IDI Insurance in the First Quarter: Motor Property Supports the Dividend, Life Insurance Holds Back Profit

The first quarter at IDI Insurance looks almost unchanged at the bottom line: comprehensive profit of NIS 89 million, essentially matching the parallel quarter. The breakdown says something sharper. Motor insurance, especially comprehensive and third-party cover, cut prices and still improved underwriting profitability, so the drop in premiums did not turn into margin erosion this quarter. Compulsory motor, a weak point in the 2025 annual report, moved to a small but positive pre-tax profit. On the other side, life insurance made the quarter less clean: an unusually high claims ratio and higher finance expenses erased that segment's contribution and put IFRS 17 volatility back in the center. The dividend is supported by a solvency ratio of 134% even after NIS 140 million of dividends, but operating cash flow was negative because of a one-time National Insurance Institute payment and higher tax advances. The right read is therefore not "profit did not grow", but "the motor engine is working better, while life insurance and cash still need proof". The next quarters need to show that motor property profitability holds after the approved tariff is implemented, that compulsory motor does not slip back into losses, and that life insurance returns to contribution without absorbing the improvement in general insurance.

Premiums Fell, but Underwriting Produced More Profit

The company is a direct insurer whose economics are driven by underwriting, pricing, claims management, and the investment of capital backing insurance liabilities. The business map this quarter is relatively clear: general insurance, especially motor, carried profit; life insurance reduced the quality of the bottom line; and health continued to contribute, while remaining sensitive to interest rates and assumption updates.

The accounting headline does not show that on its own. Gross premiums fell 12% to NIS 1.01 billion, but the decline looks steeper because of the government employee tender comparison effect. Excluding that tender, premiums were down only 1%, and insurance service revenue rose 3% on the same basis. At the same time, insurance service profit increased 11% to NIS 145.4 million, and insurance service profit after segment operating expenses rose 14% to NIS 129.9 million.

That matters because it separates volume from underwriting quality. An insurer can report lower premiums and still be in a better business position if it gives up less profitable business, corrects pricing, or benefits from lower claims. In the first quarter, general insurance delivered exactly that split: pre-tax profit in the segment rose to NIS 110.2 million from NIS 77.7 million in the parallel quarter, even though segment premiums fell 15%, and were down only 2% excluding the government tender.

Motor Property Cut Prices Without Breaking Profitability

The formal regulatory category is motor property insurance, meaning comprehensive and third-party cover. This is the most important finding in the quarter. Premiums in the line fell 20% to NIS 524.2 million, and were down 7% excluding the government tender. The decline did not come from a collapse in policy count: the number of policies rose about 4%. It mainly reflected price reductions after lower theft risk and stronger competition.

Normally, a price cut in a claims-heavy motor line would be a warning sign. This quarter, it did not break underwriting. Insurance service profit in motor property rose 50% to NIS 88.3 million, pre-tax profit rose 44% to NIS 83.7 million, and the gross and retained combined ratio fell to 83%, compared with 90% in both the parallel quarter and full-year 2025. That does not prove the new profitability level is permanent, but it does prove that the first phase of price cuts did not wipe out the operational improvement.

This point is especially important after the new tariff approval. The regulator required several insurers to submit motor property tariffs, and the company received approval to market a new tariff that will be implemented for policies starting no later than August 1, 2026. In a previous analysis on the motor insurance tariff approval, the key checkpoint was whether tighter regulatory oversight would make the exceptional profitability harder to sustain. The first quarter does not answer that question fully, because the new tariff has not yet been fully implemented, but it does give a better starting point: the company does not look as if it is holding profit only through excessively high pricing.

Compulsory motor gives another small, earlier signal. The line moved to pre-tax profit of NIS 11.3 million from NIS 8.5 million in the parallel quarter, and insurance service profit rose to NIS 7.9 million. That is an improvement relative to 2025, when compulsory motor recorded a pre-tax loss of NIS 24.6 million. Still, one quarter is not enough to conclude that the line has stopped pressuring the motor package. This needs at least two more reporting periods: whether policy growth, CPI-linked rates, and portfolio improvement are enough to preserve underwriting profit when claims normalize.

