AK Sigorta AS

IST:AKGRT.E

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, welcome to Aksigorta Fourth Quarter 2020 Earnings Call. I will now hand over to your host, Ugur Gulen, CEO; and Osman Akkoca, CFO. Please, gentlemen, go ahead.

[Ugur Gulen, executive]

Okay. Welcome to Aksigorta fourth quarter earnings call presentation. I wish you a successful [indiscernible] this year, and I will give the word to Osman who is going to present the numbers, and we are going to answer your questions at the end of the presentation.

Osman, good luck.

[Osman Akkoca, executive]

Thank you, Ugur. Hello, dear investors. We welcome you to our last earnings call for 2020, and we have our presentation, which now I will share and tell with you. And then this presentation will be available on our website under the caption of Investor Relations. And we renew our Investor Relations caption. You can visit and see the past presentations also.

And on the first page, we want to share what we said and what we did in the last 4 years. In the last 4 years, you see we did what we said. We have our annual guidance, which we announced at the beginning of the year each year. And in the last year, you see our guidance was 15% to 25% growth in terms of top line, and we realized 18% growth. And other items of guidance was for the net profit line and the guidance was up 10% growth, and we realized 18% growth in terms of bottom line. So it shows that we did what we said and its promises that Aksigorta could achieve its targets, and we will also share this year's guidance in the following pages.

So in the next -- on the next slide, we share the scorecard of the last quarter. And in the last quarter of 2020, we have 28% growth in gross written premiums. We issued TRY 1.7 billion premiums. And our net income resulted at TRY 88 million, which is a decrease of 18%, which is basically due to the revaluation in Turkish Lira. You all know that we have a hedging position of MOD spare parts cost with our FX position on our balance sheet. So the rate increase over Turkish lira versus U.S. dollars, due to that rate change, we had FX loss in the last quarter. And our total equity improved by 25%, and we reached to almost TRY 1.1 billion.

In the last quarter, you see in terms of insurance income, we have good results. Our net loss ratio is 72%, which is flat compared to prior year same period. And net combined ratio is 96%, which is at a very satisfactory level. And we increased our total assets up to TRY 5.6 billion with 22% increase. And our ROE is still much satisfactory with 42%.

And our asset under management reached to almost TRY 3.3 billion with an increase of 26% year-over-year. And annualized return yield in the last quarter is 14%, thanks to the increasing interest rates.

On the next slide, we have the scorecard results of the full year. We have 18% growth in top line, and the same growth is in the net income line also. We have TRY 5.3 billion gross written premiums, and we have TRY 432 million net income in statutory financial. And the total equity increased by 25%.

And annual net loss ratio is 68% with an improvement of 5%. And net combined ratio is 92% with an improvement of 6%. 5% is coming from the loss ratio and 1% is coming from the expense ratio. And the total assets reached TRY 5.6 billion and ROE is 43%.

And during the year, we paid out TRY 202 million dividend and the payout ratio was 55% out of the 600 -- sorry, TRY 366 million net profit of the previous year.

And on the next page, we have the market figures. You see the market growth was 17% in the first quarter, 13% in the second quarter. It was a weak quarter. And then strong growth in the third quarter with 23%, thanks to the acceleration in the bank loans and the prospect of the COVID conditions and acceleration in the economic activities in the third quarter. And the last quarter is in between the second and the third quarter with 19% growth. And the year-end result is 18% growth.

And looking to the breakdown of the product, we have a weak growth in MTPL side, which is 7%. You see the growth in the right-hand side and in the below table. MTPL growth of the market is 7%. You know that MTPL is a cash flow business. And due to the increasing interest rates, there was a huge competition in the market. So the growth was weak with 7%, even less than the annual inflation rate, which is 13.6%. And in MOD side, comparably a stronger growth with 15%, which is due to the increasing new car sales and also the increasing issued value of the car. So the -- as the values of the cars are increasing, the premiums -- the insurance premiums of the cars are also increasing.

