Clal Insurance Enterprises in 2025: the core improved, cash is moving up the chain, but earnings still lean on the market

Introduction to the Company

Clal Insurance Enterprises is no longer just a large insurer with a credit-card business attached to it. In 2025 it is effectively a three-layer financial platform: the insurance and long-term savings engine inside Clal Insurance, the consumer growth and lending engine inside Max, and the holding-company layer that has to turn downstream earnings and capital into actual dividend capacity and financing flexibility for shareholders.

What is working now is clear enough. Pre-tax core income rose 12% to NIS 2.289 billion, insurance and savings core income rose 12% to NIS 1.586 billion, Max reached NIS 455 million of pre-tax income excluding the one-time adjustment, assets under management reached NIS 420 billion, and shareholders' equity rose to NIS 10.8 billion. This is no longer a story that depends only on a regulatory release valve or a supportive market backdrop. Large parts of the group are showing real business improvement.

But that is only a partial reading. Comprehensive income after tax, NIS 2.266 billion, also leaned on NIS 1.225 billion of excess financial margin before tax, versus only NIS 249 million in 2024. So even after the core improved, a large part of the reported result still depended on capital markets, the risk-free curve, and what the company itself treats as a non-normalized financial contribution. At the same time, health softened, and the cash that is truly accessible to shareholders still has to pass through capital, regulatory, and dividend gates at the subsidiaries.

That is exactly the difference between "a strong year" and "a clean earnings base." Clal enters 2026 in better shape, but not in a place where 2025 can simply be treated as a stable run-rate. The question is no longer whether there is value inside the group. The question is how much of that value is operating and repeatable, how much is market-driven, and how much can actually rise from Clal Insurance and Max to the holding-company layer.

There is also an important screen-level point early on. As of April 3, 2026, the market cap was about NIS 17.3 billion, the stock was in the TA-35 index, and daily trading volume that day was about NIS 40.7 million. This is not a hidden-value micro-cap. The market already sees the improvement, so the next leg depends on earnings quality and capital accessibility, not on discovery.

What matters right from the start:

• Core earnings improved, but headline earnings were pulled much higher by NIS 1.225 billion of excess financial margin before tax.
• Health looks weaker than the consolidated headline implies. Premiums rose to NIS 1.973 billion, but core income fell to NIS 430 million from NIS 490 million.
• Life improved, but not through classic premium volume. Core income rose 40% even as insurance-contract premiums fell to NIS 4.177 billion.
• The holding-company layer is cleaner, with net financial debt down to NIS 686 million from NIS 892 million, but it still depends on upstream dividends and refinancing.

The quick economic map looks like this:

Events and Triggers

The main story in 2025 is not just a strong report. It is a real change in the group’s ability to move value from the subsidiaries to the parent.

Cash is moving up the chain, but through defined gates

The first trigger: Clal Insurance is no longer just talking about capital, it is distributing it. It paid NIS 300 million in May 2025, and on March 25, 2026 its board approved another NIS 600 million dividend, about 30% of 2025 comprehensive income. That matters because the long-running question around Clal was never only how much capital sat inside the insurer, but how much of it could actually rise to the parent.

The second trigger: Max is also becoming a more regular dividend source. On March 10, 2026 Max approved a NIS 56 million dividend, about 30% of 2025 net income. On its own that does not transform the holding-company layer, but it matters as a signal. Max is no longer only consuming capital in order to grow, it is beginning to return some of it.

The third trigger: The holding company itself is now translating that into a distribution policy. On March 25, 2026 it approved a NIS 400 million dividend, representing about 61% of the dividends declared or distributed by subsidiaries by the date the accounts were approved. That means cash is not staying entirely downstream anymore.

The fourth trigger: After year-end, Clal Funding expanded Series 15 in January 2026 and raised proceeds of about NIS 622 million that were recognized as additional Tier 1 capital at Clal Insurance. That is not earnings, but it does expand freedom of action. At the same time, on March 26, 2026 the holding company said it was examining a new bond series intended to fund a partial or full early redemption of Series A. That is debt-shape management, not a distress signal.

2025 ran ahead of the plan

This is one of the more interesting signals in the report. In March 2025 the company set 2027 targets of NIS 1.3 billion to NIS 1.6 billion of comprehensive income after tax, 12% to 15% return on equity, about NIS 200 million of dividends, and assets under management of NIS 420 billion to NIS 460 billion. In 2025 itself it already finished with NIS 2.266 billion of comprehensive income after tax, 26.1% return on equity, a NIS 400 million approved dividend, and NIS 420 billion of assets under management.

