Anadolu Anonim Turk Sigorta Sti

IST:ANSGR.E

Earnings Call Transcript

[Baris Safak, executive]

Hello, everyone. I waited a few seconds because there are still participants attending. Welcome to our 2024 year-end financial results webcast. As you already know, I guess, we disclosed our results on Friday, our year-end results. And as usual, we are going to have a webcast. We are going to have a presentation related with our fourth quarter results and overall year figures as well.

The presentation will be handled by Erdem Bey, our CFO; and by myself, Head of Investor Relations, as usual. Before I give the floor to Erdem Bey, I want to thank you for attending our year-end webcast presentation. We are going to have a Q&A session at the end of the presentation, as usual. [Operator Instructions]. So Erdem Bey, back to you. Floor is yours.

[Ibrahim Erdem Esenkaya, executive]

Thank you, Baris. Welcome to Anadolu Sigorta Financial Presentation '24 Q4. Our presentation has 3 different titles, company and market overview, technical results and financial highlights. I will present company and market overview and the technical results. And after that, my colleague, Mr. Safak, will present financial highlights. I think that will take 30 minutes. If there is any question, we will pleasure to answer it.

At the beginning, one of the important agenda item of the second quarter in our country was whether there will be an increase similar to exchange rate experienced after the elections last year. Following the local elections, the increasing dollar demand of residents before the elections, they decreased after the elections and USD demand gave way to Turkish lira's demand, and there was no problem. Of course, it affected economic condition [ supposedly in this term ].

And most important issue, the agenda of the world economies in the third quarter was the moves of central banks to reduce the interest rates. And Turkish Central Bank decreased interest rate too in this term. And it was another important step for us. And in Turkish [ KKM ] amounts sharply fall down and the Central Bank reserves increase in this term. It was quite interesting and important improvement in this term.

But on the other side, inflation rate was hiked at end of the year and is real a big problem for us, chockful, which worries about inflation, justifiably so [ securing ] household budgets at the same time, the company's budgets still in this term. It was very important for us.

At the beginning, again, when we look at the insurance sector in '24, totally TRY 838.5 billion total premium production in this term. And of course, it includes the life and non-life premium production and TRY 100 billion premium production is the life side and the TRY 738.6 billion is the non-life side premium production in this sector, in this term. Then we look at the macro side in '24. A year of the tight monetary policy downtrend in inflation opportunities for real returns. In '25, we think that tight monetary stands to prevail, albeit increasingly accommodative in the in '25.

When we look at the insurance market in '24, strong real growth in this term. As I said before, in '24, premium production at TRY 738.5 billion and 72 percentage increase year-to-year when we compare the '23. Then we look at the '25, a challenging year [ versa ] mix drivers. Risk are on downside of disable income and stable TL and the potential for real investment returns in the turn.

When we look at the branches, MTPL, one of the price cap rise 13 point for nearly 14 percentage increase in this term. Real growth in majority of branches held 34 percentage increase and the fire and natural disasters, 29 percentage increased, general losses minus 2 percentage in this term and the competitive pressure in the fourth quarter '24.

Next slide, please. When we look at the non-life insurance market in this term, as you see Anadolu Sigorta nearly 57.3 percentage increasing, and we reached TRY 69.6 billion premium production. If we compare the sector increasing rate, we are a little bit downside. But anyway, we are -- we were in the [ 3 degrees ] and 9 percentage in the market share.

Next slide, please. When we look at Anadolu Sigorta highlights, especially in this term. Profitability, it was very important for us and the technical profitability increased materially in this term. Claims ratio decreased from 91% to 72.4 percentage and bank insurance channels share in total underwriting increased above sector average, improving technical profitability and strong investment income versus a strong solid ROI of [ 15.7% ] in this term.

