Menora Miv Hon 2025: The Capital Window Reopened, but the Real Market Test Is Still Ahead

Getting To Know The Company

At first glance Menora Miv Hon looks like a technical shell. There is no underwriting business here, no customer-facing insurance product, and no operating engine that should be read like a normal listed company. That is only half true. In practice, this is one of the cleanest ways to read the capital-market access of Menora Mivtachim Insurance: the company issues subordinated notes, deposits the proceeds with Menora Mivtachim Insurance on matching terms, and the whole structure tells you whether the debt market is open, in which capital layer, and at what price.

What is working now is clear. In 2025 the company added two new series, Series Tet with NIS 400 million recognized as Tier 2 at Menora Mivtachim Insurance and Series Yod with NIS 800 million recognized as Tier 1, and the balance sheet grew to NIS 2.780 billion from NIS 1.525 billion. That would not have happened without a friendlier market backdrop. The report itself describes falling inflation, two rate cuts to 4.0% by January 2026, and a rising bond market. For a shell that lives entirely through the capital markets, that is not just background. It is the raw material of the story.

But the picture is still not clean. Roughly NIS 299.925 million out of Series Yod was bought by Menora Holdings. So the headline said NIS 800 million, while the true outside-market test was smaller. At the same time, the balance sheet already shows about NIS 300 million of current maturities, and the repayment schedule attached to the notes, assuming the early-call rights are exercised, already shows NIS 300 million of principal in 2026 and another roughly NIS 242.2 million in 2027. That means the story no longer stops at whether the company can issue. It has already moved to whether it can keep the window open, refinance around the call dates, and do so without leaning too heavily on internal support.

The superficial read can easily get stuck in the wrong place. The company itself ended 2025 with a net loss of only NIS 329 thousand and a capital deficit of NIS 1.574 million. That is almost beside the point. Finance income and finance expense both stood at NIS 129.038 million, G&A expense was only NIS 376 thousand and was almost fully reimbursed by Menora Mivtachim Insurance, and the only meaningful swing factor was the expected-credit-loss allowance on the deferred deposits, which rose to NIS 2.416 million. In other words, this is not a profit story. It is a wrapper that tells you whether the market is willing to fund Menora Mivtachim Insurance, and whether perceived credit risk is moving.

There is one more point that is easy to miss. Series Yod is not just another long-dated note. Because the matching deferred deposit has potential write-down features, the company measures both that deposit and Series Yod at fair value through profit and loss. At year-end 2025 the structure carried a NIS 32.698 million fair-value remeasurement on both sides of the balance sheet. That matters because it is an accounting balance-sheet uplift, not free cash and not value that truly remains at the wrapper level.

The economic map looks like this:

The first chart shows what the headline alone does not. Until 2024 Menora Miv Hon was almost a pure Tier 2 wrapper. In 2025 it added a Tier 1 layer, so both the risk profile and the analytical lens changed. The second chart makes clear how quickly Series Yod became the largest single instrument in the stack.

Events And Triggers

What Opened In 2025

The first trigger: In March 2025 the company issued Series Tet for NIS 400 million, recognized it as Tier 2 at Menora Mivtachim Insurance, set a 5.02% annual coupon, and fixed March 31, 2030 as the first early-call date. This was a straightforward expansion of Menora Mivtachim Insurance's secondary-capital layer.

The second trigger: In September 2025 the company issued Series Yod for NIS 800 million, recognized it as Tier 1 at Menora Mivtachim Insurance, set a 5.18% annual coupon, and fixed November 30, 2035 as the first early-call date, while final maturity runs all the way to November 30, 2074. This is a very different instrument. It sits deeper in the capital structure, is harsher for investors, and is more important to Menora Mivtachim Insurance itself.

The third trigger: Out of Series Yod, Menora Holdings bought about NIS 299.925 million of par value. This is one of the most non-obvious points in the report. The new capital layer is indeed much larger, but the external market test is smaller than the headline suggests. In plain terms, 2025 proved demand, but not the full scale of demand that the gross issuance figure implies.

