Anadolu Anonim Turk Sigorta Sti

IST:ANSGR.E

Earnings Call Transcript 2024-Q1

[Baris Safak, executive]

Welcome to Anadolu Sigorta 2024 First Quarter Earnings Call. Thank you all for participating in our webcast. Today, we will be presenting our financial results with our CFO, Erdem Bey. I'm going to hand over to Erdem Bey, he is going to start the presentation, then I will be following with financial figures and at the end of presentation, we will -- we are going to have a Q&A session. Erdem Bey, the floor is yours.

[Ibrahim Erdem Esenkaya, executive]

Thank you, Baris. Welcome to Anadolu Sigorta financial presentation first quarter '24. My name is Erdem Esenkaya. I would like to present, especially 2 titles, all presentation will be 2 different titles, company and market overview, technical results and financial highlights. And company and market overview and technical results, I'll present to you. And after that, my colleague, Mr. Safak, will present the other title. And I think it will take nearly 30 minutes. After this, you can ask any question by end of the presentation.

When we look at the highlights of the sector, premium production reached at TRY 177 billion if we compare to last year, 89.2 percentage increase and regulatory, I mean, the insurance regulation and supervision agency in Turkey, increases discount rate from 28 percentage to 35 percentage end of the year, and it affected first quarter of the '24.

And in the motor branches, especially new calculation method in force in May '24, I mean, at the beginning of the year, authority regulator decided 10% every month, I mean, January and February. And after that, it discounted 5 percentage. And now -- and after April and at the beginning of May, they will begin to calculate, new calculation method for the MTPL prices and maximum will be the 3 percentage increases MTPL prices in the next term. Government announced no mid-year minimum wage hike is important for us, especially because it affects our reserves at the beginning -- at the end of the year. And the financial conditions, Central Bank increases deposit rate 50 percentage, it affects our financial incomes, of course. And TL depreciation below CPI. I mean, in depreciation, 8.6 percentage depreciation rate, plus CPI 15 percentage in this term. So more valuable TL in this term, we can say. And this 100 index rise nearly 20 percentage in '24 first quarter.

Next slide, please. When we look at premium production figure, we can see easily that we are below the sector. And total loan life premium products TRY 178 billion first quarter. Last year, at the same term, it was TRY 92 billion. It shows nearly 93 percentage increasing. Anadolu Sigorta premium production increased rate lower than the sector premium production in the increased rate in this term, especially, I can say.

Top 5 companies have 49 percentage and the top 10 companies have 71 percentage market share in '24 first quarter. As you see on this page, Türkiye Sigorta is the first, Allianz Sigorta second, and Anadolu Sigorta is third. Degree of range is last year.

Next slide, please. When we look at the highlights of Anadolu Sigorta, for business MOD clients ratio maintains 60 percentage. And it is a good level for us, especially for the earning money and the profit. '24 first quarter claims ratio nearly 70 percentage and strong growth in health branches focused on corporate health policies in this term are very important for us again. MTPL affect our financial statements, especially income side very effectively. So MTPL growth, 25 percentage in '24 first quarter and is continuing 25 percentage at the same time. We control -- increased the MTPL in this time, which is very important, again, for our financial statement.

Assets under management reached to TRY 36.4 billion in this term, additional TRY 4.4 billion first quarter. [Addicted] in this term especially. Time deposits compound yield 65 percentage. When we look at the highlights again, the branch breakdown and the growth rate Anadolu Sigorta and sector, if you compare. In the motor side, Anadolu Sigorta has 36 percentage increasing and in the sector, 38 percentage increasing. In the fire side, 21 percentage increasing and the fire side in the sector 18 percentage. In the health side, we have the 20 percentage and in sector 21 percentage. If you look at the premium production increasing in the account, 131 percentage increasing if you compare to last year, in the motor side 42 percentage and other side 105 percentage in the first quarter '24.

In table, we can compare the premium production on Anadolu Sigorta and non-life sector totally, premium production increased 80 percentage and it reached TRY 16.5 billion end of the first quarter, but the non-life sector increasing rate 93.1 percentage and nearly TRY 178 billion in this term.

Market share. When we look at the market share in [indiscernible] company has succeeded in winning 2 first places, 3 second places and 4 third places in main branches we can see here and watercraft and MOD, we are the first rank in the end of the first quarter, especially the MOD side is very important for earning money and profit for us in this term.

When we look at financial status and net profit drivers side, activity results of our company are exempt since our assets TRY 68 billion which has increased nearly 96 percentage increasing in this term. And the premium production reached TRY 16.5 billion and 80% increasing compared to previous year. As a result of premium increase realized or increased it is market share that reached the level of 9.3 percentage and our company realized TRY 2.9 billion is nearly the consolidated and unconsolidated profit similar in this term.

