Anadolu Anonim Türk Sigorta Sirketi (ANSGR) Earnings Call Transcript & Summary

Hello. Welcome to Anadolu Sigorta Second Quarter '25 Financial Results Webcast. Today, we are going to be making the presentation with our CFO, Erdem Bey, as usual. Erdem Bey is going to start the presentation with technical results, and I'm going to -- I'll be following with financial figures after Erdem Bey. So I'd like to thank you for your participation in advance. Erdem Bey, the floor is yours.

Thank you, Baris. Okay. Welcome to Anadolu Sigorta Financial Presentation of '25 Second Quarter. My name is Erdem Esenkaya. Whole presentation has 17 slides and 8 of them, I will present to you. And after that -- after the investment portfolio that -- after that, my colleague, Mr. Safak will present next slides. I think that it will take nearly 30 minutes. If there is any question, we will pleasure to answer it. At the beginning, I would like to give short notice about the last 6 months for only refreshment of the mind, I mean. One important thing that was happened in this term decrease of discount rate from 35% to 32.5%. This is 250 basis decreasing, effect was nearly TRY 750 million or financial statement negatively. Second important thing that was happening this term in Turkish lira lost value against the foreign currencies, especially in the middle of the March term. And following the tension on March 19, there was a major loss in Borsa Istanbul Index. Its meeting on March 16, the Monetary Policy Committee had lowered the interest rate by 250 basis points to 42.5%. But after that this happened, it increased 42% in April. And increased the overnight lending rate from 46% to 49% in this term. On the other hand, our company general assembly met in March and decided a [ TRY 2.1 ] billion dividend and increased the paid capital from TRY 500 million to TRY 2 billion with pre stock. Again, in this term, 2 insurance companies were sized by SEDDK insurance regulation and supervision agency in this term. And again, SEDDK regulated about MTPL production. I mean, the MTPL depended on MOD 70% in this term. And after that, in our presentation slide, please. Okay. And first of all, we would like to give information about highlights and profitability. Real growth when we look at Anadolu Sigorta in the first 6 months, premium volume is at strong increased TRY 44.5 billion, nearly 41% year-to- increase at the inflation rate end of June 35% in this term. Real profitability, especially the trailing 12 months solo ROAE 36.4%, consolidated nearly 50% in this term. When we look at the technical outlook, technical profitability supports overall profitability. Quarterly claim ratio improved 3.4 points down to nearly 78% and quarterly combined ratio improved 1.9% down to nearly 109%. When we look at the assets under management owned, grew significantly by TRY 5.4 billion quarterly, reaching TRY 64 billion in this term. Of course, the tight monetary stance continues to support investment income in this term. When we look at the non-life insurance market and totally nearly 6 insurance companies in the sector and Anadolu Sigorta in the first half produced TRY 44.4 or 44.5 billion premium production. And when we compare to last year, it increased the -- 41% increased. And we have got third degree or the third rank in the sector. If you look at the 5 companies, they produced TRY 237 billion. And when we look at the 10 companies, TRY 338 billion and totally premium production TRY 498 billion. When we look at -- if you compare to last year, I would like to take attention at this point. If we look at the first 5 companies, they produced nearly 50% of the total sector premium. But when we look at in this term, it is 48.5 or 49% of the total premium. But again, when we look at the top 10 companies, they produced total premium 60% last year, but this year, it was 58%, 59%. I mean 1% or 2% slightly went out of 10 companies, and they went in production to middle and small-sized insurance companies in the sector. It shows a kind of aggressive pricing in this term. Next slide, please. When we look at premium value and composition, we have got nearly TRY 44.5 billion premium production and 41% increase if you compare to last year. When we look at the sector, there was TRY 498 billion and nearly 48% increase. MTPL side, we are lower than the sector, but especially the health side is higher than the sector in this cycle, I can say. And we compare