Harel Insurance Investments & Financial Services (HARL) Q2 2022 earnings summary

Executive summary

• H1 comprehensive loss was NIS 108m versus income of NIS 560m in H1 2021; Q2 comprehensive loss was NIS 436m versus income of NIS 306m.

• H1 net income was NIS 440m versus NIS 511m; Q2 net loss was NIS 181m versus profit of NIS 267m.

• Net investment and financing loss was NIS 4,182m in H1 versus income of NIS 6,342m; positive after-tax special effects of NIS 724m softened the reported comprehensive loss, which was NIS 832m excluding them.

• H1 premiums, benefit contributions and investment-contract receipts rose 24% to NIS 18.7bn from NIS 15.1bn; Q2 increased 14% to NIS 8.9bn.

Financial highlights

• H1 gross earned premiums were NIS 8,590m versus NIS 7,462m; retained earned premiums were NIS 7,513m versus NIS 6,590m.

• H1 total income was NIS 4,275m versus NIS 13,981m; pre-tax profit was NIS 632m versus NIS 711m, and net income was NIS 440m versus NIS 511m.

• H1 basic and diluted EPS was NIS 2.05 versus NIS 2.38; Q2 EPS was a loss of NIS 0.86 versus earnings of NIS 1.24.

• June 30 total assets were NIS 135,526m, equity was NIS 8,462m and cash and cash equivalents were NIS 5,546m.

• Market capitalization was NIS 8.2bn as of August 28, 2022; shareholders’ equity was NIS 8.4bn.

Outlook and guidance

• The sharp H1 rise in the risk-free interest-rate curve was expected to support capital surplus and solvency; falling equity markets and higher CPI were expected to weigh on them.

• Variable fees on specified yield-dependent policies remained suspended until cumulative investment gains recover prior losses; uncollected fees were NIS 324m at June 30 and NIS 268m immediately before publication.

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

• Investment in technology and human infrastructure continued to advance strategic targets and support industry leadership.