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I.D.I. INSURANCE COMPANY LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS AT DECEMBER 31, 2015

Note:This report is a translation of the original report in Hebrew to English, the original

version shall prevail.

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CONSOLIDATED FINANCIAL STATEMENTS AS AT DECEMBER 31, 2015

INDEX

Page

Auditor's Report 3-4

Consolidated Statements of Financial Position 5-6

Consolidated Statements of Profit or Loss and Other Comprehensive Income 7

Consolidated Statements of Changes in Equity 8-9

Consolidated Statements of Cash Flows 10-12

Notes to the Consolidated Financial Statements 13-160

- - - - - - - - - -

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Auditors' Report to the Shareholders

of I.D.I. Insurance Company Ltd. - Internal Control over Financial Reporting

We have audited the components of internal control over financial reporting of I.D.I. Insurance Company Ltd. and its consolidated company ("the Company") as at December 31, 2015 based on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The Company's Board of Directors and management are responsible for maintaining effective internal control over financial reporting, and for their assessment of the effectiveness of internal control over financial reporting included in the accompanying Board of Directors and management report. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the U.S. Public Company Accounting Oversight Board ("PCAOB") regarding the audit of internal control over financial reporting, as were adopted by the Institute of Certified Public Accountants in Israel. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether internal control over financial reporting has been effectively maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk of a significant weakness, as well as testing and evaluating design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing other procedures we thought necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Internal control over financial reporting of a company, which is an institution, is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards ("IFRS") and in accordance with the disclosure requirements prescribed by the Commissioner of Insurance according to the Supervision of Financial Services (Insurance) Law, 1981. Internal control over financial reporting of the Company, which is an institution, includes the same policies and procedures that: (1) relate to management of records which, in reasonable detail, accurately and adequately reflect the transactions and transfers of Company assets (including disposition of assets); (2 ) provide reasonable assurance that the transactions are recorded as required in order to enable the preparation of financial statements in accordance with IFRS and in accordance with the disclosure requirements prescribed by the Commissioner of Insurance according to the Supervision of Financial Services (Insurance) Law, 1981 and that the Company's receipt and issuance of funds are solely performed in accordance with authorizations of the Board of Directors and management of the Company; and (3) provide reasonable assurance regarding prevention or disclosure at the time of acquisition, use or transfer (including disposition) of Company assets, that can have a significant effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion the Company effectively maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 based on the criteria established in the Internal Control-Integrated Framework issued by COSO.

We have also audited, in accordance with generally accepted auditing standards in Israel, the consolidated financial statements of the Company as of December 31, 2015 and 2014 and for each of the three years in the period ended December 31, 2015 and our report dated February 28, 2016 expressed an unqualified opinion thereon, and we draw attention to Note 36 to the consolidated financial statements regarding exposure to contingent liabilities.

Tel Aviv, Israel Kost Forrer Gagai and KsirerFebruary 28, 2016 C.P.A .s

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Kost, Forrer Gagai and Ksirer3 Aminadav St.Tel-Aviv 6706703

Tel.:+972-3-6232525Fax: +972-3-5622555|www.ey.com

AUDITORS' REPORT

TO THE SHAREHOLDERS OF I.D.I. INSURANCE COMPANY LTD.

We have audited the accompanying consolidated statements of financial position of I.D.I. Insurance Company Ltd. ("the Company") as of December 31, 2015 and 2014 and the related consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's Board of Directors and management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with accepted auditing standards in Israel, including those prescribed by the Israeli Auditors' Regulations (Auditor's Mode of Performance), - 1973. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.. An audit includes a sample audit of evidence supporting the amounts and information contained in the financial statements. An audit also includes assessing the applied accounting rules and of the significant estimates made by the Board of Directors and the Management of the Company, as well as an evaluation of the general proper presentation provided by the financial statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company and its consolidated company as at December 31, 2015 and 2014 and the result of their operations, changes in equity and cash flows for each of the three years in the period that ended on December 31, 2015 in conformity with International Financial Reporting Standards ("IFRS") and in accordance with the disclosure requirements prescribed by the Commissioner of Insurance according to the Supervision of Financial Services (Insurance) Law 1981.

