Zur in the First Quarter: The Holding Discount Runs Through Dividends, Debt and Adgar FX

Zur reported a first quarter that strengthens the operating story in several layers, but still does not solve the reason a holding company like this trades at a discount. Net profit attributable to shareholders jumped to NIS 47.5 million, mainly because the consumer-credit arm improved sharply, and the insurance layer continued to generate profit and dividends. At the same time, equity attributable to shareholders rose only to NIS 772 million from NIS 770 million at the end of 2025, because profit met a shareholder dividend and other comprehensive loss at the investee level. The company's value table looks unusual: NIS 25.42 per share using the market value of holdings and NIS 35.89 using valuation work, compared with a traded share price of NIS 11.13. That gap still needs cash proof, because the value sits in lower layers and part of it depends on market prices, valuations, distribution capacity and currencies. The current quarter provides two positive proofs: insurance continues to upstream dividends, and credit returned to materially higher profitability. The remaining bottleneck is access to cash at the parent layer, while Adgar already absorbed an FX-driven other comprehensive loss in the quarter and, after the balance-sheet date, further weakness in the euro and Canadian dollar is expected to reduce the company's share of Adgar's equity by about NIS 25 million.

The Holding Company Is Measured by What Moves Up to the Parent

Zur Shamir holds four different engines: insurance through IDI Insurance, consumer credit through Mimun Yashir, income-producing real estate through Adgar Investments, and global financial services through Nima. In a holding company, accounting profit matters less than the path that turns value into accessible cash: asset value, debt above the assets, dividends that move up and access to the debt market.

In the first quarter, the company's share in investee-company profit rose to NIS 59.4 million from NIS 30.5 million in the comparable quarter, and net profit attributable to the company reached NIS 47.5 million. Total comprehensive income attributable to shareholders was lower, at NIS 33.5 million, because the company's share of other comprehensive loss from investees was NIS 14.1 million. That is progress compared with the prior 2025 analysis, where the key tracking point was the ability to turn value at subsidiaries into cash accessible at the parent, not only into consolidated profit.

The datapoint that frames the quarter is the company's own value table. On book value, calculated equity per share is NIS 11.86, almost aligned with the NIS 11.13 share price. Using the market value of listed holdings, the calculated equity rises to NIS 25.42 per share. Using the valuations published in May 2026 for Bituach Yashir and Yashir Holdings, it reaches NIS 35.89 per share.

The gap invites a simple cheap-stock read, but for a holding company it is only the starting point. The table shows investments in investees at NIS 1.94 billion on book value, NIS 2.82 billion using market prices, and NIS 3.50 billion using valuations. Against that, the value table deducts NIS 1.19 billion of net financial debt. Within that figure, the company itself has about NIS 1.4 billion of gross financial debt against NIS 434 million of cash and securities. The discount is therefore not only a pricing gap. It also reflects the time, debt and conditions required before value at subsidiaries reaches Zur shareholders.

Consumer Credit Drove the Profit Jump, Credit Losses Define Quality

The consumer-credit segment was the engine that moved the quarter. Comprehensive profit before tax rose to NIS 84.1 million from NIS 32.3 million in the comparable quarter. Revenue from consumer credit rose by about 29% to NIS 386.5 million, and much of the improvement came from fair value and loan-portfolio transactions: in auto loans, revenue from changes in fair value rose by about NIS 62 million, and in mortgages it rose by about NIS 46 million, including about NIS 38 million from a mortgage securitization transaction.

That profit quality needs to be unpacked. The credit portfolio that has not been assigned to third parties reached about NIS 9.8 billion, and growth also relies on assignments and securitization. During the quarter, auto-loan and mortgage portfolios were assigned or securitized for about NIS 1.42 billion and NIS 399 million, respectively, and after the balance-sheet date additional auto-loan assignments totaled about NIS 715 million. The business can generate volume, but it has to show that volume becomes recurring spread and not only transaction gains and fair-value income.

Credit losses remain the yellow flag. Credit-loss expense rose to NIS 73.4 million from NIS 44.5 million in the comparable quarter. The credit-loss ratio in auto loans rose to 4.02% from 3.18%, and in mortgages to 0.3% from an unusually low 0.07% in the comparable quarter. Part of the pressure was tied to Operation Sha'agat HaAri: in the auto segment, Mimun Yashir estimates that credit-loss expenses increased by about NIS 11 million because of payment deferrals, weaker customer conditions and difficulty realizing vehicles during the operation. From April 2026, loan origination volumes in auto and mortgages returned to their pre-operation pace.