That means the old plan is effectively exhausted. The company explicitly says it expects to complete a new strategic plan during the coming year, and the investor presentation says a group-level plan will be formulated during 2026. That is a clear sign that 2026 will not be judged against an old plan that has already been surpassed. It will be judged on whether 2025 was a one-off peak year or the start of a new framework.

Max is stronger, but one scar remains

Max delivered a good core year in 2025, but the headline was marked by a one-time adjustment. Following a court ruling involving the credit-card companies and VAT assessments on overseas cardholder activity, Max increased its provision in the second quarter by NIS 170 million before tax and NIS 131 million after tax. The company stresses that most of the provision relates to years before Max was acquired. So this is real noise, but not noise created by 2025 operating economics.

The story did not fully end after year-end. On March 22, 2026 Max, together with two other credit-card companies, filed a joint request for an additional hearing following the Supreme Court ruling in a class-action matter, and at this stage Max says it cannot assess the chances of that request. That is a reminder that even as the core improves, Max still carries legal and accounting overhangs from the perimeter.

Efficiency, Profitability and Competition

Clal’s core business is better in 2025, but not every part of the group improved in the same way, and not every improvement came from the same engine.

In insurance, P&C and life worked, health was softer

At the insurance and savings level, pre-tax core income rose to NIS 1.586 billion from NIS 1.412 billion in 2024. But the internal split is the story.

Life rose from NIS 348 million to NIS 488 million of core income. That is a sharp improvement, but it did not come from a straightforward premium boom. On the contrary, total insurance-contract premiums fell to NIS 4.177 billion from NIS 4.516 billion, mainly because of higher outflows from executive insurance and weaker inflows into some products. What moved the profit line higher was mainly stronger CSM release, excess returns, and the accumulated effect of assumption changes. That is an improving core, but not through a simple sales-volume engine.

P&C delivered the cleanest improvement. Core income rose to NIS 614 million from NIS 532 million while premiums were almost flat, NIS 3.948 billion versus NIS 3.960 billion. That matters because the improvement came more from underwriting quality than from sheer volume. In Motor Property, the combined ratio fell to 88% from 93%, and in the fourth quarter to 86% from 94%. Compulsory Motor was weaker, mainly because last year benefited from a National Insurance Institute settlement that did not repeat.

Health is where the consolidated headline can mislead. Premiums rose to NIS 1.973 billion from NIS 1.856 billion, but core income fell to NIS 430 million from NIS 490 million, and insurance-service and operating profit fell to NIS 362 million from NIS 424 million. In some portfolios this reflected lower CSM release, in some it reflected weaker underwriting, and in some it reflected class-action and expense pressure. In simpler terms, health is still profitable, but the path there is less clean than the group headline suggests.

The CSM still says this is a business that has to keep selling well

One of the less intuitive data points in the report is the contractual service margin, the retained CSM. At the end of 2024 it stood at NIS 10.148 billion, and at the end of 2025 it stood at only NIS 10.264 billion. During the year there was NIS 653 million of new business, but also NIS 902 million of release and only NIS 364 million of financial margin and actual-versus-expected movement.

The implication is that the future earnings inventory did not deteriorate, but it also did not expand at a pace that can be called a breakout. This is a franchise that is still generating fresh value, but it also consumes part of that value every year through release. So 2026 will be judged not only on reported earnings, but on the ability to replenish the future earnings stock.

Max is no longer just growth, it is also quality

Max and Milo together generated NIS 455 million of pre-tax profit in 2025 excluding the one-time adjustment, versus NIS 390 million in 2024. At the Max level, revenue rose to NIS 2.465 billion from NIS 2.244 billion, transaction volume reached NIS 153.8 billion from NIS 139.8 billion, and active cards rose to 3.464 million from 3.232 million.

The more important point is growth quality. Credit-loss expense fell to NIS 169 million from NIS 216 million, the net write-off rate fell to 1.15% from 1.43%, and the non-accruing receivables ratio fell to 1.06% from 1.13%. In other words, Max is not only growing, it is also looking more orderly from a portfolio-quality perspective.

