Interest Rate Update/Notice • Aug 1, 2024
Interest Rate Update/Notice
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July 30, 2024
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Mark Nicholson, London, 44-20-7176-7991 [email protected]
Matan Benjamin, Ramat Gan, 972-3-753916 [email protected]
Eyal Chelouche, Ramat Gan, 972-3-7539737 [email protected]
Please note that this translation was made for convenience purposes and for the company's use only and under no circumstances shall obligate S&P Global Ratings Maalot Ltd. The translation has no legal status and S&P Global Ratings Maalot Ltd. does not assume any responsibility whatsoever as to its accuracy and is not bound by its contents. In the case of any discrepancy with the official Hebrew version published on July 30, 2024, the Hebrew version shall apply.
| Overview3 | |
|---|---|
| Rating Action 3 | |
| Rationale3 | |
| Outlook 4 |
| Downside Scenario4 | |
|---|---|
| Upside Scenario 5 | |
| Related Criteria And Research5 | |
| Ratings List 5 |
On July 30, 2024, S&P Maalot affirmed its 'ilAAA' rating on The Phoenix Insurance Company Ltd. and its 'ilAA' rating on The Phoenix Holdings Ltd, both with a stable outlook.
Phoenix Insurance's profitability continued to distinguish it from its peers in the past two years. In Q1 2024, the group reported a total income of NIS 284 million, which represents an annual return on equity of 11.2%. Profit in the quarter was driven by non-life lines as the impact of stronger rates came through, but also supported by non-insurance activities, including asset management, agencies and credit, which contributed an after-tax income of NIS 129 million. The group's robust performance was underpinned by sustained income growth and expansion of assets under management (AUM) through both organic and inorganic strategies. At the end of Q1.2024, AUM was NIS 472 billion, compared to NIS 433 billion at year-end 2023 and NIS 371 billion at year-end 2022.
Phoenix Insurance has consistently outperformed the P/C insurance industry, achieving a combined ratio of 85.3% in 2023. This metric has remained stable within the 85%-95% range over the past five years, averaging 89.5%. At the same time, the P/C segment exhibited robust growth in 2023, with premiums increasing by 22% year-on-year. This growth was primarily driven by strong performance in the motor lines, which doubled underwriting profits.
Phoenix Insurance strategically shifted its life-line focus towards lower-risk, capital-efficient short-term products. These products, primarily distributed through agency channels, generate revenue through AUM fees.
Phoenix Insurance's capitalization on our model strengthened over 2023, though it remains heavily dependent on life Value in Force and sensitive to our assessment of interest rate risk. We believe that capitalization will be sufficient to support the rating through the group's growth plan implementation and any volatility arising from investment fluctuations or the military and political situation in Israel and around. In addition, Phoenix Insurance benefited from a strong solvency ratio of 194% at Q1 2024, higher than its 150%-170% target range.
Despite the ongoing war and wider political and economic instability, we do not currently expect it to affect the group's results. The Israeli government has a scheme that will cover property insurance losses directly related to the war as well as military life insurance claims; insurers themselves will not cover these risks. The most significant effect of a prolonged war could be on insurers' investment portfolios, though these were swift to recover after the initial attack by Hamas on Israel in October 2023. More broadly, there could be protracted effects from changed macroeconomic prospects and credit conditions, particularly if the conflict expands more widely.
The stable outlook on Phoenix Insurance reflects our view that it will maintain its leading business position in the Israeli insurance market in the next 18-24 months. Our view is supported by the Company's diversified business model and sound profitability, supporting its capital accumulation. At the same time, we believe Phoenix Insurance's capital adequacy will strengthen and remain adequate in relation to balance sheet risks.
We may consider a negative rating action in the next 18-24 months in case of material deterioration in the Company's operating performance which will erode its loss absorbing capacity thus materially weakening its capital adequacy, or in case of a decline in premiums to a level that we find to weaken Phoenix Insurance's business position in the local market. A widening of the scope of the war could also prompt a negative action.
A negative rating action on Phoenix Insurance may lead to a similar action on Phoenix Holdings. A weakening in Phoenix Holdings' liquidity profile may also lead to a negative rating action.
We may consider a positive rating action on Phoenix Holdings if the group's creditworthiness continues to strengthen, while maintaining adequate liquidity.
| Phoenix Insurance Ltd. | Rating | Date when the rating was first published |
Date when the rating was last updated |
|---|---|---|---|
| Issuer rating(s) | |||
| Long term | ilAAA/Stable | 24/05/2004 | 27/12/2023 |
| Issuer Credit Rating history Long term July 11, 2023 |
ilAAA/Stable | ||
| April 21, 2020 October 07, 2018 |
ilAA+/Stable ilAA+/Positive |
||
| February 19, 2017 | ilAA+/Stable | ||
| November 17, 2015 May 20, 2014 |
ilAA+/Negative ilAA+/Stable |
||
| November 18, 2012 | ilAA+/Negative | ||
| July 18, 2012 October 16, 2011 |
ilAA+/Watch Neg ilAA+/Stable |
||
| August 26, 2010 | ilAA/Stable | ||
| August 17, 2009 May 19,2009 |
ilAA-/Negative ilAA-/Watch Neg |
||
| February 08, 2009 | ilAA/Watch Neg | ||
| May 24, 2004 | ilAA |
| Phoenix Holdings | Rating | Date when the rating was first published |
Date when the rating was last updated |
|---|---|---|---|
| Issuer rating(s) Long term |
ilAA/Stable | 14/03/2007 | 27/12/2023 |
| Issue rating(s) Senior Unsecured Debt Series 4 Series 5 Series 6 |
ilAA ilAA ilAA |
03/02/2020 03/02/2020 14/12/2021 |
27/12/2023 27/12/2023 27/12/2023 |
| Issuer Credit Rating history Long term July 11, 2023 October 06, 2019 October 07, 2018 February 19, 2017 November 17, 2015 May 20, 2014 November 18, 2012 July 18, 2012 January 12, 2012 August 26, 2010 May 19, 2009 November 16, 2008 March 14, 2007 |
ilAA/Stable ilAA-/Stable ilA+/Positive ilA+/Stable ilA+/Negative ilA+/Stable ilA+/Negative ilA+/Watch Neg ilA+/Stable ilA/Stable ilA/Negative ilAA/Watch Neg ilAA/Stable |
| Phoenix Capital Raising (2009) Ltd. |
Rating | Date when the rating was first published |
Date when the rating was last updated |
|
|---|---|---|---|---|
| Issue rating(s) | ||||
| Hybrid Subordinated debt | ||||
| Series 9 | ilAA | 03/02/2020 | 27/12/2023 | |
| Series 4 | ilAA | 03/02/2020 | 27/12/2023 | |
| Series 5 | ilAA | 03/02/2020 | 27/12/2023 | |
| Series 8 | ilAA | 03/02/2020 | 27/12/2023 | |
| Series 10 | ilAA | 03/02/2020 | 27/12/2023 | |
| Series 11 | ilAA | 16/02/2019 | 27/12/2023 | |
| Series 13 | ilAA | 23/06/2022 | 27/12/2023 | |
| Series 12 | ilAA- | 27/07/2021 | 27/12/2023 | |
| Subordinated debt | ||||
| Series 14,15 | ilAA | 12/12/2023 | 12/12/2023 | |
| Additional details | Item |
|---|---|
| Time of the event | 30/07/2024 09:54 |
| Time when the event was learned of | 30/07/2024 09:54 |
| Rating requested by | Issuer |
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