Anadolu Anonim Turk Sigorta Sti

IST:ANSGR.E

Earnings Call Transcript 2019-Q4

[Operator]

Dear fellow investors, welcome to Anadolu Sigorta 2019 Quarter 4 Financial Results Conference Call and Webcast. Our speakers today, our Chief Financial Officer, Fatih Gören; and our Head of Investor Relations, Baris Safak. Dear speakers, the floor is yours.

[Fatih Gören, executive]

Thank you very much, and good afternoon, everybody. Welcome to Anadolu Sigorta conference call about fourth quarter of 2019 results. Today, we are going to make our presentation with Mr. Baris Safak, our IR Manager. There are 3 parts of our presentation. In the first part, we will give company market and market outlook. In the second part of our presentation, we will talk about the technical results of Anadolu Sigorta and our brands. I will show you the figures about our profitability and our cost combined ratio by branch. And in the third part of our presentation, Baris will give you information about our financial highlights. He will talk about income statement, our income statement, balance sheet, our ROE performance and investment portfolio. And finally, as usual, we will have a Q&A session.

Now let's start with top 10 nonlife companies in the sector and their 2019 premium income results. When you look at the whole of the sector for 2019, the total of premium has reached nearly TRY 57.9 billion, which means 21.3% increase within a year. And at Anadolu Sigorta, we are keeping our leading position, and our rank is second. We have 11.4% market share, and we increased our premium, 16%, and we have reached during that period TRY 6.6 billion premium income. And as you see here, there are top 2 insurance companies, Allianz and Anadolu. And there's still a gap, a big gap between the third and -- between ours and third insurance company. Then look at top 5 companies, they increased around 22.4%, and it constitutes nearly 44% of the total premium. And then look at top 10 companies, the total premium reached TRY 38.4 billion, which is 66% of the total premium. As you know, there is merging in public insurance companies. When I look at their rank, their rank is 8, 9 and 10, Ziraat, Gunes and Halk Sigorta. And then I add all these -- those 3 insurance companies' premium, our reach is TRY 7.1 billion premium income there with a share of -- market share of 12.4%. Then -- and we are expecting that in the first quarter -- in the end of the first quarter of this year, they are going to merger. And that means they are going to be the first insurance company if they keep their premium income with around 12.4%, which is quite closer to Anadolu Sigorta and Allianz, so that means -- then, I look at the 2019 result statements, top 10 companies will be produce 72% of total premium income while the others, more than 20 insurance companies, will produce more than -- less than -- sorry, less than 30%. We will see what will happen for the coming days.

And on the next slide, I would like to give you information about premium production breakdown by branch. As you see that, motor TPL still constitutes the biggest part of our premiums in 2019 with 18% increase. It has reached nearly TRY 19 billion. Motor own damage follow as the second biggest insurance branch with an increase of nearly 20%. It has reached TRY 9.4 billion. Health branch is really growing very strong. And those branch increased 34% during the last year, and total premium income reached TRY 8.4 billion. Fire branch follow this health branch, and it has TRY 5.9 billion premium income with 12% increase. General losses, TRY 8.5 billion with 21% increase. Accident, TRY 2.4 billion with 31% increase. General liability, TRY 1.7 billion with 23% increase. Marine transportation, financial losses, watercraft and credit branch are the other branch following those branch. And then look at, as total as I said you before, the total premium increase was around 21.3%, which means higher than inflation. So we can easily say that although the economic crisis, insurance sector succeed to increase its premium income higher than inflation rate and above 20%.

And I would like to talk about a little bit the highlights of Anadolu, especially for the fourth quarter. Now we look at Anadolu's fourth quarter results. We see that the technical results are getting better. We see a recovery. And as you see there, the trend is -- combined ratio trend is going down to 111% nearly at the end of this year. And we are expecting that this decline in trend will be going on for 2020. Our investment portfolio growth, and it has reached nearly TRY 6.5 billion, which means 26.5% increase. Our assets under management, that constitutes TRY 5.9 million and credit cards constitutes nearly TRY 587 million as you see on our presentation. And we keep a strong net profit increase for the fourth quarter also.

As you see here that, quarterly, our net profit is TRY 93.5 billion, which means that 24% year-over-year at comparison.