And in the non-motor side, you will see a huge growth with 26%. And there was one-off issues on policies during the year, which are all issued by the state company, Suqigorta. There was a nuclear reactive plant and Tuna natural gas point and also the kickstart of the satellite insurance businesses. And if we exclude those one-off policies, growth in the non-motor is 23%, and the overall growth in the market is 17% instead of 18%.

And you see health is, again, growing higher than the profit growth with 21%. There is a medical inflation [ progress ] than the overall inflation. So it has been almost higher than the overall inflation. One reason is that at current season, due to the pandemic conditions, people are demanding health products more. So these were the reasons for the high growth in health side.

And agency is the main motor insurance seller channel. So the average of the motor product growth is very similar to the agency growth with 12%. And in the bank side, again, the bank channels, the growth is slightly less than the market average growth with 16%. And in the corporate side, there is a 35% growth, which is very close to non-motor -- very similar to normal motor growth. And market growth is 18% as I shared.

So that was the picture of the market of 2020. And on the next slide, I share the growth figures of Aksigorta. In the last quarter, especially starting from the third quarter, you see we have overperforming growth compared to the market growth. It's 31% in the third quarter and 27% growth in the last quarter, and the year-end result is 17% growth. And if we exclude those one-off issues, one-off businesses from the market, we have a parallel growth with the market in 2020.

And looking to the breakdown of the product. We have 7% growth in MTPL, which is the same as the market growth. And we have 23% growth in MOD, and we all performed in the market in the MOD line. You all know that MOD is a strategic priority product for Aksigorta. And we have been using the new technologies both in MTPL and MOD, considering we are using artificial intelligence and machine learning in MTPL underwriting and pricing. And we are using artificial intelligence, and also I'm very pleased to say that we just launched a new IoT project with Fiat Connect in MOD products. So we are bundling the Fiat Connect car sales with our MOD insurance and which is also a project of IoT.

So we are growing good in motor products. We accelerated in motor products in the last -- in the second half. You see we have higher growth in motor products in the second half.

And in non-motor side, we are slightly less than the market growth with 20% annual growth. And if we exclude the one-offs, we can say the market growth is 23%. And at the beginning of the year, we said that we have some nonrecurring policies. So that was around TRY 200 million annual volume. If we also add those TRY 200 million, we could also overperform the market growth.

In the health line, we are parallel with the market growth with 21%.

And coming to the breakdown of the distribution channels, we have 15% growth in agency channel. We are already strong in agency channel and also becoming more strong in that channel. We exceeded 3,000 agencies out of 16,000 agencies in the market, so we can say that our agency distribution is more than 20% of the total market. So we are growing very good in agency. And you see not only in MTPL and MOD, we are also -- we overperformed the market growth in agency channel in non-motor and health product.

In bank channel, that was a weak performance year for the bank channel. The bank, the loan campaign in the second half from that loan acceleration, the state bank benefits a lot. So the private banks are behind the state bank. So basically due to that credit performance, we were also behind the market growth in bank channel.

On the corporate side, we had a good year, and we have 28% growth in corporate channel. And overall growth is 17%. So that was the picture of the top line for 2020.

On the next slide, we share the underwriting results of the company. You see we have a good first quarter with TRY 99 million on the left-hand side. And in the second quarter, we have a huge underwriting result with TRY 196 million, around TRY 145 million was coming from the COVID conditions due to the lockdowns. And in the third quarter, you see a weaker result with TRY 60 million, which is basically due to the [ vast ] of the COVID conditions. You all know that people go outside and the claim frequencies were higher in the third quarter.

