Migdal Insurance in the first quarter: above the dividend threshold, with little room to spare
Migdal opened 2026 with NIS 322 million of comprehensive profit and NIS 572 million of core profit, but the important finding is capital-related: after the Additional Tier 1 raise, its solvency ratio without transition measures reached 116%, only NIS 93 million above the dividend threshold. At the same time, CSM grew mainly because of market and rate variables, while demographic and operating assumptions still reduced it.
Migdal Insurance opened the first quarter with numbers that support the 2025 recovery story, but also leave little room for a loose interpretation. Comprehensive profit after tax rose to NIS 322 million, core profit rose to NIS 572 million, and the company moved above the capital threshold that its board set for dividend distribution without transition measures. Still, that move came only after a NIS 531 million Additional Tier 1 raise in April, leaving only NIS 93 million above the 115% target. The quarter therefore does not yet prove that the company has entered a broad and comfortable distribution phase. It shows that the company moved from an obvious capital shortfall to a position where a weak market quarter, an actuarial update, or weaker underwriting can bring the capital constraint back to the center. CSM, the contractual service margin that represents future profit not yet recognized, also grew in the quarter, but the increase relied mainly on financial changes while demographic and operating assumptions continued to reduce it. The result is a positive quarter with a real core improvement, but one that still needs proof over the next 2-4 quarters: a wider capital surplus, better-quality CSM growth, and underwriting improvement that does not depend on capital markets.
An Insurance Machine That Became A Capital Test
The company is an insurance and long-term savings group, not just a financial holding company with a volatile bottom line. Its economics sit in three layers: long-term savings, which generate management fees and CSM; health and general insurance, where underwriting quality determines recurring profit; and a large nostro portfolio, which adds volatility through capital markets and interest rates. In this quarter, all three layers mattered: the core improved, markets helped, but capital still determines how quickly that value can reach shareholders.
This is the direct continuation of the open issue left after the 2025 annual analysis. At that point, the company had shown a broad profit recovery, but the surplus capital without transition measures was still not free. The Additional Tier 1 analysis also framed the raise as a potential release of the bottleneck, but only if it took the company above 115% without leaving it too close to the line. The current report answers the first part. It does not close the second.
Capital Crossed The Threshold With A NIS 93 Million Cushion
The most important number in the report is not quarterly profit. It is the solvency table without transition measures. Before the Additional Tier 1 raise, the economic solvency ratio as of December 31, 2025 stood at 112%, with a capital surplus of NIS 1.926 billion. After the April raise, own funds for solvency purposes rose to NIS 18.212 billion, the surplus rose to NIS 2.457 billion, and the ratio reached 116%. Against the board's 115% target, the excess above the target is only NIS 93 million.
The chart shows the improvement, but also the limit. Compared with 2024, when the company had a NIS 1.729 billion shortfall versus the capital target, the company moved to a small surplus. That is a material change. On the other hand, a NIS 93 million surplus at an insurer with an SCR of NIS 15.755 billion is not a cushion that makes market volatility or assumption updates irrelevant. The company itself notes that the board can review and update the capital policy from time to time based on changes in risk factors, the development of the solvency ratio, and regulation.
The quality of the new capital also matters. Series 19 was issued for about NIS 531 million, is unlinked, carries annual interest of 4.92%, and its net proceeds of about NIS 525 million were recognized as Additional Tier 1 capital. This capital layer strengthens regulatory solvency, but its terms include possible cancellation or deferral of interest and principal payments under suspension events, and a possible full or partial write-down of principal in certain circumstances. It helps shareholders through regulatory capital, but it is not simple free cash at the holding-company layer.