But this is not free growth. Operating expenses rose to NIS 1.009 billion from NIS 897 million, selling and marketing expenses rose to NIS 514 million from NIS 438 million, and Max is still growing through a more intense operating footprint, not through a pristine operating-leverage story. So here too, the question in 2026 will not be whether it can keep growing, but whether it can keep growing without sending credit costs and operating expenses back in the wrong direction.

Cash Flow, Debt and Capital Structure

This is where a shallow reading can go wrong. In a financial group like Clal, consolidated cash flow and consolidated cash are not the same as cash that is actually accessible to shareholders.

The consolidated cash flow looks strong, but not all of it is available upstream

During the year, consolidated cash flow from operating activity was NIS 2.513 billion, investing activity used NIS 2.347 billion, and financing activity added NIS 1.202 billion. Cash and cash equivalents rose to NIS 8.329 billion from NIS 7.069 billion at the start of the year.

But that is not the right bridge for shareholder flexibility. This is insurer cash, credit-card balance-sheet cash, portfolio cash, and operating funding. It matters, but it is not "free cash." In Clal’s case, the more relevant cash picture is the holding-company layer.

At the parent, flexibility genuinely improved

At December 31, 2025 the holding company had NIS 883 million of financial assets, including NIS 67 million of cash and cash equivalents, NIS 241 million of other financial investments, and NIS 575 million of fair value in Series 15 bonds issued by Clal Funding. Against that, it had NIS 32 million of current financial liabilities and NIS 1.537 billion of non-current financial debt. The result is net financial debt of NIS 686 million, an improvement from NIS 892 million at the end of 2024.

That matters because it means the story is no longer one of a very tight holding company staring upward at trapped insurance capital. It still depends on dividends from below, but it enters 2026 with a cleaner top layer, an unused NIS 250 million credit line, and an explicit intention to optimize the debt stack through the planned Series D examination and the possible early redemption of Series A.

Capital downstream is wider, but still not entirely free

At Clal Insurance, the solvency ratio without transitional relief rose to 138% at June 30, 2025 from 128% at year-end 2024. With transitional relief and the impact of capital actions, the ratio rose to 161%, and the company presented a 163% estimate for September 30, 2025 during the transition period. That is already far removed from a purely defensive capital stance.

At Max, equity rose to NIS 2.250 billion, common equity Tier 1 rose to NIS 2.252 billion, the CET1 ratio rose to 10.2%, and the total capital ratio rose to 13.0%. In March 2026 Max even cut its internal CET1 target to 9% from 9.25%. That is another way of saying the group sees more cushion there and less need to sit on extra capital.

But even after all of that, it is important to stay precise: better capital is not the same as fully available capital. Dividends at Clal Insurance and Max are still subject to regulatory limits, internal capital targets, and board decisions. Value is becoming more accessible. It is still not fully unconstrained.

Outlook and Forward View

This section matters more than any backward-looking number, because 2025 has already outrun the old target framework.

Four points that need to be pinned down before looking forward:

• 2025 has already exceeded the old 2027 profit, return-on-equity, and dividend targets, which means 2026 starts without a current target framework.
• For the first time, the company presents a positive sensitivity to lower rates, a 0.5% decline in rates is expected to generate NIS 83 million of income at Clal Insurance.
• Assets under management already reached NIS 420 billion, the low end of the old 2027 target range.
• The CSM remained high, but only rose modestly, so even after a strong year Clal still has to replenish future earnings.

2026 looks like a proof year, not an automatic continuation

The company itself talks about strong momentum into 2026, and that is fair. But the type of year this looks like is much more a renewed proof year than a relaxed harvesting year. For the positive reading to hold, Clal has to show that the core business, which stood at NIS 2.289 billion before tax in 2025, was not merely wrapped around a strong market year, but can also hold up if the excess financial margin normalizes.

That means a few very concrete things. Life has to keep showing CSM release and new business without relying only on market volatility. P&C has to keep underwriting quality intact even without another exceptionally strong equity year. Health has to stabilize its insurance-service profit, because right now it is the least clean part of the story. And Max has to prove that its credit growth does not come at the expense of portfolio quality, especially while operating expenses continue to rise.

The genuinely interesting point is that the sensitivity profile has shifted

One of the more important lines in the investor presentation is that, for the first time, a 0.5% decline in rates is expected to generate NIS 83 million of income. That matters because it suggests Clal’s rate sensitivity is not the same one readers may remember from earlier years. If that also holds in the next few reports, it could be one reason the market becomes more willing to give 2025 more credit.

