Menora Mivtachim Holdings In 2025: Profit Was Strong, But 2026 Will Test Capital And Credit

Getting To Know The Company

Menora Mivtachim Holdings is not another insurer to read through one quarterly profit line. It is a holding company sitting on top of three different engines: a large-scale insurance and pension platform, a meaningful health and P&C engine, and a non-bank credit platform that is now becoming material. Anyone reading the company only through portfolio returns, or only through underwriting, is missing the fact that the group already manages ILS 440.4 billion of assets, including ILS 309.3 billion in pension funds, ILS 54.0 billion in provident funds, ILS 38.6 billion for insurance and investment contracts, and another ILS 5.0 billion in credit activity. The group employed 3,805 people at year-end and manages Mivtachim HaHadasha, Israel’s largest pension fund.

What is working now is clear enough. Comprehensive income attributable to shareholders rose to ILS 2.342 billion, net profit attributable to shareholders rose to ILS 2.351 billion, attributable equity reached ILS 9.187 billion, and operating profit jumped to ILS 3.598 billion. At the same time, credit is no longer a side activity. It is now a reported segment with pre-tax profit of ILS 183.4 million and assets of ILS 6.0 billion. Even at the holdings level, 2026 opened aggressively: the group signed in January to acquire the remaining 30% of ERN, and in February increased its holding in Yesodot to 60.1%.

But the active bottleneck no longer sits in the income statement. It sits in the question of how much of this profit is truly available to the parent, and how much remains tied up in insurance capital requirements and credit expansion. At the parent-company level there is no visible liquidity problem right now: on a solo basis Menora has only about ILS 229 million of financial liabilities, against around ILS 1.344 billion of liquid financial assets. The issue is not whether Series G can be repaid. The issue is what remains free for shareholders if that same capital base is also needed to support dividends, solvency, and a larger credit book.

That is also where a first-pass read can go wrong. 2025 looks like a clean peak year, but the picture is more complex. Growth in pension and provident AUM from ILS 308.6 billion to ILS 363.2 billion looks excellent, yet net accumulation fell from ILS 14.9 billion to ILS 10.3 billion. The group’s long-term savings market share also slipped to 14.7% from 14.9%, and in pension to 27.2% from 28.4%. In other words, part of the improvement was built on supportive markets and asset appreciation, not only on clean commercial momentum. At the same time, an important part of the improvement in life sits in variable management fees that were collected again and credited to CSM, the future profit reservoir, rather than flowing one-for-one into current revenue.

Menora’s economic map in 2025 looks like this:

This chart is a good example of what a superficial read may miss. Commercial activity does not look weak, contributions rose to ILS 24.4 billion, but net accumulation deteriorated. So it is wrong to read all AUM growth as proof that the group is strengthening its competitive position at the same pace as its balance sheet is growing.

This pie matters because it organizes the story correctly. From the outside Menora still looks like an insurer. Inside, it is already a combination of long-term savings, insurance risk, health operations, credit, and proprietary capital. That is exactly what made 2025 strong, and also what makes 2026 a more complicated proof year.

Events And Triggers

IFRS 17 And IFRS 9 Change The Reading Framework

The first trigger: 2025 is the first year under IFRS 17 and IFRS 9, with 2024 and the last quarter of that year restated for comparison. This is not a footnote. It means a large part of the 2024 to 2025 comparison already runs through a new accounting language, especially in life and long-duration health. Anyone looking only at the headline profit number without understanding that the mechanics of profit recognition changed could give too much weight to the consolidated total and too little weight to how it was built.

Cash Is Moving Up The Chain, Then Another Round Starts

The second trigger: the layer that matters to shareholders is not only profit, but the ability to upstream cash. In 2025 Menora Insurance paid ILS 1.2 billion to the parent in three tranches, Menora Pension and Provident paid ILS 117 million to the parent, and Shomera paid ILS 100 million. The parent itself distributed ILS 600 million during the year, and after the balance-sheet date announced another ILS 500 million dividend. After the reporting date Menora Insurance also announced ILS 400 million, and Menora Pension and Provident announced ILS 60 million, of which ILS 54 million goes to the parent.