And again, as the top line, the underwriting result is the same in the second quarter and the fourth quarter. In the last quarter, we have TRY 95 million underwriting results, and that underwriting results corresponds to 23% increase compared to last year's last quarter. And at the end of the year, we have TRY 450 million underwriting result, which is TRY 200 million above the last year's result. And there is around 80% increase in terms of underwriting results. And we can say that it was a very different year in our -- which will play in our memories. We have around TRY 180 million positive impact coming from the lockdowns due to the pandemic. So that continues a lot on our underwriting results.

And putting that positive impact aside, in the other side, we have TRY 10 million coming from the Elazig earthquake, which occurred in the first quarter and TRY 10 million coming from the Izmir earthquake, which occurred in the last quarter. And again, you may remember there was cancellation of the general conditions in MTPL products, which canceled the standard calculation of the indemnity payment in bodily injuries in MTPL product. So that being a TRY 30 million increase for the risks on our outstanding claim. So that was another one-off impact in the last quarter, which is TRY 30 million, 3-0. And this is another negative impact for this year and also basically due to the increasing claim frequencies in the third-party liability and employees liability increased our provisions for liability product with TRY 20 million during the year. That was also another negative impact. So all in all, we had good results in terms of underwriting within the years.

And looking to the product breakdown, we have our underwriting margins. On the right-hand side on the below table, you see MTPL with 8% underwriting margin and MOD with 16%, that increased a lot compared to the 5 years in the 2 motor product. And we have 6% in non-motor. That non-motor is -- in the sequential non-motor, we have high retention products like households and low retention products like corporate and commercial products like corporate fire, engineering, et cetera, these are in top. So compared to other products, MTPL and MOD, now MOD has low premium retention. So the margin seems less than the others. And in the health side, we have 14% underwriting margin, which is still good.

And in terms of the distribution channels, we have 10% in agency channel and 26% in bank channel and 4% in corporate channel. And an overall underwriting margin in the company is 10%.

So that was the picture of the underwriting performance of 2020. And on the next slide, which is a similar analysis, the analysis of the combined ratio, which is a critical KPI and also most of you follow that KPI, considering the performance of the company. You see the last year's result was 98% on the right-hand side, and you see this year's result is 92%. If you include the -- or exclude the costing impact of the lockdowns that combined ratio will reach 86%, which is still very satisfactory.

So you see we have 1% improvement in the expense ratio because. You see at the top, you see 9% for this year. And the combined ratio is flat with 15%, and we have a 5% improvement in loss ratio. So that picture of the combined ratio and breakdown.

And on the next slide, you all know that we have 2 income sources. One is the insurance income and the other one is the financial income. So that's the view of the financial income side. Our assets under management reached to almost TRY 3.3 billion, even we distributed TRY 200 million dividend in the year. And the annualized return yield is 14%. This is the last quarter's results and the annual results is 12%.

Just a quick reminder, at the beginning of the year, the interest rate in the market were around 11%. During the year, it dropped to almost 7% in July and August. And then at the end of the year, the interest rates were around 17%, 18%. So we can say that it was very fluctuating in terms of interest rates.

And looking to the portfolio share, we have 52% in the time deposits. You see during the year, it's almost dropped to 34% in the third quarter. But at the end of the year, we increased our share in the time deposit basically due to the increasing interest rates. And then the corporate bonds, the share of the corporate bonds is 29% at the end of the year and 5% we have in eurobonds and 8% in government bonds and 5% in equity.

So we have a strategic asset allocation study. And according to the results of that study, we distribute portfolio shares. So for the next year, we can say that we will be around that shares for the composition of the portfolio, I can say.

And the last quarter's financial income is TRY 89 million. And as I said, we have around 35 million long position either in eurobonds or in dollar term time deposits. So we have that position for the purpose of hedging the FX exposure in the spare part cost of MOD product. In MOD product, we have around 70% loss ratio, and around 70% of the losses is coming from the spare part costs. And almost all that cost is exposed to foreign currency, either in dollars or in euros. So -- and we price that product in local currency. So the currency rate change affect cost in MOD products. So we hedge that risk, that exposure with a long position on our balance sheet. So we still keep that long position around that level, the 35 million.

