凤凰金融（PHOE）：过去与现在

Israel | InsurancePhoenix Financial Then & Now In our view, 1Q 2025 has proven to be a landmark quarter for PhoenixFinancial, not just because of the long-awaited introduction of IFRS 17,but also because of the remarkable improvement in profitability, which webelieve more than justifies the recent share price performance. Earnings Growth - Then & Now- Although much of the focus today is likely to be on thenuances of the new IFRS 17 disclosures (adopted for the first time this quarter), our eyeswere instead drawn to the bigger picture. More specifically, we note that the group's core netincome in 1Q 2025 has grown to NIS 626m, which is notable because it exceeds the entireFY 2020 core net income of NIS 601m. As our initial view of the 1Q 2025 earnings is thatthis is probably a good representation of the current run-rate, it means that over the past 5years, management have managed to quadruple the group's profits. Thus, while the recentshare price performance has been impressive (+59% YTD, +138% in 1-year, +420% in 5-years),it doesn't even represent a material re-rating of the shares. Framed through the core ROE,Phoenix has improved profitability consistently over time, from 8.7% in 2020, to 10.7% in 2021,11.9% in 2022, 12.6% in 2023, 15.9% in 2024, 21.6% when 2024 is restated for IFRS 17, andnow 23.6% in 1Q 2025. Accounting Transition - Then & Now- At NIS 2,296m, Phoenix's FY 2024 core net income isNIS 536m higher under IFRS 17 than the NIS 1,760m under IFRS 4. Pleasingly, this is slightlyhigher than the top end of management's guidance that IFRS 17 would lift historical earningsby between NIS 400m and NIS 500m. Perhaps more importantly, the non-operating incomeand expenses are materially smaller under IFRS 17, demonstrating that earnings are higherquality and less volatile, which we believe ought to be reflected through a higher multiple. Ashoped, the implied run rate for earnings in FY 2025 is already in the middle of the target rangethat had been set for FY 2027. As such, we still expect targets to be lifted in 2025, probablywith the 3Q 2025 results, as by that time the longer term impact of IFRS 17 will be clearer. Capital Returns - Then & Now- The other notable change in 1Q 2025 is that Phoenix havemoved from half-yearly to quarterly dividends. As such, a dividend of NIS 230m has beenannounced with these results, which if pro-rated equates to NIS 920m for FY 2025, +10% higherthan last year's NIS 835m. In our view, the shift to quarterly dividends is a pleasant surprise,as only one other insurer in our coverage has quarterly dividends (Tryg), and that company isconsidered best-in-class. Management confirmed that all subsidiaries are now remitting cashto the holding company quarterly, and the payout is sustainable even in the unlikely event theinsurer does not contribute in any one quarter. In our view, this improvement in the frequencyof cash payout is indicative of how cash generative Phoenix is, largely because of its outsizedexposure to fee based businesses (eg advisory, brokerage, asset management) and shorterduration insurance (eg non-life). Divisional Details- Looking into 1Q 2025 in more detail, the following points stood out to us. •Brokerage business has outperformed, as usual when markets are volatile.•Revenue and earnings growth has accelerated in advisory, in part driven by the integrationof historical M&A, in part by improving the back office platform, and in part becauseunderlying volumes have grown (as tech sector hiring has improved).•Property underwriting markedly improved, offsetting elevated theft claims in motor.•The nostro returns were disappointing in the quarter (as for all Israeli insurers), althoughthis makes the attractive ROE even more notable. Philip Kett * | Equity Analyst44 (0) 20 7548 4126 | pkett@jefferies.com Company Description Phoenix Financial Phoenix Financial is a market leader in Israeli multi-line insurance, asset management, and financial services. As well as underwriting, the groupowns much of the insurance value chain and thus a material proportion of Israel’s agency distribution network. Company Valuation/Risks Phoenix Financial We derive our 12-month price target from a multi-stage, residual income valuation model. Upside risks include higher growth, and downside risksinclude natural catastrophes or mark-to-market losses. Analyst Certification: I, Philip Kett, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subjectcompany(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or viewsexpressed in this research report. Registration of non-US analysts:Philip Kett is employed by Jefferies International Limited, a non-US affiliate of Jefferies LLC and is not registered/qualifiedas a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a