When we look at the branches, MTPL premium growth 54.5% in '24. MTPL claims ratio fell down to 99 percentage in '24 and strong growth in health branch, 117 percentage increase year-to-year in this term. When we look at the assets under management, grew by TRY 5.7 billion in quarter 4, reaching to TRY 5.5 billion, and it is strong premium growth and real returns. Tight monetary stance and more stable TL outlook with gradual appreciation pattern has been supportive of investment income in '24.

Next slide, please. When we look at the branch breakdown and growth rate Anadolu Sigorta [ Health ] sector, premium production, TRY 738.6 billion and Anadolu Sigorta premium production, TRY 69.6 billion. And when we look at the share of the premium production in the 41 percentage motor, 22 percentage fire and 18 percentage in health side and 19 percentage in other side in the premium production.

When we look at the sector in the motor side, 35 percentage and the fire side 17 percentage and the health side, 18 percentage like us. And there's quite differences, especially in the motor side or Anadolu Sigorta market share is lower than the 4 percentage points, I can say. And fire branches, nearly 5 points more than the sector and health branches is a similar sector market share.

Next slide, please. Then we look at the production, again, Anadolu Sigorta, MTPL, MOD, Fire and Natural disaster, Health and other branches totaled 57.3 percentage increase, and we reached TRY 69.6 billion premium production. Then we look at the sector, sector increased 72.1 percentage increase and TRY 738.6 billion production in this term.

Next slide, please. When we look at the market share, we are in 12 different branches, we are the first say, we first say both of them, 2 of them. And 5 of them, we are the second and 2 of them third and 2 of them again, fourth degree and one of them the fifth degree. And totally, we are the third degree on the premium production in this sector. And when we look at the slide, we have got 9 percentage market share in totally.

Next slide, please. When we look at the net profit drivers, if you look at '23, end of '23, we have got TRY 5.9 billion profit and underwriting TRY 2.5 billion and investment TRY 5 billion and the tax minus TRY 3.2 billion and other TRY 596,000, and totally in '24, TRY 10.9 billion net profit. When we look at the distribution channels, we have got nearly 2,600 agencies at the same time, nearly 1,000 bank branches, all of the Turkey [indiscernible] Türkiye. And we have got wide marketing, [ anti ] sellers channels in Türkiye. After that, we can say easily, we have got an agency tendency company. If you look at the sector, agency premium production has got 60 percentage. But if you look at our site, 63 percentage. And bank insurance side is very important for us, and we are improving our production in this site.

When we look at our distribution channels here and 35 -- sorry, 15 percentage, If you look at last year, it was 13 percentage plus 2 point higher than the last year. And when we look at the sector, it was 13 percentage. And the broker side, in all company, this is the 14 percentge, but the sector 17 percentage, 3 point increase or 3 points higher than Anadolu Sigorta.

On the other hand, the agency side and the bank insurance side are very important and the bank insurance side is very important because of the profitability is very good in this side.

Next slide, please. Technical results. Gross written premium and technical earnings here. And first of all, MOD, motor an demand, I can say the last quarter, 14.6 percentage increase and claims net is 8.1 percentage increase and the combined ratio minus 3% in this term. When we look at the MTPL, gross written premium increased 59.4 percentage increase and the claims net minus 5 percentage and the combined ratio 158.1 points in this turn. And when we look at the accidents, GWP increased 55.9 percentage increase and claims net 70.2 percentage and the combined ratio increased 5.9 point. And health side, gross written premium 91.2 percentage increase and the claims net 128.6 percentage and the combined ratio 20 points.

Fire and natural disaster, GWP, 45.2 percentage increase and the claims net 54.4 percentage increase, combined ratio 24.6 point increase in this term. General losses, GWP, 40.6 percentage increase and the claims net 25 point percentage decrease and the combined ratio minus 47 in this term. When we look at the profitability and combined ratio fell to 5-year low. It was very good and important result for us, especially the '24, it was 119.1 combined ratio and in '24, 104.7 and decreased nearly 14 points. And on the other hand, the claims ratio in '23, 31 points and 20 point percentage in '24, 72 4 percentage and nearly 17 point decrease in this term. And it was very good results for us, especially for the decrease in the combined and declined ratios, and they are -- both of them affect our profitability positively in this term.