And on the next slide, we have the income statement results of each quarter and also the year end. At year end, we have TRY 5.3 billion premiums and TRY 2.7 billion net premiums. We have TRY 450 million underwriting result and the net profit is TRY 432 million. I said the combined ratio is 92% and the underwriting margin is 5%, which is over gross earned premiums.

And on the next slide, we have our balance sheet figures. You see our top line growth is 17%, but we have 22% growth in total assets. For receivables, we have 22% growth. And for assets under management, we have 26% growth, which is far higher than the top line growth. So we can say that our portfolio-investment performance was very satisfactory in 2020. And our equity reached TRY 1.1 billion. And we have an ROE of 43%, which is far higher than our long-term ambition.

And on the next slide, we have the bridge between our local statements, local financial statements, which is TFRS, Turkish Financial Reporting Standard and versus the IFRS results. You all know that we are disclosing our IFRS results since 2017. And in local results, we have TRY 432 million net profit. And in IFRS, we have TRY 374 million net profit. The main difference between the 2 ledgers is the discounting or pending claims, which is not an issue in IFRS ledgers.

And on the next slide, we have the risk and opportunities for the coming period. The downsizing economy could limit the insurance growth, as you all know. But the overall insurance penetration of the country is still low compared to the tier countries or tier economies. And decreasing underwriting profit margin due to competition, as we experienced in MTPL in 2020, it can continue in 2021 also because the interest rates are still high. And uncertainty, high volatility on currency and interest rates is another risk. Decrease in interest rate is an important risk for insurance companies, which was one of our income source is the financial income.

A natural disaster with the climate change and also other reasons, we had -- sorry, I forgot one incident also in 2020. There was a flood incident in September, which costs to Aksigorta around TRY 20 million, which occurred around Istanbul region. So we had 2 earthquakes, we had several floods, and we have hail incident in September. So the frequency of those natural disasters increase in the last year. So that's another risk.

And possible churn in individual segments due to spending cutoffs. That's another risk. And sudden increase in mobility and use of private cars instead of public transportation with easing of restrictions could be another risk. But we observed that in January, the new car sales increased by 66%. So still high volumes are continuing in the market in terms of new car sales.

And in opportunities side. Increase in the interest rate is the biggest opportunity. Increasing new vehicles and mortgage home sales is, again, a big opportunity. And the pandemic conditions, we benefit a lot in 2020. So in January, we observed that we are also benefiting from the lockouts,but we don't know when it will end. And accelerate our digital transformation with the pandemic is another opportunity. Increasing efficiency, higher end premiums and improved underwriting margin with the introduction of new products. We introduced the cybersecurity insurance in the last year. We hope that we will accelerate on that product in 2021 and a high focus of industry on technology and analytics to generate values is another opportunity, not only for Aksigorta but for the whole market.

And on the next slide, we share our guidance for 2021. We have guidance for gross written premiums at 15% to 25% growth. So this is for top line. And for the bottom line, our guidance is 10% to 20% increase in net profit.

And on the next slide we have our long-term ambitions, which you used to see on all our presentations. Our long-term ambition for return on equity, above 30%. Our market cap ambition is USD 1 billion, which we increased our market share during this year. We outperformed both insurance index and Istanbul Stock Exchange 100 index. And so we had a good performance in the top side in 2020. And our long-term ambition for combined ratio is 95%. And we keep our market share ambition at 10%, which is not so far considering this year's result, 8.4%.

So that's all from our side, and we are ready for your questions. Thank you for all.

[Operator]

[Operator Instructions] The first question comes from Karim Sawabini from Moon Capital.

[Karim Sawabini, analyst]

Congrats on the results. My question is the currency obviously had been strengthening recently based on orthodox policy. That seems to suggest that rates should be higher for at least the first half of the year, maybe in some parts of the second half of the year. Can you talk about what that has in terms of implications for your business? One, what's your assumption is on the yield you'll earn on your portfolio? And two, if the currency does remain relatively strong, what are the further implications relative to your guidance?

