Harel's Financial Blueprint: How Diversification Forges Growth

TEL AVIV, Israel – May 27, 2026 – Harel Insurance Investments and Financial Services today unveiled first-quarter results that paint a vivid picture of a legacy industry in transformation. While the headline figures—a solid NIS 562 million in comprehensive income and a robust 18.5% return on equity—signal a company in good health, the real story lies beneath the surface. Harel's performance is not merely an insurance success story; it is a masterclass in strategic diversification, showcasing how the fusion of asset management, credit, and traditional insurance is creating a resilient financial engine for the future.

At a time when market volatility and shifting risk landscapes challenge established models, Harel’s Q1 report offers a compelling look at how innovation is intersecting with real-world finance. The group's ability to navigate turbulence in one segment by leveraging strength in others demonstrates a forward-thinking approach that is reshaping its identity from a dominant insurer into a comprehensive financial services powerhouse.

The New Growth Engines: Asset Management and Credit

The most striking aspect of Harel’s Q1 2026 performance is the surging contribution from its non-insurance ventures. The company's strategic pivot towards broader financial services is no longer a future ambition; it is the primary driver of current profitability. Core profit from the asset management segment skyrocketed by an impressive 52% year-over-year, reaching NIS 97 million. This wasn't a fluke but the result of a deliberate strategy, fueled by growing Assets Under Management (AUM) and the sophisticated management of pension funds, provident funds, and a growing suite of financial products like ETFs.

Simultaneously, Harel's credit segment has become a formidable pillar of its financial structure. The division posted a 20% increase in core profit to NIS 61 million, a testament to the continuous expansion of its credit portfolio, which now stands at NIS 8.1 billion. This growth is largely anchored in the Israeli mortgage sector, where Harel is carving out a significant niche. By expanding into development property finance and credit for medium-sized businesses, the company is embedding itself deeper into the fabric of the Israeli economy. This expansion comes as the Bank of Israel maintains a steady interest rate of 4.5%, creating a complex but navigable environment for lenders.

The combined success of these two divisions powerfully counterbalanced performance fluctuations elsewhere. The group’s total AUM, which swelled to approximately NIS 630 billion, underscores its expanding influence. This isn't just about managing money; it's about building an ecosystem where capital is deployed across a spectrum of financial activities, creating multiple, reinforcing revenue streams that are less susceptible to the specific risks of any single market.

A Tale of Two Insurances

While the new ventures flourish, the report also highlights the inherent complexities of the traditional insurance market. Harel’s results reveal a starkly divergent performance within its core insurance activities, further validating its diversification strategy. The life insurance segment saw a significant drop in comprehensive income, falling to NIS 24 million from NIS 184 million in the same quarter last year. The company attributed this to a “statistical increase in the claim amounts in life risks products,” a reminder of the inherent volatility and unpredictability in this line of business.

However, this dip was effectively buffered by strong performance elsewhere. The non-life insurance division delivered a marked improvement, with comprehensive income before tax jumping by NIS 117 million to NIS 305 million. This was driven primarily by better results in the compulsory motor and motor property segments. Health insurance also demonstrated steady growth, with its pre-tax comprehensive income rising to NIS 327 million.

This internal balancing act is crucial. It shows that while Harel remains Israel's largest insurer, its future is not solely dependent on selling policies. The group's structure allows it to absorb shocks in one area—like a statistically challenging quarter for life insurance claims—while capitalizing on favorable conditions in others. This resilience is a key differentiator in an increasingly competitive field.

Navigating a Competitive and Regulated Landscape

Harel’s strategic success is even more pronounced when viewed within the context of the Israeli financial market. The sector is dominated by a handful of major players, and the competition is fierce. In Q1, Harel and its primary competitor, Phoenix Holdings, appear to be pulling away from the pack. While Phoenix reported a higher ROE of 24.1%, Harel’s strong, consistent growth and massive AUM solidify its top-tier position. Other legacy players like Clal and Migdal, while still significant, have shown more varied performance, with some facing challenges in maintaining capital adequacy.

Here, Harel’s financial prudence becomes a key asset. As of year-end 2025, its solvency ratio stood at a comfortable 165%, well above the regulatory requirements of frameworks like Solvency II. This strong capital position not only satisfies regulators at the Capital Market, Insurance and Savings Authority but also provides the foundation for its strategic investments and expansion into credit and asset management. It signals to investors and the market that Harel is built to withstand economic stress, a critical advantage in an uncertain global environment.

Value Creation Beyond Premiums

Perhaps the most forward-looking indicator in Harel's report is the growth in its Contractual Service Margin (CSM). This metric, which represents the unearned future profit from its in-force insurance contracts, grew to a massive NIS 17.5 billion. More importantly, the new business written in the first quarter alone generated NIS 514 million in new CSM, a 26% increase from the prior year. This figure significantly outpaced the NIS 411 million in CSM that was released into profit during the quarter, meaning the company is adding to its reservoir of future profits faster than it is drawing from it.

This is the quiet engine of long-term value creation. It demonstrates that Harel's focus on growth products like life risk and medical expense policies is building a sustainable and predictable profit stream for the years to come. By successfully marrying this long-term insurance value with the immediate, dynamic returns from asset management and credit, Harel is crafting a business model that is both resilient and growth-oriented. It’s an approach that acknowledges the challenges of the past while aggressively seizing the opportunities of a more integrated financial future.