Without qualifying our aforementioned opinion, we draw attention to Note 36 to the financial statements regarding exposure to contingent liabilities.

We also audited, in accordance with the U.S. PCAOB Regulations regarding audit of internal control over financial reporting, as adopted by the Institute of Certified Public Accountants in Israel, the Company's internal control over financial reporting as at December 31, 2015 based on criteria published in the Internal Control-Integrated Framework issued by COSO and our report dated February 28, 2016 included an unqualified opinion on the effectiveness of the Company's internal control over financial reporting

Tel Aviv, Kost, Forrer Gagai and Ksirer

February 28, 2016 C.P.A .s

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Kost, Forrer Gagai and Ksirer3 Aminadav St.Tel-Aviv 6706703

Tel.:+ 972-3-6232525Fax: +972-3-5622555|www.ey.com


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31 2015 2014

Note NIS in thousands

ASSETS

Intangible assets 4 98,917 81,473

Deferred acquisition costs 5 229,280 208,040

Fixed assets 6 49,237 51,348

Real estate for investment 8 203,660 -

Reinsurance assets 14 164,347 152,628

Debtors and receivable 9 43,964 31,463

Outstanding premiums 10 364,465 260,791

Financial investments in respect of yield-dependent contracts 11 499,510 490,057

Other financial investments: 12

Quoted debt instruments 562,559 718,785

Unquoted debt instruments 1,055,64

0 1,062,77

6

Shares 17,177 26,053

Other 189,345 145,309

Total other financial investments 1,824,72

1 1,952,92

3

Cash and cash equivalents in respect of yield-dependent contracts 13a 15,519 27,222

Other cash and cash Equivalents 13b 244,068 365,216

Total assets 3,737,68

8 3,621,16

1

Total assets for yield-dependent contracts 11 515,029 517,279

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31 2015 2014

Note NIS in thousands

EQUITY AND LIABILITIES

EQUITY

Shares capital 14 14,429 14,188

Shares premium 341,577 336,481

Capital reserves 5,659 8,969

Retained earning 169,993 122,941

Total equity 531,658 482,579

LIABILITIES

Liabilities in respect of non-yield-dependent insurance contracts 15 2,067,528 1,990,464

Liabilities in respect of insurance and investment yield-dependent contracts 16 509,923 512,234

Financial liabilities 24 301,423 378,415

Deferred tax liabilities 21 20,890 15,968

Employee benefit liabilities, net 22 15,784 11,128

Current tax liability 39,757 18,119

Creditors and payables 23 250,725 212,254

Total liabilities 3,206,030 3,138,582

Total equity and liabilities 3,737,688 3,621,161


February 28, 2016Financial Statements Approval Date Moshe (Muki) Schneidman Raviv Zoller David Michael

Chairman of the Board General Manager Chief Financial Officer

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CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Year Ended December 31

2015 2014 2013Note NIS in thousands(except per share data)

Gross premiums earned 25 1,734,636 1,546,301 1,379,028Premiums earned by reinsurers 25 92,606 88,925 83,115

Premiums earned on retention 25 1,642,030 1,457,376 1,295,913Gains from investments, net and finance income 26 52,404 89,816 118,102Income from management fees 27 7,119 7,224 7,158Income from reinsurers' commissions 15,115 17,343 17,493Other income - - 50

Total Income 1,716,668 1,571,759 1,438,716Payments and change in liabilities in respect of gross insurance and investment contracts 1,124,251 963,944 909,657Reinsurers' share in payments and in change in liabilities in respect of insurance contracts 63,429 17,356 22,880Payments and change in liabilities in respect of insurance and investment contracts on retention 28 1,060,822 946,588 886,777

Commissions, marketing and other acquisition expenses 29 249,173 241,678 208,528General and administrative expenses 30 121,931 113,459 119,962Finance expenses 31 15,002 13,064 24,216Other Expenses 207 584 79Total Expenses 386,313 368,785 352,785

Income before taxes on income 269,533 256,386 199,154Taxes on income 21 101,505 98,023 77,889

Net income 168,028 158,363 121,265Other comprehensive income (loss):Actuarial income (loss) in respect of a defined benefit 22 (546) 2,063 (1,080)Effect of the tax 21 203 (778) 407