[Osman Akkoca, executive]

Yes. Maybe I can start from the financial perspective. Yes. We hold a long position in the foreign currency side, and we hedge more MOD claims. So if the Turkish lira performed well in the first half of this year, so it means that we will not gain money even we can lose some money in financial side in terms of foreign currency losses, but we can gain some money from our MOD portfolio.

We are #1 in the market in terms of MOD at the beginning of the year. So we were #3 at the end of last year. So we started very good in MOD market. So it's the valuation of Turkish lira was strong in this year, that means we will have a very competitive advantage in terms of MOD. So we can either increase our MOD underwriting results or maybe we can increase our market share in MOD. So that will be our strategic choice. So Ugur, you can continue.

[Ugur Gulen, executive]

Yes. Osman, thank you. Indeed, Karim, it's pleased to hear you for a long time. And thank you for your question as well. You are right. Turkey has high TL interest rate, low FX policy up to 2016. And after 2016, exactly the opposite policy is implemented and executed. So high FX rate and low TL interest state. Unfortunately, that policy did not work well. And so we encountered several FX hikes starting from March 2018.

Currently, as you rightly mentioned, high interest -- high TL interest rate is depressing as fixed rate. That is not for us, by the way, because the cost of claims are -- we are keeping the cost of claims stable. So that makes us a more -- let's say, foreseeable pricing on the policies and more stable underwriting margin results. But of course, that's mainly to some fluctuation or growth problem in Turkey. Growth problem may lead to lower number of car sales and lower number of asset exchange. Just that may negatively impact our new business volume.

On the other hand, we can enjoy from our existing -- profit from existing stock level on MOD and MTPL side, I would say. But we both -- we have to watch what will happen at the end of the day. The central bank's target must be to keep the inflation level in a reasonable level, which is around the world is around 5% level. Currently, inflation is 15%. And most probably at the end of April, we will see 18% inflation rate. So with the existing high interest rates, most probably inflation rates will change in this direction. And we'll have a lower interest rate vis-a-vis the estimation shows a level to us 12% at the end of the year.

But probably policymakers keep that TL interest rates higher in order to keep lower inflation. We are going to see because there is an election in 2023. So really, we don't put too much chance. So what we see, TL interest rates will stay high not only for 6 months, maybe in a little bit longer period of time. So this will definitely positively impact our financial yield, interest yield, margins. That would be my comments regarding your question. Thank you.

[Karim Sawabini, analyst]

And if I could just ask one follow-up. I know that Aksigorta has a lot of investment in technology and digitalization. Can you talk about what do you think the larger opportunities may be for you if we think beyond this year for the next several years?

[Ugur Gulen, executive]

Okay. First of all, definitely, you are right, really Aksigorta [indiscernible] companies who use technology a lot in not only in the insurance, obviously in other industries. We consider digitalization of technology in 2 terms externally and internally. On the internal digitalization side, really, we have almost completed all the investments. So currently around 3 million to 4 million transaction has been done by robots. So we are investing a lot, but the marginal impact of internal digitalization has been decreasing.

On the coming periods, the -- I think external digitalization have a higher potential than that. The major -- one of the major steps we want to take is to carry the insurance products to the customer journeys -- to the customers. Our customers are making transactions with other companies. So we call it partnership insurers. Currently, we started that partnership insurance with Vodafone Turkey, telecom operators in Turkey. Now Aksigorta is the single provider -- insurance provider of Vodafone Turkey. And we are offering Aksigorta products to the Vodafone customers while bring telco operations in Vodafone apps or Vodafone transactions -- while customers are doing a Vodafone transaction, we are offering an insurance product. So we would like to tell the insurance business to the -- to where the customers are transacting with other companies like Vodafone, like airline company, like retail the company.