The message cuts both ways. On one side, it confirms that Menora can upstream real cash from subsidiaries and not only create accounting value. On the other side, it is exactly why the market will judge 2026 through the capital layer. The more the group combines shareholder distributions with credit expansion, the more every shekel leaving the system will be judged against what remains to support risk assets and solvency.

Credit Has Shifted From Optionality To A Real Story

The third trigger: credit is no longer presented as another complementary activity. The group explicitly says that the growth in activity and its profit contribution justify presenting credit as a new operating segment. This is built on two moves. First, the Yesodot transaction that was launched in 2025 and matured in January and February 2026 into a 60.1% controlling stake. Second, the January 2026 acquisition of the remaining 30% of ERN for about ILS 234 million at an implied company valuation of around ILS 770 million.

That is a real strategic shift, not cosmetic reporting. Menora is trying to reduce dependence on capital-market conditions and the financial cyclicality of its legacy core, while building an additional earnings engine in business and consumer credit. But every such diversification move also works both ways: it improves income diversification, while bringing more credit risk, more exposure to construction and real estate, and more need for underwriting discipline outside insurance.

External Confirmation Exists, With An Asterisk

The fourth trigger: in January 2026 Midroog reaffirmed the issuer rating and Series G rating at Aa2.il with a stable outlook. The rating report supports the view that the parent still looks conservative on leverage, with a high-quality holdings base and reasonable financial flexibility. Midroog also builds a 2026 to 2027 base case of ILS 760 million to ILS 855 million of annual receipts at the parent level.

But even here there is an asterisk. The same report stresses that holdings concentration remains high, and that the parent’s control over the dividend capacity of its major subsidiaries is partly constrained by regulation and external factors. That is exactly the difference between a company with good assets and a holding company with value that is accessible without friction.

Motor Property Regulation Becomes A Near-Term Market Test

The fifth trigger: in November 2025 Menora Insurance and Shomera were instructed to submit an updated tariff for motor property insurance. If no updated tariff is approved by April 30, 2026, they will not be able to continue selling under the current tariff. This is the kind of issue the market can easily miss on first read, but it matters a lot. It sits right at the intersection of pricing, P&C profitability, and the ability to sustain volume without subsidizing the business.

Efficiency, Profitability And Competition

The central insight is that Menora’s 2025 profit was broader than the headline suggests, but less clean than the bottom line alone implies. This was not only a generous market year, and not only better underwriting. It was a combination of better insurance-service performance, a sharp jump in investment and financing contribution, higher fee income, stronger health economics, and the addition of a credit engine that is already moving the profit base.

This waterfall makes the point clearly. Insurance service result rose by only ILS 57.5 million to ILS 1.587 billion, while investment and finance profit jumped by ILS 883.8 million to ILS 1.884 billion. At the same time, management-fee income rose by ILS 155.6 million to ILS 1.199 billion. So a read that says "this was only a market year" misses the fee and health expansion, while a read that says "this was only underwriting" misses the fact that the biggest incremental bridge came from the financial layer.

Life illustrates this especially well. In participating life policies Menora returned in 2025 to collecting variable management fees after the negative real return accumulated in 2022 had not yet been fully offset until the second quarter of 2025. By year-end it had collected ILS 239 million of variable fees, alongside ILS 251 million of fixed fees, versus ILS 237 million of fixed fees and no variable collection in 2024. That is a real positive. But the company also says explicitly that both fixed and variable fees are not recognized as revenue. They are credited to CSM according to projected fee patterns in the actuarial models. That is crucial. Part of the good news in 2025 builds future profit stock, not immediate cash or immediate accounting income in the same form.

Pension and provident tell a somewhat different story. Pension profit rose to ILS 346 million from ILS 276 million, and provident profit rose to ILS 77 million from ILS 52 million. The group explains the improvement mainly through higher net fee income, driven by larger managed assets and higher collections, with only a moderate increase in expenses. That is a good result, but the quality angle still matters: deposits rose, AUM rose, yet market shares and net accumulation weakened. That does not make the trend negative, but it does mean growth does not yet look like a clean gain in competitive power.

