“I am glad that there is uncertainty in the markets. It puts people in proportion,” Clal Insurance CEO Yoram Naveh told Calcalist yesterday, with the publication of the insurance company’s reports for the third quarter and first nine months of 2021. The uncertainty is a consequence Of the discovery of the new corona strain Omicron, but despite the dangers inherent in it, “the risk in the markets is not aggressive at this stage” according to Naveh. He is careful to make a reservation: “If there is one thing the Corona has taught us it is that it is worthwhile to remain modest and enjoy the successes along the way, because everything is very fragile.”
In the third quarter of the year, Clal Insurance showed a slight decrease of 6.5% in total profit, which amounted to NIS 248 million, compared with NIS 265 million in the corresponding period. This is a lower profit than Migdal, NIS 416 million, which is the only insurance company that published a report for the third quarter before Clal. The return on capital of Clal amounted to 14% compared to 20% in the corresponding quarter and 22% recorded by Migdal. In the first nine months, it amounted to a little over NIS 1 billion – while in the same period in 2020 the bottom line was a loss of NIS 80 million.
Clal Insurance should attribute most of the credit to increases in the markets, which covered a decrease in some of the core activities. Thus, profit from long-term savings jumped by 130% to NIS 141 million. This is in view of the company’s activity in executive insurance – policies in which the funds managed are all invested in the capital market, and in which the company participates with the profit savers. Clal Insurance is the second largest company in the field, and it manages NIS 91 billion in executive insurance.
Increases non-marketable assets
On the other hand, Clal Insurance’s profit in non-life insurance was only NIS 3 million, while in the corresponding period it amounted to NIS 138 million. That is, the profit was almost wiped out, due to an increase in vehicle travel, with the release of the Corona limits, which led to an increase in vehicle claims.
“An insurance company cannot break away from its connection to the capital market. Insurance companies are ultimately a kind of option on the markets,” Naveh said, emphasizing: “Not every year the market will rise by 20%, so we must prepare for the day after.” “Clal Insurance is less sensitive to the capital market than other insurance companies. In previous years we were much more dependent on the market and interest rate movements, but after changing the investment mix, the dependence on the market is small.” The change in question is, according to Naveh, an increase in investments in non-marketable assets: “In the last three years, we have increased these investments and we are investing in all types of private equity funds, in infrastructure, in technology.”
Yossi Dori, the company’s chief investment officer, is confident about the increase in non-marketable investments. In the pension fund, for example, non-marketable assets reached a peak of almost 9%, double the rate at the end of 2018. Menora Mivtachim, on the other hand, has the largest non-marketable assets rate of 8.6% – an increase of 1% compared to 2018 . In this channel, Migdal leads the pension fund, with a 10.5% holding in non-marketable assets, compared with 6% in 2018. Clal’s non-marketable investments include two large Park Plaza hotels in London, with an initial investment of more than NIS 400 million. In addition, the company will provide financing of NIS 665 million for the construction of housing projects with a total volume of 506 housing units. It is estimated that non-marketable assets (investments and credit) amount to 20% of Clal’s asset portfolio.
With takeover intentions
Alfred Akirov, the largest shareholder in Clal Insurance, is currently preparing to apply for a control permit. Akirov holds through Alorov Real Estate, which he controls (79%), 15% of Clal Holdings, the public parent company of Clal Private Insurance, whose share has risen by 60% since the beginning of the year. The control will be the first time since 2013 that Clal Insurance has a controlling shareholder.
Between Akirov and Naveh there is a charged history. Last year there was a media confrontation between Naveh and private shareholders in the company. Naveh claimed that Akirov, along with shareholders Mori Arkin and Eyal Lapidot, pressured then-chairman Danny Naveh to remove him from office and even collected incriminating material against senior Clal executives. Of day, the chairman left and the CEO continued in his role in what was interpreted as his victory.
But now, with Akirov’s expected arrival, this victory may be only temporary. Naveh refuses to answer questions about his future under the ownership of Akirov’s possibility. Despite repeated questions, he agrees to say just this: “I and management are committed to the company, and this is the solution to flooding value to employees, customers and stakeholders. Our results are valued by the board and the market. We will work with any shareholder and any ownership structure.”
After Calcalist revealed Akirov’s intention to apply for a control permit, Akirov told Calcalist, in what appeared to be a clear message to Naveh: “I do not intend to manage Clal Insurance. There will be a board of directors on my behalf and he will choose the management. “Good, but a year ago, in 2020, it lost NIS 600 million. Let them bring good results, and then they have nothing to fear. Those who are good should not be afraid, those who are not good should be afraid.”
In any case, Akirov will surely be happy to see that since the beginning of the year, Clal Insurance’s assets have risen by 13% to NIS 268 billion, and equity has risen by NIS 1 billion to NIS 7.3 billion. Also, the economic solvency ratio, which determines whether the company will be able to distribute dividends, stands at 152%, while the distribution regulator resin stands at 100%. That is, the company can theoretically divide up to a third of its equity as a dividend.