Harel Insurance Investments & Financial Services (HARL) Q3 2022 earnings summary

Executive summary

• 9M 2022 net income was NIS 527m vs NIS 789m; comprehensive loss was NIS 355m vs income of NIS 942m, primarily reflecting market losses.

• Gross premiums, benefit contributions and investment-contract receipts rose 21% YoY in 9M to NIS 28.2bn; Q3 rose 15% to NIS 9.4bn.

• Ranked largest in Israel by gross earned premiums, benefit contributions and investment-contract receipts; served over 4 million customers, with AUM of NIS 354bn at September 30.

• Falling capital markets, higher interest rates and actuarial updates shaped results; rate movements also reduced insurance liabilities in several lines.

Financial highlights

• Gross earned premiums rose to NIS 12,872m from NIS 11,264m; earned premiums in retention were NIS 11,220m vs NIS 9,916m.

• Net investment and financing income was a NIS 5,535m loss vs NIS 8,041m income; total income fell to NIS 7,119m from NIS 19,462m.

• Profit before tax was NIS 759m vs NIS 1,109m; net income was NIS 527m vs NIS 789m, and EPS was NIS 2.45 vs NIS 3.67.

• Q3 net income was NIS 87m vs NIS 278m; comprehensive loss was NIS 247m vs income of NIS 380m.

• Total assets were NIS 134,895m at September 30 vs NIS 137,671m at December 31, 2021; equity was NIS 8,214m vs NIS 8,893m.

Outlook and guidance

• IFRS 17 adoption in Israel remains scheduled for periods beginning January 1, 2024, with transition on January 1, 2023; pro forma reporting requirements apply during 2023.

• The risk-free rate curve continued rising after Q3; equity-market declines and CPI increases were expected to weigh on solvency surpluses and the economic solvency ratio.

• Variable management fees remained suspended for specified yield-dependent policies until cumulative investment gains recover prior losses; the uncollected estimate fell from NIS 433m at September 30 to NIS 366m before publication.