Health is even more interesting. Menora says the improvement in adjusted profit came mainly from medical expenses, critical illness, and growth in HMO long-term care operations. Meuhedet and Leumit moved in 2025 from group LTC underwriting into an operating model with no insurance risk, and Maccabi has been running under a similar framework since January 1, 2024. That is not just a commercial adjustment. It reduces some reported premium volume, but improves earnings quality because it replaces underwriting risk with fees and operating compensation.

P&C needs a more careful read. Menora explains that the improvement in adjusted profit for the full year came from compulsory motor, while profit moderated in motor property and in other property and liability lines. In compulsory motor the improvement came both from favorable development on prior years and from stronger current-year results. In motor property and other P&C lines, favorable prior-year development was weaker even if current-year performance itself improved. That is exactly what the market needs to test again in 2026: whether P&C earnings are increasingly driven by better current underwriting, or still rely on a cushion from prior years that may be thinning out.

Credit is now changing the group story. In 2025 the credit segment generated ILS 432.9 million of revenue, ILS 183.4 million of pre-tax profit, and ILS 183.2 million of pre-tax comprehensive profit, versus ILS 135.5 million the year before. The group decomposes that increase in a useful way: roughly ILS 19 million came from Yesodot being consolidated for the first time, and another ILS 28 million came from continued growth in ERN and Ampa. That strengthens the case that Menora is building a genuine second leg. But it also means part of the improvement is the result of a change in group scope, not only the same base business earning better on its own.

This bar chart, based on the annual investor presentation, helps read the year correctly. No single engine rescued Menora. Almost every line improved. But credit is the line where the market now has to decide whether this is smart diversification, or a profit engine that also imports new cyclicality and risk into a group whose insurance and pension arms were already working well.

Cash Flow, Debt And Capital Structure

To analyze Menora correctly, two cash frameworks have to be used separately. The first is all-in cash flexibility at the consolidated level: what remains after actual cash uses. The second is capital accessibility at the parent-company layer: how much of the profit can really move up. In an insurance holding company, those are not the same story, and mixing them would be a mistake.

The Consolidated Picture

At the consolidated level Menora looks strong. Cash flow from operating activities rose to ILS 2.227 billion from ILS 1.659 billion, and year-end cash rose to ILS 5.385 billion from ILS 3.983 billion. But once the line is opened up, the picture is more nuanced. In 2025 the group invested ILS 217.1 million in intangible assets, ILS 32.1 million in fixed assets, and paid ILS 57.7 million of negative lease-related cash flow. At the same time it paid ILS 600 million of dividends to shareholders and repaid ILS 285.7 million of financial liabilities. To support all of that while still growing cash, it raised ILS 1.473 billion of financial liabilities net of issuance costs.

In plain language, the consolidated picture is comfortable, but it does not tell a story of a business that alone funded all of its cash uses and still ended the year with a large fully free surplus. Part of the flexibility came from capital markets and new funding, not only from the business’s underlying cash-generation power.

So if anyone wants to argue that the year created a large amount of truly free cash in the simple sense, they need to be careful. At the consolidated level Menora absolutely strengthened. But that is not the same as saying that all of the cash increase came from profit that flowed back to shareholders without any help from funding.

The Parent-Company Picture

At the parent-company level the picture is different. There is no near-term debt drama there. Menora says that on a solo basis it had about ILS 229 million of financial liabilities at the reporting date, made up of around ILS 54 million of Series G bonds and around ILS 175 million tied to a put option on non-controlling interests. Against that it had about ILS 1.344 billion of liquid financial assets, including around ILS 302 million of subordinated instruments issued by Menora Insurance. In addition, under the bond rating framework the company committed to maintaining liquid assets and credit lines equal to 100% of the next 12 months of debt service.