the Anadolu Sigorta and sector premium production composition in motor side, 37% but in sector 42%, and the fire side in Anadolu Sigorta, 20%. And when we look at the sector, 18% and the health side, we have got 23% and the sector 22%, something like that composition. Next slide, please. When we look at the market share and rank in this term, we have got 13 different branches, and we have got first degree in the third branches, MOD, watercraft and transportation. And we have got second degree in the aircraft, aircraft liability, accident and general liability. And we have got third rank, fire, general loss and health. And totally, we have got third degree and 8.9% market share in this term. Next slide, please. When we look at the sales channels, as I said before, we have got agency tendency insurance companies. So if you compare the sector, we are higher than the sector. When we look at the sector, it was 59% in premium production in sector. When we look at Anadolu Sigorta, you can see easily 62% increase. And if you compare to last year in the Anadolu Sigorta again, 2 points increase in the agency production. On the other hand, the bank insurance side is very important for our company. If you compare to last year, we have got lesser than the 1 point, I mean, the 13%. But if you compare the sector, 12% and 1 point higher than the sector. And if you compare the broker side, we have got a 16% and the sector 18%. And the other side, we have got 9% and the sector 11%. When we look at the branch outlook and the total portfolio quarter-to-quarter improvement, especially. If we look at the end of '24, especially the fourth quarter '24, there was -- it was 112.1% (sic) [ 111.1% ] and after that 110.7% and 108.7%. This is slightly decreasing in this term, and it is good, of course, positive effect on our financial statement. And when we look at the MOD side, strong profitability we can see there. And fourth quarter of '24, it was 86.8% and after that, it was 76.7% (sic) [ 78.7% ] and end of the second quarter, 87.2% in this term. Of course, especially it depends on the discount rate changing at the beginning of the year. And the MTPL side, quarter-to-quarter the positive improvement is very good for us, especially end of the year and fourth quarter, it was 139% (sic) [ 139.1% ], after that, it increased to 151.7% and now end of the second quarter, 131.2%. Of course, this is a higher percentage, but if you compare the last year and especially the last quarter and the end of the year, it is a good improvement for the combined ratio side for us. And financial and -- sorry, fire and natural disaster side, when we look at end of the year, fourth quarter, it was 117.3% combined ratio and end of the first quarter, 131.1% and end of the second quarter, it was 115.4%. Here, if you compare the 2025 first quarter, this is increasing, but totally when we look at -- if you compare the last year and first quarter of '25, it is a good improvement for us. The health side is very important and strategic premium production side for us. It was end of the year 144.4% and end of the first quarter 114.6% and end of the second quarter, 102.4% in this term. And the profitability level is good for us generally. Next slide, please. As you see the combined ratio is increased [ 8.7 point, ] discount rate affect nearly 7 points in this term, especially first half, I'm talking about. When we look at the financial status and activity results of our company are exempt, it is seen our assets exceeded TRY 111 billion with an increase of nearly 37% compared to the previous year. And premium production, as I said before, reached TRY 44.5 billion and with an increase 41% compared previous year. And our market share, 8.9% in this term. Our company realized TRY 5.2 billion in unconsolidated net profit in this term. When we look at the technical profitability side, especially end of the first half of '24, it was 73.1% and it increased 79.5%, but mostly it depends on the discount rate changing in this term. Combined ratio, when we look at 101.2% in '24 and in '25, 109.6% in this term. As I said before, the discount rate changing in this term. And last year at the same term, discount rate increased, but this term has decreased. So both of them, the effect of [ compatible ] discount rate changing and claims ratio and combined ratio together increased. And now I would like to give sentence to my colleague, Mr. Safak. Thank you.

