Shlomo Insurance: Were Motor-Property Renewals Bought at the Cost of Profitability?

What Was Truly Repaired, and What Was Bought at a Price

The main article already established that insurance was a major part of the explanation for Shlomo Holdings' profit improvement in 2025. This follow-up isolates one question only: did the insurance engine improve through cleaner underwriting, or was part of the rebound bought through commercial concessions in motor lines.

The short answer is that the rebound is real, but it is not uniform. Compulsory motor went through a sharp repair. The insurance-service loss almost disappeared, and the company ties that to tariff increases, the agreement with the National Insurance Institute, and continued portfolio refinement. Motor-property moved in the opposite direction: renewal rates jumped, the number of insured vehicles rose, but premiums fell, profit weakened, and the combined ratio moved up. In other words, motor insurance did not improve as one block. Compulsory motor was repaired. Motor-property compromised.

That is not a semantic distinction. It is the question that determines how to read the quality of 2025 insurance earnings. If both lines had improved together, the right takeaway would have been broader underwriting repair. In practice, compulsory motor delivered the fix while motor-property absorbed the concession. That means the jump in insurance profit looks cleaner in the headline than it does underneath.

This table alone is enough to show why insurance has to be split into two different stories. In compulsory motor, the company generated more premium on fewer vehicles and almost eliminated the loss. In motor-property, it kept more vehicles and more renewals, but with less premium and less profit.

This chart cuts through the headline correctly. The insurance rebound did not come from clean improvement across both motor lines. It came from a rotation: compulsory motor stopped dragging as hard, while motor-property gave up margin to hold the book.

Compulsory Motor Improved for Real, but Part of the Repair Belongs to the Past

In compulsory motor, the insurance-service loss narrowed to just NIS 7 million in 2025 from NIS 78 million in 2024. That is a NIS 71 million improvement, and the company links it to three explicit drivers: tariff increases, the agreement with the National Insurance Institute, and continued portfolio optimization.

The surrounding numbers support that read. Gross premium in compulsory motor rose 2.6% to NIS 455.2 million even though the number of insured vehicles fell to roughly 225 thousand from 236 thousand. The renewal rate improved to 52% from 49%, and the share of compulsory-motor customers who also bought motor-property rose to 73% from 68%. In plain language, the book became smaller in units but stronger in price and quality.

To avoid relying only on the headline amount, it helps to look at a simple proxy: gross premium divided by the number of insured vehicles. That is not an official tariff measure, but it is a useful directional indicator. In compulsory motor that proxy rose from roughly NIS 1.88 thousand per insured vehicle to roughly NIS 2.02 thousand, an increase of about 7.6%. That looks like better pricing and better portfolio quality, not bought volume.

But this is the point where discipline matters. Compulsory motor did not improve only because of pricing. In May 2025 the company reached an agreement with the National Insurance Institute for a one-time global payment, as an alternative to settling traffic-accident subrogation claims one by one, in order to close out accidents from 2016 through 2022. The company states explicitly that the agreement contributed positively to the compulsory-motor portfolio in 2025 for the underwriting years covered by that agreement. So part of the improvement reflects the closure of a legacy tail, not just better current-year underwriting economics.

That does not invalidate the repair. It does mean the right read on compulsory motor is a real improvement with a non-recurring element inside it. In 2025 the line clearly regained breathing room, but it would be too aggressive to assume that every part of that improvement is a clean new run rate.

Motor-Property Held on to the Customer, but Gave Up Price

If compulsory motor is a repair story, motor-property is a compromise story. The line ended 2025 with insurance-service profit of about NIS 131 to 132 million, down from NIS 171 million in 2024. The decline was not tied to a one-off catastrophe. It sat right in the core of the model: lower tariffs, mainly because competition in motor insurance intensified.

The key point is that the weaker profit did not come together with customer loss. Quite the opposite. The renewal rate jumped to 59.7% from 50.3%, and the number of insured vehicles increased to roughly 201 thousand from 194 thousand. The company even states explicitly that the higher renewal rate was driven, among other things, by price reductions it implemented.