That matters because it identifies the real risk correctly. Anyone reading Menora as an overly leveraged holdco is probably looking in the wrong place. The issue is not repayment pressure at the parent. The issue is how much of the profit created at the lower layers can be turned into upstream dividends without over-tightening capital in the insurance subsidiaries, and without reducing flexibility for the credit platform.

Solvency Is Still Far From Distress, But Direction Matters

The main capital signal comes from Menora Insurance. At June 30, 2025 the solvency ratio, including transitional relief and including the impact of capital actions, stood at 180.2%. Without transitional measures it stood at 167.1%. Shomera stood at 122.9%, against a 113% target. Menora Pension and Provident held a capital surplus of around ILS 558 million even after a post-balance-sheet ILS 60 million dividend. All companies in the group meet their capital requirements.

And yet there are two yellow flags here. The first is that Menora Insurance’s board set a gradual path for the target capital level to rise from 115% at the end of 2024 to 130% by 2032. The second is that the estimated solvency ratio at September 30, 2025 already stood at 164.8% under transitional relief, below the 180.2% seen in June. That is still far from immediate pressure, but direction matters. The margin can narrow faster if the environment turns, or if the company tries to push both distributions and credit growth at the same time.

That is where the heart of the story sits. There is capital surplus. There is cash flexibility at the parent. But capital that is fully accessible to shareholders without thinking twice about solvency, credit growth, and regulation is a more careful story.

Forecasts And Outlook

Before going into detail, here are the five most important non-obvious conclusions for 2026:

• The first finding: 2026 is not a proof year for basic profitability. It is a proof year for profit accessibility. Menora has already shown it can earn well. Now the market needs to see how much of that profit remains truly free after capital and credit demands.
• The second finding: the 2025 improvement was broad, but not all of it is equally repeatable. Investment and financing gains, variable fees, and some interest-rate effects gave the year unusually strong tailwinds.
• The third finding: credit is already a real engine, but 2025 was only the transition year in which it moved from nice add-on to reportable segment. 2026 needs to prove asset quality, not only volume growth.
• The fourth finding: in long-term savings, commercial quality is less impressive than balance-sheet growth. Market shares slipped slightly and net accumulation declined even as assets and profits rose.
• The fifth finding: health looks cleaner than before because part of the LTC activity moved into a fee-based operating model with no insurance risk. That is a positive for quality, but it also makes premium comparisons less straightforward.

If 2026 needs a label, it is a proof year for earnings quality and capital allocation. Not a reset year, because the business is already working. Not a clean breakout year, because the story is too large and too layered for that. Investors will try to decide whether 2025 was a cyclical peak year helped by strong markets, or the beginning of a period in which Menora benefits from a more diversified earnings mix with less dependence on any single legacy line.

What has to happen over the next two to four quarters for the reading to improve? First, the company needs to keep upstreaming dividends without showing concerning erosion in capital cushions. Second, the credit platform has to prove that the larger Yesodot and ERN exposure creates real diversification rather than simply importing more real-estate and project-finance risk. Third, P&C profitability has to hold up even without leaning again on unusually favorable prior-year development, and the updated motor property tariff has to move through without a material hit to activity. Fourth, legal and class-action pressure has to stop eating into profit through bigger provisions.

The Midroog report provides a useful outside frame. On one hand, it builds a 2026 to 2027 base case of ILS 760 million to ILS 855 million of annual receipts at the parent. On the other hand, it also assumes holding-company expenses, debt service, and investments in subsidiaries and new ventures. This is not a framework that says there is an enormous free surplus for everything. It says there is capacity, but it has to be managed carefully.

What may the market miss in the near term? Mainly three points. First, the return of variable fees in life is good news, but not all of it drops straight into current earnings. Second, health improvement is better in quality terms than some of the premium headlines suggest because of the move toward no-risk operating models. Third, credit is now large enough to add both upside and risk, so one weak report there can change the whole tone around Menora very quickly.

