Clal Capital Raising 2025: This is not about profit, it is about whether the market stays open

Getting To Know The Company

Clal Capital Raising is not an insurer, not an asset manager, and certainly not a company that should be read through net income. It is a dedicated funding arm of Clal Insurance. It issues notes to the public or through private placements and deposits the entire proceeds back with Clal Insurance in subordinated deposits on matching terms. So anyone looking at 2025 and asking whether the company "earned" or "lost" money is already asking the wrong question.

What is working today is fairly clear. In 2025 the company expanded Clal Insurance’s capital stack through two new series, series 14 in the amount of ILS 500 million and series 15 with total par value of ILS 1.1496 billion from public and private issuance combined. That lifted total liabilities by about 26% to ILS 5.874 billion, alongside an almost identical jump in subordinated deposits with Clal Insurance to ILS 5.806 billion. Put differently, the conduit worked, and it grew materially.

But the story is still not clean. The active bottleneck is not profit, but capital-market access. The company is fully dependent on Clal Insurance, on its solvency headroom, and on its ability to keep raising regulatory capital in the Israeli market. Series 15 adds an important capital layer, but it also adds coupon-cancellation, principal-deferral, and principal write-down mechanics if Clal Insurance ever reaches a trigger event.

What a superficial read can miss is that the near-term calm is slightly deceptive. There is no principal wall in 2026 or 2027, and the company’s own projected repayment tables only start in 2030. But that schedule rests on an early-redemption assumption, not only on the legal final maturities. So the real picture is not "there is no wall", but rather "the wall was pushed out and concentrated". That is a material distinction, because it changes how the whole debt stack should be read.

Anyone looking for operating value will not find much here. Anyone looking for proof that the market still funds Clal Insurance through this issuance arm will find quite a bit. January 2026 already provided a first confirmation, with another expansion of series 15 in the amount of ILS 590.607 million par and gross proceeds of about ILS 622.5 million. That is why 2026 looks less like an earnings year and more like a proof year for capital access.

The Economic Map In One Glance

The first chart is the heart of the story. The company did not take issuance proceeds and turn them into a new business. It transferred them almost entirely back into Clal Insurance. So the analysis has to focus less on profitability and more on the quality of the conduit, meaning the market’s willingness to keep supplying capital on terms that still count for regulatory purposes.

The second chart sharpens another point. At year-end 2025 the stack still leaned mainly on Tier 2 instruments, but Additional Tier 1 already accounted for almost one-fifth of total par value. That is a meaningful change, because moving lower in the capital stack can improve Clal Insurance’s regulatory flexibility, while also making the instrument materially harsher for investors.

Events And Triggers

2025 was not a routine refinancing year. It changed the capital structure.

The first trigger: in April 2025 the company issued series 14 in the amount of ILS 500 million, recognized as Tier 2 capital at Clal Insurance. That strengthened the recognized subordinated-capital layer and extended the ladder, but it did not yet change the company’s character. Up to that point, this was still a fairly classic Tier 2 funding vehicle.

The second trigger: in October 2025 series 15 was issued, and that is already a different story. The public leg raised ILS 594.21 million par, while a private placement of ILS 555.37 million par was made to Clal Holdings against the cancellation of an indexed capital note in the amount of ILS 450 million that had previously been issued to Clal Holdings and recognized as Additional Tier 1 capital. This matters because 2025 was not only about bringing new money from the market. It was also about replacing an existing intra-group capital instrument with a traded one-series instrument. Clal Insurance recorded a loss of about ILS 24 million from that move, while Clal Holdings recorded an equal gain.

The third trigger: in January 2026 the market test after year-end came, and it was passed. The company expanded series 15 by another ILS 590.607 million par, with gross proceeds of about ILS 622.5 million. 88% of the offered units were backed by early commitments from classified investors, 57 orders were received, and the issue was not underwritten. That is a sharp indication that the market did not just accept the new capital instrument, but was willing to increase exposure to it soon after the original launch.

