Clal Capital Raising in the First Quarter: Series 15 Adds Capital but Leaves Refinancing Dependent on the Market

Clal Capital Raising moved in the first quarter from an earnings question to a depth-of-capital question: how much regulatory capital the market is still willing to fund for Clal Insurance, and on what terms. The January expansion of Series 15 brought in NIS 622.5 million gross, was recognized as Additional Tier 1 capital at Clal Insurance, and lifted the series' carrying amount to roughly NIS 1.82 billion. That is a positive signal for a market window that was open early in the year, but it does not close the question left by the prior annual analysis: whether that window remains open after rate, bond-market, and security-market volatility. At the financing company itself there is almost no free cash flow or standalone profit story, because the issuance proceeds were deposited at Clal Insurance, issuance costs were reimbursed, and cash remained around NIS 5 thousand. The quarter therefore strengthens Clal Insurance's ability to use a deeper capital instrument, but it also increases the weight of an instrument whose structure still includes interest cancellation, principal deferral, and write-down mechanics. The quarter's read is cautiously positive: there are no suspending or write-down circumstances, distributable earnings exist, and the issuance was completed with stable ratings, but the next proof point is the ability to refinance or expand regulatory capital under less comfortable market conditions.

Company Setup

Clal Capital Raising is not an insurer, investment company, or ordinary credit business. It is Clal Insurance's funding channel: it issues bonds and debt certificates to the public, deposits the proceeds as subordinated deposits at Clal Insurance, and Clal Insurance uses the money at its discretion and responsibility. The company's shares are not traded on the TASE, but because it has issued securities to the public it remains a reporting entity.

The economics are intentionally symmetrical. Subordinated deposits at Clal Insurance sit on the asset side, and the debt certificates issued to the market sit on the liability side. Finance income and finance expenses move together, overhead is covered by Clal Insurance, and the quarter ended with only NIS 197 thousand in profit. That profit is not the analytical focus. The focus is whether Clal Insurance can still convert bond-market demand into recognized regulatory capital without moving closer to triggers that allow payments to be deferred or principal to be written down.

That makes Clal Capital Raising mainly a market-access machine. Large debt is not abnormal for this kind of company, because debt issuance is the product. Operating cash flow of zero is not, by itself, a weakness either, because the structure is designed to balance interest received on the deposits with interest paid to holders. What is unusual in the first quarter is the change inside the funding stack: Series 15, an Additional Tier 1 instrument, became a much larger part of the system.

Series 15 Is No Longer a Side Layer

On January 22, 2026, the company expanded Series 15 by NIS 590.607 million par value and raised roughly NIS 622.5 million gross. One day earlier, the series received an ilA+ rating from S&P Maalot and an A1.il rating from Midroog, both with stable outlooks, for up to NIS 600 million par value. The proceeds were recognized as Additional Tier 1 capital at Clal Insurance, subject to the regulatory cap on that capital layer.

The important point is not only that the issuance happened, but where it sits in the capital structure. At the end of 2025, Series 15 had a carrying amount of roughly NIS 1.19 billion including interest payable. At the end of March 2026, it was already roughly NIS 1.82 billion. Over the same period, the other series, 11 through 14, declined together from roughly NIS 4.68 billion to roughly NIS 4.64 billion. In practice, the net expansion in financial liabilities came from the deeper capital layer, not from the older Tier 2 layer.

That changes the monitoring lens. In the focused follow-up on Series 15, the issue was not that the series exists, but that it needs to be read as a deep capital instrument rather than a plain long bond. The first quarter reinforces that point: Series 15 now represents roughly 28% of financial liabilities including interest payable. As that weight rises, the question is not only whether Clal Insurance can raise capital, but whether it can raise the right kind of capital without the market demanding too much compensation for loss-absorption mechanics.

The Cash Moved to Clal Insurance, and the Cushion Remains the Question

The quarter's cash flow shows how little cash Clal Capital Raising is meant to retain. The issuance generated NIS 622.5 million, and the full amount was deposited as subordinated deposits at Clal Insurance. Issuance costs were NIS 7.6 million, and Clal Insurance reimbursed them. Interest paid and interest received offset each other at NIS 85.9 million on each side, leaving operating cash flow at zero.

All-in cash flexibility after the period's actual cash uses is almost nonexistent at the company level, but that is not a normal red flag. It is the structure. The money is supposed to reach Clal Insurance, where it is supposed to strengthen capital. A claim that the financing company has "strong cash flow" would therefore be misleading: there is no free cash flow to common shareholders and no standalone cash-generating business. There is a mechanism that funds Clal Insurance, and debt holders depend on Clal Insurance's capital quality and repayment capacity.

The income statement tells the same story. Effective-interest finance income was NIS 66.5 million, and matching finance expense was the same amount. Fair-value movements contributed NIS 29.7 million on both sides. Profit before tax, NIS 302 thousand, came mainly from the change in the credit-loss allowance on the subordinated deposits, not from an independent operating activity.

The quarter closed three points that were open after the annual report, and left two others open. The first closed point is January demand: the market bought a meaningful Series 15 expansion, and the ratings remained on stable outlook. The second is trigger status: as of the approval date of the financial statements, there are no suspending circumstances for Tier 2, and no suspending or write-down circumstances for Series 15. The third is distributable earnings at Clal Insurance, a basic condition for avoiding interest cancellation.

But the proof is still partial. The issuance was completed in January, before much of the security and macro stress of the quarter was reflected in the financial statements. Later in the quarter, broad bond and Tel Bond indices posted slight declines, the Bank of Israel cut rates in January and May while keeping a cautious tone, and the company describes a local and global environment with elevated uncertainty. Clal Insurance currently does not expect the fighting to have a material effect on its medium-term results, but that is still not proof that the capital market will remain equally open for additional regulatory-capital issuance.

The most sensitive point is that the current disclosure gives a binary status, not a quantitative cushion. It says there are no suspending or write-down circumstances, but the financing-company report does not break down Clal Insurance's cushion above SCR, its distance from a 75% solvency ratio, or the sensitivity of that cushion to capital markets. That is enough to say the quarter passed without a trigger. It is not enough to say that Series 15's capital risk materially declined.

The governance layer above Clal Insurance also remains part of the risk, not as an immediate trigger but as noise that can affect rating, reputation, and agreements. The holding company above Clal Insurance is still described as having no controlling shareholder, with constraints that materially limit its influence over Clal Insurance and over officer appointments. A future transfer of control could affect certain group agreements, including with reinsurers. This does not cancel the positive signal from the issuance, but it prevents an overly clean conclusion.

The Quarter's Conclusion

Clal Capital Raising delivered one useful first-quarter proof point: in January 2026, the market was still willing to absorb a large Additional Tier 1 instrument for Clal Insurance. That is positive, especially after the previous annual analysis put market access at the center. But the quarter also sharpens the cost of that proof: Series 15 now takes a larger share of the funding layer, and every additional shekel raised through it increases dependence on Clal Insurance's solvency cushion and on market confidence in deeper capital instruments.

The current conclusion is that the company passed the expansion quarter, but did not solve the refinancing question. The strongest counter-thesis is clear: stable ratings, no suspending circumstances, and January demand can support the view that practical risk is low. The answer is that the current quarter does not test the market after all of the quarter's stress and does not disclose a quantitative cushion above the triggers. In the coming reports, the market is likely to focus less on the financing company's profit and more on three signals: whether Clal Insurance maintains a comfortable capital cushion, whether series ratings remain stable, and whether the group can keep raising regulatory capital without a sharp increase in funding cost.