Clal Insurance

Investor Presentation • Mar 29, 2024

Other limitations

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This presentation contains only partial information regarding the Company's results for 2023 and was prepared for summary and convenience purposes only. The presentation cannot be in lieu of reviewing the reports published by the Company for the public (including its financial statements), which include the complete information about the Company, before making a decision to invest in the Company's securities. In the event of any discrepancy between that stated in the presentation and that stated in the Company's official reports, that stated in the said reports will prevail.

Any forward-looking forecast and/or statement (as forward-looking information is defined in the Israel Securities Law, 1968) provided, if any, by way of this presentation, is based on the Company management's assessment according to its discretion, and involves uncertainty, including factors that are beyond the Company's control, each of which or a combination of them, as well as materialization of any of the risk factors typical of the Company's operations, may lead to the said forecasts and/or assessments not being realized or being realized materially differently than expected.

This presentation does not constitute an offer to acquire securities of the Company, or an invitation to receive such offers, and is intended for the provision of information only, as part of providing explanations about the Company.

Introduction

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The Iron Swords War broke out on October 7th, when Israel was the target of a murderous terrorist attack.

For six months now Israel has been facing the very complex and painful reality of war. We have Israeli hostages that have been held in Gaza for 173 days, soldiers in the south and in the north, and tens of thousands of residents who are cut off from their homes and the normality of life as was known to them through October 6th.

History taught us that protracted wars have adverse effects on the economy, which sometimes last several years. 2024 is expected to be a complex year. In those defining moments, institutional entities play an enormously crucial role in reinforcing the economic resilience, which also has a direct effect on the State of Israel's national resilience.

At this time, our hearts go out to the hostages, their families and the IDF soldiers, and we pray that they will return quickly to their families. Our condolences to the families of IDF soldiers, who were killed in the line of duty, and the families of the civilians, who were murdered; we pray for a quick recovery for the injured.

We all hope for better days soon - for a life of security, peace and joy.

The Israeli economy The economy's stabilization and recovery following crises

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Consumption volumes by credit cards (NIS billion)

The volume of consumption by credit has returned to it level prior to the Iron Swords

Risk premium (5 Years CDS)

The Iron Swords War The risk premium in Israel is on a downward trend following a significant increase since the outbreak of the War. Similar past events indicate that these are merely temporary effects

Average exchange rates (USD, EUR)

The Israeli economy Strong macroeconomic data prior to the Iron Swords War

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Inflation index

Foreign exchange balances (USD billion)

GDP per capita (USD)

The Israeli insurance and credit market Key drivers

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Fertility rate, average no. of children per woman

Average savings per capita (NIS thousand)

Penetration rate - insurance products (%)

Expenditure for private consumption per capita (NIS thousand)

In 2023, the Group transitioned from a legacy insurance company with a significant bias towards traditional long-term savings and long-term care products, to a financial holding group with diversified sources of income and profit.

Under this strategy, the Group completed the acquisition of credit card company MAX.

This acquisition is expected to add an important foundation to the Group's profitability while diversifying the sources of income. The credit card activity is becoming an increasingly significant foundation for Clal Holdings, alongside the insurance activity.

In 2023, MAX earned approx. NIS 246 million (net of one-off selling expenses), with a return on its equity of approx. 14%. MAX was consolidated as from Q2 and - due to accounting effects, some of which are one-off as of the acquisition date - this profitability has yet to be significantly reflected in the financial statements of 2023.

To be fully reflected, net of one-off effects, in 2024.

Key trends

Better income diversification and profitability from a variety of activities while reducing dependence on past loss-making activities

Improvement of underwriting income across the insurance subsegments

Comprehensive income of approx. NIS 102 million in Q4, net of the direct effects of the Iron Swords War and provision for retirement plan, income amounted to approx. NIS 170 million

Excess capital of approx. NIS 0.9 billion in Clal Insurance, which translates into a solvency ratio of 109%, very close to the dividend distribution threshold (as of June 2023)

Leadership in capital management and own-funds (nostro) investments; First place in nostro returns in the past two years compared to the competitors*

* Compared to the five major insurance companies; net of revalued own-use real estate properties

Operating Segments

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P&C insurance

comprises five subsegments: Liability - compulsory motor and other liability (which mainly includes third-party liability insurance products); property - motor property, credit insurance and other property (including remaining property subsegments other than motor and liability as well as other insurance subsegments, such as guarantees)

Health insurance

comprises the Group's activity in the health insurance subsegments. The segment includes LTC (individual and collective) and Illnesses and hospitalization (which includes medical expenses, surgeries and transplants, personal accidents and travel)

Long-term savings

includes the Group's activity in the life insurance, pension funds and provident funds subsegments. The segment includes long-term savings as well as insurance coverage of various risks such as death and disability insurance

Credit cards

includes credit cards operating results, divided into two main areas of activity: issuance and acquiring

Other Mostly includes own agencies, and investment in Michlol

Activity that is not assigned to segments

consists of the Group's headquarters, which mainly consists of capital, liabilities (including finance expenses for MAX's acquisition) and assets outside the insurance or credit card businesses, and amortization of MAX's excess cost

