Dear investor community, welcome to Aksigorta Q4 earnings call presentation. Our speakers are Mr. Gülen, CEO, and Mrs. Bal, CFO. We will have only written questions after presentation. Thanks for your patience. Mrs. Bal, the floor is yours.
Thank you, Berkay.
Dear all, thank you very much for joining the Aksigorta 2023 quarter four investor call meeting. We are going to present our earning calls presentation together with Zeynep. As Berkay mentioned at the beginning, we are going to get only written question at the end of the presentation. Now floor is Zeynep. Zeynep, please.
Okay. Thank you, Uğur . We have published our last quarter 2023 results yesterday, as you all know. As a summary of our main KPIs, the scorecard for the last quarter is as follows. The total gross written premiums growth is almost 90%. We reached TRY 9.5 billion of GWP in only three months in the last quarter. Our total net income reached TRY 468 million, showing a growth of 71%, and total equity reached TRY 3.3 billion, with almost 70% of year-over-year growth. At the same time, in the operational ratios, our net loss ratio deteriorated by 2 percentage points, and net combined ratio, mainly coming from this deterioration in the net loss, is showing an increase of 3 percentage points, reaching 108%. As you know, we have been trying to minimize our motor line of business market share for concerns of capital consumption.
Due to this reason, we are at 6.7% of market share at the end of the year, which shows a slight decline versus last year. Regarding the financial income, our total AUM exceeded TRY 9 billion at the end of this year, which show the annualized yield of 32%, which has increased by 3 percentage points year-over-year, corresponding to a financial income of TRY 743 million. Moving to the annual scorecard of this year. The total GWP reached TRY 27 billion, almost close to a $1 billion level. At the same time, total net income is at TRY 1.2 billion. Since last year's result was negative, the fluctuation ratio is not really meaningful, but we are improving our net income by almost TRY 1.3 billion in this year. The overall net combined ratio improved by 18 percentage points, leaving us at a level of 117%.
In the financial terms, the total annual yield reached 40%, which shows a growth of 9 percentage points versus last year, corresponding to almost TRY 3 billion of both FX and also interest income, with 83% of year-over-year growth. When we move to the market GWP, as you are also aware, in the last quarter, we are seeing a slowdown in the market growth. In the first three quarters, that has been announced at around 130, 140 levels, now slowed down to 82% at the last quarter of the year. When we look into the details, we see that the main reason for the slowdown is that the MTPL monthly increase in the price cap has been decreased from 4.75 to 2 percentage points.
We have the full quarterly impact in the last quarter, which slows down the growth of MTPL from almost 174 percentage in the prior quarters to 58% growth in the last quarter. In addition to that, when you look at MOD growth is 63%, and it has also slowed down versus the first half and also the third quarter. The main reason in MOD is also coming from the increase in pricing. We see that in the second half of 2023, in the market, the average premium in MOD has slowed down, and the increase in the prices is not as fast as the first six months. That's the main reason for the relatively lower growth rates in the motor line of businesses. Also, non-motor is still strong at 101% versus the prior quarters. Relatively, we have a similar effect in non-motor.
That can be mainly explained by the FX moves. Non-motor is mainly priced in corporates which are denominated in FX-based premiums. Health shows strong growth of 116%. When you look at the overall market in this year, in last year, the total market premium reached almost TRY 400 billion, showing a growth of 111%. Whereas when you look at the portfolio shares of the main business lines, we see that the motor lines weight slightly declined versus the 2022. Whereas the non-motor and health each gained 1 percentage point of portfolio share in the total market. When you look at Aksigorta on a similar basis, we see that we are in the third quarter and in the last quarter of 2023, our premium growth outperformed the market, and we increased our market share in the second half of the year.
In overall annual terms, our market share dropped from 9.6% to 9.7% at the year-end. When you look at trend in our total portfolio shares, we see that the MTPL portfolio share has been coming from 18% to 15% in the second half of the year. Please note that this is mainly because of the capital adequacy optimization actions, and we have been focusing on rather non-motor and health, which are relatively better underwriting result producer line of businesses. The good news is that we succeeded to increase our non-motor market share in 2023 by almost half a percentage points in last year, and we are at around 7.6% in non-motor. When you look at the next page, we have the underwriting result and the combined ratio development. You see a huge improvement from 2022 to 2023 in the underwriting results.
We are moving from TRY 1.2 billion of loss to almost TRY 300 million of loss. This is mainly supported by the positive underwriting result that we have gained from non-motor and also MOD this year. The non-motor helped by TRY 410 million in the deviation, whereas the MOD produced additional TRY 770 million of underwriting result, thanks to better margins in 2023. Whereas the underwriting margin improved to single digits minus of - 1.3% coming from 12% last year. When you look at the net combined ratio, overall net combined ratio improved by 18 percentage points, moving to 117%. We have the main portion is coming from the loss ratio. Loss ratio has moved from 112% to 91%. One of the main reasons that is underlying this improvement is the increase in the technical discount rates this year. We have two impacts, two times increase in the discount rates.
