Libra in the First Quarter: Profit Broadens Beyond Motor, but Capital Sets the Pace

The first quarter of 2026 strengthens the case that Libra is no longer only a story of an exceptional year in comprehensive and third-party motor, but it also shows that the next stage requires more capital and leaves less room to treat profit as free cash. The company reported net profit of NIS 25.1 million and pre-tax profit of NIS 38.3 million, with underwriting profit in general insurance rising to NIS 33.0 million. The new point is not the growth itself, but the spread of the proof: compulsory motor moved to pre-tax profit of NIS 9.5 million, the smaller general-insurance lines moved into profit, and retained contractual service margin in life insurance rose to NIS 19.6 million. Still, comprehensive and third-party motor did not deliver a completely clean quarter: the retained expense and claims ratio rose from 76% to 78%, and the company says average premium erosion offset part of the improvement in insured count and theft costs. The quarter should therefore be read as an improvement in the quality of the profit base, not as acceleration without cost. The next few quarters need to show three things: stability in retained motor profitability, continued growth in retained CSM without excessive pressure on solvency, and cash flow that stops contradicting reported profit after dividends and growth.

Profit Broadened Beyond Comprehensive Motor

Libra is a direct digital insurer whose economics are driven mainly by underwriting, pricing, claims management, reinsurance and the investment of capital that backs insurance liabilities. Motor property, meaning comprehensive and third-party motor, still carries most of pre-tax profit, but the first quarter matters because it slightly reduces that dependence. That was one of the checkpoints after the prior Deep TASE analysis on motor underwriting: whether 2025 was mainly an exceptional motor-property year, or the beginning of a broader profit base.

Pre-tax profit rose to NIS 38.3 million, compared with NIS 25.3 million in the corresponding quarter. In general insurance, pre-tax profit rose to NIS 37.0 million, but comprehensive and third-party motor was not the only contributor. Compulsory motor moved from pre-tax profit of NIS 0.8 million to NIS 9.5 million, and the smaller general-insurance lines, home, business, pet and travel insurance, moved from a small loss to pre-tax profit of NIS 1.0 million. For profit quality, that is more important than another quarter in which the core motor line remains profitable.

That breakdown changes the quarter's interpretation. Net profit rose to NIS 25.1 million, but the profit line alone could have hidden a company still almost entirely dependent on comprehensive and third-party motor. In practice, the quarter provides early evidence that compulsory motor and smaller activities are beginning to contribute as well. This is not proof of full diversification: comprehensive and third-party motor generated NIS 26.4 million of pre-tax profit, still most of the total. But the lines that were weaker in the past no longer look like a permanent drag on profitability.

Comprehensive Motor Remained Profitable, but Average Price Eroded

In comprehensive and third-party motor, insurance service revenue rose to NIS 149.3 million, compared with NIS 134.0 million in the corresponding quarter. Insurance service profit rose to NIS 25.8 million, and pre-tax profit rose to NIS 26.4 million. The company attributes the improvement to a higher number of insured customers and better theft costs, but it adds the point that prevents an overly clean read: the average premium in the line declined versus the corresponding period.

That matters because growth in customer count is not the same as growth in quality. In the general-insurance segment as a whole, new joiners rose by about 20%, while gross premiums rose by only about 16%, and the company attributes the gap to average premium erosion in comprehensive and third-party motor. At the same time, the gross expense and claims ratio in the line improved from 79% to 78%, but the retained ratio rose from 76% to 78%. In other words, pricing and theft trends helped at the total portfolio level, but after reinsurance the improvement was not sharper than in the comparable quarter.

That is the difference between strong profit and frictionless profit. As long as Libra continues to work almost entirely with private customers and without fleets or collectives, it keeps better control over portfolio quality and customer loyalty. But average premium erosion means competition is already visible in the numbers. If the retained ratio stays around 78% while prices erode, comprehensive and third-party motor will remain a high-quality profit engine. If price erosion moves faster than the improvement in volume and claims costs, the core line's profitability will look less strong than the current profit line suggests.