The next strategy will probably try to connect insurance and credit

The company is signaling its next direction quite clearly. The investor presentation talks about "the next level," about a joint customer value proposition, about stronger use of AI and data, and about expanding the ecosystem between Clal and Max. For now, that is more strategic framing than reported numerical contribution. The market is unlikely to give it full credit before it sees evidence, but it should still be read as a signal: the next engine is not supposed to be just another good insurance year, but an attempt to connect insurance, savings, and credit.

What has to happen in the next 2 to 4 quarters for the thesis to hold?

• Clal Insurance has to maintain comfortable capital even without an unusually generous market tailwind, while continuing to distribute capital.
• Health has to stop being the place where premiums grow but earnings quality weakens.
• Max has to keep growing without a renewed rise in credit-loss expense.
• The holding company has to show that the new debt structure really improves value access rather than merely shifting maturities around.

Risks

Earnings are still too exposed to capital markets

The first risk is obvious. Core income rose by NIS 250 million before tax, but excess financial margin rose by NIS 976 million. That means that even if the core is better, the market could still look at 2025 as a year that is difficult to repeat.

Health and legacy issues still create friction

The decline in health is not a side issue. It is a reminder that even inside a large insurance group, not every line is moving in the same direction. If that trend persists, it will eat into some of the improvement built in life and P&C. At Max, there are still legacy legal and accounting issues that can continue to weigh on the bottom line.

Max is also exposed to regulation and Israel’s rating

Max says that another two-notch downgrade of Israel by S&P, to BBB+ or lower, would reduce its CET1 ratio by about 0.25%. That is not a thesis-breaking event on its own, but it is a good example of an external signal that could erode part of the cushion just as the group is trying to expand dividends.

The holding company is better, but not independent

Net financial debt of NIS 686 million is no longer a pressure story, but it does mean the holding company still does not live entirely off itself. It lives off dividends, refinancing, and the ability of Clal Insurance and Max to remain comfortable enough to keep distributing capital.

Short Interest View

Here the picture is actually calm. Short interest as a percentage of float fell to 0.32% on March 27, 2026, from 1.23% at the end of December 2025. SIR fell to 0.75 from 3.15 over the same period. Even against the sector averages, 0.86% short float and 1.952 SIR, Clal is on the low side.

The practical reading is that the market is not building an aggressive downside position in the stock right now. That does not prove the next year will be easy, but it does mean the debate is currently more about earnings quality and repeatability than about a sharp short thesis.

Conclusions

Clal ends 2025 as a better company than it was at the start of 2024. The core improved, capital broadened, Max became a higher-quality growth engine, and the holding company is starting to receive real cash from below. The main block is that too large a share of the earnings still comes from capital markets and excess financial margin, which keeps 2026 in proof-year territory rather than harvest-year territory.

What will shape the market’s short- to medium-term reading is not another headline about "high earnings," but whether Clal can hold strong core earnings even without such a generous market tailwind, and whether dividends from insurance and Max become a habit rather than an event.

Current thesis in one line: Clal enters 2026 with a stronger core and more accessible capital, but 2025 still did not prove that earnings are truly detached from market volatility.

What changed versus the prior read: It used to be easier to read Clal mostly through solvency and the trapped-value question. In 2025 the picture moved to the next stage, the core really improved, and cash is starting to move up to the holding company.

The strongest counter-thesis: This analysis may be too cautious, because even if excess financial margin normalizes, the improvement in the core, the wider capital cushion, and the dividends from the main engines may already be enough to support steadier profitability and distributions.

What could change the market’s interpretation in the short to medium term: Reports that show stabilization in health, continued high-quality growth at Max, and a steady dividend flow from Clal Insurance to the holding company would strengthen the positive read. A renewed dependence on markets or fresh legal noise at Max would weigh on it.

Why this matters: In the end, Clal is not judged only by how much capital is created inside the insurer, but by how much of that capital can actually become earnings, dividends, and flexibility at the group level.

What has to happen over the next 2 to 4 quarters: Clal Insurance has to preserve comfortable solvency and dividend capacity, health has to stabilize, Max has to maintain credit quality while growing, and the holding company has to clean up the debt schedule without losing flexibility.