The fourth trigger: the outside signal was supportive as well. In January 2026 Midroog assigned an A1.il rating to the Additional Tier 1 instrument, alongside an Aa1.il insurance financial-strength rating for Clal Insurance. More important than the letter itself was the reasoning: Midroog said that uncertainty around reaching deferral or trigger circumstances is low, as long as a sufficient margin above the effective solvency requirement is maintained. That is not a guarantee. It is a reminder that the outside market still reads Clal Insurance as sitting on the stable side of the equation.

This chart explains why 2025 is a structural transition year and not just another funding cycle. The net addition after issuance costs more than doubled versus 2024. That is exactly the type of move that matters in a financing vehicle, because it means the market window did not just stay open, it was used at a much larger scale.

There is also a short-term market-reading layer here. Anyone who reads 2025 without January 2026 gets an incomplete picture. Anyone who reads January 2026 without series 15’s write-down mechanics also gets an incomplete picture. Put together, the files say something simple: the demand was there, but it bought a deeper capital instrument, not ordinary debt.

Efficiency, Profitability, And Competition

This is where it is easy to slide into mechanical summary, so the main point should come first. Clal Capital Raising’s profitability is supposed to be close to zero. The company is not meant to earn a spread. It is meant to pass it through. In 2025 financing income amounted to ILS 205.713 million, and financing expense was booked at the exact same level. Fair-value changes on series 15 and on the matching deposit also offset one another at ILS 36.734 million on each side. In other words, when the structure works, the bottom line is almost not the story at all.

What is left after that is modest: reimbursement of expenses from the parent in the amount of ILS 1.337 million, general and administrative expenses in the same amount, a negligible negative change of ILS 13 thousand in expected-credit-loss provision on subordinated deposits, and a tax benefit of ILS 5 thousand. The final result is a loss of ILS 8 thousand. That is not operating weakness. It is near-accounting neutrality.

That is why efficiency has to be read differently here. It does not run through operating margin, but through the quality of the asset-liability match, the amount of accounting friction left on the income statement, and the price the market demands for each capital layer. What really matters is that the company keeps the structure almost economically neutral even while adding a more complex instrument such as series 15.

Where Competition Actually Sits

Clal Capital Raising does not compete for customers. It competes for risk appetite. Its competition is whatever other debt and capital alternatives the market offers, and in practice also any other route through which Clal Insurance could raise qualifying capital. That is visible in the ratings. Series 11 through 14, which count as Tier 2 capital, carry Aa3 and ilAA- ratings. Series 15, which counts as Additional Tier 1, drops to A1 and ilA+.

That gap matters not because it is surprising, but because it defines the product boundary. The lower the company goes in the capital stack, the better the regulatory utility for Clal Insurance may become, but the harsher the instrument becomes for the holder. That is exactly the point where a move that looks positive at the group level can also become more expensive at the cost-of-capital level.

What 2025 Says About The Model

2025 shows that the funding-vehicle model worked, but it also shows its limit. On the one hand, the match between subordinated deposits and liabilities remained almost one-to-one, and the company states that it has no material market-risk or liquidity-risk exposure. On the other hand, the same filing says explicitly that repayment capacity depends on Clal Insurance’s solvency and financial strength. So what looks like a tightly closed structure is really a concentrated transfer of credit risk to the parent insurer.

That is why "efficiency" here is not about how much the company earned, but about how little noise is left in the transfer between the market and Clal Insurance. By that standard, 2025 was fairly clean. But it is still conduit efficiency, not business efficiency.

Cash Flow, Debt, And Capital Structure

This is where the language has to change. It does not make much sense to talk about free cash flow in the usual way, because the company has no operating activity that generates autonomous cash. The right frame here is all-in cash flexibility for a funding vehicle, meaning how much was raised, how much was repaid, how much issuance cost, and how much of the net was sent back into Clal Insurance.

