Insurance firms could issue profit warning

This comes in response to the poor performance of both the local and foreign stock markets.

Meir Slater 88 (photo credit: Courtesy)
Meir Slater 88
(photo credit: Courtesy)
Israel's five largest insurance companies could issue profit warnings for the coming quarter, following the poor performance of both the local and foreign stock markets in January, Prisma Investment House cautioned in a report released Wednesday. According to figures released by Prisma, the Migdal insurance group saw a reduction of 3.8 percent in returns from its investments in January, while returns for the Klal insurance company were down by 3.23%. Harel saw a decrease in returns on investment of 3.17%, Phoenix was down 3.32% and Menora was down 3.47%. February showed signs of a turnaround, Prisma's report said, with an increase of between 0.5% to 1.5% in yields on investments for the top five insurers. Overall, however, since the start of 2008, the big five experienced dips of between 2% to 3%. Those who make monthly pension payments through insurers could lose up to 5% of their funds in 2008, Prisma analyst Meir Slater told The Jerusalem Post Wednesday. They had already experienced a loss of 3%-4% in January, he said, adding that despite the setback, the stock market was a sound place to invest their money. "Savers profited when the stock market did well, so they can't really complain now," Slater said. "When the markets turned downward, they lost a little. But the stock market is still the best place to invest, if you look at it historically." Investments in stocks made up one of the main sources of profits for insurance companies, he said, providing many times more revenue than the profit made from clients. "The profit of insurance companies is largely based on the stock market," Slater said. They invested mainly in the Tel Aviv Stock Exchange, though some funds were invested in foreign markets, he said, adding, "Insurance companies are some of the best market players around." Prisma's alert on profit warnings should be seen as "a very pinpoint warning, for the first quarter of 2008," Slater said. The insurance companies and their investors were more affected by the performance of the stock markets than pension savers, he said.