Clal Health in 2025: premiums rose, but insurance-service profit weakened
The main article argued that Clal’s consolidated headline looked stronger than the earnings quality underneath it. Health is the clearest example: premiums rose to NIS 1.973 billion, but profit from insurance services and activity fell to NIS 362 million, and most of the annual offset came from financial effects rather than from underwriting.
Why This Follow-up Exists
The main Clal article already made the broader point that 2025 improved, but not cleanly. Health is the sharpest place to see that. This follow-up does not ask whether Clal sold more health insurance. It clearly did. It asks why profit from insurance services and activity weakened precisely as premiums rose, and what that says about the segment’s earnings quality.
The investor presentation frames the point immediately. Within insurance and savings, health was the only segment that moved backward in 2025: life added NIS 140 million, P&C added NIS 83 million, pension and provident added NIS 10 million, and health alone fell by NIS 60 million. So this is not a minor pocket inside otherwise strong numbers. It is the only insurance-and-savings engine whose direction of surprise was negative.
Four numbers hold the whole thesis:
- Gross health premiums rose to NIS 1.973 billion from NIS 1.856 billion, up 6.3%.
- Profit from insurance services and activity fell to NIS 362 million from NIS 424 million, down 14.6%.
- Core health insurance profit fell to NIS 430 million from NIS 490 million, down 12.2%.
- In the fourth quarter the deterioration was much sharper: profit from insurance services and activity collapsed to NIS 34 million from NIS 150 million, while core profit fell to NIS 53 million from NIS 166 million.
That is exactly where the CSM, the contractual service margin, matters. The damage did not come from disappearing demand. It came from lower CSM release following the cumulative effect of assumption changes, together with class-action costs, expenses, and in some portfolios also cancellations or claims costs that came in worse than expected.
| Health metric | 2024 | 2025 | Change | Q4 2024 | Q4 2025 | Change |
|---|---|---|---|---|---|---|
| Gross premiums | 1,856 | 1,973 | 6.3% | 475 | 494 | 4.0% |
| Profit from insurance services and activity | 424 | 362 | -14.6% | 150 | 34 | -77.3% |
| Core health insurance profit | 490 | 430 | -12.2% | 166 | 53 | -68.1% |
| Comprehensive profit before tax | 432 | 573 | 32.6% | 136 | 74 | -45.6% |
That table is the core of the story. Health did not lose volume. It lost earnings quality. That distinction matters because a first read of the group naturally gravitates to comprehensive profit and stronger equity. But the segment where premiums kept growing is exactly the segment showing that the underwriting engine was not moving in the same direction.
Where the Core Weakened
Management states explicitly that core health profit declined mainly because of lower release of contractual service margin, due to the cumulative effect of assumption changes, and also because of class actions and expenses. That matters because it is not the language of a temporary sales dip. It is the language of a future-profit reservoir contributing less to the current year.
Put more simply, Clal sold more health insurance but pulled less profit out of the future reservoir already sitting on the books. That is why 2025 reads less like a demand problem and more like a conversion problem: premiums keep coming in, but the rate at which they turn into insurance-service profit has weakened.
The fourth quarter makes the point even sharper. A 77.3% fall in profit from insurance services and activity, down to NIS 34 million, means the weakness was not smoothed evenly across the year. It concentrated into year-end. That is exactly the kind of signal that says the annual headline is already masking a more severe intra-year move.
Which Portfolios Drove the Erosion
Once the NIS 62 million decline in profit from insurance services and activity is broken apart, it becomes clear that this was not a broad-based story. Two pockets pulled the segment down, while two others only softened the blow.
| Portfolio group | 2024 | 2025 | What really changed |
|---|---|---|---|
| Private LTC | 85 | 29 | Sharp decline because of lower CSM release, together with weaker underwriting in claims costs and expenses versus expected |
| Group LTC | -27 | 6 | Moved from loss to profit, mainly because claims costs came in lower than expected |
| Private medical and disability | 132 | 138 | Small improvement, mainly from higher CSM release driven primarily by new business |
| Group medical and disability | -16 | -13 | Loss narrowed due to better underwriting results |
| Other portfolios | 249 | 201 | Material decline because of lower service-margin release, assumption changes, and cancellations above expectations |
Two points come out of that split. First, the problem was not everywhere. If Clal were showing only private medical and disability or group LTC, health could still look reasonable. Second, the main pressure sat exactly in the portfolios where CSM release was supposed to support profit, but did so less, or was eroded alongside claims, expenses, and cancellations.
That is why this is an earnings-quality issue rather than just a routine operating wobble. In private LTC, the decline was not only about a single claims event. It was the combination of weaker future-profit release and worse realized underwriting. In other portfolios, the decline was not only about an assumption reset. It also reflected cancellations above expectations. In other words, both the future reservoir and the current underwriting year were less supportive.
The private medical and disability line does show that the entire health business is not breaking down. New business is still helping there. But that only sharpens the point that the internal mix turned less favorable: newer pockets are contributing, while the older and historically more supportive books are contributing less.
Why the Full-Year Headline Still Looked Good
If the analysis stopped at insurance-service profit, the story would be simple: health weakened. But at the level of comprehensive profit before tax, the segment actually rose to NIS 573 million from NIS 432 million. That is the paradox that needs to be unpacked.
That chart is why health was the obvious continuation topic. Service profit fell by NIS 62 million, and normalized financial margin barely moved, rising by only NIS 3 million. What kept the annual result standing was the financial layer: residual financial margin rose by NIS 37 million, and above all the effect of the change in the risk-free curve on liabilities improved from a NIS 149 million loss to a NIS 14 million gain, a swing of NIS 163 million.
That is not a footnote. It is the difference between saying "health delivered a strong year" and the more accurate reading: "health delivered a year in which markets and the curve offset weaker underwriting economics." In earnings-quality terms, that is a large gap.
And the fourth quarter shows that the financial cushion is not permanent. In Q4, comprehensive profit before tax already fell to NIS 74 million from NIS 136 million. Once the financial offset became less generous, the weakness in service profit became much harder to hide.
Bottom Line
Health is where the Clal thesis becomes more demanding. On one side, there is still a sales engine. Premiums rose, and in some newer portfolios there is even a better CSM contribution from new business. On the other side, the two mechanisms that should have held earnings quality together, CSM release on the older books and the claims-expense-cancellation picture in key portfolios, weakened precisely while the group headline looked strong.
So the key line is straightforward: Clal Health in 2025 was not a weak-demand year. It was a year in which service profit weakened, while the better full-year headline was built mainly with the help of the financial layer.
Over the next two to four quarters, three checkpoints matter. First, whether CSM release in private LTC and other portfolios stabilizes. Second, whether cancellations and claims costs stop eating into the premium growth. Third, whether health can return to improving insurance-service profit without relying on the curve and capital markets. That is where it will become clear whether 2025 was a temporary grind inside a still-profitable segment, or an early sign that health earnings quality deteriorated more than the consolidated headline suggested.
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