Dear Investors, welcome to Aksigorta 2023 first half earning call presentation. Today, Aksigorta CFO Zeynep Eröktem and Aksigorta new Agency Sales Assistant General Manager Osman Akkoca, the previous CFO of Aksigorta, and myself are with you. After the presentation, we would like to ask you kindly to write your questions in a written format in order to follow up correctly and to answer them in a more proper way. Please ask your question in a written format in the area where Zoom provided to you in Q&A part. Now, I want to give the word to Zeynep to make this earnings call presentation. Please, Zeynep.
Thank you.
Thank you.
Thank you, Uğur. For starting with the second quarter scorecard results. In the second quarter, gross written premiums doubled year-over-year and reached TRY 5.9 billion. Net income is TRY 454 million, which is three and a half times compared to our TRY 131 million net result in the first quarter this year. Total equity reached TRY 2.6 billion, and net loss ratio is 102%, with 31 percentage points improvement year-over-year, still higher than the first quarter loss ratio of 86%. In the second quarter, there are three one-shot items impacting our financials. One of them is favorable, which is increase in the discount rate from 22%- 28%, effective from June this year, which led to TRY 331 million positive impact in our discounting figure. Second one is interim minimum wage hike of 34%, which resulted in a TRY 250 million negative impact, additional reserving in the second quarter.
The third one is the cancellation of MTPL general conditions, which resulted in TRY 600 million gross and around TRY 320 million net negative impact, which means additional reserving in our financials in the second quarter. These three one-shot items in total have negative impact of TRY 240 million on our second quarter financials. When we eliminate those three impacts, normalized net loss ratio is calculated as 90%, which is slightly above the first quarter loss ratio of 86%. Net combined ratio is reported as 126%, which is normalized as 114%, excluding those one-shot impacts. As of the end of June, our total market share is 6.4%, which indicates a year-over-year loss of 1.2 percentage points, which is mainly coming from our actions, our positioning motor line of businesses. When you look at the financial income, total financial income reached TRY 1.1 billion.
This figure includes both the interest and also the FX gain in the second quarter, which corresponds to an annualized average yield of 60% in total. When you compare it from the first quarter, it was 24%. There is a huge increase versus the last quarter in the yield as well. When we look at the next slide, this slide shows the first six months KPI scorecard. There is a similar growth in the top line. In the first half, gross written premiums doubled and reached TRY 11.1 billion. Net income reached TRY 585 million. Net loss ratio is 94%, with 42% improvement year-over-year. When we adjust for those three one-shot items in the second quarter, net loss ratio is calculated at 88%.
Net combined ratio is 120%, which shows a year-over-year improvement of 40 percentage points, which is mainly coming from the improvement in the loss ratio. When we normalize it for those three items, this 120% becomes 113%. At the end of June, our total asset under management size reached TRY 9.4 billion, with a growth of 108% year-over-year. Financial income for the first half reached TRY 1.6 billion, with annualized return yield of 41%. Also, we should note that the Turkish lira assets return exceeded 30% in the first six months. Out of that TRY 1.6 billion, FX gain is TRY 617 million. Thanks to our long position in U.S. Dollar amounting to slightly over $100 million , which is a stable level when you compare it with the March balance sheet.
Also, as you all know, we have been investing in the Turkish lira tax advantage fund starting from last year, August. In this year, total tax yield generated from those TL investment funds reached TRY 95 million as well. When you look at the next page, we have the market's gross written premium development slide here, and we have divided the market's development into quarters for showing the year-over-year growth trends. In the second quarter this year, market's gross written premiums increased by 133% and reached TRY 86.6 billion. We see an increase in MTPL portfolio share from 25%- 28%, whereas other line of business portfolio shares dropped in the second quarter. MTPL share increases due to both increase in the price cap and also number of policies. Average premium increases 150% year-over-year, and number of policies increased by 4% in MTPL.
In MOD, market growth is 122%, written in green font. When you compare it with the first quarter growth rate, we see that it has slowed down from 177%- 122%, which is mainly attributable to higher average premium base effect in the second quarter last year. All in all, in the first half, market's gross written premium growth is 139%, and total production, total premiums reached TRY 168 billion. Moving to the Aksigorta gross written premiums development. In the second quarter, Aksigorta premiums increased by 97% and reached TRY 5.7 billion. Aksigorta growth is lower than the market's growth of 133%. This is mainly due to the MTPL and MOD line of businesses. In motor and health, we are growing faster than the market. In non-motor, market growth is 122%, whereas we are growing at 125%.
Also in health, the market is growing by 142%, whereas Aksigorta growth is 146%. So we are gaining market share in health and non-motor. When you look at the next slide, this shows the underwriting result and also the combined ratio components. In this quarter, our underwriting result is, in the first six months, negative TRY 242 million, which are showing a rough improvement of TRY 750 million year-over-year. The increase in the technical discount rate partially compensated for the interim minimum wage increase and also the cancellation of MTPL general conditions impact. In total, TRY 240 million negative net impact occurred from those three one-shot events. We have uploaded the full impact of cancellation of MTPL general conditions in our first six months financials, which is around TRY 320 million in net terms.