Life Is Growing on a Retained Basis, but Value Is Not Fully Accessible Yet

The more interesting non-motor line is life insurance. Gross premiums rose to NIS 5.0 million, compared with NIS 2.2 million in the corresponding quarter, and annualized premium stood at NIS 20.9 million at the end of March, compared with NIS 10.1 million a year earlier. This is still small relative to general insurance, but it is beginning to produce data that allow a better test of growth quality.

The important test is not only gross CSM, but retained CSM, meaning the part of the contractual service margin that remains with the company after reinsurance. In the follow-up analysis on life insurance, the checkpoint was how much of the future profit built in the line really remains for shareholders. In the first quarter the answer improved: gross CSM rose from NIS 30.9 million at the end of 2025 to NIS 37.8 million at the end of March, while retained CSM rose from NIS 15.0 million to NIS 19.6 million. The retained increase in the quarter, NIS 4.6 million, was about 67% of the gross increase.

Still, that value has not fully reached earnings. Life insurance contributed only NIS 1.2 million of pre-tax profit in the quarter. Insurance service profit rose to NIS 2.0 million, partly because of a higher CSM release, but the financial margin was negative by NIS 0.8 million because of an increase in the long-end interest-rate curve. In other words, future profit is being built, but accounting timing and interest rates still determine how much appears in each quarter.

Capital also sets a boundary. The solvency report attached to the filings shows that the capital requirement for life underwriting risk rose at the end of 2025 to NIS 40.5 million, compared with NIS 15.8 million at the end of 2024, mainly because of growth in life activity. In addition, new business in 2025 increased economic own funds by NIS 22.5 million, but increased the capital requirement by NIS 24.7 million, reducing the capital surplus by NIS 2.2 million. That is not a reason to dismiss the life engine. It is a reason to read it correctly: it adds future profit, but not for free in capital terms.

The Dividend Relies on Capital, Not Quarterly Cash Flow

On 28 May 2026, the board declared a NIS 10 million dividend, equal to about NIS 0.22 per share. That distribution does not look disconnected from capital: the economic solvency ratio at the end of 2025 was 136%, compared with 116% at the end of 2024, and the capital surplus was NIS 72.5 million. Even after deducting the dividend declared after the reporting date, the surplus over the board target was NIS 62.4 million. From 2026, the capital target rises from 105% to 110%, so the buffer exists, but the reference point is tougher.

All-in cash flexibility after actual cash uses in the quarter, as distinct from normalized maintenance cash generation, was negative. Operating cash flow used NIS 13.7 million, compared with positive operating cash flow of NIS 11.3 million in the corresponding quarter. Investments in IT systems and software used NIS 1.3 million, and lease-liability principal repayment, not total lease-related accounting expense, used NIS 0.6 million. As a result, cash declined from NIS 30.0 million at the end of 2025 to NIS 14.5 million at the end of March.

For an insurer, one quarter of negative cash flow is not enough to conclude that the business does not generate cash. Cash flow is affected by movements in the investment portfolio, insurance liabilities, taxes, claims and reinsurance. But when the company is also distributing dividends and building a life activity that requires capital, the gap between accounting profit and quarterly cash becomes a real monitoring point. The market can accept distributions as long as solvency remains comfortable, but it will demand more proof if cash flow remains negative in the coming quarters.

The Focus Moves From Growth Rates to Capital Quality

There is another risk layer that should be put in the right place. The contingent-liabilities note lists seven pending motions to certify class actions, with no provision recorded in the financial statements. Some of these proceedings touch exactly the places where Libra wants to differentiate itself: fast service, payment within 48 hours, the Chik product and the digital user experience. This does not change quarterly profit, but it is a reminder that an efficient digital model can also attract higher legal and regulatory scrutiny.

The first quarter improves the read on Libra, but it does not make it clean. Motor underwriting is still strong, compulsory motor and other activities are adding profit, and life insurance shows real growth in retained CSM. Against that, average premium erosion, negative quarterly cash flow, the higher capital requirement of the life activity and class-action exposure keep 2026 as a proof year. The checkpoints are clear: whether comprehensive and third-party motor remains profitable on a retained basis despite price pressure, whether life releases more profit without consuming too much capital, and whether the solvency ratio remains high enough to support growth and dividends together.