Bloomberg News

Turkish Insurers Rise on Government Incentives: Istanbul Mover

January 03, 2013

Turkish insurance companies advanced for a second day in Istanbul as government incentives to encourage savings through private pension plans came into effect with the start of 2013.

Anadolu Hayat Emeklilik AS (ANHYT) led gains, surging 12 percent to 4.85 liras at the close, its biggest advance since November 2008 and the highest level since Aug. 3. Yapi Kredi Sigorta AS (YKSGR), which is being split into life and non-life units for sale by parent Yapi & Kredi Bankasi AS, climbed 2.1 percent to 16.80 liras.

“Anadolu Hayat and Yapi Kredi Sigorta are companies that will benefit most from the incentives,” Isik Okte, a strategist at Istanbul-based Halk Yatirim Menkul Degerler, said in e-mailed comments today. “Anadolu Hayat will see more short-term interest from foreign funds that believe in the private pensions story in Turkey.”

The government will match 25 percent of private pension contributions up to the minimum wage level to encourage more participation, according to the regulations. The effort could add 500,000 new participants to the system this year, Mehmet Bostan, chairman of the Pension Monitoring Center, said at a news conference in Istanbul yesterday. Turkey’s pensions system has 3.1 million participants with 20.1 billion liras ($11.3 million) of funds, according to the center’s website.

Haircuts

While analysts predict as much as 30 percent annual asset growth in private pensions, benefits to pension companies may be pared by limits to fees and commissions included in the new legislation, according to Kutlug Doganay, an analyst at Istanbul-based Is Yatirim.

The government cut the maximum fee pension fund managers can charge to 2 percent from 8 percent. Fund operation fees were reduced to as low as 1.09 percent from 3.65 percent. The changes were effective as of Jan. 1.

“With the recent haircuts in fee rates, pensions fund managers will suffer declines in revenues,” Doganay said in a phone interview on Dec. 28. The average period to start profiting from contributions will rise to between seven and eight years, compared with about five before the cuts, he said.

The seven-member Istanbul Stock Exchange Insurance Index rose 4.1 percent to 142,100.28, the highest level since May 2011, at the close in Istanbul today. The benchmark Istanbul Stock Exchange National 100 index rose 0.5 percent to 80,033.33, breaching 80,000 points for the first time.

To contact the reporter on this story: Taylan Bilgic in Istanbul at tbilgic2@bloomberg.net

To contact the editor responsible for this story: Alaa Shahine at asalha@bloomberg.net


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