Risks

Financial Markets Still Fund A Large Part Of The Story

Menora improved insurance-service economics, but the biggest delta in 2025 came from investment and financing profit, which rose to ILS 1.884 billion from ILS 1.000 billion. Variable management fees in life also came back only after a long period of negative real returns. So if 2026 turns into a less generous market year, part of the picture will look less attractive even without a material operating deterioration.

Accounting Capital Is Large, But Not Fully Free

This is the core risk to the thesis. ILS 9.187 billion of equity attributable to shareholders is a strong number, but it does not automatically mean the company can keep moving large amounts to shareholders with the same ease. Capital is needed to support the insurance subsidiaries, the rising solvency targets, and a credit business that is becoming more aggressive. In a holding company, the gap between value created and value accessible can remain open even after a very strong year.

The Legal Load Rose, Not Fell

Menora finished 2025 with cumulative provisions for claims of ILS 266 million, versus ILS 179 million a year earlier. The report lists 34 pending class-certification requests with ILS 1.328 billion of company-specific claimed amounts, alongside 4 class actions already approved with ILS 301.5 million of company-specific claimed amounts. In addition, in January 2026 a document-disclosure request was filed to examine the existence of grounds for a derivative action following a late-December 2025 company report. Not all of these matters will end in a material hit, but they do show that the legal burden has not disappeared.

Credit Improves Diversification, But Also Increases Exposure

In its credit-activity chapter Menora explicitly says that business credit in Israel is heavily exposed to construction and real estate, that interest rates affected demand and pricing, and that the war slowed projects and pushed out timelines. That matters because Yesodot and Ampa are operating precisely in that terrain. Credit therefore does not only reduce dependence on capital markets. It also brings the group more exposure to real-estate cyclicality, collateral quality, sales pace, and developers’ debt-servicing ability.

Pension Competition Did Not Ease

Menora remains a huge pension player, but competition from default funds and member transfers has not really calmed down. The slight decline in market shares and net accumulation is a reminder that even a very large company can deliver an excellent financial year without improving its competitive standing at the same intensity.

Short Sellers’ View

Short interest in Menora no longer signals the same kind of pressure seen at the end of 2025, but it has not disappeared either. As of March 27, 2026 short float stood at 2.42% and SIR at 5.28 days. That is materially above the sector averages of 0.86% and 1.952 days, respectively. In market terms, this is not a short position that screams imminent collapse, but it is clearly a layer of skepticism that still wants proof.

The direction has improved. In November 2025 short float stood at 3.14% and SIR at 8.24 days, while by late March 2026 both were lower. But they are still well above sector averages, and on SIR the latest figure sits at the sector maximum in the available data. The reasonable read is that the market respects 2025, but still has not fully bought into the idea that profit, capital, and credit expansion will all fit together smoothly in 2026.

Conclusions

Menora ends 2025 with a year that is stronger than a simple "good market year" reading would suggest. There is broad improvement in fees, health, credit, and operating economics, not only market tailwinds. At the same time, the story is not yet fully clean because all those stronger layers still run through a double filter of capital and risk allocation.

Current thesis: Menora built a stronger and more diversified earnings base in 2025, but 2026 will determine whether that profit turns into accessible shareholder value or remains tied up in capital and credit growth.

What changed versus the previous understanding: the key question shifted from "is Menora earning well" to "how much of this profit is actually free, and how much is already being consumed by capital and credit."

Counter-thesis: 2025 was too favorable, helped by strong markets, the return of variable fees, and a one-off compensation payment from Isracard, so normalized 2026 earnings could look materially weaker.

What may change the market reading in the short to medium term: another sequence of upstream dividends without capital erosion, an updated approved motor-property tariff, and evidence that credit integration is not introducing a new quality problem.

Why this matters: in an insurance holding company, the gap between strong consolidated profit and capital that can actually be moved to shareholders is the whole story.

What must happen: Menora needs to keep upstreaming cash without over-tightening solvency, prove that credit adds diversification rather than only risk, and hold up P&C and health profitability even in a less generous market backdrop. What would weaken the thesis is a combination of capital erosion, credit softness, or another sharp increase in legal provisions.