I think this will be the next big step in terms of external digitalization. Aksigorta is one of best companies in that respect, and you are going to see the implication of that starting from 2021. Most probably, that strategy will accelerate in the coming periods as well. Thank you.

[Operator]

[Operator Instructions] The next question comes from [ Dorote Cord ], an investor.

[Unknown Attendee]

Congratulations for the results. I would like to ask about the payments to the Sabanci Foundation, This has increased 44% this year, although the net income increased nearly 18%. This is the amount of, I guess, nearly 7% of the net income gone to the donations, will Aksigorta continue donating at this rate or really consider changing this policy?

And secondly, Aksigorta always underestimates its share expectations, and that's great for me, by the way. Do you see an outside potential on your expectations? Or would you consider revising them on the year because of the current interest rate involvement and increasing exchange rates?

[Ugur Gulen, executive]

Can you answer, Osman?

[Osman Akkoca, executive]

Okay. Yes. Ugur. [ Dorote ], thank you for joining, and thank you for your question. In terms of the Sabanci donation, Sabanci vaccine donation, it is set in the shareholders, the -- sorry, the main -- sorry for that. It is set by the shareholders in the general assembly 5% of the gross profit before tax, profit before tax. So it doesn't change from year-to-year. It's basically due to the results of the company in structural financials. So it doesn't change.

And if you are calculating over the net profit, it will be wrong. You have to consider the profit before tax line. So every year it's 5% of the profit before tax, and it will not change because it is defined by the general assembly. So one is for the donation.

And the second one, yes, we have -- let's say, we have a smart guidance, smart targets. So it's achievable, but it is not unrealistic. So in the past 3 years, there was a huge fluctuation in the financial markets in terms of -- in Turkish financial markets in terms of interest rates. And also in the last -- in the prior years, there was some regulation change in the last minute, we can say. So considering those risks on the interest rates in the financial markets and considering the risks from the regulation side, we have to set and share our guidance, which is not big but not very unreachable. So that is a challenging one in our perspective.

But we have opportunities, as you said. Our return yield -- annual return yield is around 60% for the year because we started around 17%, 18%. But maybe you follow up the announcement or the guidances of the banks, the local banks, they all forecast around 300 bps decrease in the interest rate till the year-end. So it means we can start with 17%, 18%, but it can reach to almost 12% to 13% interest rate. So the annual average could be around 15%. So we are still at a challenging side with 15% of the total return yield.

But if the interest rate remains high, we have an opportunity from the financial income side. One is that one big opportunity. The second big opportunity is the COVID situation, the lockdowns, there was a full retail lockdown in December. But in January, we have -- the retail lockdowns are continuing, but we cannot call it a full retail lockdown because we see our local people in the outside. So if the lockdown continues 3 or 4 months, we can benefit from the lockdown conditions. One is that.

And in April and in May 2020, the claim frequency of MOD products dropped to 10%, which is around 20% in the long term, so from 20% to 10%. But in January, we don't observe this kind of, let's say, decrease in the claim frequency. So it's now around 17%, 18%. So we cannot call it a full lockdown, but let's say the rules of the lockdown and the duration of the lockdown, periods of the lockdown could be another opportunity for our underwriting results.

And the third part would be, as Ugur mentioned, we are investing a lot in the technology side. So we are leveraging our insurance business and the insurance with use of technology. So we started a good partnership with telco insurance distribution with Vodafone. So the growth in the Vodafone also could be another opportunity for Aksigorta.

And the last, maybe you follow annual guidance of other banks. They are expecting a huge increase in the volume of loans. So if they achieve a huge growth in the loan side, we can also benefit from that growth. So we have several opportunities. But in the opposite side, we have also very -- let's say difficulties. Ugur, do you want to -- some other issues in terms of guidance?