One was in June and the other one in December financials. When you make the calculation, the increase in the discount rate has contributed to almost 12 percentage points in the improvement of 21 percentage points in loss ratio. Other than that impact, we have a natural improvement in our result by 9 percentage points in terms of both loss ratio and the combined ratio. When you look at the financial income development, as you see in the trends in the pie chart, throughout the year, we increased our weight in the corporate bonds and the tax advantage fund, which we have established in 2022 in terms of benefiting from investing in TL and generating a tax shield by 30 percentage points, the same level with the corporate tax rate.
It is classified in the corporate bonds slice of the pie chart, and it has reached almost TRY 3.7 billion at the end of last year, which has a weight of 42% in the overall investment portfolio. Thanks to this fund, we have generated a tax yield of TRY 238 million this year, which we expect to increase to above TRY 400 million level in the coming year. In terms of the maturity of the overall portfolio, we can say that 70% of total asset under management is with less than one year period of maturity. We are trying to keep it go as short as possible in order to benefit from the potential increase in the interest rates. There is no major change in our portfolio breakdown when we move from the September to December pie chart. It is almost similar.
The main thing we did in the last quarter was that we have, as you may recall from earlier information, we had invested in CPI linkers in August, and after the surprising policy rates hike in August council meeting, we had some MTM losses in CPI linkers. In November, we had the chance to take them out of our TL tax advantage fund and reclassify them as hold to maturity at a yield of CPI plus zero percentage points. Which means that we will be mimicking the inflation in the coming terms, in the coming periods, with the CPI linker portfolio no longer creating any risk. Other than that, a few comments on the FX portion. We are carrying at 28% of our total assets under management as FX, which we plan to lower in the 2024 period.
We will be watching the markets and all the news and everything very closely in order to make the right timing and right amounting in FX position. Anyhow, we are not planning to go at a level below 20%, since our costs are, especially in motor line of businesses, mainly denominated in FX as well. In the last quarter, we have generated TRY 743 million of total financial income, which corresponds to an overall yield of 32%. Please note that this is the overall return, including both the FX and the TRY financial assets. So this is it for the financial income. When we move to the income statement, we have the growth of 90% in gross written premiums. We are at TRY 9.5 billion in the last quarter, which takes us to TRY 27 billion in the total year top line figure, with a double fold of last year's top line.
The good news is the underwriting result. In the last quarter, we have increased underwriting result by 63%, and also in the annual terms, we have increased our, at least improved our loss by TRY 1 billion, thanks to MOD and non-motor, with better margin in all lines of businesses. So when you look at the financial income, it has reached TRY 2.6 billion after cutting off for the financial expenses. It's the net figure, which takes us to a total overall net profit of TRY 1.2 billion in 2023. We are at a combined ratio level of 117%, with an improvement of 18 percentage points. When you look at the last quarter only in a solo perspective, the net income is TRY 468 million, year-over-year improvement of 70%, and also the combined ratio stays at 108% level. So this is it for the P&L.
When you move to the balance sheet, we have a total balance sheet size growth of 65%, which is similar to our year-end inflation level. The receivables grown by 140%, whereas the payables show the similar growth, very close growth at 138% increase. In terms of the asset under management, the year-over-year growth is limited at only 19%, which rises to TRY 9.1 billion of AUM. Though there are a few reasons explaining the limited growth in the asset under management. There are three, and the first one is that we have took the decision to slow down in motor line of businesses, and we have also focused our MTPL market share in pool part, which is a better selection in terms of the capital risk requirement.
But on the other hand, since this is only a collection and then transferring product, since we transfer all of them to the pool without any holding period in our own funds, we cannot generate any financial income and asset under management out of this premium. This is one of the reasons. Amongst others are that, as you know, we have made some pre-financing in the earthquake claims in order to support the claim insured families and companies. So we had collected those from the reinsurers after we have already paid it. It was a challenging period for 2023. But as you know, this impacted our short-term financial performance, but also we have highlighted the strength of our business model. And also we have acted as a responsible insurance company.
The last item is that in 2022, we were making arbitrage income by collecting our credit card receivables earlier, and then using the funds, the proceedings, and investing in higher returns and making a profit in between. Whereas, with the start of the increase in the political interest rates in August, we stopped doing that in 2023, August, since there was no room for any profit-making with the elevated interest rates. The reason I'm telling this is that the 2022 figure of TRY 7.7 billion includes this early collected credit card receivables of almost TRY 1.6 billion. Whereas in 2023, we do not have such an inflated figure. So if we would make a like-for-like comparison, the actual growth would be among a 60% level in the similar base terms.
The increase in the total assets is 65%, and we have also succeeded to move our total equity from TRY 1.9 billion last year to TRY 3.3 billion at the end of December, with an ROE of 45%. So we are still working on the capital adequacy calculation to report to the regulator. But the good news is that we are at a level above 100% according to our draft calculations, I can tell. So these are our classic recurring slides in risks and opportunities. As you all know, the real interest rates is one of the main drivers of our revenue in insurance companies. So we are very dependent on the interest rate level. And also FX is one of the main impacts parameters in our business.