Other comprehensive income (loss): (343) 1,285 (673)

Total comprehensive income 167,685 159,648 120,592

Basic net earnings per share ( in NIS) 33 11.72 11.38 8.75

Diluted net earnings per share ( in NIS) 33 11.53 11.09 8.49Number of shares used to calculate earning per share:Basic 14,336 13,912 13,852

Diluted 14,568 14,282 14,288The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Shares capital

Share premium

Capital reserve in respect of capital notes

Capital reserve in respect of

Shares based payment Retained

earning Total

capitalNIS in thousands

Balance as at January 1, 2015 14,188 336,481 572 8,397 122,941 482,579

Net income - - - - 168,028 168,028

Other comprehensive loss - - - - (343) (343)Total comprehensive income for the period - - - - 167,685 167,685

Options exercise (Note 14) 241 5,631 - (5,631) - 241Cumulative effect, net, as at December 31, 2015, of changes in insurance reserves in general insurance (see Note 2(e)(2)(d)(4) - - - - 29,367 29,367Cost of share based payment cost (see Note 32) - - - 2,321 - 2,321

Issuance expenses - (535) - - - (535)

Dividend (see Note 14e) - - - - (150,000) (150,000)

Balance as at December 31, 2015 14,429 341,577 572 5,087 169,993 531,658

Shares capital

Share premium


Capital reserve in respect of

Shares based payment Retained

earning Total

capitalNIS in thousands

Balance as at January 1, 2014 13,759 322,767 572 13,431 93,293 443,822

Net income - - - - 158,363 158,363

Other comprehensive income - - - - 1,285 1,285Total comprehensive income for the period - - - -

159,648 159,648

Options exercise (Note 14) 404 11,110 - (11,110) - 404Issuance of share capital less issuance expenses (see Note 14) 25 2,604 - - - 2,629Cost of share based payment cost (see Note 32) - - - 6,076 - 6,076



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Capital reserve in

Shares capital Share premium


respect of Shares based

paymentRetained earning

Total capital

NIS in thousands

Balance as at January 1, 2013 13,963 311,139 572 - 57,701 383,375

Net income - - - - 121,265 121,265

Other comprehensive loss - - - - (673) (673)Total comprehensive income for the period - - - -

120,592 120,592

Shares capital conversion (329) 329 - - - - Issuance of share capital less issuance expenses 125 11,299 - - - 11,424Share based payment cost (see Note 32) - - - 13,431 - 13,431



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Year Ended onDecember 31

2015 2014 2013NIS in thousands

Cash flow from current operating activity (Annex A) 138,255 (143,875) 246,679

Cash flows from investing activities:

Investment in fixed assets (12,934) (21,194) (23,479)

Investment in intangible assets (34,653) (36,269) (30,825)

Proceeds from sale of fixed assets 1,883 3,404 1,731

Cash used for investment activity, net (45,704) (54,059) (52,573)

Cash flows from financing activities:

Proceeds from issuance of share capital less issuance expenses (535) 2,629 11,424

Proceeds from issuance of subordinated deeds less issuance expenses - 125,019 -

Dividend paid to equity holders of the Company (150,000) (130,000) (130,000)

Options exercised into shares 241 404 -

Settlement of subordinated deeds (74,893) - (73,481)

Net cash used in financing activities (225,187) (1,948) (192,057)

Effect of exchange rate fluctuation on balances of cash and cash equivalents (215) 785 (1,336)

Increase (decrease) in cash and cash equivalents (132,851) (199,097) 713

Balance of cash and cash equivalents as at the beginning of the year (Annex B) 392,438 591,535 590,822

Balance of cash and cash equivalents as at the end of the year (Annex C) 259,587 392,438 591,535


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CONSOLIDATED STATEMENTS OF CASH FLOWS



Cash flow from current operating activity (Annex A): Net income 168,028 158,363 121,265Adjustments to the profit and loss items:Net gains from financial investments for yield-dependent contracts (6,345) (27,699) (30,100)Net loss (gains) from other financial investments:

Quoted debt assets 253 (7,593) (20,156)Unquoted debt assets (43,903) (23,465) (36,295)Shares (2,157) (1,744) (7,376)Other investments (4,941) (22,294) (10,003)

Finance expenses in respect of subordinated deeds 13,970 12,978 23,268 Capital loss 207 584 79Depreciation and amortization:

Fixed assets 12,955 11,836 9,155Intangible assets 17,209 11,567 8,187Change in liabilities in respect of non-yield-dependent insurance and investment contracts 128,565 125,783 124,804

Change in liabilities in respect of yield-dependent insurance and investment contracts (2,311) 23,252 26,781Change in share-based payment transactions 2,321 6,076 13,431Change in reinsurance assets (16,171) 20,696 25,633Change in fair value of real estate for investment 11,080 - - Change in deferred acquisition costs (21,240) (13,535) (33,809)Taxes on Income 101,505 98,023 77,889Changes in other balance sheet items: Financial investments for yield-dependent contracts (8,688) 1,115 (12,156) Net acquisitions (sales) of other financial investments 143,575 (427,666) (19,197) Acquisition of real estate for investment (214,740) - - Outstanding premiums (103,674) (31,051) (28,443) Debtors and receivables (12,501) 2,634 4,696 Creditors and payables 38,454 16,057 8,952

Employee benefit liabilities, net 4,110 1,832 610

Total adjustments required to present cash flows from operating activities 205,561 (64,251) 247,215Cash paid and received during the period for: Interest paid (16,069) (10,729) (18,049) Interest received 34,512 34,666 60,831 Taxes paid (96,166) (111,464) (49,863) Taxes received 3,954 2,009 - Dividend received 6,463 5,894 6,545

Total cash flows provided by (used in) operating activities 138,255 (143,875) 246,679


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CONSOLIDATED STATEMENTS OF CASH FLOWS



Annex B - cash and cash equivalents as at the beginning of the year

Cash and cash equivalents in respect of yield-dependent contracts 27,222 20,337 19,739

Other cash and cash Equivalents 365,216 571,198 571,083

Balance of cash and cash equivalent as at the beginning of the year 392,438 591,535 590,822

Annex C - cash and cash equivalents as at the end of the year:

Cash and cash equivalents in respect of yield-dependent contracts 15,519 27,222 20,337

Other cash and cash Equivalents 244,068 365,216 571,198

Balance of cash and cash equivalent as at the end of the year 259,587 392,438 591,535


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I.D.I. INSURANCE COMPANY LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note 1: - GENERAL

a. I.D.I. Insurance Company Ltd. ("the Company") is an Israeli resident company which was incorporated in Israel and is officially domiciled at 35 Efal Street, Kiryat Arie, Petach Tikva. The Company's financial statements as at December 31, 2015 include those of the Company and its subsidiaries ("the Group"). The Company's shares are listed for trade on the Tel Aviv Stock Exchange ("the TASE").

b. The Company operates as a direct insurer in the general insurance, long-term savings branches and health insurance. In the general insurance branch, the Company operates in the motor casco, motor act, other property branch and other liability branches. In life insurance and long-term savings, the Company operates in marketing risk policies, occupational disability, savings policies and in health insurance the Company markets personal accidents insurance, illnesses and hospitalization, sever illnesses and foreign travel.

c. As at December 31, 2015, the holding rate in the Company is as follows: I.D.I. Holdings Ltd. ("Direct Holdings" or "the parent company") holds 49.30% of the Company's shares capital, Battery Ventures ("Battery Fund") hold 11.05% and 39.65% are held by the public.

The controlling shareholder in Direct Holdings is Direct Insurance Financial Investments Ltd. ("Direct Insurance"). The controlling shareholder in Direct Insurance is Zur Shamir Holdings Ltd. ("Zur Shamir"). The shares of Direct Insurance and of Zur Shamir are listed for trade on the Tel-Aviv Stock Exchange ("the TASE").

d. Definitions

The Company - I.D.I. INSURANCE COMPANY LTD.

The parent company - Direct I.D.I. Holdings Ltd.

The Group - The Company and its investees as detailed in Note 7.

Consolidated company - I.D.I. Issuance (2010) Ltd. Its financial statements are consolidated directly with the Company's financial statements.