Our net combined ratio improved from 160%- 120%, which is mainly coming from the improvement in the loss ratio. If we eliminate those three impacts as one-shot events in the first six months, our TRY 242 million of underwriting loss would become slightly negative at almost a breakeven point, at -TRY 3 million. Also the combined ratio would be 113% rather than 120%. This shows the general profitability. When you look at the next slide, we have demonstrated the financial income components and also the allocation of our asset under management. In the first six months as of June, our total assets under management reached TRY 9.4 billion, which shows a growth of 108% year-over-year. We expect to have a higher growth in the year-end asset under management with collection of the earthquake claim payments from the reinsurers.
When you look at the second quarter portfolio asset allocation in the right pie chart, the main difference when you compare it with the first quarter is the increase in the Eurobond share from 13% - 18%, which is led by switching from the fixed time deposits into Eurobonds. Currently, our asset under management portfolio is divided into three main pieces, both having almost equal shares, like 1/3 for each. The first one is the tax advantage fund. We have invested over TRY 3 billion in Turkish lira tax advantage fund. As I have already mentioned, which led to TRY 95 million of tax shield. In this fund, we are having a return of 35% in the second quarter, excluding tax shield. The other component or piece of asset under management is our FX portfolio, which is composed of Eurobonds and also the FX deposits.
Currently, we are carrying a Eurobond portfolio of $69 million, and we have FX deposits that is amounting to TRY 1.2 billion . Our total Eurobond maturity is three years, and we have yields which are increasing from 7%- 9.4% within time. Currently, the total return in the Eurobonds reached 8% in year-to-maturity terms. For the FX deposits, we are investing at on average a 5.5% yield. As the last piece of the total asset under management, we have the offshore fiduciary and supra bond portfolio, which accounts for another TRY 3 billion , on which we are gaining a return of over 40%. These are the main breakdowns of our asset portfolio.
We are trading, as you see, we are showing 0% in equity pie chart, whereas we should note that we are trading equities tactically, and as of our balance sheet date, our holding is limited. That is why you see that as a zero. In normal terms, we have the limit of 5% in overall assets under management to be invested in equities as well. One thing we should also note that our current portfolio is liquid. 30% of our total asset under management will be available for the investment in the last quarter of this year. If there is an increase in the interest rates, we would have available funds to invest and use that, catch that opportunity. That is the summary for the financial income. When you look at the financials, starting from the income statement.
In the first six months, underwriting result is TRY242 million negative with expenses of almost TRY 500 million . We have the net financial income. In net, we mean that when we deduct the financial expenses, which are composed of mainly the early collection of our credit card receivables, we pay a fee, interest in order to receive our credit card receivable earlier, and pay our claims and other operational needs. That is the net figure you see there as TRY 1.4 billion . All in all, the net profit is calculated as TRY 585 million . The combined ratio is showing a 40% improvement compared to the last year, this quarter, this first six months. When we go to the balance sheet. In the balance sheet, as of June, our total asset size reached TRY 15 billion , and this shows a growth of 19% versus December year end.
Our total equity is TRY 2.6 billion, and our return on equity, our ROE, is calculated on a trailing 12- months basis, is 40% as of June. These are the main highlights. We have the risks and opportunities as a recurring page. In the risks, the negative real interest rates still is one of the risks in our business, and also the uncertainty, high volatility on currency is another one. The systematic risk of bankruptcy in industry is one of the risks. The increase in reinsurance cost is also another risk, which has already increased after the earthquake. Also the natural disasters due to climate change and churn in individual segments due to savings, and also hyperinflation can be one of the risks. Also we have that increase in the FX rates, which makes stress on our MOD claim cost as among one of our risk items.
On the opportunities, on the other hand, we have the increase in interest rates as an opportunity since we are carrying an asset under management on our balance sheet. Also FX rates is both a risk and an opportunity since we are long in FX as well. We see that one of the main opportunities could be the switch to the free tariffication in MTPL, which would improve the overall industry MTPL profit, which would be the best case. Also, we have the accelerating digital transformation with the pandemic as one of the opportunities, the increasing efficiency and quality and innovation with remote working. We have the higher premiums and improved underwriting margin with the introduction of new products as well. As one of our recurring items, we have the high focus, the intense focus of industry on technology and analytics to generate value.
Almost 100% of our CapEx is made on IT in that respect as well. That's the end of my presentation, and we can start the Q&A session, if it's okay for you as well. If you have any questions, please use the Q&A session bar, session menu. I think that Mehmet is raising hand. Mehmet Karas. Maybe we should give him access. Yes.
I have two questions. Why is the combined ratio so high, 120%? Because in the old days, you were one of the more efficient insurance companies. In other words, your combined ratio wouldn't be more than 100%. That's number one. Number two, you said you limit equity exposure to 5%, which I find very interesting because, ironically, that's the same risk limit I have imposed on my son when he was sort of experiencing with investment and cryptocurrencies. I wanted him to learn cryptocurrency investment, but I didn't want him to risk too much money. So I said, "No more than 5%." My point is, do you find equities so risky as to limit the exposure to 5%? I would be very interested to hear your views on why limiting equity to 5% in such a big portfolio, which should be managed in a more optimal manner.
