Phoenix and CSM: New Business Still Does Not Cover Future-Profit Releases
Phoenix's CSM and additional future-profit pool rose in the first quarter, but NIS 197 million of new business did not cover NIS 241 million of releases. The increase leaned mainly on economic, rate and other effects, so the quality of the future-profit build still needs proof.
The main article on Phoenix already showed that the dividend and buyback are better covered today than underwriting quality is proven. This continuation isolates the CSM, the contractual service margin, and the additional future profits from investment policies. The headline number looks positive: the pool rose from NIS 9.049 billion at the start of the year to NIS 9.204 billion at the end of the first quarter. But the quality of that increase is weaker than the headline, because new business contributed only NIS 197 million against NIS 241 million of releases. The net increase was carried mainly by NIS 198 million of economic, interest-rate and other effects. This does not break the broader thesis, because the pool is still large and insurance core profit remains material, but it does show that future profit has to be rebuilt through sales and new products, not just move with rates, actuarial assumptions and investment policies that are not full accounting CSM.
The Increase Is Real, But New Business Did Not Build It
For a large insurer, rising CSM is not automatically clean evidence of strong new business. The pool can grow because of rate changes, financial assumptions, model updates or other adjustments, even when the release of future profit into earnings is higher than the addition from newly written policies. The key ratio this quarter is therefore not only the closing balance, but whether new business replaces the profit being released.
The first quarter of 2026 does not yet clear that test. At the total pool level, including investment policies, new business covered only about 82% of releases. Looking only at life and health CSM, excluding investment policies, the coverage is lower: NIS 165 million of new business against NIS 216 million of releases, or about 76%.
| Future-profit layer in Q1 | New business | Releases | Economic, rate and other effects | Net balance change | New-business coverage of releases |
|---|---|---|---|---|---|
| CSM and additional future profits, including investment policies | 197 | 241 | 198 | 155 | 82% |
| Life and health CSM only | 165 | 216 | 182 | 132 | 76% |
| Health growth products | 101 | 138 | (7) | (44) | 73% |
| Life total | 64 | 59 | 186 | 192 | 108% |
| Investment policies | 32 | 25 | 16 | 23 | 128% |
This table explains why "the pool increased" is not enough. The increase is real, but it did not come from new business already covering the pace of future-profit release. For an IFRS 17 insurer, that distinction matters: CSM release is a recurring profit source, but if new business does not refill the pool at the same pace, the quality of future earnings is weaker than the closing balance suggests.
Health Is Releasing Faster Than It Builds
The sensitive point is health growth products. Their balance fell from NIS 5.091 billion to NIS 5.047 billion, because NIS 101 million of new business did not cover NIS 138 million of releases, and there was also a negative economic effect of NIS 7 million. At the total health segment level, the balance also fell, from NIS 6.417 billion to NIS 6.357 billion.
That is interesting precisely because health core income before tax rose to NIS 252 million from NIS 237 million in the comparable quarter. In other words, the current quarter can look good in current earnings while the future-profit pool in growth products is not growing. That does not negate the quality of the health business, but it limits the extent to which higher core income can be read as full proof of stronger future-profit build.
Life looks more comfortable at first, because NIS 64 million of new business covered NIS 59 million of releases. Still, most of the segment increase did not come from that. The life balance rose from NIS 1.975 billion to NIS 2.167 billion mainly because of NIS 186 million of economic, interest-rate and other effects. Within that, life growth products actually fell from NIS 645 million to NIS 627 million despite positive new business, due to a negative economic effect of NIS 55 million.
Investment policies add another layer that has to be read carefully. They rose from NIS 657 million to NIS 680 million, and new business there covered releases. But the company presents them alongside CSM even though they are not included in CSM under the accounting definition, and the calculation is based mainly on an embedded-value methodology net of acquisition costs. This may be a strategically important activity, but it is not the same as pure insurance CSM.
The Stochastic Model Can Lift the Pool Without Proving Sales
The accounting event that may complicate interpretation ahead is the implementation of the stochastic model. The company estimates that the model is expected to add about 12% to the solvency ratio as of December 31, 2025, and to have a material positive effect on the CSM balance. The effect on net profit is expected to be positive but immaterial, because the CSM entry captures the economic value over the full life of the insurance contract, while net profit recognizes only the portion attributed to the reporting period.
That can be positive for capital and for the size of the future-profit pool. But it is not the same proof as new business covering releases. Such a transition can increase CSM through measurement and assumptions before the reader sees a change in sales pace, underwriting quality or current earnings contribution. The calculation is also not yet audited or reviewed, and inclusion remains subject to completion of the audit process and regulatory approval.
The next quarters therefore need to separate three sources: new business, future-profit release and measurement updates. If the balance rises because of the model or rates, that can still be good news, but it will not by itself answer whether growth products in health and life are creating enough new future profit.
What Needs To Show Up Now
The current judgment is that Phoenix's CSM and additional future-profit pool is still large, but the first quarter did not prove enough organic rebuild. The rise to NIS 9.204 billion leaned more on economic, rate and other effects than on new business, and health growth products declined. The counter-thesis is legitimate: insurance core profit is still high, some life products and investment policies did cover releases, and the stochastic model may add real economic value. But the next proof point is clearer now: new business needs to start covering releases, especially in growth products, and the company needs to present the stochastic-model impact in a way that lets the market distinguish new sales, future-profit release and assumption updates.
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