IBI Underwriting: who captures the upside, shareholders or the underwriting team

The main article already established that underwriting came back to life. This follow-up isolates a narrower question: when 2025 reopened in IBI Underwriting's favor, who actually captured the upside at the end of the chain, shareholders or the underwriting team.

At IBI Underwriting this is not a side issue. The company had only 15 employees at the end of 2025. It explicitly says human capital is a material competitive asset, and it also says that the departure of several senior officers at the same time, as happened in 2017, could cause severe damage. That means the economics of the franchise are designed around retaining people, not around giving common shareholders a clean claim on every peak-year shekel.

What matters here is that the sharing does not run only through monthly salaries. It runs through four layers at once: salary and related costs, annual bonuses, equity-based compensation, and 15% of every distribution from the underwriting subsidiary through Class B shares. A reader who looks at 2025 and assumes the upside belongs almost entirely to shareholders is missing the real allocation mechanism.

The figures below are not additive, but together they map the main channels through which the upside is shared:

A large part of the 2025 upside never stayed in the bottom line

The first place to see it is the salary line. Salary and related costs rose to ILS 36.984 million, almost double ILS 19.325 million a year earlier. At the same time, employee compensation liabilities rose to ILS 23.571 million from just ILS 9.268 million at the end of 2024. Inside that, salary and wage liabilities, noted as mainly short-term bonuses payable, jumped to ILS 16.503 million, while long-term bonus payable rose to ILS 5.329 million.

That is the core point. The upside was not only paid out, it was also carried forward. A bigger share of 2025 economics was converted into compensation liabilities that remained open on the balance sheet at year end. Anyone reading only the annual profit line misses the fact that part of the strong year had already been allocated to the team, even if the cash had not fully left yet.

The auditor stopped on this point too. Salary expense, including compensation plans and bonuses, was treated as a key audit matter. Not because of a malfunction, but because the bonus mechanism depends on formulas, thresholds, caps, and accounting judgments that materially affect period expense. When bonus calculations become important enough to be singled out as a key audit issue, this is no longer a minor detail inside operating costs.

For the three core managers, this already looks like partnership economics

The three core managers, the CEO and General Counsel, the subsidiary CEO, and the deputy subsidiary CEO, did not benefit only from salary. In 2025 each of them received an annual bonus of ILS 2.5 million, the full cap under their employment terms. On top of that, each had recognized equity-compensation expense from the 2022 grant, and each accrued ILS 1.081 million in dividend economics from the underwriting subsidiary.

The executive-compensation table shows how deep this structure runs. The recognized package of the four senior officers reached ILS 19.402 million. For the three core managers, this is no longer a plain salary package. It is a layered structure of base salary, annual bonus, equity compensation, and a separate economic claim on the underwriting subsidiary itself.

This is where the Class B shares matter. In 2018 each of the three managers received 6 Class B shares in the subsidiary, 18 in total. These shares carry no voting rights, but together they are entitled to 15% of every distribution by the subsidiary, in cash or otherwise, and to a proportional share of liquidation surplus. Put simply, the public company keeps control and all voting power, but it does not keep 100% of the economics.

The next detail matters even more: the company itself financed the managers' purchase of the Class B shares, and that financing was repaid out of the dividends generated by those shares. So this is not an outside minority layer that brought new capital into the subsidiary. It is an internal economic-sharing layer built to tie the three managers directly to the activity's upside.

The accounting treatment makes clear that this is a live mechanism, not a dormant legacy clause. The company recognizes a current financial liability for the obligation to buy back the Class B shares when the relevant manager leaves, based on the subsidiary's equity per share at that time. That liability rose to ILS 1.316 million at the end of 2025 from ILS 983 thousand a year earlier. At the same time, general and administrative expenses included ILS 3.244 million for the Class B holders' share of subsidiary profits, up from ILS 1.431 million in 2024. This is not footnote noise. It is an economic split.

This may be rational retention spending, but it still leaks from the shareholder layer

The fair reading is not that someone is draining value from a business with no value. The opposite is closer to the truth. In underwriting, the product is people, judgment, reputation, and relationships with issuers and investors. The company explicitly says human capital is a material competitive factor, and that its reputation is critical to the business. It is also extending the sharing architecture below the executive layer: in 2025 it granted 2.5 million non-tradable options to 10 employees who are not senior officers, with an estimated fair value of about ILS 5.03 million and a 4.5 year vesting schedule.

In other words, this is not just a one-off peak-year bonus story. It is an operating model. The company has chosen to pre-share a part of the upside in order to retain the people who originate and execute deals. The logic is understandable. An underwriting house with 15 employees cannot afford to lose the people who hold the relationships, the execution capability, and the franchise reputation.

But there is a clear cost at the shareholder layer. If activity remains strong for another year, not every extra shekel will naturally fall through to dividends or stay fully inside common-shareholder earnings. Part of it will go through salary, part through bonuses, part through equity compensation, and part is already earmarked through the subsidiary's 15% economic participation.

So the real question is not whether pay is "high" in the abstract. The real question is whether this sharing of upside buys a stronger and more durable franchise, one that can repeat 2025, or whether it mainly transfers too much of a peak-year profit pool to the team before shareholders fully enjoy it.

What is left for shareholders after all the incentive layers

It is important to be precise: shareholders were not left out. The company distributed ILS 39 million of dividends in 2025, and after the balance sheet date the board approved another ILS 14.4 million distribution out of fourth-quarter 2025 profit. So the model still produces cash that reaches shareholders as well.

But this follow-up sharpens a different point. In IBI Underwriting, shareholders own a platform where underwriting upside is pre-shared with the team that produces it. That may be the right structure in a people-driven business. It also means investors should not read 2025 profits as if they were a full look-through claim on every bit of underwriting upside. Those profits are generated inside a semi-partnership model.

Bottom line: in 2025 IBI Underwriting proved that underwriting can once again produce much more money. This follow-up shows that a large share of that money was already allocated on the way through. If the sharing model keeps the core team in place and turns high profit into repeat underwriting capability, shareholders can live with it. If 2025 remains a one-off peak year, it will turn out that shareholders captured only part of the upside while the team took its share in real time.