Thank you.
Okay. Thank you, Mehmet. For the first one, for the combined ratio, we are having struggles in both the MTPL and also in non-motor. In non-motor, other than the effect of the earthquake, which is coming from the reinstatement impact of the reinsurance cost, we are having big, large losses, large claims in non-motor. This is one of the main reasons for the increase in the loss ratio, which triggers the combined ratio. This is one of the main explanations together with the MTPL and also the deterioration in our non-motor claims. We are having high combined ratio.
Maybe, Zeynep, one adding on the non-motor side. In addition to earthquakes, there are lots of other climate-related claims as well. Floods, particularly all over the Turkey in the Black Sea region and the Southeast Anatolia, has also brought some mid to big size claims. In the first half, non-motor was really not as we predicted. MTPL, it is all sorted. But on the MOD and the health side, combined ratios are getting better. In the second half of this year, the non-motor performance is getting better, I would say.
Also, maybe I can add something on top of this. The combined ratio is the financial combined ratio, but in terms of underwriting year, the combined ratio is not that much high because the run-off impact is too much, mainly driven by the MTPL claims portfolio. The MTPL claims average duration is almost three years. So it extends up to almost 10 years, some claim files. So till we finally close those files, they will inflate by minimum wage increases, the regulation change, the cost change, et cetera. So there is a big portion of run-off impact on the MTPL side. Excluding that part, the current underwriting year combined ratio is not that much high. Yes, Zeynep, maybe we can pass to the second question.
Yes. For the next question of the equity investment, we should say that we have the first goal to increase the portion of equities in our total portfolio to 5%, then we would move up to 7.5% till the remainder of the year. So we do not have 5% as the maximum limit. But currently, we are planning to invest, we should say, less than 10% in equities. Since we have the risk and return appetite of our board as well, limits the risky investments. Also because of the higher risk coefficients assigned to equities for the calculation of capital adequacy ratio, we have to find the optimum level for the portion of equities. That is the reason I expect. Other than that, we should note that in the last three or four months, we have been gaining TRY 20 million+ for in equities trading.
That is one thing we should also note. We are seeing opportunities in equities, as we have already mentioned as well.
But, of course, it is a conservative company, and both local shareholder and the global shareholder, quite a risk-averse. Most of the companies may invest it more on the stock exchange markets, but we have some limits on that. There are two written questions, Zeynep. Furkan Zengin asked them. Could you please elaborate about the switch to free tariff in MTPL? Maybe I would give some brief information regarding that. I am the Head of the Non-Life Committee in the Association, and MTPL is a tariffed product. All price has been determined by the regulator. Unfortunately, due to continuous minimum wage increases or cancellation of constitutional law, cancellation of general condition kind of things, this tariff has to be adjusted in a frequent manner. And each time, it takes a lot of time to negotiate with the regulator to make a price adjustment on MTPL.
As an industry, we are forcing the regulator to, instead of tariff MTPL, make a free tariff MTPL. When we say free tariff, of course, there will be some floor and ceilings on the pricing, but the price will be determined by the insurance companies, or the price will be determined by supply and demand. But the regulator has announced the roadmap for the MTPL, and they want to go to the free tariff in 2025. But currently, due to those frequent negotiation periods, as industry, we are forcing the regulator to implement that free tariff before 2024, maybe at the end of this year. Atilla Benli the CEO of Türkiye Sigorta has resigned a couple of days ago. He used to be president of the association. There will be a new election, a president election, middle of September.
I will be one of the candidates for the president position. And if I be selected as the president, one of my first job is to switch to free tariff before the date announced in the roadmap. Have you any guidance for ROE for 2023, Zeynep? Are we giving?
Yes. We do not have any guidance for the year-end, but we can say that we expect to stay at a similar ROE level as June by the year-end, as an ambition. For the other question, what is your outlook for the second half this year? Will you be able to provide earnings guidance? Unfortunately, we do not provide earnings guidance. We used to do that, but we stopped doing it for the last two years, I think. Because of the cyclical macroeconomic condition and also unexpected regulatory changes, we stopped issuing guidance. Similar to the prior questions, we can say that as an overall ambition, we have a target to stick to 40% of ROE by the year-end.
There is no other written question. Is there any verbal one?
Is there any other question?
Okay. I think all the question has been answered, Zeynep.
Yes, we don't have any other pending questions.
Okay. In this case, I would like to close the meeting, Zeynep. Thank you for the participants, and we would like to see you in the third quarter earnings call. I am sure, starting from this quarter, both with the support of the higher financial yields and higher underwriting performance, we will see, let's say, an Aksigorta which you used to see in the past. Most probably, every quarter would be better than the prior one on the coming periods. Thank you very much for your participation, and thank you, Zeynep, for presentation, and thank you for Osman.
Thank you all. See you. Bye.
Thank you all. Thank you. Bye-bye.