IDI Insurance 2025: Underwriting Is Back, but Motor Liability and Capital Still Set the Ceiling

Getting To Know The Company

At first glance IDI Insurance looks like another insurer that simply enjoyed a good year in the capital markets. That is too shallow a read. In practice this is a direct insurer selling personal and family insurance without agents, through phone, digital channels, an app, and partnerships, under the Direct Insurance and 9 brands. The economics of the business are not driven only by investment returns. They are driven by the ability to take a private household, sell it motor, home, life, and health products, and manage underwriting and service at a relatively efficient cost.

What is working right now is clear enough. Comprehensive income rose to NIS 381.1 million in 2025 from NIS 305.9 million in 2024, return on equity increased to 32% from 29%, insurance service profit jumped to NIS 536.1 million from NIS 414.6 million, and equity rose to NIS 1.268 billion. Cash also increased to NIS 277.0 million from NIS 98.5 million. This was a strong year, and not by accident.

But this is also exactly where a superficial reading can go wrong. The 2025 story is not just about markets or rates. The main engine shifted back toward underwriting, especially in motor property, life, and health. At the same time, motor liability moved back into a loss, the life segment was helped by unusually low claims and actuarial assumption changes, and health already showed in the fourth quarter how quickly the financing line can move total profit even when insurance service profit itself remains healthy.

The active bottleneck going into 2026 is not demand and it is not funding access. It is the combination of pricing, regulation, and capital. Motor liability remains a line where the company explicitly says regulation does not let it charge rates it views as actuarially adequate. On the capital side, the story is solid but still bounded. The latest economic solvency ratio shown in the report is 133% as of June 30, 2025, versus a board target of 120%. That is real headroom, but not the kind that makes caution irrelevant.

There is also a practical screening layer that matters early. As of April 6, 2026, the stock traded at 21,370 agorot, with about 14.8 million shares outstanding. That puts the market cap at roughly NIS 3.2 billion. At that size, the market is no longer paying only for profit. It is paying for profit quality.

What Matters Up Front

• The 2025 profit engine was more underwriting-driven than the headline suggests. Insurance service profit rose 29% even after an unusually large legal provision update.
• The real economic unit is the motor household, not two isolated lines. In motor liability, 99.5% of customers overlap with motor property, and in motor property 94.3% overlap with motor liability.
• Motor liability remains the main friction point. The line moved from NIS 18.8 million of insurance service profit in 2024 to a NIS 12.8 million loss in 2025, and the total pre-tax loss widened to NIS 24.6 million.
• Life and health built an attractive future profit reservoir, but that is not free capital. Contractual service margin, or CSM, rose to NIS 332 million in life and NIS 655 million in health.
• There is capital, but not an unlimited amount of it. The company paid NIS 235 million of dividends in 2025, then declared another NIS 75 million after the balance sheet date, while the solvency model remains highly sensitive to markets and underwriting assumptions.

IDI's Economic Map

What this chart makes obvious very quickly is that motor still dominates the economics of the company. That is why IDI cannot be read only through total profit and it also cannot be read only through the life and health story. What happens in motor still shapes the quality of the year.

This graph sharpens an important point: 2025 was not a year of unusual premium growth. It was a year of better profit quality on top of relatively moderate growth. That is why the interesting question is not whether the company knows how to grow. It is where the improvement actually came from.

Events And Triggers

The first trigger: 2025 is the first full year under IFRS 17. The company restated 2024, so the year-on-year comparison itself is clean, but the standard changed the way rates, CPI, and actuarial assumptions flow through reported profit. That is especially visible in life and health. Anyone looking only at the final profit line may end up attributing pure underwriting strength to what is partly a measurement effect.

The second trigger: the company updated legal provisions by about NIS 53 million before tax in 2025, versus about NIS 34 million in 2024. Roughly 60% of that came from a motor property ruling on automatic policy renewals, which the company appealed in December 2025. This matters because 2025 would have looked even stronger without the noise, but it also shows that old legal exposures are still capable of becoming real expenses.

The third trigger: on November 25, 2025, the Capital Market Authority required eight insurers, including IDI, to resubmit motor property tariffs for approval so that pricing would reflect the underlying risk. The demand came with a practical threat: if a tariff is not approved by April 30, 2026, the company would not be able to continue operating that insurance program from that date. Management says it filed the request on time. This is the closest near-term trigger tied to its largest profit engine.

