Migdal Insurance Follow-Up: CSM Grew, but Assumption Changes Still Extract a Cost
Migdal's CSM rose to NIS 14.538 billion in the quarter, but the breakdown is less clean: markets, rates, and time value added NIS 499 million, while demographic and operating assumptions reduced CSM by NIS 254 million and the 2004 manager-policy loss component increased by NIS 111 million.
Migdal Insurance already showed a stronger first-quarter picture in profit and capital, but CSM quality needs a narrower test than the main article gave it. The balance rose by only NIS 127 million to NIS 14.538 billion, even though NIS 425 million of financial changes and another NIS 74 million of interest accretion worked in the company's favor. Against that, changes related to future services reduced CSM by NIS 255 million, and the assumptions note shows that demographic and operating assumptions reduced CSM by NIS 229 million in life insurance and another NIS 25 million in health. The loss component in the 2004 manager-policy portfolio also increased by NIS 111 million during the quarter. The issue, then, is not that CSM failed to grow. It is that the growth still depends more on markets, rates, and time value than on clean improvement in persistency and assumptions. For the market to give the CSM balance higher-quality credit, the next quarters need to show new business and retention that hold up even without strong financial support.
Markets And Rates Lifted CSM More Than New Business
The company frames CSM as a larger future-profit base for a longer period, and the total number did move forward: NIS 14.411 billion at the end of 2025 became NIS 14.538 billion at the end of March 2026. But the path to that increase matters more than the increase itself. New business added NIS 130 million, while current amortization reduced CSM by NIS 246 million. Financial changes added NIS 425 million, and interest accretion added another NIS 74 million. Without markets, rates, and time value, the quarter would have looked very different.
| CSM movement item | Quarterly impact | What it means |
|---|---|---|
| Financial changes and interest accretion | NIS 499 million | The largest support came from markets, rates, and time value |
| New business | NIS 130 million | Positive contribution, but still small compared with current release |
| Current amortization | NIS -246 million | Future profit keeps moving into earnings, so quality replenishment matters |
| Changes related to future services | NIS -255 million | Assumption updates and actuarial studies still offset much of the addition |
This breakdown continues the warning raised in the prior CSM-quality analysis: a higher balance is not necessarily a better-quality balance. In a favorable market year, the company's old participating portfolio can increase CSM and variable management fees. That is a real business advantage, not an item to ignore. But in a quarter like this, it also blurs the harder question: is CSM growing because of new business and persistency, or mainly because financial conditions are helpful?
Assumptions Reduced The Story, Not Just The Table
The important detail sits in the assumptions layer. The update to expected retirement dates and annuity exercise rates in classic manager policies reduced CSM by NIS 179 million. The same change also reduced the expected future eligibility for designated bonds versus the previous forecast, creating a NIS 14 million investment and finance loss. These are not large numbers relative to a CSM balance of more than NIS 14 billion, but they show that assumptions can still change the quality of future profit even when the total balance rises.
The aggregate number is sharper: all demographic and operating assumption changes, including population updates, reduced CSM by NIS 229 million in life insurance and by NIS 25 million in health. That amount excludes the effect of financial variables, current release, and new business, so it isolates the assumption cost cleanly. Against it, time value and other financial variables added NIS 437 million in life insurance and NIS 62 million in health. The net result looks positive, but its quality is less clean: a positive financial layer covered a negative assumptions layer.
The loss component in the 2004 manager-policy portfolio is the less comfortable part of this breakdown. At the beginning of 2026 the company already had a loss component in this portfolio, and during the first quarter all changes increased it by another NIS 111 million. This is where the discussion shifts from a lower future-profit stock to a component that is already weighing on the result. The special-effects line in comprehensive profit shows the same pressure: 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, alongside a decline in the fair value of designated bonds following actuarial updates.
The Next Test Is The Growth Mix, Not The Balance Size
The fair read of the quarter is not negative. The company still holds a large CSM balance, current release supports core profit, and variable management fees in the old participating portfolio totaled about NIS 118 million in the quarter. Near the report publication date, those fees had already reached about NIS 0.5 billion from the beginning of the year, so financial support can still lift the future-profit stock.
That matters because variable management fees are recognized through future release in CSM, not directly in profit and loss. A favorable market quarter therefore changes both the future-profit balance and the release path. That is an advantage when markets support the portfolio, but it raises the proof bar when demographic and operating assumptions move in the opposite direction.
Still, size is not enough. CSM quality will improve only if the next quarters show three signals together: stronger new business relative to current CSM release, stabilization in demographic and operating assumptions, and a loss component that stops growing in the 2004 manager-policy portfolio. If markets and rates remain the main contributors while assumptions keep extracting a cost, CSM will stay large but less convincing as a recurring profit source.
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