Harel Insurance Investments & Financial Services (HARL) Q1 2022 earnings summary

Executive summary

• Q1 2022 comprehensive income was NIS 327m vs NIS 255m, and net income was NIS 621m vs NIS 244m; excluding disclosed special effects, comprehensive income was a NIS 286m loss vs NIS 398m income.

• Gross earned premiums, benefit contributions and investment-contract receipts rose 32% to NIS 9.8bn from NIS 7.4bn; AUM was NIS 362bn.

Financial highlights

• Total income was NIS 4,013m vs NIS 6,774m; gross earned premiums were NIS 4,511m vs NIS 3,671m, while net investment and financing income swung to a NIS 433m loss from NIS 2,995m income.

• Profit before tax was NIS 912m vs NIS 333m; net income was NIS 621m vs NIS 244m, and EPS was NIS 2.89 vs NIS 1.13.

• Shareholders’ equity increased 16% to NIS 8.9bn from NIS 7.7bn YoY; total comprehensive income included NIS 294m of other comprehensive loss, primarily from lower fair values of available-for-sale assets.

• Income from management fees fell to NIS 357m from NIS 457m, reflecting negative yields and no variable fees on certain legacy policies.

Outlook and guidance

• The risk-free curve increase through April 30 was estimated to raise capital surplus by NIS 1.2bn with transitional provisions and NIS 1.8bn on a full-calculation basis; estimated solvency-ratio increases were 24% and 20%, respectively.

• Post-quarter market declines raised the estimate of variable management fees not to be collected to NIS 257m from NIS 82m at March 31; subsequent Nostro losses were also recorded.

• IFRS 17 is scheduled for adoption in Israel from January 1, 2024; pro forma IFRS 17 and IFRS 9 statements are expected in Q2 2023 and the 2023 annual report.