Migdal Insurance Company posted a total loss of NIS 563 million in the first quarter

Migdal Insurance Company posted a total loss (after tax) of NIS 563 million in the first quarter of 2020. This compares with a total profit of NIS 543 million in the corresponding quarter last year. The loss in the first quarter was mainly affected by the Group's considerable capital losses in the capital markets, in light of the Corona virus crisis.
In addition, the changes in the interest curve have resulted in an increase in NIS 134 million after tax on life insurance, and a decrease in NIS 161 million after tax in long-term care insurance reserves, which is in large part attributable to part of the fair value of the assets over their book value.
When examining the core of its activity, insurance activity, it appears that the underwriting results in life insurance, health insurance and general insurance have deteriorated in the reported quarter compared to the corresponding quarter last year.
Migdal notes that the total profit in 2019 and the corresponding quarter last year was restated due to the retroactive application of the Consolidated Circular regarding the measurement of liabilities - the adequacy of the reserve. This determined that the reserve adequacy test would be calculated while grouping life insurance products into a single insurance portfolio, rather than calculating the reserve adequacy for each life insurance product separately.
The decline in the value of the nostro investment portfolio in the reported quarter amounted to approximately NIS 700 million before tax and is mainly due to the negotiable portfolio. In the period following the reported quarter and close to the date of publication of the financial statements, there was an increase in capital markets. It offset the aforementioned effects and recorded investment profits of NIS 700 million in the nostro tradable portfolio.
The company achieved a gross negative real return of approximately 10.3% in the policies that participate in the profits of the old Y. Fund, as a result of which the company did not collect variable management fees but only fixed management fees. As of the end of March 2020, the estimated management fees that will not be collected due to the negative real return until a positive return is accumulated, amounted to approximately NIS 1.1 billion before tax. Following increases in capital markets in the period following the balance sheet date, the Company covered a large part of the real investment losses accrued to the insured's debt, so that as of the date of publication of the financial statements, the estimated management fees that were not collected will amount to approximately NIS 500 million before tax.
Total assets under management, which mainly affect the level of fixed management fees charged by the Group in the context of yield-dependent policies, pension funds, provident funds and mutual funds under management, decreased by NIS 28 billion at the end of March, reflecting a decrease of 10% compared to End of 2019.