The fourth trigger: on February 3, 2026, after the balance sheet date, the company signed a CUT-OFF agreement with the National Insurance Institute on 2016 to 2022 road-accident claims. Management says the agreement is not expected to have a material effect even on the first quarter of 2026. This is not a profit jump event, but it does remove an old source of noise in motor liability.

The fifth trigger: 2025 was also a year of active capital management. In April 2025 the company took NIS 185 million of subordinated bank loans recognized as Tier 2 capital. In September 2025 it issued subordinated notes for net proceeds of about NIS 338 million. In November 2025 it fully redeemed Series E for about NIS 315.9 million. In other words, the company did not just earn well. It also worked hard to manage its regulatory capital base.

The sixth trigger: capital return remained aggressive. It paid NIS 60 million in March, NIS 55 million in May, NIS 60 million in August, and NIS 60 million in November 2025. In late March 2026 it declared another NIS 75 million dividend. Together that equals 66% of 2025 profit. A high payout can support sentiment, but at an insurer dividends always have to be read together with solvency, not separately from it.

Efficiency, Profitability, And Competition

The Motor Engine: Motor Property Produces, Motor Liability Burns

Motor property is the core profit engine, and the 2025 numbers make that very clear. Gross premiums were NIS 2.047 billion, essentially flat versus 2024, but up 2% excluding the government motor tender. Policy count rose 4%, insurance service profit increased 19% to NIS 275.3 million, pre-tax profit rose to NIS 273.8 million from NIS 235.1 million, and the net combined ratio stayed at 90%.

That is a strong number, but it still needs to be read correctly. The book improved not because of crude premium growth, but because of better underwriting quality, claims management, operating efficiency, and pricing that better reflects risk. In other words, this is a quality-of-book story, not just a volume story. That matters because the same line was asked in November 2025 to resubmit tariffs. If the regulator allows risk-reflective pricing, this engine can stay strong. If not, the ceiling comes down.

On the other side, motor liability moved back into being an explicit drag. Premiums rose to NIS 715.6 million, and by 8% excluding the government tender, but insurance service profit flipped from a positive NIS 18.8 million in 2024 to a NIS 12.8 million loss in 2025. The pre-tax loss widened to NIS 24.6 million, and the effect of the "Pool" on the company's net pre-tax result was a NIS 29.3 million loss.

This does not look like a one-off mishap. In the business description the company says outright that the regulator does not allow it to sell compulsory motor insurance at rates it sees as actuarially sufficient, that the lack of tariff updates has hurt results over time, and that reinsurers have effectively exited the line to the point that the agreement in this area was not renewed in the reporting year. On top of that, the transfer to the National Insurance Institute was set at 10.95% of premium from January 1, 2025, without a matching tariff increase.

The more important point is that motor liability is not truly a standalone line. Almost every liability customer is also a motor property customer, and vice versa. So IDI is not looking at this product only as an isolated profit center. It is part of a combined motor franchise in which liability supports the customer relationship while property produces most of the economics. That explains why the company remains in the line even when it hurts. But it also means any further deterioration in motor liability directly erodes the heart of the multi-product model.

This chart captures the core thesis in one view: almost every line improved, and only motor liability moved in the wrong direction. That is why the conclusion on 2025 cannot simply be "a strong year." It has to be "a strong year, with one structural friction point that is still unresolved."

Life And Health: Real Improvement, But Not All Of It Is Repeatable

The life segment posted a dramatic jump. Gross premiums rose 5% to NIS 373.2 million, insurance service profit surged 156% to NIS 132.6 million, and pre-tax profit climbed to NIS 135.2 million from NIS 53.2 million. But this is exactly where investors should resist turning one strong year into a flat base case. The company attributes the improvement mainly to a much better claims ratio, which was unusually low in 2025 and unusually high in 2024 in part because of the war, and also to assumption changes following actuarial studies in the fourth quarter.

That is the kind of number that looks excellent in an annual report, but still needs normalization before it becomes a steady-state earnings line. Better claims are obviously good. Assumption changes may also be justified. But they are not automatically recurring at the same pace every year.

