Harel Issuances: How Much The Harel Insurance Upgrade Really Changes
The main article already showed that Harel Issuances is a financing conduit for Harel Insurance. This follow-up isolates the February 2026 Midroog upgrade and argues that its real value sits less in the issuer's own earnings and more in solvency headroom, future funding economics, and the ability to refinance subordinated capital without pressure.
What This Follow-up Is Isolating
The main article already argued that Harel Issuances should not be read through its tiny bottom line. It is a financing arm translating Harel Insurance credit quality into tradable securities. This follow-up isolates the Midroog upgrade of February 5, 2026 because that event shows what really changed in the issuer's credit engine, and what did not.
This is not an earnings jump. It is a credit-quality jump behind the conduit. Midroog raised Harel Insurance's financial-strength rating from Aa1.il to Aaa.il and raised the subordinated instruments issued through Harel Issuances from Aa3.il(hyb) to Aa2.il(hyb), with a stable outlook. For Harel Issuances, that does not create a new business model. It reduces uncertainty around the price at which the market may be willing to keep funding subordinated capital for the group.
The positive part is that the upgrade rests on real improvement. The less comfortable part is that it does not rest on pure underwriting alone. Midroog explicitly ties the move to stronger underwriting profitability, better profitability metrics, stronger asset quality backed by equity growth, but also to IFRS 17 support in life and health and to investment and finance gains from capital-market returns. Anyone reading the headline as though every quality question has already been settled is moving too fast.
There is another layer that matters. February 2026 was not starting from zero. On November 30, 2025, Maalot had already raised Harel Insurance to ilAAA/stable, and had also raised the Harel Issuances instruments to ilAA- for Series 21 and ilAA for Series 22 and Series 23. So Midroog's move was less a first discovery and more the closing of a gap between rating agencies. In a name like Harel Issuances, that cross-agency credit consensus is worth money.
The Upgrade Engine Was Strong, But Not Clean
Midroog did not hide behind a rating headline. It laid out the case quite clearly. The upgrade rests on material and ongoing improvement in underwriting profit and profitability metrics, on better asset quality supported by higher equity, on a strong business position, and on solvency ratios that stand out positively against the sector.
That chart explains why the market did not get a cosmetic wording change. ROC rose to about 19.1% on an annualized basis in the first nine months of 2025, versus about 12.1% in 2024. Comprehensive income to gross earned premiums rose to about 14.7%, versus about 8.2% in 2024. That is too large a gap to dismiss as statistical noise.
But Midroog also adds the key caveat. It says outright that the improvement came not only from underwriting but also from IFRS 17 in life and health and from investment and finance gains tied to capital-market returns. That separates two different questions. The first question is whether 2025 looks much stronger. The answer is yes. The second question is how much of that improvement remains just as strong without help from capital markets. That answer is less automatic.
That is exactly why the upgrade matters. It says the agency did not see a single lucky year. It saw enough improvement to move both the insurer and the subordinated instruments issued through Harel Issuances up a notch. Still, it does not erase the fact that part of the recent earnings engine depends on conditions that may be less generous later on.
Solvency Headroom Is The Real Pricing Engine
If one variable really drives Harel Issuances funding economics, it is not the issuer's own net profit and not even Harel Insurance's headline comprehensive income. It is the distance from the point where subordinated instruments stop behaving like expensive debt and start behaving like what they really are: loss-absorbing capital.
This is the real core of the upgrade. Midroog says that because of the existing and expected solvency position, and because of a sufficient gap over the effective regulatory solvency requirement, uncertainty around reaching "deferring circumstances" is low. That is why it did not apply an additional notch reduction beyond the standard two-notch distance used for Tier 2 capital instruments. That sounds technical, but it is where solvency turns into pricing.
"Deferring circumstances" are defined here as 80% of the required solvency ratio during the transition period. Against that threshold, Harel Insurance's solvency ratio stood at 183% with transition and 159% without transition as of June 30, 2025. That does not mean risk disappears. It does mean the market is currently being offered real distance from the event, and that distance is exactly what a subordinated capital instrument needs in order to trade like costly debt rather than stressed capital.
This also explains why the rating upgrade is especially valuable in a structure like Harel Issuances. The debt instruments are not secured by collateral, and the company is allowed to issue future obligations that are senior, equal, or junior in rank. In that type of stack, the real protection does not sit in collateral. It sits in Harel Insurance credit quality and in its distance from regulatory trigger zones.
That does not eliminate the weak point. Midroog still defines Harel Insurance's liquidity profile as stable but low relative to the rating, with a current ratio of about 1.6 between weighted liquid assets and the insurance and financial liabilities expected to mature in the short term. So even after the upgrade, the story is not sitting on endless balance-sheet comfort. It is sitting mainly on solvency strength and funding access.