If you look at Anadolu Sigorta premium production as a sector, still, motor TPL is the biggest branch. And we have a 16.5% increase. Motor own damage follow that branch. Our premium income is TRY 1.3 billion, with an increase of 20%. Fire and natural disaster is TRY 1.2 billion with 13% increase. Health branch, TRY 823 million, with 16% increase. And other branch increased 14%. And as total, our premium was reached TRY 6.6 billion with 16% increase. This year, for 2019, our increase was a little bit lower than the sector. And as you see that it was because of, especially, health branch and fire branch because we cut down on some of our unprofitable business lines, especially on those branch. And we were planning to get the benefit of those actions for 2020.

And if we look at market share and ranks of insurance companies by branch, we see that Anadolu Sigorta is the leader insurance company, the market leader for most of the -- for example, for motor TPL, our rank is first. We are the first-ranked insurance company with 9.7% market share. For motor own damage, our market share is nearly 14%. We are market leaders. For fire branch, again, nearly 14% market share and market leader, Anadolu Sigorta. General liability and watercraft are the other branch that Anadolu Sigorta is a market leader. And marine transportation, aircraft, aircraft liability branch, our rank is second. And general losses and health branch, our rank is third. As you see in the total -- at the total, Anadolu Sigorta rank is second and with a market share of 11.4%.

And if you look at the premium income by distribution channels for 2019, we see that still agencies are constitutes the biggest part, especially professional agencies, 62.4% of our premium income comes from professional agencies. Bank insurance -- banking channel has a 13.2% share. Brokers has 10.7% share and other distribution channels has nearly 14% share in our portfolio, as you see that. And as you know, all of the Isbank branch are exclusively working with us, and we have 348 direct sales staff in that branch.

And in the second round, I would like to talk about a little bit technical results by branch. In the first slide, you will see that our accident branch results quarterly. As usual, accident branch is the most profitable branch of our portfolio and of the sector. And then we get its claims ratio, and it's 19.5 -- 19.4%, and its claims ratio is decreasing. It's a good point. For health branch, if you look at health branch, the fourth quarter's claims ratio is 84.6%, which means more than 11% below the previous year fourth quarter. And our gross premium written increase is nearly 19%. For land vehicles and other big branch, the claims ratio is continuing to decrease. It's a positive point from our point of view. And our gross premium written increased year-over-year, 27.3%. For general losses, as you see that combined ratio decreased 1% and gross premium written increased at 16.4%. Motor TPL, the biggest branch of sector is at Anadolu, of course, it's a cash-generated branch. And its claims ratio, it's good. It's good to see here that down to 105.3%, that is, year-over-year, 10.3% decrease while gross premium written increased 32.2% quarterly, year-over-year change. For fire branch, it was a good year. Actually when you compare the fourth quarter, especially, the claims ratio is about 48%, as you see there. It means a nearly 10% decrease when we compare with previous year last quarter.

And finally, look at the total combined ratio. As you see there, for motor own damage, last year's 111% combined ratio dropped down to 91.2%. For motor TPL, it has risen to 135.6%. For fire branch, it was again, decreased 101%. Health branch is nearly the same as when we compare the previous year. Accident branch nearly dropped down 3%, and it has reached 66.3%, which is most profitable branch. General liability, 157%. And general losses, 101.5%. And then we get the total of the picture. The total combined ratio is dropped down to 110.8%. It was 113% for 2018.

And now I will hand over to Mr. Baris Safak for the rest of presentation. The floor is yours, Baris.

[Baris Safak, executive]

Thank you, Mr. Gören. Welcome, investors. I'm going to follow up with our balance sheet and P&L family metrics.

