Clal Holdings Reports Strong Second Quarter 2023 Results Fueled by MAX Acquisition

Clal Holdings, under the leadership of CEO Yoram Neve, unveiled its impressive financial results for the second quarter of 2023. The company's strategic move to acquire MAX, a credit card company, has played a pivotal role in its resurgence.

The transaction, completed about five months ago, marked a significant step in the insurance industry's expansion into the credit card sector. Clal's management, spearheaded by Neve, showed their foresight by recognizing the potential synergy between insurance and payment services.

The financial data reflects Clal's sound decision-making and its commitment to growth. During the second quarter, Clal Holdings witnessed a remarkable turnaround, with profits totaling NIS 154 million after taxes. This is in stark contrast to the corresponding period last year when the company faced a loss of NIS 510 million. This notable improvement can be attributed to the substantial contributions from its credit card subsidiary, which along with its payment-focused sister company, HYP, generated NIS 99 million in profits during the quarter. This contribution accounted for more than 40% of the group's pre-tax profits.

The transformative impact of the MAX acquisition is not only reflected in short-term profits but also in the company's overall financial health. The first half of the year closed with a profit of NIS 52 million, a remarkable rebound from the loss of NIS 289 million during the same period in the prior year.

Capitalizing on its gains, Clal's board of directors, led by Chairman Haim Samet, announced a dividend distribution policy. The policy stipulates a dividend distribution ranging from 50% to 30% of Clal Insurance subsidiary's total profits. However, dividends have not yet been distributed, with an anticipated distribution timeline toward the end of the year. This measured approach reflects the company's commitment to meeting its capital targets while rewarding shareholders.

The company's assets under management have experienced an impressive 11% growth since the beginning of the year, amounting to NIS 328 billion. This expansion underscores Clal's strengthened position in the market and its ability to leverage its acquisitions for sustained growth.

Despite its impressive performance, Clal Holdings faces challenges in the capital market sector. The long-term savings division reported a pre-tax loss of NIS 89 million, largely attributed to variable management fees. The company can only levy these fees when it achieves a real positive return on certain assets. Given the current high inflation environment, achieving such returns presents a challenge. Clal has managed to reduce the impact of this issue by NIS 56 million since the start of the year, but a remaining "management fee pit" of NIS 697 million needs to be addressed before the company can impose management fees on these assets.

In the property construction sector, Clal experienced a pre-tax loss of NIS 41 million during the reported quarter. Although this is an improvement from the NIS 58 million loss during the same period last year, the division still operates at a deficit. The company's optimism, however, remains intact, as the process of premium price adjustments is expected to gradually boost profitability, possibly leading to a turnaround in 2024. On the brighter side, the compulsory car insurance segment turned profitable during the second quarter, reporting a profit of NIS 60 million compared to a loss of NIS 15 million in the corresponding period.

In conclusion, Clal Holdings' second-quarter performance underscores the success of its strategic decisions, with the MAX acquisition and the contribution of its payment subsidiaries serving as major growth drivers. The company's ability to adapt to market trends and navigate challenges will be crucial in sustaining its upward trajectory. As the insurance industry continues to evolve, Clal Holdings remains poised to seize opportunities and deliver value to its stakeholders.