Interested parties and controlling shareholder

- as defined in the Israeli Securities Regulations (Annual Financial Statements), 2010.

Related Parties - as defined in IAS 24.

The Commissioner - The Commissioner of the Capital Market, Insurance and Savings.

The Supervision Law - The Supervision of Financial Services (Insurance) Law, 1981.

Supervision Regulations - Supervision of Insurance Business Regulations (Capital Adequacy Requirement from an Insurer), 1998 as amended.

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Note 1: - GENERAL (continued)

d. Definitions (continued)

Ways of Investment Regulations

- Supervision of financial services (provident funds) (Ways of Investment applied to institutions), 2012 and "Investment Rules applied to institutions" circular.

Details of Account Regulations

- Supervision of Insurance Business Regulations (Details of Accounts), 1998, as amended.

Insurance contracts - Contracts in which one party (the insurer) assumes a significant insurance risk from another party (the policyholder) by consenting to compensate or indemnify the policyholder if a pre-defined uncertain future event (the insurance case) adversely affects the policyholder.

Investment contracts - Policies which are not insurance contracts.

Yield-dependent contracts - Insurance contracts and investment contracts in life assurance in respect of which the liabilities are linked to the return on the investment portfolio (investment profit sharing policies), or derived from such contracts.

Assets for yield-dependent contracts

- The total assets outstanding against liabilities arising from profit participating contracts.

Liabilities in respect of insurance contracts

- Insurance reserves and outstanding claims in life assurance, general insurance and health insurance.

Reinsurance assets - the reinsurers' share in the insurance reserves and in outstanding claims.

Premiums - Premiums including fees.

Earned premiums - Premiums relating to the reporting period.

Note 2: - SIGNIFICANT ACCOUNTING POLICY

a. Basis of Financial Statements Presentation

1. Measurement basis

The Company's financial statements are prepared on a cost basis, except real estate for investment, certain financial properties, (including derivatives) which are presented at fair value through profit or loss, and insurance liabilities.For more information on the measurement way of these assets and liabilities see sections f and h below.

2. Preparation Mode of the Financial Statements

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").

Furthermore, the financial statements have been prepared in accordance with the disclosure requirements in the Supervision of Financial Services (Insurance) Law, 1981, and the regulations enacted thereunder and directives of the Securities Regulations (Annual Financial Statement) 2010, insofar as these regulations apply to insurance companies.

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NOTE 2: - SIGNIFICANT ACCOUNTING POLICY (continued)

a. Basis of Financial Statements Presentation (continued)

3. The operating cycle

The Group's ordinary operating cycle exceeds one year, particularly with respect to the life assurance and long-term savings segments, the health insurance and the long-tail general insurance segment.

4. Current reporting structure

The financial statements reports, which mainly include the Company's assets and liabilities, were presented according to the liquidity order without differentiation between current and non-current. This presentation provides a more reliable and relevant information, as required by IAS 1.

5. Consistent accounting policies and initial adoption of IFRS

The accounting policies adopted in the financial statements are consistent with those of all periods presented.

On accrual recording and first time implementation of the optimal practice in general insurance, see Note 2e2(d)(4).

b. Significant Accounting Judgments, Estimates and Assumptions used in the preparation of the financial statements

The Judgments

In the process of applying the Group's accounting policies, management has made the following judgments which have the most significant effect on the amounts recognized in the consolidated financial statements:

1. Classification of insurance contracts and investment contracts

Insurance contracts are contracts in which the insurer assumes a significant insurance risk from another party. Management is examining for each contract with a policyholder or with a group of policyholders with a joint disposition, whether they involve taking a significant insurance risk in order to be classified as an insurance contracts or investment contracts.

2. Classification and designation of financial investments

The Company's management used discretion in classifying and designating the financial investments into the following groups:

- Financial assets measured at fair value through the profit and loss.- Financial assets measured at amortized cost.

See section f below.

Estimates and Assumptions

Preparation of the financial statements, requires Management to make judgments, estimates, and assumptions, that affect the adoption of the accounting policy and the reported amounts of assets, liabilities, income and expenses. The basis of the estimates and assumptions is reviewed regularly. The changes in accounting estimates are reported in the period of the change in estimate.