In health, the underwriting picture is cleaner, but the total profit line is more exposed to the IFRS 17 mechanics. Gross premiums rose 9% to NIS 311.2 million, insurance service profit increased 17% to NIS 104.7 million, mainly because of growth in critical illness, medical expense, and travel products, alongside lower claims. But the fourth quarter already showed the sensitivity of the accounting structure. Even though insurance service profit in the quarter rose 20%, segment pre-tax profit fell 32% because financing income that had helped the prior year reversed.

What ties those two segments together is the growth in the future profit stock. CSM, contractual service margin, rose in life to NIS 332 million from NIS 323 million, and in health to NIS 655 million from NIS 596 million. That is a positive sign because it shows the company did not just enjoy the current year. It also built a profit reservoir that should be recognized over time as coverage is provided.

But this is where the distinction between created value and accessible value becomes critical. CSM is expected future profit from insurance contracts. It is not a dividend, it is not regulatory capital, and it is not a free buffer that holds up the thesis by itself. Anyone reading the combined NIS 987 million of life and health CSM as if it were surplus capital would be reading the company incorrectly.

Where Competition Actually Sits

The company operates in a highly competitive market, and the report keeps making that point. In motor property and motor liability the base product is broadly similar across insurers, so competition comes down to price, service, speed of response, and tailoring the offer to the customer. In health, the company notes that more insurers are expanding direct distribution, meaning the old direct-model edge is no longer as exclusive as it once was.

Still, IDI retains three clear advantages. The first is direct distribution, which gives it better control over acquisition cost. The second is a high level of cross-product overlap, especially around the motor household. The third is a brand and service model built around private customers from the start, rather than around collective groups. That is not an unbreakable moat, but it is still a meaningful operating edge.

Cash Flow, Debt, And Capital Structure

For an insurer, the right cash lens is not the classic industrial free cash flow frame. What really matters here is the mix of cash, equity, debt recognized as capital, and solvency. So the relevant framework for IDI in 2025 is overall capital flexibility, not a mechanical exercise on maintenance capex.

What is clear from the report is this. Cash rose to NIS 277.0 million from NIS 98.5 million. Cash flow from operating activities increased to NIS 328.5 million from NIS 143.4 million. Investing cash outflow was NIS 110.9 million, mainly for intangibles and fixed assets. Financing cash flow added NIS 39.2 million net, and included NIS 522.7 million of subordinated issuance, NIS 315.6 million of redemption, and NIS 235 million of dividends.

So this is not a liquidity stress story. But it is also not a free-capital story. Loans and credit rose 35% to NIS 787.7 million, and other finance expenses jumped 93% to NIS 29.7 million. The company bought itself more capital oxygen, but it paid for it in interest expense.

The more important point sits in solvency. The latest economic solvency ratio disclosed in the report is as of June 30, 2025, not December 31, 2025. It stood at 133% versus 127% at December 31, 2024, against a board target of 120%. The excess above target was NIS 195.2 million. That is decent headroom, but the report itself warns that the model is highly sensitive to market variables and other assumptions, and that after June 30, 2025 macro developments occurred whose full effect the company cannot yet quantify.

That is a point the market can easily miss on first read. The capital story looks solid, but the verified figure the market gets inside the annual report is a June 2025 solvency number. Investors do not get a fully updated year-end answer to how much capital still remains after the second half of 2025, after market volatility, and after the March 2026 dividend declaration.

Dividends are exactly where the strength and the friction meet. On one hand, NIS 250 million distributed against 2025 profit, including the NIS 75 million declared after the balance sheet date, signals a management team that is reasonably confident. On the other hand, at an insurer every shekel distributed is also a shekel that no longer supports the regulatory capital cushion. So the right way to read 2025 is not "the company is strong, therefore it distributes." It is "the company is strong enough to distribute, but not so strong that the distribution stops being thesis-relevant."

Outlook

Five Points A Reader Can Easily Miss

• 2025 was stronger than the headline. The company absorbed NIS 53 million of legal provision updates before tax and still grew comprehensive income by 25%.
• Motor liability is not a side issue but a strategic constraint. It sits inside a motor franchise where customers almost entirely overlap between liability and property.
• The future profit stock grew, but it is not free capital. Nearly NIS 1 billion of combined life and health CSM is an important operating asset, not a substitute for solvency surplus.
• The main capital number investors can verify in the report is June 2025. There is no disclosed December 31, 2025 solvency ratio inside the annual report itself.
• The fourth quarter already showed how fast the financing line can reverse. In health, better underwriting still did not stop total profit from falling because financing effects moved the other way.