The message is not that credit is weak. The quarter shows a profitability recovery, lower general and administrative expenses in auto despite higher loan origination, and an improvement in the average cost of credit. The contribution of credit to Zur over the next few quarters will be measured by stabilization in credit losses and funding cost, not by another quarter of fair-value income alone.

Insurance Upstreams Cash, Adgar Shows the Price of FX

Insurance remained the group's anchor. Comprehensive profit before tax in insurance was NIS 136.5 million, almost unchanged from NIS 137.0 million in the comparable quarter. Beneath that stability, the mix changed sharply: general insurance improved to NIS 110.2 million of comprehensive profit before tax, mainly because motor property, compulsory motor and other property-and-liability lines improved. Life and long-term savings moved to a NIS 15.2 million comprehensive loss before tax, mainly due to an unusual claims ratio and finance expenses from insurance contracts. Health contributed NIS 6.9 million.

Insurance matters here less as an earnings story and more as a cash pipe. IDI Insurance's solvency ratio stood at 134% at the end of 2025, above the board target of 120%, after deducting the NIS 75 million dividend declared in March 2026 and the roughly NIS 65 million dividend declared in May 2026 from recognized own funds. At Zur's level, Bituach Yashir declared a NIS 40 million dividend in March, of which the company's share was NIS 35.1 million, and on May 31 it declared another NIS 25 million dividend, of which the company's share is expected to be about NIS 22 million. This is the proof the market was waiting for after 2025: not only value below, but cash moving up.

Adgar tells the other side. Rental income declined to NIS 81.1 million from NIS 84.8 million, mainly because of exchange rates, a property sold in Israel and lower average occupancy in Canada. Real estate profit before tax still reached NIS 49.0 million, helped by investment income and lower net finance expenses. Then came other comprehensive income: a NIS 45.9 million loss absorbed almost the entire contribution, and comprehensive profit before tax in the segment fell to only NIS 3.1 million.

The post-balance-sheet event sharpens the risk. Adgar has excess assets over liabilities of about CAD 0.4 billion and EUR 0.2 billion. After March 31 and close to the reporting date, the Canadian dollar and euro declined by about 10% against the shekel. The expected effect on equity attributable to Adgar shareholders, net of existing hedges, is a decline of about NIS 48 million, and the company's share is about NIS 25 million. That is why the operating improvement in real estate is not enough when FX works against equity.

Debt Is Far From Covenants, and the Next Read Depends on Upstream Cash

The relevant cash frame for Zur is all-in cash flexibility at the parent layer: cash, securities and dividends against shareholder distributions, interest, debt repayments and refinancing access. On a standalone basis, the company ended March with NIS 28.8 million of cash and NIS 405.6 million of financial assets. Against that, financial liabilities totaled about NIS 1.40 billion. The top layer therefore should not be assessed by consolidated profit, but by the cash balance, financial assets, dividends to be received and access to the debt market.

In the quarter itself, standalone operating activity almost did not consume cash: only NIS 40 thousand. Investing activity generated NIS 6.1 million net, mainly from net sales of financial assets, and there was almost no financing activity. Two non-cash items explain the timing: a NIS 35 million dividend declared to shareholders and not yet paid, and NIS 35.9 million of dividends declared by investees and not yet received by the company.

There is no immediate covenant pressure. The company's equity is NIS 772 million, against minimum equity requirements of NIS 90 million for Series J, NIS 180 million for Series K, NIS 290 million for Series L and NIS 300 million for Series M. The net financial debt to total asset value ratio is about 35% for Series J and about 29% for Series K through M, versus a 55% cap. For Series L and M, the equity-to-balance-sheet ratio is about 43%, versus a minimum 12% requirement.

The legal note does not define the quarter, but it explains why regulation and litigation remain part of earnings quality in a group that holds insurance and consumer credit. Provisions for all pending legal claims at group companies rose to NIS 185 million from NIS 156 million at the end of 2025. The aggregate claimed amounts in the summary table are about NIS 1.11 billion based on plaintiffs' pleadings, while the company emphasizes that these are plaintiff estimates and not a quantified company exposure estimate.

The first quarter shifts Zur from the question of whether there is value in the assets to a more practical question: how quickly that value moves up, and how much remains after debt, dividends and FX. If credit losses stabilize, funding cost does not rise again, dividends from Bituach Yashir continue to reach the parent, and FX does not erase Adgar's improvement, Zur's value table becomes easier to defend. If one of those four weakens, the market will have another reason to keep the holding discount high, even when the value table looks attractive.