TURSG TI: 4Q22 Review (Oyak Yatırım)

Backed by financial income
 
Combined ratio rises; strong financial gains
Turkiye Sigorta posted 4Q22 net income of TL424mn (+109% q/q, +54% y/y), above both our estimate (TL310mn) and market consensus (TL370mn). Financial income was the biggest contributor of earnings this quarter thanks to expanded portfolio size and agile portfolio reshuffle to high yielding instruments. Despite relatively lower exposure of Turkiye Sigorta vs peers in the motor segment (traffic and casco), technical line stayed sequentially in the red this quarter on claims from motor segment and prevailing impact of 50% hike in minimum wage rate. Besides, high spare part costs in the motor segment on depreciation of the lira against USD kept taking its toll from the technical line. Combined ratio rose to 145% in 4Q from 125% in 3Q and 112% last year. Trailing ROE realized at 20% in 4Q from 19% in 3Q and 27% a year ago. We forecast 23E earnings to increase by 8%, while ROE should be at 15%.
Motor and health business lines have potential to grow
Turkiye Sigorta is a market leader in agricultural, accident, fire and natural catastrophe and general damage business lines. We think the company has a potential to grow in motor and health segments. Its MTPL market share rose by 2.5ppt y/y to 11.55% as of 22YE and remained as the market leader. MTPL prices keep rising by 4.75% per month till 23YE. We expect higher prices to offset some of the negative pressures on margins in the medium term. TURSG has the seventh position in health insurance with 5.3% market share as of 22YE. TURSG has the sixth position in health insurance with 4.4% market share as of 22YE.
Investment portfolio keeps growing
Turkiye Sigorta has an investment portfolio of around TL16.4bn as of 22YE, in which time deposits and government bonds constitute a large part of the total portfolio. We expect its investment portfolio to reach TL22bn by end-2023.
FY23E earnings maintained; upgraded to OP
Turkiye Sigorta trades at 11.0x 23E P/E and 1.6x P/B with 23E ROE of 15%. We maintain our TP at TL15.85/share, implying 64% upside potential. We upgrade our recommendation for the stock to Outperform from Marketperform on high upside potential.


Oyak Yatırım Menkul Değerler A.Ş.
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