In 2025 that picture is straightforward. The company received ILS 1.6496 billion from issuances, redeemed ILS 498.0 million of notes, and paid ILS 13.0 million of issuance costs. The net after costs, ILS 1.1386 billion, was effectively redeposited with Clal Insurance through subordinated deposits. That is the real cash story. By contrast, interest paid and interest received, ILS 168.073 million on each side, almost fully offset one another.

The Right Cash Bridge For This Company

If one tries to analyze the company through normalized cash generation, the result is close to meaningless, because there is no underlying operating engine that should be producing cash before growth CAPEX or discretionary uses. This is exactly the kind of company where the right cash framing is the full picture of actual uses, not a "normalized" operating bridge. In plain terms, the company’s real free-cash equation is whether it can issue more than it redeems, and do so at a reasonable cost and with regulatory recognition.

The Debt Structure, And What Really Sits Inside It

This table may be the single most important data point in the whole filing. All par value outstanding at year-end 2025, about ILS 5.893 billion, sits between 2030 and 2036 in the projected repayment schedule that the company itself presents. But it matters to say exactly what that means and what it does not mean. It does not mean that all debt legally matures by 2036. It does mean that the company frames its repayment profile on an assumed economic call schedule.

Series 15 makes that distinction especially sharp. Its legal final maturity is October 2075, but the company presents a projected maturity in 2036 and changes the rate mechanism from that point onward. That is not a technical footnote. It means the sensible way to read the instrument is not as "50-year debt", but as a capital instrument that will be economically re-tested in 2036.

The first chart sharpens the principal wall. The second reminds the reader that this wall does not start from a zero cash burden, because projected interest still runs at about ILS 230 million in 2026 through 2029 under the same schedules. As long as the market window stays open, that is not an immediate threat. But if the market closes, the company will not be able to hide behind the fact that there are no short-dated principal repayments.

Why The Tiny Asset-Liability Gap Actually Matters

The gap between subordinated deposits and liabilities in 2025 was only ILS 2.67 million, almost identical to the ILS 2.657 million gap at the end of 2024. That is not random. It is the expected-credit-loss provision on the subordinated deposits measured at amortized cost. In other words, even in a structure that tries to be almost perfectly back to back, the one accounting line that really bites is the credit-risk line on Clal Insurance. Again, the story circles back to the same place.

Forward View

Before getting into the full discussion, it is worth stating the five non-obvious findings of 2025 directly:

• Finding one: the ILS 8 thousand loss says almost nothing about the company. Market access and refinancing capacity say almost everything.
• Finding two: 2025 moved the company from a structure built mainly on Tier 2 to one that already carries a meaningful Additional Tier 1 layer.
• Finding three: the repayment tables the company presents are not only legal maturity tables, but economic schedules built on call assumptions.
• Finding four: January 2026 showed that the market was still open even for a deeper capital instrument.
• Finding five: the positive outside signal, stable ratings and low stated trigger uncertainty, is explicitly conditional on continued solvency headroom.

What Kind Of Year 2026 Looks Like

2026 looks like a proof year for capital access, not a harvest year and not an earnings year. The question is not whether Clal Capital Raising reports a cleaner net-income line. The question is whether Clal Insurance keeps enough distance from its capital triggers, stays within capital-composition limits, and can keep using the issuance arm without the market price becoming too punitive.

That matters because the value created here is not accounting value for common shareholders of the funding vehicle, and it is not free cash sitting inside the SPV. It is regulatory and economic value at Clal Insurance. So even when the move is positive, the improvement is primarily accessible at the insurer level and only indirectly improves the flexibility of the broader structure.

What Has To Happen Over The Next 2 To 4 Quarters

The first checkpoint is that Clal Insurance’s solvency headroom needs to stay comfortably away from series 15’s trigger levels. Midroog’s reasoning was supportive, but it did not come out of nowhere. It depended on current and expected solvency levels. If that buffer narrows, the whole reading of series 15 changes quickly.

The second checkpoint is that the group needs to show that even after the January 2026 expansion of series 15, it still has reasonable room within recognized-capital composition. Precisely because series 15 counts as Additional Tier 1, the question is not only whether the market is willing to buy more of it, but also whether Clal Insurance still needs and can use more of that layer.