Structure of main holdings

Diversified activity in the fields of insurance and long-term savings, credit cards and insurance agencies

Group Results in 2023 - Highlights

NIS 26.8 billion

Premiums

With contributions towards benefits and investment contracts

NIS 305 million

Comprehensive income, after tax, 2023

Attributable to shareholders

NIS 102 million

Comprehensive income, after tax, Q4/2023

Attributable to shareholders

AA-Aa3 Aa1

Midroog, MAX Midroog, Clal Insurance

S&P Maalot - Clal Holdings

The Company's rating

NIS 338 billion

Assets under management

NIS 8.6 billion

Shareholders equity

Attributable to shareholders

NIS 0.9 billion Net of Transitional Provisions

Excess capital

109%

Net of Transitional Provisions

Solvency ratio

Updated as of June 2023

Main trends Improvement across most of the Company's KPIs

Premiums (NIS billion)

Shareholders' equity (NIS billion)

Attributable to shareholders

Return on equity (%)

Equity Average return on equity of approx. 8.4%, during the past four years

NIS million

Comprehensive income, after tax, by operating segment

The company transitioned from loss to profitability, with an increase of approx. NIS 540 million in comprehensive income

NIS million

* Unallocated adjustments, offsets and expenses in 2023 include a provision for credit default (approx. NIS 220 million before tax), amortization of excess cost and finance expenses for MAX's acquisition.

Assets under management

double-digit annual growth (approx. 13%) in assets under management in past three years

NIS billion

Scope of long-term insurance and savings activity

Strong growth in core activity (P&C, individual health and risks) against a run-off in executive insurance and a decrease in proceeds from investment contracts; total growth across three periods is approx. 37%

Premiums earned, gross, contributions towards benefits and proceeds in respect of investment contracts, NIS billion

Returns on own (nostro) assets*

Compared to leading competitors, Clal leads in returns on nostro assets, and has been ranked first for the past two consecutive years

Compliance with solvency requirements and management's policy – Clal Insurance higher solvency ratio and compliance with the capital requirements of the insurance company

Dividend distribution policy

* As from the Economic Solvency Ratio Report as of December 31, 2024, a new outline taking into account the fair value of future variable management fees as part of the existing capital will enter into effect. The effect of this outline is estimated at an additional rate of approx. 15%, without taking into account the Transitional Provisions, and with an additional rate of approx. 6%, taking into account the Transitional Provisions.

P&C insurance

Average annual growth of approx. 12% in gross premiums, mainly in the property subsegments

P&C Health Life Pension and provident Credit cards Other

Premiums, gross, NIS million

P&C insurance

Improvement in the performance across all subsegments, contributing approx. NIS 400 million before tax to income

Health insurance

Growth in the illnesses and hospitalization subsegment compared to a runoff in the long-term care subsegments

hospitalization

Individual longterm care

2022 2023

271 278

+7

Health insurance Lower comprehensive income due to the lack of interest rate effect alongside an increase in incidence of LTC claims

Comprehensive income, before tax, by operating segment, NIS million

Long-term savings

Improvement of approx. NIS 360 million in comprehensive income, alongside an average annual growth of approx. 11% in premiums

Premiums, contributions towards benefits and proceeds in respect of investment contracts, NIS billion

Growth in pension and provident, alongside a run-off in life insurance (executive insurance), and a decrease in proceeds for investment contracts

Comprehensive income, before tax, by operating segment, NIS million

Long-term savings - pension The Company maintains its market positioning with a market share of approx. 16%

Pension assets under management (comprehensive and supplementary) and market share (NIS billion)

The Company's pension assets under management grew by an average of approx. 17% annually in the last three periods, hand in hand with the market's growth, while maintaining a stable market share, despite the entry of new players.

Clal's market share

Pension assets under management comprehensive and supplementary

Credit cards - MAX's results vs. the competition MAX leads in return on equity, maintaining profitability similar to 2022, despite the Iron Swords War

Credit card activity

Includes the operating results of the credit cards company, which engages in issuance, acquiring and credit origination

The results of MAX and Milo, as well as of companies under their control, were consolidated under the segment as of April 1, 2023

Development of net income, m NIS

Net of a one-off effect as a result of selling expenses in the amount of NIS 28 million, arising from the completion Clal Holdings' acquisition transaction

Return on equity and net income* (%, m NIS)

Credit cards - MAX's results vs. the competition Realization of growth strategy in non-banking cards

Issuance turnover, NIS million

Credit cards - MAX's results vs. the competition MAX has the largest credit portfolio in the industry; leads in portfolio size and quality

Credit portfolio, NIS million

Other segment

Growth of approx. 53% in comprehensive income in the past three years in respect of own agencies

Income from commissions, NIS million

Income from commissions provided by insurance agencies activity grew by approx. 10% compared to the corresponding period last year, with the average annual growth being approx. 15% in the past three periods.

Comprehensive income, before tax, NIS million

Average annual growth is approx. 15% in the past three periods. The 2021 income was affected by a one-off income from an investment in Michlol.