That sentence matters because it links the commercial outcome directly to its cost. Renewals improved not despite the price, but also because of the price. Once that is combined with the decline in gross premium to NIS 834.8 million from NIS 864.6 million, the picture becomes very clear: the book was defended more successfully, but each unit of book was worth less.

Here too, the premium-per-vehicle proxy helps sharpen the economics. A simple gross-premium-to-insured-vehicle calculation points to a decline from roughly NIS 4.46 thousand per vehicle to roughly NIS 4.15 thousand, a drop of about 6.8%. It is not an official tariff reading, but it captures the economic logic of the year well: more renewals, more vehicles, less money per vehicle.

The cost of that move also shows up in the actuarial line. The combined ratio in motor-property rose to 83% gross from 78%, and to 83% net from 79%. That is the important part: even after the company benefited from some reduction in average claim cost, mainly because theft frequency declined, profitability still weakened. The tariff decline was stronger than the claims relief.

The book itself also looks a little less sticky than the raw renewal number suggests. The share of motor-property customers who also bought compulsory motor fell to 79% from 83%. That does not prove by itself that the company bought weaker customers, but it does show that the improvement in renewals did not come together with stronger two-line attachment. In practical terms, there is more renewal, but not necessarily more customer depth.

And the backdrop is not accidental. The company describes a highly competitive line with 18 active insurers, two newly licensed insurers that began operating in 2025, and regulation that makes policy cancellation, switching and quote comparison easier. This is not only a hard market. It is a market becoming structurally easier to move around in, which naturally pushes pricing harder.

The 2026 Test Was Already Placed on the Table

The tension between volume and profitability in motor-property had already moved beyond the income statement. In November 2025 Shlomo Insurance received a demand from the Capital Market Authority to update motor-property tariffs so they match the risk embedded in the activity and to file a full, updated actuarial appendix with a revised tariff. In February 2026 the company submitted that appendix. The regulator added that if an updated actuarial appendix and revised tariff were not approved by April 30, 2026, the company would not be able to continue those same insurance programs from that date.

That is a key point because it means the motor-property problem is not only an analyst's reading of margin erosion. The regulator itself flagged pricing adequacy. When the company says it does not expect the letter to have a material effect, that is management's assessment. What the reader should take from it is different: the 2025 pricing dynamic was strong enough to turn tariff quality into a regulatory issue.

That is why 2026 will not be judged only through renewal rates. It will be judged through the ability to rebuild pricing quality without giving back everything that was bought in the book. If that happens, motor-property can become a more convincing profit engine again. If not, the company may be left with a larger book but a weaker set of economics.

So How Clean Was the Insurance Rebound, Really

To understand the quality of the rebound, it is not enough to look only at the two motor lines. Total insurance-service profit rose to NIS 160 million from NIS 89 million. That is a real improvement. But it did not come from broad underwriting tailwinds across all lines. Almost all of the delta came from the collapse of the compulsory-motor loss and the move to profit in other general insurance, while motor-property moved backward.

Even above the underwriting line, the picture is less clean than the headline suggests. Insurance segment operating profit before tax rose to NIS 244 million from NIS 139 million. But within that jump, net investment and financing income not included within insurance-service business climbed to NIS 61 million from NIS 5 million. In the same year, net investment and financing income included within insurance business actually fell to NIS 43 million from NIS 67 million. So even inside the insurance rebound, not all of the improvement is clean underwriting.

That is why the answer to the title question is yes, but with an important qualification. Yes, motor-property renewals were bought, at least in part, at the cost of profitability. The company says so indirectly through explicit price reductions, and the economics confirm it through lower profit and a worse combined ratio. But it would also be wrong to turn the whole insurance segment into a manufactured rebound story. Compulsory motor genuinely improved, and the National Insurance Institute agreement closed out an old layer of risk that had been hanging over the book.

The better conclusion is that insurance delivered a real rebound in 2025, but one of mixed quality. Compulsory motor went through both a structural and a partial repair. Motor-property defended the book through commercial concession. That is why anyone reading 2025 only through insurance profit gets a picture that is too generous. Once the two lines are separated, the real 2026 question is not whether insurance has already been fixed, but which part of the fix can hold without another round of price concessions and without another legacy-tail cleanup.