Investing.com -- Moody’s Ratings has affirmed the Baa1 insurance financial strength ratings (IFSR) for Clal Credit Insurance, one of the two largest credit insurers in the Israeli market and a subsidiary of Clal Insurance Company Ltd. The rating agency also upgraded the company’s outlook to stable from negative on March 27, 2025.
The change in outlook to stable is due to Clal’s substantial capital buffers and continuous strong performance, which positions the firm well to withstand further potential stress in the operating environment. This could include a possible one-notch downgrade of the sovereign debt rating. The revised outlook also reflects Moody’s upward revision of real GDP growth expectations for Israel, which will support Clal’s continued business growth and stability of asset prices, despite fiscal weakening and significant pressure on government finances.
As of June 30, 2024, Clal maintained a strong capital position, with a regulatory solvency ratio around 460%. The company continued to generate robust earnings, backed by stable and healthy loss ratios, since the onset of the military conflict in October 2023. Clal’s resilient earnings profile is partly due to its strong underwriting flexibility and ability to manage credit risk exposures to limit the impact of adverse economic developments on its profitability.
Clal also benefits from its affiliation with Atradius N.V., the second-largest global credit insurer, which holds a 20% stake in Clal and provides substantial reinsurance capacity to the company.
Despite the unchanged negative outlook and Baa1 long-term issuer rating for the Government of Israel, the economy is gradually recovering due to recent temporary ceasefire agreements with Hamas and Hezbollah. Moody’s now expects Israel’s real GDP growth to increase by 3.8% in 2025 and 4.3% in 2026, following a 1% growth last year.
The upward revision in economic growth forecasts supports Moody’s expectation of continued business growth and underwriting profitability for Clal. These factors contribute to the continued strength in the company’s overall credit profile.
The ratings on Clal could be upgraded if the downside risk to the sovereign and operating environment recedes sufficiently, and the outlook for the Government of Israel changes to stable. The company would also need to maintain its strong solvency positioning while continuing to generate strong earnings with stable loss ratios. A strengthening in explicit support from the company’s minority shareholder, Atradius N.V., could also be positive for the rating.
Conversely, Clal’s ratings could be downgraded if there’s a significant deterioration in the credit quality of Israel, evidenced by a multi-notch downgrade of the sovereign rating. The outlook could revert to negative if there’s a substantial reduction in the company’s solvency position, a significant and sustained deterioration in operating performance, or a weakening of the company’s business profile.
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