First of all, from our balance sheet. Our assets has increased around 24% in 2019, and it has reached up to TRY 9.8 billion. The increase in the last 12 months was almost TRY 2 billion of the total asset increase. Similarly, our assets under management has increased also. Our assets under management was TRY 4.7 billion at the end of 2018. After 12 months, with that 12 -- 26%, we have reached TRY 5.9 billion, TRY 1.2 billion increase in 2019. If we look at the increase since 2015, when you may calculate, the increase was 144%. Similarly, on the other side of the balance sheet are liabilities and biggest part of our net liabilities is technical reserves. Technical reserves also increased in 2019. It will increase right around TRY 1.1 billion. There are 2 parts of technical reserves: unearned premiums and outstanding claims. The increase in the unearned premiums was TRY 350 million, and our outstanding claims reserves increased TRY 645 million at the end of 2019, in 12 months. And our shareholders' equity, this being our shareholders' equity, has an increase around 31%. The increase -- the number -- the amount of the increase was TRY 500 million. I mean, of course, the increase was coming from our net profit and also the [ NCAP ] increase of Anadolu Life's stake.

On the following slide, income statement summary, it can be seen. First of all, our technical income. Our technical income increased 14% on quarterly basis compared to previous year's fourth quarter. The increase was TRY 136 million. Our technical income yearly increase was TRY 585 million, it has a ratio of 16%. Technical expenses increased in quarterly basis TRY 127 million and the ratio was 12%. And yearly, technical expense increase was TRY 573 million.

At the end of the table, you may see our gross profit. Gross profit increase was at 19% on Q-on-Q basis. And on a yearly basis, the increase was 32% with the amount of TRY 123 million net profit increase. And -- summary, net profit at the end of the table, again, you may see our net profit increase was TRY 90 million quarterly basis and TRY 95 million yearly basis. And our -- we have reached TRY 403 million net profit on unconsolidated basis, of course, because we do disclose both the consolidated and unconsolidated basis.

So you may proceed to following presentation -- following slide. Some metrics from our balance sheet. Actually, we have spoken about our assets in amount, the increase was around 24%. And the 3 main items can be seen from our balance sheet, cash and marketing securities, the increase was higher than assets increased to 28%.

Anadolu Life's stake -- equity participations on Anadolu Life's stake, it had an increase around 13%. And the main part of other assets, but most of it is receivables, it had an increase, 16%.

On the other side of our balance sheet, technical provisions is the biggest part, and it had an increase around 20%. And again, other liabilities is mainly consist of payables and it had an increase around 30%.

On Page 19, on the following page, you may see the growth performance trend of our metrics, our assets, our shareholders' equity, investment portfolio, net profit and our ROE calculations both in consolidated and unconsolidated form. These ROE calculations are average, I should mention. And at the top of the table, our average ROE -- consolidated ROE is 28.6%. It's a very good performance for Anadolu Sigorta this year, I guess.

On the very last page, I'm going to speak about our investment portfolio. The investment portfolio distribution is on the left-hand side of the page. 86% of our portfolio is on -- invested in deposits, bank deposits, time deposits. And maybe I should give some numbers. Our time deposit amount in Turkish lira is around TRY 1 billion. And in our fixed deposit is around TRY 3 billion. We have bonds, 11% of our portfolio is invested in bonds. And these bonds, in terms of amount, given amount, Turkish lira bonds is around TRY 300 million, whereas Eurobond, bonds are around TRY 324 million. We have some funds, 17% in terms of amount. It's around TRY 1.1 billion funds we have in our investment portfolio. And we also have stocks to 3% of our portfolio in stocks, it's around TRY 190 million. I may say, this is -- it's still too high levels for stock investment for Anadolu Sigorta. So our investment portfolio increased TRY 360 million in last quarter. And at the end of the year, we have reached investment income in terms of PL, this number is likely going to -- P&L, I'm sorry, was TRY 1.242 billion. And average portfolio return was around 22.5%, this means we had an 15%, 16% increase in terms of investment income.

So this is all for my presentation, you may proceed to Q&A session. [Operator Instructions] Thank you for your participation. [Operator Instructions]

So we do not have any questions, I guess. And I'm -- [Operator Instructions]

[Fatih Gören, executive]

Yes, Baris. I understood that. Everything is quite clear, and our investors are happy about our results.

[Baris Safak, executive]

[Operator Instructions]

[Fatih Gören, executive]

Okay. Dear participants, I would like to say a couple of words at the end. It was a successful year for Anadolu Sigorta for both profitability and premium income. And we would like to keep our sustainable record in profitability and premium income for 2020. And we would like to thank you for your participation and wish you to be at for next -- our conference call. Until that time, goodbye.