Now about the financial highlights, I would like to give attention to Baris. Thank you very much.

[Baris Safak, executive]

Thank you, Erdem Bey. I'm going to continue with balance sheet and P&L figures. As you see on the screen, on the left-hand side, these are the assets figures and on the right-hand side, liability figures.

Total assets. Anadolu Sigorta's total assets increased with 65% in 2024 and our total assets amount reached to TRY 96.2 billion at the end of the year. Our assets under management portfolio has increased, was 73% and the amount reached to TRY 55.5 billion. On the right-hand side, our technical reserves can be seen. The increase in 2024 was 42.7% and the amount of technical reserves, including outstanding reserves and unearned premium reserves was TRY 51 billion.

And at the end of our slide, you can see our shareholders' equity change. The increase was 116% and our shareholders' equity solo or unconsolidated shareholders' equity amount reached to TRY 31 billion. There was an important effect coming from Anadolu Hayat, per share and cap increase in our shareholders' equity. We should mention this.

On the next slide, you can see our yearly income statement, summarized income statement, P&L figures. On the left-hand side, the unconsolidated figures can be seen. And on the right-hand side, consolidated figures can be seen. Just to be a footnote, I should say, we do consolidate Anadolu Hayat, which we have 20% stake. It's a like company. It's a group company. And we do consolidate it with equity pickup method. So the only difference is at shareholders' equity. We do subtract. We do exclude, it's uncapped valuation or revaluation and we include -- it's equity share that we own 20%. So the only difference for P&L is at financial income part. As you see, net technical income and technical expenses are identical. They don't change.

So when we look at the figures after this information, extra information, our technical income increased 77%, and it was TRY 42 billion at the end of the year, technical expenses increase was 56%, and it was TRY 44 billion. Net financial income was TRY 16 billion for solo in P&L, and it was TRY 16.7 billion, and the increase was year-on-year increase was 34%. And at the end of the table, you see our net profit stood at TRY 10.9 billion with an increase of 84% for solo figures and consolidated net profit was TRY 11.5 billion with an increase of 81%.

On the next slide, you can see our quarterly income statement figures and they are compared with previous year's last quarter on technical income, which is -- which financial income transferred to technical division is excluded, I haven't mentioned it in the previous slide, but I should also underline that one because you are going to see different figures when you look at our P&L, official P&L. The increase was 71% for technical income. Technical expenses increase was 44% compared to last year's last quarter. Net financial income change was 85% in solo figures and 84% in consolidated figures, which was around TRY 5.2 billion and TRY 5.4 billion.

And net profit for last quarter of this year stood at TRY 3 billion with an increase of 517% increase and consolidated net profit was TRY 3.3 billion with an increase of 404%.

On the next slide, you can see our net income breakdown for financial side. On the right-hand side, you see a table starting with technical earnings. We had a loss from technical side, which doesn't include any financial income, I should highlight that part. Our technical income was almost TRY 17 billion. Amortization figure was minus TRY 175 million. Provisions and other income was minus TRY 408 million. We rediscount our receivables, and it's minus TRY 370 million. And after tax deduction, our net income stood at TRY 10.9 billion.

And on the next slide, you can see our return on average generation. These figures shows return on average equity figures. At the end of the year, our solo return on average was 51% and our consolidated return on average equity figure was 61%, which is relatively high compared to the stock market listed companies. Actually, I should underline that one also.

And on the next slide, you can see our portfolio breakdown. As you see, as we have mentioned, we are going to be managing a portfolio of more than TRY 55.5 billion, which is divided into bonds with 19%, funds 36%, stocks 10% and time deposits, 34%. And our portfolio return, which is 17 billion was 46.7% yield we were able to achieve from our portfolio.

That was the last slide of our presentation. Now we can proceed with Q&A session. [Operator Instructions].