Life and Health Keep the Read Less Clean

If general insurance is the reason to read the quarter positively, life insurance is the reason not to overstate it. Life premiums rose 4% to NIS 95.6 million, but insurance service profit dropped from NIS 37.7 million to NIS 2.6 million, and the segment moved from pre-tax profit of NIS 28.4 million to a pre-tax loss of NIS 15.2 million. The weakness reflected an unusually high claims ratio in the current quarter versus an unusually low claims ratio in the parallel period, as well as higher finance expenses from insurance liabilities.

This is not just accounting noise. Once life insurance moves to a loss, the improvement in motor property has to cover another segment instead of reaching the bottom line in full. In addition, finance expenses from life insurance liabilities rose to NIS 11.9 million from NIS 6.3 million in the parallel quarter, and the rise in the interest-rate curve also hurt health. Under IFRS 17, interest-rate changes and assumption updates can change the timing of future profit recognition, so good motor underwriting is not enough by itself to make the quarter clean.

The future profit stock in life and health did not break. CSM, the contractual service margin representing future profit not yet recognized, was NIS 340 million in life and NIS 653 million in health at the end of March, compared with NIS 332 million and NIS 655 million at year-end 2025. That means the future profit pool remains meaningful, but the quarter is a reminder that it does not flow to earnings in a straight line. In health, pre-tax profit rose to NIS 6.9 million and insurance service profit increased 56% to NIS 30.3 million, but finance expenses from insurance liabilities there also nearly doubled to NIS 21.5 million.

An investor who looks only at premium growth could miss the real question: whether life and health can maintain a future profit pool without creating volatility that masks the improvement in general insurance. In the first quarter, the answer is only partial. Life looks like a weak event against an exceptionally strong comparison period, but until another quarter shows a more normal claims ratio, the loss should not be treated as noise alone.

The Dividend Is Backed by Solvency, Not Clean Quarterly Cash Flow

The company continues to behave like a cash-return equity. In March 2026, it declared a NIS 75 million dividend that was paid in April, and in May 2026 it declared another NIS 65 million dividend. The May dividend equals about 73% of quarterly comprehensive profit, and continues a policy aimed at distributing at least 50% of annual profit, subject to capital constraints.

The distribution base is solvency, not quarterly cash flow. The solvency ratio at the end of 2025 was 134% after material capital actions, including the two dividends declared after the calculation date. The board target is 120%, and the surplus above that target was NIS 218.5 million. That leaves room for distribution, but not unlimited room: a 25% drop in equity markets would reduce the ratio by 10 percentage points, and 5% morbidity or mortality shocks would reduce it by about 5 to 6 points.

Here it is important to separate normalized profitability from all-in cash flexibility after real cash uses. Operating cash flow was negative NIS 95.3 million, compared with positive operating cash flow of NIS 221.4 million in the parallel quarter. The weakness mainly reflected a one-time payment to the National Insurance Institute under a settlement for road accidents from 2016 through 2022, and higher tax advances. Cash also fell from NIS 277.0 million at the start of the year to NIS 153.1 million at the end of March, before the April dividend payment.

The dividend therefore does not look detached from capital, but it is also not supported by clean quarterly operating cash. That distinction matters for an insurer that returns substantial cash. If the next quarters return to positive operating cash flow and solvency remains above target, the distribution will look like a natural translation of profitability and capital. If cash flow remains weak or solvency erodes because of markets, claims, or interest rates, the market is likely to focus less on dividend yield and more on how much capital cushion the company is willing to release.

What Needs to Happen Next

The first quarter improves the quality of the read on the company, but it does not clean it up. General insurance, especially motor property, delivered a stronger quarter than the headline profit suggests. Compulsory motor gave a first positive signal after a weak year. The solvency ratio supports the dividend, even after two material distributions.

The main remaining friction sits in two places. The first is implementation of the approved tariff in motor property: if the combined ratio remains low after price reductions and tighter tariff approval, the motor engine will have a much stronger proof point. The second is life insurance: another weak quarter there would raise the risk that group profit is too dependent on motor and the investment portfolio, and not enough on stable profitability across business lines.

From here, 2026 looks like a proof year, not a breakout year. The company has already shown in the first quarter that it can underwrite better even in a competitive environment, and that it has capital room for distributions. Now it needs to show that the improvement is not just a convenient mix of motor claims, the government tender comparison effect, and unusual cash timing. The checkpoints are the combined ratio in motor property after August, continued profitability in compulsory motor, a return to reasonable profitability in life, and operating cash flow that can support dividends without eroding liquidity.