The third checkpoint is that the early-redemption assumption needs to remain credible. As long as the series are seen as reasonable refinancing candidates at their economic call points, the projected repayment schedule makes sense. If market conditions make refinancing more difficult, investors may have to shift their attention back toward the legal final maturities, and in series 15 that is already a very different world.

What The Market May Start Measuring Right Away

In the near term, the market is likely to put less weight on the company’s negligible bottom line and more weight on three other things: issuance terms, depth of demand, and signals from Clal Insurance about financial strength. So anyone who reads the company as "very long debt with a tiny loss" will miss the point. Anyone who understands that this is a capital instrument trading on the market’s confidence in Clal Insurance’s solvency buffer will read 2025 and early 2026 far more accurately.

Risks

The first and most material risk is parent-company risk. The company itself carries almost no meaningful market-risk or liquidity-risk exposure, but it is concentrated almost entirely in Clal Insurance’s creditworthiness and financial strength. That is not a side issue. It is the model.

The second risk is the structure of series 15. This is not just another Tier 2 series. It is an Additional Tier 1 layer with coupon cancellation, principal deferral, and full or partial principal write-down if Clal Insurance’s equity falls below SCR, if the solvency ratio falls below 75%, or if there is a going-concern warning. So even in a relatively calm period, this series carries a much harsher tail-risk profile than the Tier 2 instruments.

The third risk is the gap between the economic schedule and the legal schedule. As long as the market stays open, early redemption at economic call points looks reasonable. If the market closes, projected maturities may slide to the right, and the company may end up living longer with instruments that were priced on an assumed refinancing path.

The fourth risk is a shut market window. January 2026 was strong, but the deal also came without underwriting. That is good when demand is there. It is less comfortable if the market turns quickly. In a funding vehicle, a closed window is not just a technical inconvenience. It is the business problem itself.

There is also a secondary but important risk worth noting: if principal or coupon were ever deferred because of deferral circumstances, Clal Insurance would not be allowed to pay dividends to its shareholders as long as that situation remained unresolved. In other words, the risk in the capital instrument would not stay only with noteholders. It could also move upward into the broader group structure.

Conclusion

2025 was a good year for the issuance arm, but not because it earned money. It was good because the market bought the product. The company materially expanded Clal Insurance’s capital stack, kept the asset-liability structure almost perfectly matched, and showed that even in early 2026 series 15 could still be expanded. The main blocker is still the same blocker: not the funding vehicle’s bottom line, but Clal Insurance’s ability to keep raising capital in this format without losing regulatory headroom and without leaning too heavily on an assumed call path.

Current thesis: Clal Capital Raising is a relatively efficient capital conduit, and the right way to read it in 2025 is through market access and regulatory structure, not through net income.

What changed: 2025 moved the company from a structure based mainly on Tier 2 to one where Additional Tier 1 already accounts for almost one-fifth of par value, so the risk profile changed materially as well.

Counter-thesis: one can argue that the caution here is excessive, because the company already proved in both October 2025 and January 2026 that the market is open to it, and the stable ratings imply that series 15’s trigger risk remains comfortably distant in practical terms.

What may change the market reading in the short to medium term: another successful issue, or alternatively any sign of erosion in Clal Insurance’s solvency headroom, will matter far more than any small change in the funding vehicle’s own bottom line.

Why this matters: this company is almost a laboratory case for how the capital market translates an insurer’s perceived strength into regulatory funding. When the machine works, Clal Insurance gains flexibility. When it jams, the problem becomes visible very quickly.

What has to happen for the thesis to strengthen: Clal Insurance must preserve a sufficient cushion above capital requirements, keep market access open even for Additional Tier 1, and leave the early-redemption assumption looking like a realistic refinancing route rather than just a convenient table.

What would weaken it: a closed market window, a higher cost of capital, or erosion in Clal Insurance’s solvency position, especially if any of those forces make investors re-read the series through legal final maturities rather than projected economic ones.