478 million before tax in the corresponding period last year. The decrease in profit is due to the effect of capital markets and interest rates in this period compared to the corresponding period last year. It should also be noted that as of the date of the report, the shortfall in variable management fees amounts to NIS 571 million (as of the report publication date - NIS 529 million).

Pension and provident funds

The comprehensive income before tax for the second quarter of 2023 amounted to NIS 40 million, compared to a comprehensive income of NIS 38 million before tax in the corresponding period last year. The comprehensive income before tax for the first half of 2023 amounted to NIS 60 million, compared to a comprehensive income of NIS 59 million before tax in the corresponding period last year.

Investment services segment (includes primarily Phoenix Investment House, formerly Excellence)

The comprehensive income before tax for the second quarter of 2023 amounted to NIS 60 million, compared to a comprehensive income of NIS 124 million before tax in the corresponding period last year. The comprehensive income before tax for the first half of 2023 amounted to NIS 111 million, compared to a comprehensive income of NIS 147 million before tax in the corresponding period last year. The decrease in income was affected by an improvement in the profit of the brokerage and portfolio business in the amount of NIS 28 million in the second quarter of 2023 and NIS 46 million in the first half of 2023, compared to the corresponding periods last year, which was offset by a non-recurring transactional profit recorded last year.

Agencies (retirement, benefits, and insurance agencies)

The comprehensive income before tax for the second quarter of 2023 amounted to NIS 82 million, compared to a comprehensive income of NIS 95 million before tax in the corresponding period last year. The comprehensive income before tax for the first half of 2023 amounted to NIS 155 million, compared to a comprehensive income of NIS 167 million before tax in the corresponding period last year. The decrease in profit is due to a non-recurring profit recorded in the periods last year totaling NIS 22 million as a result of a transaction.

Credit segment (includes Gama)

The comprehensive income before tax for the second quarter of 2023 amounted to NIS 27 million, compared to a comprehensive income of NIS 12 million before tax in the corresponding period last year. The comprehensive income before tax for the first half of 2023 amounted to NIS 55 million, compared to a comprehensive income of NIS 24 million before tax in the corresponding period last year. The increase in operating profit in the reporting period is mainly attributed to improvement in Gama’s credit spreads and an increase in total credit portfolio.

Conference Call Information

Phoenix Holdings will hold a conference call on Thursday, August 24, 2023 at 1pm local time in Hebrew and at 5pm local time / 3pm UK / 10am ET in English, and has published dial-in details and the presentation through the Tel Aviv Stock Exchange website.

About Phoenix Holdings

Phoenix Holdings is a leading Israel-based financial, insurance, and investment group traded on the Tel Aviv Stock Exchange (TLV:PHOE). Group activities include multi-line insurance, asset management, credit, and financial product distribution, and have demonstrated strong growth and performance across the cycle. The Phoenix serves a significant portion of Israeli households with a broad set of activities and solutions across businesses and client segments. Managing over $100 billion in assets, the Phoenix accesses Israel’s vibrant and innovative economic activity through a robust investment portfolio, creating value for both clients and shareholders.

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