The profitability of the insurance industry in 2024 was boosted by an increase in investment income, according to Mr Koray Erdogan, CEO of Ray Sigorta.
Mr Erdogan, in his assessment of the performance of the insurance market which he shared at a recent media briefing, said that in 2024, “there was a tremendous amount of investment revenue reaching TRY62bn ($1.7bn), and this situation significantly corrected the picture of the sector’s profitability,” according to a report by Insurance Gazette.
As for assessing the industry’s real technical profits, he said that the financial statements of insurance companies needed to be studied, excluding investment revenue transferred from the non-technical section. He pointed out, “Technical losses, which were approximately TRY20bn for the first three quarters of 2023, increased to TRY26bn by the end of the third quarter of 2024. While the loss rates are decreasing, the deterioration of the technical side is thought-provoking. Of course, the main reason for this was primarily operational costs.”
2025 expectations
Commenting on the topline performance of the insurance industry in 2024, Mr Erdogan evaluated prospects in the motor branch which is the dynamo of the non-life sector. He said, “We started the year with 72% auto and 112% non-auto growth in 2024, and completed it with 54% auto and 87% non-auto growth. We experienced a 7.4% contraction in real terms in motor insurance.
“This trend also gives us important clues about 2025. It can be expected that traffic insurance (that is, auto third-party liability insurance) will complete this year with a growth of approximately 45% and the motor insurance side with a growth of approximately 35%. There is a similar picture for fire insurance. If the current trend continues, this branch will remain at a growth level of 25%, and the negative real growth we saw in the motor insurance branch in 2024 will be seen in the fire branch this time.”
Mr Erdogan also stated that for 2025, the forecast is that the non-life insurance sector would see 36% growth.
Effect of interest rate changes to be felt starting in 2H2025
Mr Erdogan said that insurers needed to be more cautious in 2025, given that interest rates are beginning to be eased. Türkiye’s central bank cut its key interest rate in December 2024 and further reduced it in January 2025. Mr Erdogan added, “It is important for the sector to focus on sustainable growth and manage its portfolios effectively.”
He said, “Since we think that the effect of the decrease in interest rates will be felt in the second half of the year, we foresee a financial income increase of 50%. In parallel with this, we calculated an operational expense (OPEX) increase of 50% and created our year-end profit estimate. Assuming that technical results will not deteriorate further in 2025 and will remain at 2024 levels in the optimistic scenario, we can expect a profitability increase in the non-life insurance sector of 10%.”