The fourth trigger: In May 2025 Midroog published a monitoring report that kept the parent company's rating at Aa1 with stable outlook, kept Tier 2 instruments at Aa3 with stable outlook, and kept Tier 1 instruments at A1 with stable outlook. In a wrapper like this, the rating is not a side note. It is one of the main variables that decides whether future refinancing around the call dates will stay workable.

Why 2026 Is Already Inside The 2025 Report

The annual report looks, at first, like a summary of a successful issuance year. In practice it is already pushing the reader into 2026. The balance sheet shows NIS 299.637 million of current note maturities and NIS 299.259 million of matching current deferred deposits. At the same time, the repayment table attached to the note disclosure, assuming the early-call rights are exercised, shows NIS 300 million of principal in 2026, NIS 242.224 million in 2027, NIS 303.880 million in 2029, NIS 392.542 million in 2030, NIS 400 million in 2032, NIS 300 million in 2033, and NIS 800 million in 2035.

The implication is straightforward: the market does not need to wait several years to test the story. The checkpoints begin now.

This is one of the most important charts in the report. It does not say the debt suddenly falls due tomorrow. It does say the structure is built around active refinancing, not around passively carrying every series to final maturity. That is why 2026 looks less like a quiet carry year and more like a test year.

Efficiency, Profitability And Competition

The core point is that there is very little value in reading Menora Miv Hon like a normal profitability story. The competition here is not about pricing power, underwriting margin, or product mix. It is about access to the market, the depth of demand, and the ability to move debt between different capital layers without breaking the funding cost.

The Bottom Line Almost Misses The Point

In 2025 the company posted finance income of NIS 129.038 million and finance expense of NIS 129.038 million. At the same time, G&A expense of NIS 376 thousand was almost exactly offset by an equal expense reimbursement from the parent. So the wrapper itself is not generating a meaningful spread, and it is not supposed to. The asset and liability are designed to mirror one another.

What actually moved was the expected-credit-loss allowance on the deferred deposits, which rose by NIS 507 thousand in 2025 after declining by NIS 329 thousand in 2024. That is the main reason the company moved from NIS 329 thousand of pre-tax profit to NIS 507 thousand of pre-tax loss, and from NIS 227 thousand of net profit to NIS 329 thousand of net loss.

That chart matters because it stops the wrong interpretation early. A jump in the balance sheet or in finance income does not signal a stronger earnings engine here. It mostly signals that the wrapper issued more and placed more with Menora Mivtachim Insurance.

Almost The Entire Year Was Decided By One Small Line

The quarterly table shows that almost all of the annual loss was created in the first quarter. In Q1 the company recorded NIS 501 thousand of additional expected-credit-loss expense and a net loss of NIS 327 thousand. Q2 showed a tiny NIS 3 thousand loss, Q3 a NIS 4 thousand loss, and Q4 a tiny NIS 5 thousand profit.

That means the line worth following is not earnings growth. It is the perceived risk of Menora Mivtachim Insurance as it flows through the expected-credit-loss allowance on the matching deposit. In a wrapper like this, that is the closest thing to a real signal about whether quality improved or worsened.

What Is Actually Different About Series Yod

This is where the real economic change of 2025 sits. The older series were all recognized as Tier 2, measured at amortized cost, and structurally simple. Series Yod already sits in Tier 1, and because the matching deposit has write-down potential, the company measures both the asset and the liability at fair value through profit and loss. At year-end that produced a NIS 32.698 million remeasurement on both sides.

That is a material insight because it separates created value from accessible value. The remeasurement does not mean more cash stayed inside the wrapper. It does not mean a new spread was created. It only means the company moved into a capital layer that must be measured differently.

Competition Here Is Really About Market Access

In a shell like this there is no end-customer and no classic franchise advantage. The real competition is about three things: rating, pricing, and depth of demand. 2025 gave Menora Miv Hon a clear win on the first two. It expanded the balance sheet by NIS 1.2 billion and added a Tier 1 layer. But on demand depth the picture is more mixed, because almost NIS 300 million of Series Yod was absorbed inside the group.

So the year is better than the wrapper's accounting profit suggests, but less clean than the gross issuance headline may imply.

