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For a decade, insurance company stocks had been among the best performers on the Tel Aviv Stock Exchange. But for the last three years they've underperformed the benchmark indexes.

From January 2005, insurance stocks have returned about 30 percent, while the TA-25 blue-chip index has doubled. Migdal, the biggest insurance company in the land, returned a paltry 15 percent in the last three years, less than risk-free investment in short-term Bank of Israel notes (makams).

The last three years were ones of upheaval in Israel's capital market, after the regulators let the insurance companies manage the public's pension savings, forbidding that privilege to the banks. So the insurance companies snapped up the provident and mutual funds that the banks were forced to sell, as well as pension funds and training funds. They also bought these long-term investment vehicles from the Histadrut labor federation.

All that turned the insurance companies into monsters with hundreds of billions of shekels under management. Yet somehow, bank stocks returned more than double the insurance companies: The Tel Aviv Banks-5 index rose about 70 percent in three years. Why is that so?

There are two main reasons. One: the banks basically own their customers, and the customers are key to profit in today's economy. Even though the banks no longer manage the public's long-term savings, they have complete control over the public's bank accounts; they sell the public products and charge service fees for that pleasure. Meanwhile, the insurance companies depend on the investment advisers at the banks and on insurance agents, they have to compete over each and every deal, and they have to lower prices to be attractive.

Second is that emptying pork barrels known as bituach minahalim - managers' insurance. Over the years the insurance companies merrily pushed these policies to the public at extraordinarily beneficial terms for the companies. It was so bad they'd grab 28 agorot in fees for each shekel the customer deposited. That is over now. Today's bituach-minahalim policies aren't so skewed in the companies' favor. Also, the regulators are working on a reform to let people shift money from one pension plan to another without incurring a penalty, which should shift pricing in favor of the customer, not the company.

Why therefore would investors want to invest in the insurance companies? Mainly because they are still very powerful companies, stable and profitable, with owners and managers who are doggedly perseverant. Buying insurance stocks in the dip today could well pay. Their profit multiples are between 6 and 7 and their equity multiples are between 1.6 and 2.2, and that's before the embedded value of the life insurance portfolios is made public.

The companies may well be worth more than their market capitalizations indicate. Moreover, the reform allowing customers to switch pension service providers hasn't started yet. In 10 years, who's betting that the insurance companies will be gigantic, smoothly-operating financial corporations?