Then we look at the distribution channel of the Anadolu Sigorta and the sector and compare them. We have got nearly 2,700 agencies and 1,100 bank branches. We can say, why separate net for [indiscernible] with these channels. It is a very important side of our sector power. There are nearly 350 direct sales staff, we say MSU [indiscernible]. They are working in each bank branches, and they are especially affect our premium production positively. If we compare the last year, actually all companies, the agency tendency company last year premium production percentage, 63 percentage in the total premium production past at this year, the agent side 58 percentage and 7 point decreasing or minus if you compare to last year, but at the same time, in the bank side and the broker side, there are increasing in this term.

If we compare the company in the sector, we are, again, in the agency side, we are over the sector. And in the bank side, over the sector. Broker side, over the sector. But other side, lower than the sector.

Next slide, please. When we look at the technical result in the side, first [indiscernible] -- next slide, please. Okay. And then accident and health, both of them are important branches for us. If you look at the accident side, gross premium brighten 111 percentage increase -- premium production increase and net claims increased percentage 33.4 and combined ratio 7.2 increase in this term. Health branch is a very strategic branch for us, and we are planning to grow in this site especially. And you can see easily here, 130.6 increase in gross premium written and it affects, of course, the claims net 173 percentage increase in this term. And the combined ratio, 21 percentage, 22 percentage -- nearly 22 percentage increase in this term.

Next slide, please. MOD and MTPL. MOD gross premium production written in this term 47 percentage increase in this term and clients net 92.5 percentage in this term and the combined ratio 9 percentage increase. But in the next term, we would control it and we would like to improve our writing premium in this branch. MTPL side is, again, very important for financial statement. And if you compare to last year, 25.5% increase in writing premium and clients net 18.4 percentage in this term, and the combined ratio of 124.7 decrease in this term. It is a very good effect of our financial statement in this term.

Next slide, please. Yes. Fire and natural disaster, and the general losses together when we compare them. Fire side 122 increase in premium production and claims net 62.5% and combined ratio 14.4 increase in this term. General losses premium writing 96.2 percentage increase and claims net 200 percentage and the combined ratio 10 percentage in this term. Then we will look at the profitability and combined ratio. As you see, our combined ratio is decreased from 125.6 to 100.4 in this term, and claims ratio again decreased 98.7 to 69.5 in this term. We would like to control our claims ratio and the total combined ratio. And we would like to decrease combined ratio lower than the 100 in next term. It is -- we look at a very important profitability and very good financial statements end of the year.

In this subject, I would like to give sentence to my comment, Mr. Safak. Thank you.

[Baris Safak, executive]

Thank you, Erdem Bey. I'm going to continue from now on with financial highlights. To begin with, you might see our summarized figures of our balance sheet on the left-hand side, total assets trend can be seen in the first quarter of '24, the increase was 18%, and our total assets was TRY 68.9 billion. Our own assets under management growth was 20%, a bit higher than our assets growth and it reached to TRY 36.4 billion. On the right-hand side, it's the liabilities part and technical reserves is the biggest portion of our liabilities. The growth rate was 9%, and the amount was TRY 39 billion at the end of first quarter. The growth rate was rather smaller than our assets growth, mainly due to discount rate increase from 28 to 35. It affected our liabilities. And because of this high in this country, the reserves increase was relatively lower than our assets. And shareholders' equity growth was also strong with 21.4% in the first quarter, and it reached to TRY 17.2 billion.

On the next slide, you are going to see our summarized income statement. First quarters compared, 2023 first quarter and 2024 first quarter Q-on-Q table. On the left side, our unconsolidated figures can be seen. And on the right-hand side, our consolidated figures. As you see at the bottom of our table, '24 Q1 both consolidated and unconsolidated figures are same because Anadolu Life consolidation didn't affect our P&L in the first quarter this year.

Our technical income growth was 102% in the first quarter, and our technical income reached to TRY 9 billion. Our technical expenses increase was much lower than our technical income with 62%, thanks to, again, discount rates in this lower increase and our financial income in the first quarter reached to TRY 3.6 billion with a growth rate of 416%. And at the end of table, our net profit stood at TRY 2.9 billion. It was a loss-making quarter last year. As you see in solo form, it was minus 117 and in consolidated form profit -- our loss was TRY 138 million last year.

Our income statements breakdown of the nontechnical side can be seen in this slide. On the right-hand side, as you see, our technical earnings, technical figures was almost breakeven, it was minus TRY 71 billion. And other than technical site, our nontechnical P&L figures were investment income was TRY 3.9 billion, we had a dividend income from [indiscernible] TRY 200 million. Our amortization provisions and rediscount of our receivables and other expenses made around TRY 400 million in minus form. And our tax was TRY 753 million, and that made our net income reach to TRY 2.9 [indiscernible].

