Insurance companies are announcing their exit from the corona crisis through the adoption of a very generous dividend distribution policy.
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Harel Investments, The parent company of Harel Insurance Company, announced yesterday (Sunday) that it will regularly distribute 35% of its total profit to shareholders. This is the second insurance company among the five largest insurance companies adopted by dividend countries. This is after the Phoenix Adopted at the end of 2020 a dividend distribution policy of up to 50% of total profit. To these two companies must also be added a direct insurance company that also has a generous dividend distribution policy of 50% of total profit.
The dividend distribution policy is made possible, among other things, following the update of the solvency provisions made by the Capital Market Authority towards the end of 2020. As part of the update, insurance companies are allowed to hold a smaller amount of capital after the crisis.
Of the major industries in the capital market, the insurance industry is the only one that did not distribute dividends in the first months of 2020, mainly due to the corona crisis. In the face of these developments, most public insurance companies have started hoarding Equity Higher than necessary in the ratio of solvency (equivalent in the insurance industry to the ratio Capital Adequacy In the banking sector). The crisis has so far turned out to be a health and economic crisis but not one that could harm the conduct of insurance companies and hence the possibility and perhaps the necessity to distribute a dividend. Harel, for example, holds 35% of the required capital according to the solvency ratio.
In recent years, every year more than 40% of the public companies on the Tel Aviv Stock Exchange have distributed dividends to their shareholders. According to a stock exchange study from 2020, more than 80% of them (164 companies) regularly distribute dividends.CalcalistHarel has distributed about NIS 2.3 billion as a dividend in the last decade, the highest amount of dividends in the industry. This value constitutes about 35% of the current market value of Harel Insurance Business, which is estimated at NIS 6.6 billion, without dividend distribution, Harel would today reach a market value of almost NIS 9 billion.
In the last decade, the Phoenix has distributed about NIS 940 million in dividends, which constitute about 13% of its market value. Although industry executives believe this rate is set to grow in the coming years. This follows the sale of Phoenix to two U.S. investment funds, Centerbridge and Geltin Point, which are expected to support dividend distribution to increase foreign shareholders’ profits. ratio Solvency Of the Phoenix stood, as of the end of 2019, at 165%. According to a report published by Phoenix, its capital surplus was about NIS 4.85 billion before it set the dividend policy.
A safe lamp next in line
The share of Harel Investments rose yesterday (Sunday) by 2% against the background of the company’s announcement of the adoption of the dividend countries, but it is not the only insurance share that jumped. The share of Menora Mivtachim Holdings, the parent company of Menora Mivtachim Insurance, rose by 3.6% following the expectation that Menora Mivtachim will be the fourth holding company in the insurance industry to adopt a fixed dividend policy. In the last decade, Menora Mivtachim was the company with the most modest dividend distribution with a distribution of NIS 450 million, which constitutes about 11% of the company’s market value, which recently reached NIS 4.2 billion.
Menora Mivtachim will distribute NIS 100 million in dividends today (Monday), after setting its distribution from about two weeks ago. Its solvency ratio was previously 120% (according to the company’s reports, as of the end of 2019) and a surplus of NIS 1.9 billion.
The pair of holding companies in the other insurance companies, Migdal and all insurance businesses also have capital surpluses. The adoption of a dividend policy in these two companies is a more complex matter, mainly due to restrictions imposed by the insurance commissioner Dr. Moshe Barkat specifically on these two companies. It should be noted that Migdal has been one of the largest dividend departments in the last decade. .