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b. Significant Accounting Judgments, Estimates and Assumptions used in the preparation of the financial statements (continued)

Estimates and Assumptions (continued)

The following are the main assumptions contained in the financial statements, regarding uncertainty as of the balance sheet date and critical estimates computed by the Group, where a material change in these estimates and assumptions may change the value of the assets and liabilities in the next reporting year:

1. Liabilities in respect of insurance contracts

Liabilities in respect of insurance contracts are based on actuarial valuation techniques and assumptions as detailed in Note 34e(1) regarding life assurance and long-term savings and health and in Note 34e(2) regarding general insurance.

The different actuarial valuations and assumptions are mainly derived based on past experience and mostly rely on the premise that the pattern of past behavior and claims represents the future. The variation of risk factors, the incidence of events or their severity and changes in the legal status may all have a material effect on the amount of the liability in respect of insurance contracts. As for changes in the main assumptions used to calculate the insurance liabilities in life insurance, see Note 20 and Note 342(1).As for the sensitivity analyses of insurance risks see Note 33e(1) regarding life assurance and regarding health insurance.

2. Legal claims

The Company is facing various pending legal claims and motions for approval of class actions. In estimating the likelihood of outcome of legal claims filed against the Company, the Company relies on the opinion of its legal counsel. These estimates are based on the legal counsel's best professional judgment, taking into account the stage of proceedings and historical legal precedents in respect of the different issues. Since the outcome of the claims will be determined in courts, the results could differ from these estimates. See additional information in Note 36 below.

In addition to the aforementioned claims, the Company is exposed to legal allegations/ claims that were not alleged/ submitted as yet, due, inter alia, in the event of a doubt in the interpretation of an agreement and/or a provision of the law and/or implementation mode thereof. The Company is notified about this exposure in several ways, including: through customers pleas to parties in the Company and especially to the Company's public complaints officer, through customers complaints to the public complaints unit at the Commissioner's office and through claims (not class actions) submitted to the court. These subjects are brought to the attention of the Company's management, if and insofar as the handling parties identify that the claims may have significant implications. In assessing the risk derived from allegations/ claims that were not submitted as yet, the Company relies on internal assessments of the handling parties and the Management, who weigh the estimated chance of submitting the claim and the success prospect of the claim, if and insofar as it will be submitted. The estimation is based on cumulative experience on the subject of submitting claims and on the analysis of the actual allegations.Naturally, in view of the initial stage of the clarification of the legal allegation, the actual result may differ from the early estimation, at the stage before the claim was submitted.

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3. Determination of fair value of unquoted financial instruments

The fair value of unquoted debentures, loans and deposits is calculated according to the discounted cash flow model and interest discount rates are determined by a company that provides price quotes and interest rates to institutional entities.

4. Impairment of financial assets

If there is objective evidence of an impairment loss in respect financial assets presented at amortized cost, the loss is carried to profit or loss, see Note 12 below.

At each balance sheet date, the Group examines to see if there is any objective evidence.

5. Real estate for investment

Credibly measureable real estate for investment is presented at fair value as at the report date, where changes in the fair value are charged to profit or loss. The fair value is determined by independent external assessors, according to economical valuations which include use of valuation techniques and assumed estimates of future cash flows expected to arise from the asset and estimated capitalization rate conforming with these cash flows. Where possible, the fair value is determined by referring to transactions concluded recently in real estate with a similar type and location to the estimated real estate.

When measuring the fair value of real estate for investment, the assessors and the Company's management are required to use certain assumptions regarding the yield rates required from the Group's assets, future lease prices, occupation rates, contracts rates, likelihood of leasing vacant spaces, assets operation expenses, financial strength of the lessees and implications arising from investments that will be required for future development, for the purpose of estimating the future cash flows from the assets. A change in the assumptions used to measure real estate for investment may cause a change in the fair value.

6. Determination of the recoverability of deferred acquisition costs

The recoverability of deferred acquisition costs is tested annually using assumptions regarding cancelation, mortality and morbidity rates as well as other variables as stated in 34e(1) below. If according to these assumptions there will be no recoverability, it might be necessary to accelerate the amortization process or even eliminate the deferred acquisition costs.