Our trend of return on average equity, it has a significant increase in first quarter. We are calculating it with 12 months trailing profit and our unconsolidated return on average equity reached to 73%, and our consolidated return on average equity was 90% in the first quarter this year. Last slide shows our investment portfolio breakdown, which is around 36 billion. Most of our investment is invested in funds, 44% is invested in funds, mutual funds. We have 29% bonds, both corporate and sovereign bonds. Most of our bonds are euro bonds in UST form. We have 7% stock portion. And deposits was -- deposits have been increasing in the last couple of months or last couple of quarters maybe, and it is 22% at the end of first quarter. We had an investment income, which was TRY 3.6 billion, and our annualized yield of our portfolio was 45% in the first quarter. As I mentioned, this was our last slide. Thanks for listening to us again.

[Baris Safak, executive]

Now we can continue with the Q&A session. [Operator Instructions] If you have any questions, please go ahead.

[Unknown Analyst]

Hello.

[Baris Safak, executive]

Hello. We have a question from Sahil Kumar.

[Unknown Analyst]

This is Sahil from Moon Capital. First of all, congratulations on the results. My question is on your investment yield and AUM growth. So investment yield is around 48% in the first quarter, right? Whereas I think approximately 40% of your AUM is into funds mutual funds and the market was up like around 20% during the quarter. So could you please explain me what drives that 48% yield in the first quarter? And what we should expect as we progress? I mean, obviously, some of the things are linked with market obviously. But overall, what are your general expectations for the next quarter?

[Baris Safak, executive]

For investment yields are you asking, Sahil?

[Unknown Analyst]

Yes.

[Baris Safak, executive]

Okay. We consider that this higher deposit rates to continue throughout the year, most of markets expectations is in that way, actually. Market does not expect a rate increase until last quarter of this year, like we do. So we assume that we will be taking advantage of higher deposit rates with growing portfolio and investing more into deposits or funds, money market funds as well. So we consider that our return, our yield is going to be affected positively throughout coming quarters.

[Unknown Analyst]

Okay. And your AUM composition, given you expect yield to remain -- the rates to remain higher, at least on the deposit side. So can we expect higher allocation to deposits at these levels? Or what sort of AUM composition to expect?

[Baris Safak, executive]

Yes, we can expect. Actually most of our front portfolio is also invested in money market fronts. So we -- our maturities are much shorter compared to term deposits because we are not urging -- we are not hurrying to make some deposits with longer maturities. But nowadays, we do actually, maybe 3 months, 6 months term deposits are a bit more attractive nowadays, we can see higher deposit portfolio.

[Unknown Analyst]

Understood. And I think just one more question from my side is on the combined ratio. Obviously, first quarter combined ratio was lower, around 100% because of the discount rate increase. And I mean, in the management commentary, you are expecting less than 100% in the coming quarters as well. So maybe if you can guide me like what we should expect overall for combined ratio maybe how the quarter is progressing, the second quarter is progressing so far and what we should expect for the rest of the year?

[Ibrahim Erdem Esenkaya, executive]

Yes. Especially, we have got good combined ratio end of the first quarter. Of course, it affected our discount rate effect here. This is realistic. But at the end of the year, we are planning to lesser than this combined ratio because we would like to control our claim ratio and decline site very closely. So it is very important for us for -- especially for getting money and profit in this term.

MOD side is very important for us. On the other hand, we are really controlling increasing in MTPL side. And the health side is very critical and strategic for us. If we think that 3 of them, end of the year, we will control or combined ratio near the 100 and below the 100 percentage. And after that, it will affect -- could affect our financial statement end of the year, we are thinking that.

[Baris Safak, executive]

We should underline and I will also mention, it's important, of course, the one-off effect of this country. So it increased our combined ratio for the first quarter. The one-off effects is not going to be -- it's not going to happen in the upcoming quarters, in second or third quarter. We are not going to see something like that, we think so. We don't expect another rate hike -- another discount rate hike, actually. So we should bear that in mind.

[Unknown Analyst]

Understood. And just one final follow-up on the combined ratio. First quarter, obviously, combined ratio includes this discount rate increase. If we keep the discount rate at 28%, what would be the first quarter combined ratio without excluding the discount rate impact?

[Baris Safak, executive]

Nearly as the same year, approximately.

[Unknown Analyst]

Sorry, similar to what?

[Baris Safak, executive]

Similar to last year's same term. I mean, 125%, something like that, nearly.

I think we don't have any other questions. Do we? [Operator Instructions] Well, since we don't have any other questions, Erdem Bey will close this. Back to you.

[Ibrahim Erdem Esenkaya, executive]

At end of the weekdays, I'm in the end of the Russian [indiscernible] which will be 6 pm. Thank you very much for joining this webcast. And we would like to be together in the next presentation, end of the first half. And thank you very much for joining again. Have a good day. Thank you.

[Baris Safak, executive]

Thank you. See you next quarter.