Other than that, I would like to highlight that also the natural disasters and also the talent retention and acquisition are amongst the challenges and risks. Whereas we have a lot of opportunities on the other side. We have those increase in both FX rates and interest rates, and also the switch to the free tariffication in MTPL, hopefully after the elections. And also we have a lot of opportunities in using digital transformation and also IT in our company. Other than that, I will focus on the, as you know, we are also a part of Sabancı Holding, and we have some ESG goals. We will be focusing on our ESG goals in the coming years, I can tell, mainly based on our investment policies. So I think this is it. Berkay? Thank you, and we are happy to receive your questions.
Thank you, Zeynep. There is one question from Ömer Karagöz, Zeynep. I will read the question first.
Okay.
Then we can answer together. At which level do you expect ROE and AUM in 2024 year end?
Did we expect combined ratio below 100% at the end of 2024? Third question, is it possible to see normalization in first quarter 2024 profits as discount rate change is applied in fourth quarter 2023? In which segments are you going to see growth in 2024? Thank you.
Okay.
Maybe you can answer. Maybe I can answer the last part of the question.
Okay. We will be most probably expecting an ROE level of close to 40% next year. Our total assets under management is expected at around TRY 14 billion-TRY 15 billion . Regarding the combined ratio, I do not think it will be a realistic assumption to expect something below 100% level. Rather than 100%, we could be landing at 115%-120%, since, as you know, MTPL is a mandatory part of our portfolio, which is creating huge losses and which is creating the combined ratio to go above 100% level. As you know, the discount rate change is applied at the end of December last year. As of the first quarter of 2024, we will not be seeing any favorable impacts coming from any discount rate changes since it has also reached 38%.
In terms of growth in segments, Uğur bey, I will generally touch on the non-motor and health focus, with also a more selective approach towards the motor line of businesses.
Particularly in MTPL. On the MOD, we would like to keep our fair market share, which is around 8%-9% market share. On the non-motor, in all customer segments, from retail to corporate, we want to grow. As you know, from the market, there is a huge increase in the reinsurance cost, and also earthquake tariff. Any policies who includes earthquake coverage, the premium of those policies will increase tremendously in 2024. The growth on the non-motor would be much more higher than expected at the end of 2024. Aksigorta reinsurance structure and reinsurance capacity is very well placed at the end of last year. We would like to utilize our huge treaty capacities to gain market share on the non-motor products regardless of customer segments, I would say, Zeynep. Of course, our new health company will start operation 1st April 2024.
Health will be one of the, let us say, focus area for Aksigorta on the coming period. Maybe that focus, that growth would not be too much 2024 because it will be a transition period. Starting from next year, health will be the major focus area for Aksigorta in terms of growth. There are two questions from Saadet Dinçbacı. Would you please give some guidance for 2024, Zeynep?
Okay.
You have done some, but maybe you can a little bit elaborate.
Yes.
Have we applied 35% discount rate already at the end of last year? The answer indeed is simple. Yes, we have applied 35% discount rate in our year-end financials. Maybe you can answer the first part.
Okay. Our first expectations for next year is the top-line growth above 80%. We expect the market still to grow in a high percentage since the inflation will still continue, and also the TRY will continue to depreciate in our expectations. We can expect something above an 80% level in terms of the GWP growth. In terms of the total combined ratio, our target would be to land at a level below 115%, which will be an aggressive target for us. But in the worst case, we can be going up to a level of 120% as well. These will bring us, and in terms of the financial income, we will be generating an overall return of almost a 40% level in our total portfolio, which would bring us at a level of both including the FX income, at a level of TRY 4 billion in a rough calculation.
Overall, we will be landing at an ROE of 40% level, Saadet. In terms of 35%, yes, we have already applied the favorable impact coming from the increase in the discount rate, which has contributed to our net profit by almost TRY 260 million in the last quarter.
Okay. Thank you. There is no other written questions, Zeynep.
Okay.
I think these are all. All the question has already been asked. Of course, we are always ready to answer your question offline. Investment community is always welcome to Aksigorta investor relation teams.
Yes. Mehmet Baki Atay has a question.
Okay. Fourth one is. Are you using equity allocation enough to diversify and enhance your returns in terms of financial, I think.
Yeah. Financial portfolio. Mehmet , we are using the equity not at a very large extent. We are using it. Its weight is around a maximum of 10% in our overall portfolio. Since we would like to focus on safer, less riskier assets, we are sticking to an investment policy approved by our board, and we are not too risk taker on that manner.
Okay. There is another question, I think. No, you are not. Okay, tamam. Mehmet answered to his question. I think we can close the meeting. Thank you very much for joining Aksigorta 2023 year-end earnings calls presentation. We wish you a happy weekend and looking forward to see you in the first quarter 2024 earnings call presentation. Of course, you are always welcome to any question if you have. Our investment relationship team will be ready, will be in your service. Okay. Thank you very much. Maybe Zeynep can also-
Okay. We wish to see you in the first quarter call with hopefully better results, Hakan.
Yeah.
Thank you all for your contribution.