Phoenix Financial (PHOE) Q3 2022 earnings summary

Executive summary

• 9M 2022 comprehensive income was NIS 599m and ROE was 8.4%; Q3 comprehensive income was NIS 62m and ROE was 2.6%, as capital-market declines partly offset by higher rates weighed on results.

• 9M operating income before tax rose NIS 369m YoY to NIS 1,338m; AUM reached NIS 364b, supported by net inflows despite market declines.

• Premiums and benefit contributions increased 22% YoY to NIS 25.1b in 9M.

Financial highlights

• 9M pre-tax financial margin was negative NIS 721m; Q3 pre-tax financial margin was negative NIS 269m, as negative investment returns were partly offset by interest-rate effects.

• Additional core businesses contributed NIS 539m of 9M pre-tax income and NIS 131m in Q3; core non-insurance activities generated NIS 281m excluding special items, up nearly 14% YoY.

• 9M net income was NIS 1.084b, down from NIS 1.392b YoY; net investment and finance income was negative NIS 6.848b.

• 9M gross earned premiums rose to NIS 9.152b from NIS 8.199b; EPS was NIS 4.07 versus NIS 5.33.

Outlook and guidance

• Medium-term ROE target remains 12%–15%; 2025 targets include AUM of NIS 450–550b and comprehensive income of NIS 1.3–1.5b, based on 3% investment returns.

• Mid-term solvency target is 150%–170%; minimum distribution threshold is 111% without transitional measures.

• 2025 P&C premium target is NIS 4.2–4.8b; strategy prioritizes P&C, asset management, distribution and credit, with NIS 1b planned technology investment during the plan.

• Management expects P&C recovery, particularly in motor property, during 2023, and expects income from core activities to grow.

• IFRS 17 adoption is scheduled for periods beginning January 1, 2024; it was expected to reduce earnings volatility.