Clal Insurance Enterprises : Financial statements as at June 30, 2016

Clal Holdings Insurance Enterprises Publishes Its Financial Statements for the First Half of 2016 and the Second Quarter of 2016 The material provisions and the low-interest rate environment contributed to a loss during the second quarter and the first half of 2016

Because of the effect of the continuing decline in long-term risk-free interest rates, the Company recognized provisions in its life insurance, long-term nursing, and non-life portfolios:

During the second quarter of 2016, a total of approximately NIS 492 million (of which a total of approximately NIS 488 million for life insurance and long-term nursing).

During the first half of 2016, a total of approximately NIS 960 million (of which a total of approximately NIS 837 million for life insurance and long-term nursing).

Following these provisions, the Company recorded a comprehensive loss after tax of:

During the second quarter of 2016, a total of approximately NIS 293 million, as compared with comprehensive income after tax of approximately NIS 176 million during the corresponding quarter last year,

During the first half of 2016, a total of approximately NIS 542 million, as compared with comprehensive income after tax of approximately NIS 238 million, during the corresponding first half of last year,

It should be stressed that any future increase in interest rates will lead to a decrease in these provisions. After excluding said provisions, the Company recorded comprehensive income after tax, as follows: During the second quarter of 2016, approximately NIS 88 million, as compared with a comprehensive loss after tax of approximately NIS 102 million during the corresponding quarter last year. During the first half of 2016, approximately NIS 140 million, as compared with comprehensive income after tax of approximately NIS 388 million during the corresponding first half of last year.

Following the Company's policy to improve its underwriting income, during the first half of 2016 the Company reported comprehensive income before tax of:

In non-life insurance (after excluding the impact of the Winograd Committee), approximately NIS 143 million (of which approximately NIS 110 million during the second quarter of 2016).

In health insurance (after excluding the impact of the low-interest rate environment), approximately NIS 63 million (of which approximately NIS 27 million during the second quarter of 2016).

According to the results of IQIS-5 tests, as of December 31, 2015, Clal Insurance's capital exceeds the capital required under the new solvency regime, this taking into account the transitional provisions. Irrespective of the transitional provisions, the Company does have a capital deficit which is not material.

Total income from gross premiums earned during the second quarter of 2016 amounted to approximately NIS 2.2 billion, similar to approximately NIS 2.3 billion during the corresponding quarter last year The Group's contributions with respect to pension and provident operations during the second quarter of 2016 amounted to approximately NIS 1.7 billion, as compared with approximately NIS 1.5 billion during the corresponding quarter last year, an increase of 14% Total managed assets of the Group at the end of the second quarter of 2016 amounted to approximately NIS 170 billion, as compared with approximately NIS 168 billion as of December 31, 2015. Total capital attributable to Company shareholders at the end of the second quarter of 2016 amounted to approximately NIS 4,009 million, as compared with approximately NIS 4,548 million as of December 31, 2015, a decrease of 12% Total recognized capital of Clal Insurance as of the end of the second quarter of 2016 amounted to approximately NIS 6,426 million, as compared with approximately NIS 7,337 million as of December 31, 2015, a decrease of 12% The effective capital surplus of Clal Insurance as of the end of the second quarter amounted to approximately NIS 1,693 million, as compared with approximately NIS 2,606 million as of December 31, 2015. The ratio of the effective capital surplus to required capital as of the end of the second quarter of 2016 was 36%, as compared with 55% as of December 31, 2015

Izzy Cohen, CEO of Clal Holdings:

Clal Insurance continues to report good results from its ongoing business operations, this in accordance with its policy of growth in underwriting income in its core businesses. The low-interest rate environment continues to impact the Company's results, as they are published today, due to the need to recognize material provisions for the Company's life insurance and long-term nursing portfolios, but an increase in interest rates is expected to contribute to a reduction of these provisions. The various efforts invested in recent years in the Company's capital and risk management, have allowed it, as of December 31, 2015, to comply with the capital requirements under the new regime, this taking into account the transitional provisions available.

Danny Naveh, Chairman of Clal Holdings:

Notwithstanding that the Company was forced to recognize material provisions stemming for the most part, from the low-interest rate environment, Clal continues to see good underwriting profitability in non-life and health insurance and to comply with the capital requirements of the solvency regime in light of the transitional provisions.

Result Highlights:

Comprehensive Income

Comprehensive loss after tax attributable to the Company's shareholders during the first half of 2016 amounted to approximately NIS 542 million, as compared with income of approximately NIS 238 million last year.

Below are the main financial results, in terms of comprehensive income (loss), expressed in NIS millions:

H 1-2016	H 1-2015	% Change	Q 2/ 2016	Q 2 /2015	% Change
Life insurance	(704)	19	#	(466)	9	#
Pension	18	15	20%	10	4	150%
Provident	18	36	(50%)	5	20	(75%)
Total long-term savings	(667)	70	#	(452)	33	#
Non-life insurance	22	165	(87%)	106	63	68%
Health insurance	(169)	111	#	(107)	252	#
Total insurance operations	(814)	346	#	(453)	348	#
Other	(20)	(34)	(41%)	(7)	(16)	(56%)
Investment income, net, and financing income	57	137	(58%)	54	(7)	#
Total comprehensive income before tax from non-insurance operations	37	103	(64%)	47	(23)	#
Financing expenses	(79)	(67)	18%	(56)	(48)	17%
Taxes on comprehensive income	316	(142)	#	170	(101)	#
Comprehensive income after tax	(540)	239	#	(291)	177	#
Comprehensive income attributable to minority shareholders	2	2	-	1	1	-
Comprehensive income after tax attributable to shareholders	(542)	238	#	(293)	176	#
Return on equity attributable to shareholders	(23.8)	11.2	#	(27.3)	16.3	#

Comprehensive loss from insurance segments before tax during the first half of 2016 amounted to approximately NIS 814 million, as compared with comprehensive income of approximately NIS 346 million last year.

The insurance segments were affected during the first half of 2016 by the following factors:

A. Additional insurance reserves due to the low-interest rate environment, and its impact on discount rates in life, and long term nursing in the health and non-life insurance segments.