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May 2022

Net profit slips despite continued GWP growth

Source: Middle East Insurance Review | Jan 2022

The Turkish operating environment continues to be volatile, with the lira losing more than 40% of its value against the US dollar and inflation running at more than 20% in the last quarter of 2021. It remains to be seen whether the six listed Turkish insurers will be able to overcome the challenges and maintain 2020’s double-digit growth momentum for GWP and net profit in 2021. 
By Cynthia Ang
There are 65 insurance companies in Turkey, consisting of 41 non-life insurers, 21 life and pension insurers and three reinsurers, according to figures published by the Insurance Association of Turkey (TSB). Of these 65 insurance companies, six entities – AgeSA Hayat ve Emeklilik, Aksigorta, Anadolu Anonim Turk Sigorta Sirketi (Anadolu Sigorta), Anadolu Hayat Emeklilik, Ray Sigorta and Turkiye Sigorta – are listed on  Borsa Istanbul stock exchange.  
In the first nine months of 2021, these six listed insurers generated an aggregate GWP of TRY23.5bn ($1.41bn), up 24.6% y-o-y (Table 1). Of this aggregate value, non-life premiums surged by 24.5% to TRY20.8bn while life premiums increased by 18.1% to TRY2.7bn.
Ranking of Turkish listed insurers by GWP
In the same period, overall premium income in the Turkish insurance sector rose 19.1% y-o-y to TRY70.6bn, according to preliminary data released by the TSB. Premium production in the non-life sector jumped by 21.4% y-o-y to TRY58.3bn while on the life side, GWP grew by 9.7% y-o-y to TRY12.3bn.
At the end of September, the business lines with the largest shares in total GWP were: MTPL (21.5%), property lines (23.5%), life (17.4%), motor own damage (13.4%) and health (12.6%), according to market reports.
GWP maintains double-digit growth
The increase in 9M GWP reported by the six listed Turkish insurers was consistent with the double-digit growth rates seen in the previous two quarters and the year 2020. The listed insurers saw their combined premiums grow by 21.8% and 25.7%, respectively to TRY15.8bn and TRY8.5bn in 1H2021 and 1Q2021. In 2020, they produced a combined GWP of TRY26.9bn, an increase of 23.9% from TRY21.7bn in 2019.
All listed insurers except Anadolu Hayat Emeklilik (-0.6% to TRY1.3bn) reported double-digit growth in their GWP in the first nine months of 2021. The surge in 9M GWP was led by AgeSA (+42.2% to TRY1.4bn), followed by Ray Sigorta (+35.5% to TRY1.5bn) and Aksigorta (+26.5% to TRY4.5bn). Anadolu Hayat Emeklilik has been reporting negative growth in GWP since the start of 2021 – -22.8% to TRY393.8m in 1Q and -9.6% to TRY795.7m in 1H.
In its 3Q2021 earnings report, AgeSA said the 9M GWP growth was driven by both 58% surge in credit linked life protection to TRY670m and 31% increase in stand-alone (non-credit linked) life protection to TRY678m. The 9M GWP performance underpinned the company’s diverse business model and product positioning, said AgeSA. With its strong bancassurance network in cooperation with Akbank, 70% of AgeSA’s 9M GWP was generated through bancassurance and the remaining 30% via its direct sales force and agency.
Turkiye Sigorta has maintained its leading position among the listed entities by producing the highest GWP, up 23.1% to $7.7bn in 9M2021. Anadolu Sigorta took the second spot with GWP of TRY7.1bn (+25.8% y-o-y), followed by Aksigorta in third place on the table.
Turkiye Sigorta, which was created through the merger of six state-run insurance companies, was also the overall market leader in Turkey in 2020. The insurer’s GWP grew by 24% y-o-y to TRY8.9bn in 2020 and accounted for 10.8% of the aggregate market premiums of TRY82.6bn. Its two listed peers – Anadolu Sigorta (+21.3% to TRY8bn) and Aksigorta (+17.9% to TRY5.3bn) – were ranked third and fourth overall in the Turkish insurance market in 2020. Allianz Sigorta (+17.5% to TRY8.1bn) secured the second position while AXA Sigorta (+13.5% to TRY4.7bn) took the fifth spot.
The ranking of the top five biggest insurers in Turkey changed slightly when Anadolu Sigorta overtook Allianz Sigorta to become the second-biggest insurance company in 1H2021. Anadolu Sigorta’s GWP grew by 25.1% to TRY4.8bn in 1H2021, surpassing Allianz Sigorta’s TRY4.5bn. The remaining rankings remain unchanged.
Net profit slips for second straight quarter
During the first nine months of 2021, the six listed Turkish insurers generated a total net profit of TRY2.2bn (Table 2), down 8.3% from the same period in 2020. In the previous quarters, the six insurers reported a slight drop of 1.2% in profitability to TRY1.62bn in 1H2021 and posted a 13.5% gain in net profit to TRY811.7m in 1Q.
Ranking of Turkish listed insurers by net profit
For the year 2020, their collective profits rose 31.5% y-o-y to almost TRY3bn despite the economic impact of COVID-19. In comparison, Turkey’s insurance industry saw its overall net profit rise by 32.7% y-o-y to TRY10.1bn.
Among the six publicly trade insurance companies, AgeSA achieved the biggest y-o-y growth in 9M net income, increasing by 48.8% to TRY342.9m. Anadolu Hayat Emeklilik is the only other insurer to register an increase in net profit during the first nine months of 2021, while the other four listed companies reported posted double-digit y-o-y fall in their profits.
AgeSA attributed its performance to strong growth in all major business lines (pension, credit life and return of premium) and increase in net financial income resulting from higher interest and foreign exchange rates. In particular, its total technical income grew by 42% mainly driven by life protection and pension profitability growth.
On the other hand, Aksigorta posted the biggest drop in 9M net profit, down 33% y-o-y to TRY230.9m, due to a drastic decline in underwriting result from TRY355m in 9M2020 to TRY74m in the same period in 2021.
Turkiye Sigorta was the most profitable insurer among its listed peers in 9M2021 albeit registering a 16.9% decline in net income to TRY798.8m. It was followed by Anadolu Hayat Emeklilik (+9.4% to TRY427.3m) and Anadolu Sigorta (-12.2% to TRY353.2m).
A challenging outlook
While the information on the industry’s aggregate 9M profit is not available, the technical results for the first three quarters provide an idea regarding the profitability challenges faced by the Turkish insurers last year. Technical results announced by the TSB for the nine months ended 30 September 2021 reveal the losses suffered by Turkish insurers, particularly in non-life branches.
The total non-life technical profit stood at TRY924.3m for the third quarter of 2021, representing a decrease of 62.1% y-o-y, according to media reports. In 9M2021, non-life technical profit totalled TRY5.1bn, falling by 29.3% from the same period in 2020, led by severe drop in technical profitability of both the compulsory MTPL and voluntary motor branches. Compulsory MTPL swung from a technical profit of TRY1.4bn to a loss of TRY897.1m while voluntary motor insurance recorded a 54.1% decline to TRY916.1m.
With the tumbling of the Turkish lira to a record low in the last quarter of 2021, the outlook for the Turkish insurance industry remains challenging. Furthermore, inflation is running at more than 20%, meaning prices of basic goods have soared while salaries in the local currency have devalued considerably, thereby deterring customers from buying insurance or renewing their policy. Hence it remains to be seen whether the Turkish insurers can overcome these challenges and maintain 2020’s double-digit growth momentum for GWP and net profit in 2021. M 
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