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7. Pensions and other post-employment benefits

The liability in respect of post-employment defined benefit plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about, among others, discount rates, expected rates of return on assets, future salary increases and employees replacement rates. The carrying amount of the liability may be significantly affected by changes in such estimates.

8. Determining the fare value of share-based payment transactions

The fair value of share-based payment transactions is determined at the first recognition by using an accepted options pricing model. The model is bases on valuation data, conducted on March 18, 2013 according to the binomic model, through the Hull-White method, by an external valuator "Eshed Rozin Tesu'ot Consultants", and the realization price and on assumptions regarding expected fluctuation, expected life span and expected dividend.

c. Functional and Foreign Currencies

1. Functional and Presentation Currencies

The financial statements are presented in New Israeli Shekels ("NIS").

The financial statements are presented in New Israeli Shekels ("NIS"), which is the Company's functional currency. The functional currency is the currency that best reflects the economic environment in which the Company operates and is used to measure its financial position and operating results.

2. Transactions, assets and liabilities in foreign currency

Transactions denominated in foreign currency (other than the functional currency) are recorded at inception according to exchange rate ruling on the transaction date. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate on that date. Exchange differences, other than those capitalized to qualifying assets or carried to equity in hedging transactions, are recognized in profit or loss. Non-monetary assets and liabilities that are denominated in foreign currency and measured at cost are translated at the exchange rate on the date of the transaction. Non-monetary assets and liabilities denominated in foreign currency and measured at fair value are translated into the functional currency using the exchange rate prevailing at the date when the fair value was determined.

3. Index-linked monetary items

Monetary assets and liabilities linked to the changes in the Israeli Consumer Price Index ("CPI") are adjusted at the relevant index at the end of each reporting period according to the terms of the agreement. Linkage differences arising from the adjustment, as above, is carried to profit or loss.

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d. Consolidated financial statements

The consolidated financial statements comprise the financial statements of a company that is controlled by the Company (subsidiary). Control exists when the Company has the power to influence the investee entity, exposure or rights to variable yields arising from its involvement in the investee entity and also to use its power to affect the amount of yields arising from the investee entity. he effect of potential voting rights that are exercisable at the end of the reporting period is considered when assessing whether an entity has control. The consolidation of the financial statements commences on the date on which control is obtained and ends when such control ceases.

The financial statements of the Company and of the subsidiary are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform accounting policies by all companies in the Group.

Significant intra-group balances and transactions and gains or losses resulting from intra-group transactions are eliminated in full in the consolidated financial statements.

e. Insurance contracts and asset management contracts:

IFRS 4 which deals with insurance contracts allows the insurer to continue with the accounting policies that were utilized before the transition date to IFRS regarding insurance contracts that were issued (including related acquisition costs and related intangible assets) as well as reinsurance contracts acquired. Below is a summary of the accounting principles relating to insurance contracts:

1. Life assurance and long-term savings

a) Revenue recognition - see paragraph p below.

b) Liabilities in respect of life insurance contracts:

Liabilities in respect of life assurance contracts are computed according to the Commissioner's directives (regulations and circulars), accounting principles and generally accepted actuarial methods. The liabilities are computed according to the relevant coverage data, such as: the age of the policyholder, number of years of coverage, type of insurance, amount of insurance, etc.

Liabilities in respect of life assurance contracts are determined on the basis of actuarial assessments, carried out by the appointed actuary, Ms. Michal Tamir who is employed by the Company. The reinsurers' share in liabilities for life assurance contracts is determined according to the conditions of the relevant contracts.

c) The Commissioner's directives regarding liabilities for payment of annuities:

In circulars published by the Commissioner regarding the calculation of liabilities for payment of annuities in life assurance policies, updated directives were determined for the calculation of the provisions as a result of the rate of increase in life expectancy. The instructions require monitoring the sufficiency of the reserves with respect to insurance policies which allow receipt of an annuity and their supplementation in an appropriate manner. See Note 34e(1) below.