This is also what defines 2026. It does not look like an automatic breakout year. It looks like a proof year. Proof of what? First, that motor property can preserve profitability under a renewed tariff regime. Second, that motor liability stops deteriorating, whether through pricing, regulatory relief, or tighter claims management. Third, that strong life and health profitability does not compress sharply once assumptions and market conditions normalize. Fourth, that the company can publish a capital picture later in the year that still supports the payout policy.

There is also a very clear short-to-medium-term market test. In the days after the report, investors may focus on profit, the 32% ROE, and the dividend. But over the next few quarters the market is likely to watch three things most closely: whether motor liability stops consuming margin, whether life and health stay strong without outsized help from the financing line, and whether surplus capital remains comfortable even after the distributions.

If those three points move in the right direction, the market read on IDI can shift from a good direct insurer with a known friction point to a stronger direct insurer with a more dependable distribution machine. If not, 2025 may turn out to have been a great year that did not really raise the ceiling.

Risks

Motor Liability Is Still A Structural Risk

The company says outright that regulation does not allow pricing it views as actuarially adequate. It also says reinsurers have effectively exited the line to the point that the agreement was not renewed during the year. Add the Pool, the transfer to the National Insurance Institute, and claims sensitivity, and this remains an industry risk sitting inside the heart of the model.

Part Of The Life And Health Profit Looks Strong, But Not All Of It Is Recurring

In life, 2025 benefited from an unusually favorable claims ratio and assumption changes. In health, the fourth quarter showed how much rates and CPI can affect total profit. Anyone treating 2025 as a flat base year for 2026 is taking a real normalization risk.

Capital Is Strong, But Sensitive

The solvency model is explicitly described in the report as highly sensitive to market variables. That means even if 133% looks comfortable, it is not invulnerable. Once high distributions are layered on top, the company still needs continued profit delivery to keep the capital story clean.

Legal Exposures Are Not Behind It Yet

The auditors highlighted the contingent liabilities note for a reason. The NIS 53 million provision update in 2025 shows that legacy legal issues can still become real charges quickly. Even if some cases eventually settle for less, this remains a meaningful overhang.

The Market Still Carries Some Caution

Short data do not point to a major red flag, but they are not zero either. As of March 27, 2026, short float was 1.07% versus a sector average of 0.86%, and SIR was 1.75. That is moderate, and clearly down from roughly 1.91% and 4.56 in early December 2025. In other words, skepticism has eased, but it has not disappeared completely.

Conclusions

IDI exits 2025 as a better insurer than a quick read would suggest. Profit grew, underwriting improved in motor property, life, and health, and capital still looks sufficient to support distributions. But this is not a fully clean story yet, because motor liability remains an active hole, part of the life and health strength is not necessarily baseline, and the capital cushion the market can truly verify still rests on a June 2025 solvency number.

In the short to medium term, the market is likely to spend less time asking whether IDI can earn money and more time asking whether it can hold onto this profit after regulation, payouts, and a potential reversal in the financing line. If the answer is yes, the quality premium can widen. If not, 2025 will remain a strong year, but not necessarily a ceiling-raising one.

Current thesis: IDI has shifted back toward underwriting-led earnings, but motor liability and regulatory capital still determine how much of that improvement really belongs to common shareholders.

What changed: The simple read of "profit rose because markets helped" no longer captures the business. The 2025 report shows underwriting moved back to the center, but it also showed again that motor liability can still eat into the improvement.

Counter-thesis: The market may be too harsh on the friction points, because motor property is already highly profitable, life and health are building a real future profit stock, and the company proved in 2025 that it can both earn strongly and manage capital actively.

What could change the market reading in the short to medium term: approval of motor property tariffs, stabilization in motor liability, and an early signal that updated solvency remains comfortable even after the March 2026 NIS 75 million dividend.

Why this matters: because for a direct insurer, true earnings quality is tested where underwriting, regulation, and capital meet. IDI is strong, but it still has to prove that this intersection works in its favor for a second consecutive year.

What must happen next: over the next 2 to 4 quarters the company has to preserve strong motor property profitability, avoid further deterioration in motor liability, and show regulatory capital that still supports both payout and growth. What would weaken the thesis is a combination of softer underwriting in life and health and a narrower solvency buffer.