Thank you, Erdem Bey. I'm going to start with investment portfolio breakdown. As you see on the screen, we have reached TRY 64 billion at the end of second quarter. Our assets under management portfolio has significantly increased. The breakdown is also seen on the slide. We have invested most of our portfolio to short-term interest instruments. The portion is 56%. We have 24% bonds, both TL, eurobonds. 57% of these bonds are TL bonds and most of them are fixed income bonds, and we have also some eurobonds and [ UST and ] eurobonds as well in our bonds portfolio. 12% (sic) [ 11% ] equity consists of both direct stock investments and also stock fund investments as well. We have commodity and venture capital investments as well, its portion is 2%. And on the left-hand side, you see 7% hedge fund investments as well. As of first half results, our investment income reached to TRY 9.5 billion. Anadolu Hayat dividend income is not included, it is excluded and which makes 17% portfolio return in the first 6 months of the year. On the next slide, you can see our income statement, quarterly income statement, stand-alone quarters can be seen on this slide. On the left-hand side, our unconsolidated figures and on the right-hand side, consolidated figures are placed. At the end of second quarter, it's second -- not at the end of second, in second quarter, our net profit stood at TRY 3.9 billion (sic) [ 2.9 billion ], TRY 3 billion. In the first quarter, our net profit was TRY 2.2 billion and last year's second quarter was TRY 2.5 billion. So Q-on-Q increase was 31% and year-on-year increase was 15% in our unconsolidated figures. And consolidated figures, when we look at our consolidated figures, our second quarter consolidated income was TRY 3.2 billion. First quarter consolidated net income was TRY 2 billion and last year's second quarter net income was TRY 2.8 billion. So the increase -- Q-on-Q increase was 64% and year-on-year increase was 15% for our consolidated stand-alone quarterly result figures. On the next slide, we have our cumulative 6 months income figures. As you might recall, our last year's 6 months results was TRY 5.4 billion for our unconsolidated income and consolidated income was TRY 5.7 billion. This year's consolidated income stood at TRY 5.2 billion. This cumulative comparison of our unconsolidated and consolidated figures is a bit below than our last year's financial results, 4% below for unconsolidated net profit and 8% below for consolidated profit can be seen on the slide. On the next page, our balance sheet, some figures can be seen. On the left-hand side, our total assets trend can be seen. In the first half of the year, our total assets grew 16%, reached to TRY 112 billion. Our AUM also increased similarly, 15% increase occurred in the first half of the year, and our AUM stood at TRY 64 billion, as I've just said in the previous slide. Our technical reserves, they are mainly outstanding claim reserves and unearned premium reserves. A total of them is TRY 62 billion with an increase of 21% in the first half. And lastly, our shareholders' equity can be seen on the right-hand side of the page. The increase was slightly below than other figures. It was 2.8% in the first half, mainly due to weaker performance of Anadolu Hayat stock price and also the dividend that we had distributed in the first quarter, as you might recall. So on the next slide, our net profit breakdown for our nontechnical side can be seen. As you might recall, our net profit on the technical side stood at minus TRY 2.7 billion. And when we deep dive in our nontechnical side, we had investment income around TRY 9.4 billion. The loss coming from amortization and depreciation was TRY 100 million. We had some provisions mainly due to recoveries. It was minus TRY 428 million. The discount coming from our payables was plus positive TRY 230 million and the tax -- net tax effect on our P&L was minus TRY 1.2 billion. So we can reach to TRY 5.2 billion at the bottom line. On the next slide, you can see the comparison between our last year's 6-month figures and this year's 6-month figures. The waterfall graph shows that our underwriting performance was worse than last year. We lost TRY 2.5 billion from our underwriting performance. Our investment performance was higher than last year's with TRY 1.1 billion. Tax was also lower than previous year. Dividend that we get from Anadolu Hayat is higher, TRY 300 million higher than last year and other items also was higher than last year with TRY 400 million. At the end of the graph, you can see our net profit coming to TRY 5.2 billion. So on the next slide, this is our last slide. Actually, our return on equity chart can be seen. On the right-hand side, you see our 6-month -- trailing 12 months ROAE -- return on average equity, I may say, actually. So yes, we had a peak in 2023, but still our return on equity is relatively high. For unconsolidated figures, it's 50% and -- unconsolidated figures, it's 36% and consolidated ROAE stands at 50%. So this was our last page. As I mentioned, thank you for listening to us. So we can have the Q&A session. [Operator Instructions] Thanks for listening to our second quarter results presentation.

We don't have any written questions as far as I see. Are there anyone that like to ask their questions verbally?

I think we explained everything very clearly. There is no question.

Okay. All crystal clear. Yes, Erdem Bey. So back to you for the closure, please. Erdem Bey?

Okay. Thank you very much for joining our presentation. We would like to see you the next presentation again. Thank you very much. Have a good day for you. Bye.

Thank you.