[Baris Safak, executive]

Do we have any questions? we have a written question from Sahil Kumar. It's a brief question. Erdem Bey, can you talk about 2025 expectations?

[Ibrahim Erdem Esenkaya, executive]

Very short question. Thank you very much for this question, Sahil. Of course, the -- first of all, maybe I can talk about '24 a lot. And '24, it wasn't an easy turn for us. But anyway, we have got good results in '24, '25 will be better. But at the same time, this is the different size. I mean, if the economy will be clear, we can object and prospect future, we can decide the right decisions. And after that, we can get good results after that. And it depends on the, first of all, the economy is very important for Turkey and the inflation rate will be very important.

On the other hand, interest rate, of course, will affect our decisions in this term. But anyway, if we compare '23, '24 is better than '23 because we can observe, we can project '24. And we believe that '25 will be a difficult year for us. But anyway, will be better than '24 because the economy situation is clear more than the last years. If this position goes on, we believe that it will be good.

On the other hand, '25 is very important for us because our company will be 20 -- sorry, 100 years old, and it is very important year for us. So we have to get good results in this term. We hope, we believe and we desire the good results, especially in this term.

Baris, if you want, you can add anything about it.

[Baris Safak, executive]

Thank you, Erdem Bey. I think you touch every point. We are hopeful from 2025 in terms of profitability, increasing our profit, increasing our premium production, keeping our technical profitability. We are -- we have an advantage even though we are going to experience decreasing figures for policy rates. We are going to be starting here with more than TRY 55 billion. It's going to be an advantage for us. So we are going to take advantage of that large AUM. And of course, we are going to keep our net profit.

The important thing is 2025 is more visible in terms of financial figures. As this financial situation continues in Turkey, we are going to be -- it's going to be more easy for us to project technical premiums. So I may add these comments, Erdem Bey. Thank you.

There's another question, but I think we have from Sahil. Also with interest rate decline, discount rate on MTPL policies will also come down. How do you see this?

Interest rate is going to come down, but we are -- in average, we are going to experience something like in simple terms, 36% rate I may comment on that. So it's going to give us a compound yield around 40 -- more than 40% when we end up with large AUM, we are going to have a positive higher investment income in our P&L side, I may say that. Maybe would you like to comment on discount rate on MTPL, Erdem Bey. I think you are mentioning -- you are asking about that the discount rate is going to -- probably is going to be coming down in 2025. So is that the question?

[Ibrahim Erdem Esenkaya, executive]

First, I think it will be [ 30%, if not 35%]. It is quite easy to discount rate decline to Turkey percentage. But after that could be 25% at end of the year, why not? But first of all, we have to see the [ Turkey ] percentage. And if there's any discount in this discount rate decline in this term, of course, it will affect our financial side and the technical side, especially for the reserve side, I mean. And end of the year, if we compare it, it will take TRY 750 million, something like that can affect our reserves positively and of course, affect our technical profit negatively, I mean say. But it is actually the normal of the financial station. So we are ready for it.

[Baris Safak, executive]

Do we have other questions. Any other hands?

[Unknown Executive]

We don't have any written questions or we don't have anyone who raised their hands.

[Baris Safak, executive]

You can always ask your questions with e-mail, of course, to our all participants, I am talking to. Erdem Bey, I think we don't have any more questions.

[Ibrahim Erdem Esenkaya, executive]

First of all, I would like to say thank you very much for joining our end of the year presentation. You gave your time for us. Thank you very much for it. And of course, you can ask any question the way you want, only one e-mail or one calling for us is enough for to [indiscernible]. Maybe, again, I would like to say '25 is important years for our company, I mean the 100 years old is a good year for us. It's a pleasure for us. And we would like to get good results and a good sign on the financial -- especially the financial side, I mean, we would like to take good financial results in this term. So -- thank you very much for joining again. See better days. Thank you.

[Baris Safak, executive]

Thank you for participating in our webcast. See you later.