What This Is Worth To Harel Issuances
Harel Issuances itself has not changed fundamentally. Even after the upgrade, it remains a conduit. The proceeds from Series 10 through Series 23 are deposited with Harel Insurance for its use and at its responsibility, and Harel Insurance is committed to pay holders principal, linkage, and interest according to each series' terms. That means the economic value of the upgrade should first appear in the pricing of the next issue or refinancing round, not in a new earnings stream at the issuer.
| Layer | What the numbers show | Why it matters |
|---|---|---|
| Harel Insurance rating | Midroog raised financial strength to Aaa.il on February 5, 2026 | This reduces uncertainty around the core credit sitting behind Harel Issuances |
| Subordinated capital rating | Midroog raised the instruments from Aa3.il(hyb) to Aa2.il(hyb) | This is the direct move in the layer the issuer actually sells to the market |
| Issuer balance-sheet structure | Year-end 2025 included NIS 5.595 billion of deferred deposits at Harel Insurance, NIS 651.337 million of current-account exposure to the parent, and NIS 6.246 billion of long-term notes | The upgrade does not change the conduit model, it changes the quality at which that model may be funded |
| Next action window | A new shelf prospectus was published on February 18, 2026, 13 days after the Midroog upgrade | The upgrade met a live issuance window almost immediately, so its value is forward-looking rather than merely optical |
There is one more sharp point in the financial-instruments note. The company says it has no material market or liquidity exposure because the deposit terms mirror the issued debt. But it does have credit exposure, because Harel Insurance's payment capacity and financial strength are the key drivers of Harel Issuances' own payment capacity. In other words, the rating upgrade is not sitting at the edge of the accounting story. It sits at the center of it.
Even the expected-credit-loss numbers support that read. The provision on the deferred deposits fell to NIS 6.003 million at year-end 2025 from NIS 8.49 million at year-end 2024. That is not a large number against the balance sheet, but it is a reminder that Harel Insurance credit quality is not only an interpretive layer. It feeds directly into the expected-loss estimate on the assets that sit against the issued instruments.
That is also where the answer lies on how much the upgrade is actually worth. It does not rewrite coupons on the series already outstanding, and it does not turn Harel Issuances into a more profitable standalone business. What it should do is improve the opening conditions for the next issuance or refinancing, especially since the operating window reopened through the fresh shelf prospectus just days after the rating step-up.
What Is Still Not Solved
The easiest mistake after a rating upgrade like this is to assume the story has become linear. It has not. Midroog itself still uses a relatively wide base-case range for 2025 to 2026, with ROC expected between about 9.0% and 18.4% and comprehensive income to gross earned premiums between about 7.7% and 14.3%. When a rating agency keeps a range that wide, it is effectively saying that performance is strong, but the path still depends on business conditions, competition, regulation, and capital markets.
The downgrade triggers matter as well. Material and ongoing erosion in capital surplus, material and ongoing deterioration in underwriting or overall profitability, and material weakening in the business profile all remain explicit downside paths. That means the current upgrade is not an insurance policy for the next few years. It is recognition that the starting point has improved.
Beyond that, the liquidity profile is still described as low relative to the rating. That matters especially in a structure like Harel Issuances because the company is not selling an insurance product and it is not diversifying business risk. It is selling capital-markets confidence in Harel Insurance's ability to stand behind subordinated funding layers over time. When that confidence is strong, the conduit works. If that confidence weakens, there are not many other lines of defense.
That is why it is also dangerous to read the upgrade as though all of the value has already been monetized. What enters immediately is mostly alignment between rating agencies and lower uncertainty. What still has to be proven in the market is whether this actually translates into better funding cost, stronger demand, and easier refinancing of subordinated capital.
Bottom Line
How much is it worth? Much more in funding flexibility than in immediate earnings. The Midroog upgrade matters because it locks in the view that Harel Insurance's credit engine improved enough to reprice the subordinated capital issued through Harel Issuances. It matters even more because it arrived just before a new shelf prospectus, which means it met a live financing window.
But it is not an upgrade that erases every open question. Part of the profitability improvement still depends on IFRS 17 and on investment and finance gains, the liquidity profile is still described as low relative to the rating, and the direct economic value of the move still has to show up in the pricing of the next issue.
The February 2026 upgrade does not change the fact that Harel Issuances is a conduit. It changes the quality of the asset sitting behind that conduit. In a subordinated-capital market, that is usually the part that actually carries the money.
Disclosure: Deep TASE analyses are general informational, research, and commentary content only. They do not constitute investment advice, investment marketing, a recommendation, or an offer to buy, sell, or hold any security, and are not tailored to any reader's personal circumstances.
The author, site owner, or related parties may hold, buy, sell, or otherwise trade securities or financial instruments related to the companies discussed, before or after publication, without prior notice and without any obligation to update the analysis. Publication of an analysis should not be read as a statement that any position does or does not exist.
The analysis may contain errors, omissions, or information that changes after publication. Readers should review official filings and primary sources before making decisions.