Profit Is Strong, But CSM Still Depends On Markets And Assumptions
Comprehensive profit after tax rose from NIS 254 million to NIS 322 million, up 27%. Core profit rose from NIS 468 million to NIS 572 million, mainly because of long-term savings, where core profit almost doubled from NIS 99 million to NIS 197 million. Excess financial profit added NIS 49 million, compared with a NIS 82 million loss in the corresponding quarter. Against that, special effects were negative by NIS 125 million, mainly because of a loss in a group of insurance contracts in the new participating portfolio due to market conditions and higher cancellations, and a decline in the fair value of designated bonds following actuarial updates.
This breakdown prevents an overly simple conclusion. The core is indeed better, but part of the result still runs through capital markets, interest rates, and actuarial assumptions. That is especially clear in CSM:
| First-quarter CSM item | Impact in NIS million | Why it matters |
|---|---|---|
| Opening balance at the end of 2025 | 14,411 | A large future-profit base was already accumulated |
| Financial changes | 425 | Markets and rates contributed more than new business |
| New business | 130 | Positive contribution, but still small versus release and other changes |
| Changes related to future services | -255 | Assumption updates and studies still extract a cost |
| Current amortization | -246 | Future profit continues to be released into earnings |
| Closing balance at the end of March | 14,538 | Net growth of only NIS 127 million |
The note adds the less comfortable detail. Demographic and operating assumption changes, including population updates, reduced CSM net of reinsurance by NIS 229 million in life insurance and by NIS 25 million in health. At the same time, financial variables increased CSM by about NIS 437 million in life and NIS 62 million in health. In addition, the loss component in manager insurance policies from 2004 increased by NIS 111 million. CSM grew, but the quality of that growth is weaker than the headline. A large part came from markets and rates, while operating assumptions continued to pressure the base.
Pension And Provident Growth Do Not Clean Up Health And Motor
On the growth side, the report gives the company several strong points. Pension contributions rose 18% to NIS 3.672 billion, and provident contributions rose 36% to NIS 1.379 billion. Receipts from investment contracts almost doubled to NIS 1.569 billion. Assets under management reached NIS 591 billion at the end of March, and the company says that near the report publication date they had already reached about NIS 618 billion. That is a better base for management fees, especially if markets keep supporting it.
But there are still points that require caution. In pension funds, net transfers into the group fell to NIS 2.553 billion from NIS 3.491 billion in the corresponding quarter. In life insurance, negative net transfers continued to rise in private savings and manager policies, even though the company says the trend moderated. Life insurance redemptions, including transfers, increased to 6.7% annualized from 6.5% in the corresponding quarter.
Underwriting is still mixed. In health, core profit fell from NIS 171 million to NIS 131 million, mainly because of worse claims in long-term care and lower collective profit. In general insurance, gross premiums rose 5% to NIS 980 million, partly because the company won the 2026 state-employee motor insurance tender. But in motor property insurance, mainly comprehensive and third-party property coverage, the net claims and expense ratio rose to 95.8%, compared with 94.1% in the corresponding quarter and 93.6% in 2025. The company also points to a decline in the average premium in that line. The implication is that growth in motor does not necessarily arrive with the same earnings quality as the premium growth.
Conclusion: Distribution Is Back As An Option, But The Base Must Widen
The first quarter improves the company's position on two fronts: core profit is visibly stronger, and the company moved above its own capital threshold for dividend distribution without transition measures. That is a real change from the end of 2025, so the market is likely to focus less on whether the capital bottleneck can open and more on how stable it will be. The sharp decline in short interest from the beginning of the year through May fits that picture: skeptical pressure around the stock has eased, but it is not a substitute for regulatory and operating proof.
The next checkpoints are clear. The company needs to widen the surplus above 115% without relying only on another hybrid capital issuance, show that CSM grows through new business and customer retention rather than mainly through financial variables, and bring health and motor back to stronger underwriting. Governance is also not just noise: the Capital Market Authority's April letter, the planned chairman change at the insurance subsidiary subject to the regulator's non-objection, and the expected departure of the holding-company CEO in July leave a management uncertainty layer around a company whose capital is already sensitive enough. The quarter is positive, but it is still a proof year, not a full release year.
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