Cash Flow, Debt And Capital Structure

The Right Cash Frame Here Is All-In Cash Flexibility

In a normal company you would ask how much cash remained after CAPEX, debt service, and dividends. Here that is almost the wrong test. Menora Miv Hon does not run a normal operating business, so the right frame is all-in cash flexibility at the wrapper level, meaning how much cash actually remains after the period's real cash uses. The answer in 2025 is simple: almost nothing.

Operating activity produced a negligible NIS 1 thousand outflow. Investing activity consumed NIS 1.188 billion, almost entirely through additional deferred deposits placed with Menora Mivtachim Insurance. Financing activity generated exactly NIS 1.188 billion, almost entirely through issuance of subordinated notes net of issuance costs. Year-end cash was zero.

That is the real cash story. The wrapper does not accumulate cash. It passes cash through. Anyone looking for a cash cushion here is reading the company through the wrong lens.

The Debt Does Not Sit On Free Cash

At year-end 2025 current assets stood at NIS 328.069 million, of which NIS 299.259 million were current deferred deposits with the parent. Current liabilities stood at NIS 328.315 million, of which NIS 299.637 million were current note maturities. In other words, the short end of the balance sheet already tells you the near-term story is repayment and refinancing, not cash accumulation.

The long side is still a mirror. Non-current deferred deposits stood at NIS 2.451 billion and non-current notes at NIS 2.453 billion. The difference, roughly NIS 2.416 million, is mainly the expected-credit-loss allowance.

The Structure Is Also Deeper And Less Protected

The company's notes are unsecured, and it explicitly states that it may issue additional instruments in the future that rank above, equal to, or below the current stack. At the same time, the only material risk the company itself identifies is the credit risk of Menora Mivtachim Insurance. That is a useful reminder: the asset and debt may mirror one another almost perfectly, but both still lean on the same counterparty.

So if the capital-structure story of 2025 needs a label, it is not a cash-surplus year and not an earnings year. It is a duration-extension year and a capital-layer deepening year, with the real test now moving to the pace of refinancing and the ability to keep the market window open.

Outlook

Before getting into detail, these are the four most important takeaways for 2026:

• First finding: 2025 proved the company can enlarge the capital stack, but it did not prove that the whole amount was absorbed by a clean external market.
• Second finding: 2026 is not a waiting year. It begins with about NIS 300 million of current maturities and with a disclosed schedule that assumes a 2026 call point and another in 2027.
• Third finding: Series Yod improved the recognized capital quality of Menora Mivtachim Insurance, but it did so through an instrument that is more junior for investors, with legal maturity in 2074 and a reset structure after 2035.
• Fourth finding: The wrapper's accounting profit will probably remain close to zero unless perceived credit risk at Menora Mivtachim Insurance changes. So the next read is about funding access and ratings, not earnings growth.

What Kind Of Year Comes Next

If 2026 needs a name, it is a funding proof year. Not a reset year, because the market has already reopened. Not a clean breakout year, because the reopening still needs to prove itself around the first call dates. That difference matters. At this stage the company has already shown it can raise both Tier 2 and Tier 1 instruments. Now it has to show the structure can be rolled forward without depending too much on internal demand or on unusually supportive market conditions.

What Has To Happen For The Read To Improve

The first thing that has to happen is a smooth 2026 refinancing round. If the roughly NIS 300 million principal that comes into view in 2026 is refinanced or called without stress, the market gets a first confirmation that the window opened in 2025 was real.

The second thing is that external demand must remain broad. Series Yod already showed that part of the take-up stayed in-house. That does not invalidate the deal, but it does mean the next test is whether fresh outside money keeps showing up without the same degree of internal help.

The third thing is that the rating and perceived solidity of Menora Mivtachim Insurance must remain stable. The company explicitly says its only material risk is the credit risk of Menora Mivtachim Insurance. If the parent's perceived risk remains stable, the wrapper stays quiet. If not, the one line that truly matters here, the expected-credit-loss allowance, could start moving again.

