Release Date: November 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Phoenix Financial Ltd (XTAE:PHOE, Financial) reported a strong return on equity of over 24% in the third quarter, despite challenging market conditions.
- The company has grown its assets under management by 19% annually over the past five years, showcasing robust growth.
- Phoenix Financial Ltd maintains a strong capital position with a solvency ratio of 195%, providing financial resilience.
- The company has a solid track record of distributing dividends and executing buybacks, with a 5% dividend yield over the past few years.
- Phoenix Financial Ltd's asset management and credit activities are profitable, generating strong growth in EBITDA and providing stable cash flows.
Negative Points
- The implementation of IFRS 17 is expected to decrease shareholders' equity by 0.4 to 0.8 billion shekels, although it will increase income and decrease volatility.
- The company faces ongoing challenges in the motor insurance market due to high levels of theft and damage costs.
- There is uncertainty regarding the future cycle of the motor insurance market, which could impact profitability.
- The initial implementation of IFRS 17 may create significant CSM, affecting the balance sheet and requiring adjustments.
- Phoenix Financial Ltd operates in a dispersed control environment following the sale of most shares by controlling shareholders, which may impact governance dynamics.
Q & A Highlights
Q: How do you see the impact of implementing IFRS 17 on your results?
A: As presented, we believe IFRS 17 will increase income, slightly decrease equity, and enhance return on equity. It will provide greater transparency and allow for better comparison with international peers. The implementation process is ongoing, and we are available to answer any questions.
Q: Following the sale of most shares by controlling shareholders, how do you operate as a company with dispersed control, and what is the sentiment among investors?
A: We maintain continuity in strategy and management with strong governance. The board includes experienced Israeli and international directors. There is growing interest from international investors, who now hold more than a third of Phoenix shares, reflecting confidence in our strategy and management.
Q: How do you see the motor insurance market following a profitable year? Are we at the peak of the cycle?
A: It's uncertain if we are at the peak of the cycle. We continue to face high levels of theft and damage costs. Accurate pricing, as practiced by Phoenix, is key to profitability in changing market conditions. Our machine learning models provide a competitive advantage, allowing us to capitalize on market opportunities regardless of the cycle's direction.
Q: Can you provide an update on the gap in variable management fees? When do you expect to return to collecting fees?
A: We are close to closing the gap, which could happen in days or weeks, depending on capital markets. Strong investment performance in Q3 has brought us near the 58 million shekels gap.
Q: Can you elaborate on the launch of the consumer credit business? Do you plan to be active in M&A in this segment?
A: We launched the consumer credit business two months ago. It's a fully digital platform with synergies across group activities, especially insurance. We continuously assess M&A opportunities, and this platform is expected to drive strong organic growth and become increasingly relevant to Phoenix's activities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
