Mor Investments: What Really Sits Inside NIS 413 Million Of Deferred Acquisition Costs

The main article argued that Mor’s core engines are strong, but that the real debate is about earnings quality: how much of today’s profit really belongs to shareholders now, and how much has simply been pushed forward. This follow-up isolates the line item where that debate sits: NIS 413 million of deferred costs to obtain contracts, or in plain market language, deferred acquisition costs.

This is not a technical detail. These are incremental acquisition costs, mainly agent commissions, that the company records as an asset only if they can be identified separately and are expected to be recovered. In 2025 the balance jumped from NIS 300.1 million to NIS 413.0 million, after NIS 200.7 million of additions against only NIS 87.7 million of amortization. In other words, Mor pushed far more acquisition cost into future periods than it sent through the income statement.

The concentration is especially sharp. The auditor’s key audit matter refers to about NIS 409 million inside Mor Gemel & Pension itself, versus the group-wide balance of NIS 413.0 million. So almost the entire asset sits on the long-term savings engine. If that engine keeps scaling and earning, the asset can prove justified. If not, this is exactly where the argument over Mor’s earnings quality becomes most exposed.

What Actually Sits Inside The Asset

The size of the asset matters, but its shape matters just as much. Roughly NIS 100.7 million is already classified as current, meaning an amount expected to hit profit or loss within the coming year. The remaining NIS 312.3 million sits beyond one year. Three quarters of the asset therefore depend on several more years of management-fee collection, not on 2026 alone.

Mor amortizes these costs on a straight-line basis over 3 to 10 years, mainly 6 years, and reviews both cancellation assumptions and the amortization profile every year. That creates a long expense tail. In years of strong fundraising, that tail helps reported earnings. In slower years, it can work the other way.

The second chart is the key point. Around 24.4% of the asset is due to roll through earnings within a year, but 75.6% still depends on several more years of fee collection, customer persistence and market returns. This is why the line item says less about 2025 alone and much more about how aggressively Mor is pulling the economics of Gemel & Pension forward.

What 2025 Did To Earnings Quality

In 2025 Mor did not just grow the asset. It accelerated it. Additions nearly doubled to NIS 200.7 million, while amortization rose much more slowly, to NIS 87.7 million. The additions-to-amortization ratio rose from 1.53 in 2024 to 2.29 in 2025. That is the point where this stops being just another balance-sheet line and becomes a real earnings-quality filter.

Management’s own discussion says it plainly: the increase came from commissions on new inflows that exceeded ongoing amortization. In the cash-flow statement that already shows up as a NIS 113.0 million operating drag. So anyone looking only at the NIS 87.7 million of amortization expense running through the P&L is missing the broader economic cost of the acquisition machine.

Inside Gemel & Pension, which is where almost the whole story sits, segment revenue rose 25.5% to NIS 646.6 million and segment profit rose 50.4% to NIS 116.4 million. But agent commissions in that same segment, including amortization of deferred acquisition costs, already reached NIS 332.5 million. That equals 51% of segment revenue and almost 2.9 times segment profit. This does not mean the growth is low quality by definition. It does mean the engine buys growth at a very meaningful cost, and part of that cost does not hit the operating line immediately.

That is the core of the issue. Mor Gemel & Pension is clearly improving, but it is doing so through a model in which a large part of acquisition cost is deferred. In a high-growth phase that produces a friendlier earnings profile. If fundraising slows before the asset has had time to run off, the same mechanism can look much less forgiving.

Why The Auditor Stopped Here

This is why the auditor flagged the asset as a key audit matter. The issue was not whether the cost existed, but whether it could really be recovered. The test relies on the expected period of management-fee collection, cancellation assumptions and expected returns on customer savings balances. The company also reviews recoverability and the amortization profile every year.

The most important nuance is the form of the test. Impairment is assessed against non-discounted nominal cash flows from expected management fees, net of direct costs that have not yet been recognized. That is not a discounted economic valuation. So the line item can be acceptable in accounting terms and still remain highly sensitive in economic terms to a relatively small change in persistence, returns or customer life.

That also explains why the audit work did not stop at a mechanical sample. It went through the IFRS 15 methodology, the models and assumptions, the specialists’ work, and the reasonableness of the balance movement, additions and amortization. When an auditor stops on a line like this, the message is not that the asset is invalid. The message is that the asset rests on a chain of assumptions that should not be read on autopilot.

What Has To Happen In 2026 And 2027

The investor presentation already lays out management’s defense. Mor Gemel & Pension finished 2025 with NIS 121.5 billion of assets under management and reached NIS 128.0 billion by March 10, 2026. Within that, pension-fund assets alone already stood at about NIS 18.1 billion. At the same time, the company is guiding to NIS 140 to 160 million of adjusted pre-tax profit in 2026 and expects the pension activity to turn adjusted pre-tax profitable during 2027.

This is not just guidance. It is effectively the recovery thesis for the asset. For the NIS 413 million to be a high-quality asset, three things must happen together. Assets under management need to stay and keep growing. Pension needs to stop diluting the engine and start contributing. And the gap between new additions and amortization needs to begin narrowing, otherwise the balance sheet will keep growing faster than the earnings it is supposed to support.

The current portion of NIS 100.7 million means the first real test arrives inside 2026. If the company hits guidance, keeps growing assets and shows a more gradual convergence between ongoing expense and the balance-sheet asset, the market can read the NIS 413 million as a reasonable cost of building a leading long-term savings platform. If not, the same line item will start to look less like an asset and more like an aggressive deferral of selling cost.

Conclusion

NIS 413 million of deferred acquisition costs is not proof that Mor’s earnings are weak. It is proof that Mor chose to grow Gemel & Pension through a mechanism that shifts cost from the present into the future. In 2025 that mechanism worked hard: additions almost doubled, the balance rose 37.6%, and operating cash flow absorbed a NIS 113 million drag.

That is why this line item is the cleanest test of earnings quality at Mor today. The real question is not whether there is growth, and not whether the brand is strong. The question is whether the long-term savings contracts signed in recent years will generate enough management fees over time for the balance sheet to start shrinking rather than keep stretching.

If 2026 and 2027 deliver continued asset growth, better pension profitability and a cleaner convergence between reported expense and economic cost, the asset will look justified. If growth cools before that happens, the NIS 413 million will move very quickly from the center of the thesis to the center of the debate.