What Can Still Weigh On The Story

The central friction is that what helps Menora Mivtachim Insurance is not automatically as comfortable for investors in every series. Series Yod strengthens the insurer's capital layer, but it also pushes investors deeper into the structure, with payment deferral features and a long reset framework. So the move improves one layer of the group while increasing the complexity and junior risk of another.

Add the market regime to that. Falling inflation, rate cuts, and a rising bond market were clear tailwinds in 2025. If that backdrop reverses, the company will not suffer through operating cash flow, because it barely has any. It will suffer through pricing and market depth.

So if you are looking for the right metric for the next year, it is not a few hundred thousand shekels of net profit. It is something else entirely: whether 2026 and 2027 pass as routine refinancing dates, or turn back into real tests.

Risks

All The Risk Sits On One Counterparty

The company explicitly defines its only material risk as the credit risk of Menora Mivtachim Insurance. That is true in both the business description and the financial-instruments note. In a normal company that concentration would look extreme. Here it is built into the model, but it is still total concentration.

The Call Calendar Can Matter Even Without A Crisis

The mere fact that the repayment table assumes use of the early-call rights already in 2026 and 2027 means the structure is built around active refinancing, not passive carry to final maturity. That is not an immediate liquidity crisis, because the asset and debt mirror each other. It is a real risk to funding cost, execution quality, and market access.

Series Yod Changes The Nature Of The Risk

Series Yod is subordinated to the other obligations of both Menora Mivtachim Insurance and the wrapper, ranks only above the ordinary shares, and shifts to a variable-rate structure if it is not called at the first date. What strengthens the insurer's capital position also puts investors deeper in the stack. That is not a technical footnote. It is the core of the instrument.

There Is No Collateral, And The Structure Can Still Get More Complex

The company states clearly that all current series are unsecured, and that it may issue future series that rank above the present stack. So even if the wrapper itself looks simple today, there is no structural guarantee that today's ranking order will stay frozen.

Even A Small Credit-Risk Move Already Shows Up In The Report

The increase in the expected-credit-loss allowance to NIS 2.416 million is still tiny relative to a NIS 2.780 billion balance sheet. But it reminds you what truly moves here. In a company whose earnings are designed to cancel out, even a small movement in that allowance becomes the key signal that market risk perception has changed.

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Conclusions

Menora Miv Hon ended 2025 not as a profit story, but as a thermometer for the capital window of Menora Mivtachim Insurance. What supports the thesis right now is a clear reopening of the debt market, NIS 1.2 billion of balance-sheet expansion, and a first step into Tier 1. What prevents a cleaner read is that the external market test was smaller than the headline, and 2026 already brings current maturities and a call calendar that requires real refinancing discipline.

The way the market reads this company in the short to medium term will not be decided by a few hundred thousand shekels of net profit. It will be decided by three simpler questions: does 2026 roll smoothly, does external demand stay broad, and does Menora Mivtachim Insurance preserve the stability that supports the whole structure.

Current thesis in one line: 2025 proved that Menora Miv Hon can reopen the capital window, but 2026 still has to prove that the window is broad and durable without leaning too much on the group itself.

What changed versus the earlier read: the company is no longer just a technical Tier 2 issuer. It has moved into Tier 1 as well, so the analytical focus has shifted from gross issuance size to issuance quality and to who actually bought it.

Strong counter-thesis: one can argue that this caution goes too far, because even after adjusting for the Menora Holdings take-up the company still expanded the capital stack materially, while keeping an almost full mirror between the asset and liability sides.

What can change the market reading: a smooth 2026 refinancing round, stable ratings, and future issuance that does not rely visibly on internal absorption would strengthen the positive case. A difficult refinancing round, a larger expected-credit-loss allowance, or a less forgiving local bond market would do the opposite.

Why this matters: Menora Miv Hon matters not because of its own earnings, but because it shows whether Menora Mivtachim Insurance can keep using the capital market as a reliable and relatively efficient funding pipe. Once that pipe reopens, the key question becomes whether it stays open at the real test points.

What must happen over the next 2 to 4 quarters: near-term maturities need to be refinanced quietly, external demand needs to remain broad, Menora Mivtachim Insurance needs to keep its risk profile stable, and the company needs to keep using the market without a visible jump in funding cost.