Wesure Is Less of a Capital Drag for Ayalon, but Core Profit Still Lags

Wesure no longer looks like the same sharp capital pressure point that weighed on Ayalon at the end of 2025, but the first quarter still does not prove that it stands on its own. Wesure's solvency ratio rose to 106%, above the 105% board target for 2026-2028, but it got there only after a NIS 16 million Tier 1 capital injection from Ayalon. Before the capital actions, the ratio was 98%, below the level needed for any clean capital-independence argument. On earnings, the headline also looks better than the quarter underneath: pretax comprehensive profit rose to NIS 7.1 million, while core profit fell to NIS 4.8 million. Comprehensive and third-party motor improved sharply, but compulsory motor moved to a core loss, and in motor insurance that cannot be brushed aside. The current read is therefore that Wesure reduced the group risk, but has not yet become a capital and profit source that strengthens Ayalon without conditions.

Capital Is Above Target, but Not by Much

The central Wesure number is 106%. That is now above the 105% solvency target for 2026-2028, and it is a positive change from the end of 2024, when the ratio was 83% before capital actions and 101% after them. But the quality of the number matters as much as the level. At the end of 2025, Wesure was at 98% before capital actions, and only after NIS 16 million of Tier 1 capital from Ayalon did it reach 106%.

The cushion above the board target is not wide. After the capital actions, Wesure's capital surplus versus the target was only NIS 1.8 million. That is enough to clear the formal threshold, but not enough to close the business question: whether the subsidiary can grow, absorb underwriting and market volatility, and avoid returning to Ayalon each time the ratio approaches the target.

Wesure's dividend policy makes that point sharper. The company will not distribute dividends unless a 110% capital target is reached and the post-distribution solvency ratio does not fall below 107%. It also needs at least NIS 10 million of cumulative profit from current operations over two years from the start of profit recognition. In other words, even after the improvement, Wesure is still far from being an asset that upstreams cash to Ayalon. At this stage, it mainly needs to stop drawing cash from it.

Comprehensive Profit Improved, Core Profit Fell

The gap between comprehensive profit and core profit is why the quarter does not close the story. Pretax comprehensive profit of NIS 7.1 million looks better than NIS 5.4 million in the prior-year quarter, but core profit fell from NIS 6.7 million to NIS 4.8 million. Part of the improvement came from the excess financial margin, which moved from negative NIS 1.4 million to positive NIS 2.3 million.

The segment breakdown does not say that Wesure is broadly weak. Comprehensive and third-party motor, the property motor bucket, improved sharply: core profit rose to NIS 7.0 million, and the net combined ratio fell to 87% from 100% in the prior-year quarter. That is a good number, and it shows the company can earn money when pricing, claims and volume work together.

But compulsory motor moved the other way. Core profit of NIS 5.4 million in the prior-year quarter became a NIS 1.9 million loss, mainly because prior accident years developed worse than in the comparable quarter. That is not necessarily structural damage, but it is a reminder that for a relatively young insurer, one good quarter in comprehensive and third-party motor is not enough to declare profitable independence.

Lower Reinsurance Raises the Cost of Independence

The less immediate but more important point sits in Wesure's solvency report. Capital requirements rose from NIS 160.1 million at the end of 2024 to NIS 205.5 million at the end of 2025. The main reason was growth in gross and net insurance liabilities, including a lower reinsurance share in compulsory motor and property motor.

That can be the right move if Wesure manages to keep more profit in-house. Less reinsurance can leave more premium and underwriting margin with the company. But it also raises the capital that has to be held against the risk. That is why the improvement in comprehensive and third-party motor matters, while the move in compulsory motor to a core loss matters just as much: when the company retains more risk, a weak branch is not only an earnings issue. It can quickly become a capital issue too.

The economic balance sheet makes this clear. The best estimate of net general-insurance liabilities rose to NIS 504.8 million at the end of 2025 from NIS 398.8 million at the end of 2024. At the same time, the reinsurance component fell to NIS 711.4 million from NIS 799.5 million. That is exactly why Wesure's growth needs to be judged through two numbers together: how much core profit it generates, and how much capital that growth requires.

The Next Test Is Core Profit, Not Another Injection

Wesure has moved from clear capital stress to a point where the risk has fallen, but it has not disappeared. A NIS 16 million injection was enough to lift the ratio above target, but it also proves that the subsidiary still needed Ayalon to cross the line. Higher comprehensive profit in the quarter is a positive point, but lower core profit and a compulsory motor loss leave the proof open.

The next check is not simply another quarter of positive comprehensive profit. Wesure needs to show rising core profit, comprehensive and third-party motor that are not carrying compulsory motor alone, and a solvency ratio that stays above the 105% target without another Ayalon injection. If that happens, the read on Wesure can move from improved capital consumer to subsidiary that builds capital internally. If not, the current improvement will remain mainly a reduction in pressure, not a full change in holding quality.