[Ugur Gulen, executive]

No. You summarized very well. 2021 -- 2020 was a difficult year because there are lots of unknown event expected, call it, earthquakes, hails, whatever. We don't know what 2021 will bring to us. Currently, today, what we see, it will be better years comparing to 2020 because on the lockdown at least will continue 1 or 2 more months, higher interest rates and very, very strong starting on the market sales side of Aksigorta. Now we are both leaders in MOD and MTPL and non-motor. We are only not market leader in health side.

So it's really today with the existing conditions, Aksigorta is very well positioned compared to market, but everything is changing rapidly. So we have to be, let's say, flexible to any changing condition. Last year, we did it. I think, in 2021, any adverse conditions occurs, we can easily steer Aksigorta to the proper policy in order to adapt the company, again, profitable and growth -- as the rating from profitability and growth.

But in this long term -- not the long term in the midterm, what we would like to create an ultimate insurance machine. This is our target indeed. We want Aksigorta, the company who use technology and digitalization and data at most and we want to be a single provider of the agencies. And we want to make us the insurance leader in this mobile world.

And we have one missing element outside now. We have started to invest on how to make Aksigorta not only a health insurance company, but a health company, a winning health company on the coming period. So as I said, we are running our business good. And we are also changing the future -- changing our business for the future according to the future to that. But at the end of the day, really, we would like to create an ultimate insurance machine from Aksigorta and to satisfy our existing and new shareholders and to allow Aksigorta [ closely ], I would say. Osman?

[Unknown Attendee]

Can I have 2 more questions, please? So in the investment portfolio, the corporate bonds, are they floating rate bonds or fixed rate bonds? I'm asking this because right now, there is 17% of interest rate in the banks, I can say. And the realized return is 14% for your portfolio this quarter. Should we expect a mild decrease in the annualized returns?

And secondly, do you have a target in the capital adequacy ratio because I think that's related with your payout ratio as well in the dividend side?

[Osman Akkoca, executive]

Thank you. So, in the past 2, 3 years, most of the corporate loans were floating rate. But in 2020, most of the corporates issued some fixed rate bonds. And we also invested in those bonds. But at the end of the year, almost all fixed rate bonds are expired. So starting from this year, we can say that the majority of the portfolio of the corporate bonds is floating rate bonds, very negligible amount of fixed rate bonds, so -- from the increasing rates.

And yes, the last quarter's return yield was 14%. But you know that the rate -- the returns of -- the returns of the deposits are immediately increasing, but the floating rates are adjusting their quarter -- their rate quarterly. So every quarter, the return yield of the corporate bond portfolio is increasing. So for the annual return yield for this year could be around 16%. First quarter could be around 17%, 18%. Second quarter could be around, let's say, 16%, 17% and 1% less for the other remaining quarters, I can say, 15%, 14% and 14%, 13%. So for the annual return yield, you can say it could be around 16%.

And then, yes, the capital adequacy result is very important in terms of dividend payout. That will be a Board recommendation to the assembly. And at the moment, our study on the capital adequacy calculation is continuing. So we can share that. That's also announced in that presentation in the appendix slide. We have 128% capital adequacy ratio, which is a very dropped result. As I said, the calculation continues. So it will finalize at the end of February. And then, as you said, the dividend payout ratio is very dependent on the capital adequacy. And we can say that the dividend level will be very similar to last year's realization.

[Operator]

Ladies and gentlemen, there are no further questions. I will now give back the floor to our speakers. Thank you.

[Osman Akkoca, executive]

Yes. Thank you. Thank you all for your joining our earnings call. As I said at the beginning, we did what we said. So we can easily say that we will do what we say because we have a good performance and a good strategy. And we have good -- very good financial. So for the coming period, Aksigorta stock is a very promising investment, I can say. And we -- I hope that we will also welcome you with good results in the coming quarters. Thank you all for joining. Thank you. Ugur?

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect your lines. Thank you.