Harel Insurance Investments and Financial Services (TASE: HARL) reported a record second quarter of FY26, with comprehensive income after tax rising 30% year-on-year to NIS 1.024 billion. The group delivered a return on equity (ROE) of 37% for the quarter, driven by higher investment income and strong core profit growth in its asset management and credit segments.

Financial Highlights

The insurer’s performance was underpinned by robust expansion in non-insurance businesses, which offset moderation in certain insurance lines. Total assets under management (AUM) reached NIS 638 billion as of June 30, 2026, marking a 10% increase from year-end 2025.

For the first half of FY26, comprehensive income after tax grew 19% to NIS 1.59 billion, with an H1 ROE of 27%. Core profits after tax for the half-year increased 6% to NIS 1.2 billion.

Segment Performance

Asset Management and Credit

The asset management segment saw core profits surge 58% to NIS 131 million in Q2FY26, fueled by rising management fees linked to AUM growth. The segment’s total assets stood at NIS 498 billion, an increase of NIS 48 billion since year-end 2025. This includes pension, provident, mutual funds, and ETFs.

Simultaneously, the credit segment recorded a 32% rise in core profits to NIS 79 million, supported by portfolio expansion. The credit book grew to NIS 8.8 billion, up NIS 2.3 billion over the past 12 months, with strength in development property finance, mortgages, and medium business credit.

Insurance Operations

Insurance activity showed mixed results across lines. Health insurance comprehensive income before tax improved by NIS 143 million to NIS 389 million in Q2FY26. However, underwriting profit in this segment declined to NIS 228 million from NIS 267 million in the prior year period.

Life insurance comprehensive income before tax rose 38% to NIS 503 million, with underwriting profit improving by NIS 37 million to NIS 207 million. Non-life insurance saw comprehensive income fall to NIS 294 million from NIS 392 million, though underwriting profit edged up slightly to NIS 126 million.

What the Numbers Show

A key divergence exists between the group’s top-line premium growth and its insurance underwriting profitability. While total premiums and contributions grew 18% to NIS 25.5 billion in the first half, overall insurance core profits before tax declined slightly from NIS 1.36 billion to NIS 1.32 billion. This decline was primarily due to a statistical increase in life insurance claims in Q1FY26, partially offset by gains in non-life insurance. Meanwhile, the Contractual Service Margin (CSM) from new sales in life and health insurance grew 23% to NIS 992 million, indicating that new business value creation remains strong despite short-term claim volatility.

Capital Returns

The Board updated the dividend policy to quarterly distributions, replacing the previous semi-annual schedule. It announced a dividend distribution of NIS 400 million. Since the beginning of the year, total dividends and share buybacks have amounted to approximately NIS 1.5 billion.

AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of "a" (Excellent) to Harel Insurance Company Ltd, the main operating subsidiary of Harel Insurance Investments & Financial Services Ltd. The outlook assigned to these credit ratings is stable. This makes Harel the only company in Israel with this rating, the highest currently attained by financial institutions and insurance companies in the country. The ratings reflect Harel’s very strong balance sheet strength, strong operating performance, neutral business profile, and appropriate enterprise risk management.

The assessment of balance sheet strength is underpinned by consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The BCAR includes partial equity credit for economic capital embedded in long-term business and hybrid debt. The group’s consolidated adjusted financial leverage as at year-end 2025 was 21.2%, with interest coverage considered adequate. Harel benefits from strong financial flexibility as a regular participant in capital markets, evidenced by a history of successful debt instrument issues. However, the group’s meaningful operating leverage, principally derived from non-insurance subsidiaries, acts as an offsetting factor.

Financial Performance

The group has demonstrated a track record of strong profitability, generating net profits in each of the last six years of operations from 2020 to 2025. In 2025, Harel reported a return-on-equity of 27.0% and a net-net combined ratio of 87.1%. Underwriting profitability is supported by consistent investment income.

Business Profile

Harel’s business profile is characterised by a leading market position in Israel as a diversified financial group with insurance, asset management, and credit activities. The group’s portfolio is geographically concentrated, with insurance service revenue sourced from Israel constituting more than 95% of overall insurance service revenue. As a composite insurer, Harel Insurance’s portfolio is well diversified by product, with a slight tilt towards health insurance. The AM Best "A" rating adds to Harel's existing "A-" rating from S&P Global Ratings, further reinforcing the international recognition of the Company's financial strength, resilience, and financial stability.