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e. Insurance contracts and asset management contracts (continued)

1. Life assurance and long-term savings (continued)

d) Deferred acquisition costs:

(1) Deferred acquisition costs ("DAC") in respect of life assurance policies include general and administrative and selling expenses involved in issuance of new policies. The DAC is amortized in equal annual rates over the policy period, but not more than 15 years. The DAC in respect of cancelled policies were written off or settled at the time of cancellation or settlement.

(2) Each reporting period, the Company's actuary examines the recoverability of the DAC. The examination is performed in order to verify that the liabilities in respect of insurance contracts and investment contracts net of the DAC in respect of the policies are sufficient, and that the policies are expected to produce future income that will cover the amortization of the DAC and the insurance liabilities, the operating expenses and the commissions relating to those policies.

The assumptions that are utilized for this examination include assumptions regarding cancellations, operating expenses, rate of return on assets, mortality and morbidity rates, that are determined by the Company's actuary every year based on a review of past experience and relevant up-to-date research studies.

e) Liability Adequacy Test in respect of life assurance contracts:

The Company examines the adequacy of the liabilities in respect of life assurance contracts. If the examination shows that the premiums received are not sufficient to cover the expected claims, a special provision for the deficiency is recorded. The examination is made separately for groups of policies that were determined by the Commissioner.

The assumptions used in the abovementioned examinations include assumptions regarding cancellations, operating expenses, rate of return on assets, interest rates, non-liquidity premiums, mortality, pension realization rates and morbidity rates, taking into account the excess fair value over their books value. The assumptions are determined by the actuary every year based on examinations, past experience and other relevant research studies. Regarding collective policies, the examination is made based on the claims' history of the individual collective and subject to the statistical reliability of this experience.

f) Outstanding claims:

Outstanding claims, net of the reinsurers' share therein, are computed on an individual case basis, according to the estimation of the Company's experts, on the basis of notifications regarding insurance events and sums insured.The provisions for annuity payments and the provisions for ongoing claims in payment for disability insurance, the direct and indirect expenses deriving from them, as well as the provisions for incurred but not yet reported claims (IBNR) were included under liabilities for insurance and investment contracts.

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1. Life assurance and long-term savings (continued)

g) Investment contracts:

Receipts in respect of investment contracts are not included in the item of earned premiums, but are directly carried to liabilities for insurance and investment contracts. Surrenders and maturities of these contracts are not carried to profit or loss, but are deducted directly from the liabilities for insurance and investment contracts.

Investment gains, change in liabilities and payments in respect of insurance contracts for the policyholders share in investment income, management fees and general and administrative expenses, are carried to profit or loss in respect of these contracts.

2. General insurance


b) The item of payments and change in liabilities in respect of gross and retained insurance contracts includes, among others, settlement and direct handling costs of claims paid, indirect expenses for settlement of outstanding claims that occurred during the reported period, as well as an adjustment of the provision for outstanding claims (which includes a provision for claims direct and indirect handling costs) reported in previous years.

c) Liabilities for insurance contracts and deferred acquisition costs:

The insurance reserves and the outstanding claims, included in the liabilities item in respect of insurance contracts, and the reinsurers' share in the reserve and in outstanding claims, included in the reinsurance assets item, were computed in accordance with the Supervision of Financial Services (Insurance) Regulations (Methods of Calculating Provisions for Future Claims in General Insurance),2013 ("Reserves Calculations Regulations"), the Commissioner's directives and generally accepted actuarial methods for computing outstanding claims which are applied according to the appointed actuaries' discretion.

d) The item liabilities in respect of insurance contracts, is composed of insurance reserves and outstanding claims, as follows:

1) Provision for unearned premium reserve, reflects the insurance fees relating to the insurance period after the balance sheet date.

2) Provision for premium deficiency. This provision is recorded in the event that the unearned premium reserve (net of deferred acquisition costs) does not cover the anticipated cost in respect of insurance contracts. In the motor casco, comprehensive residential and business premises branches the provision is based on, among others, a model determined in Reserves Calculations Regulations.

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2. General Insurance (continued)

d) The item liabilities in respect of insurance contracts, is composed of insurance reserves and outstanding claims, as follows (continued)

3) Insurance reserves and outstanding claims that are computed according to the methods detailed below:

a) Outstanding claims and the reinsurers' share therein are included based on an actuarial valuation, except for the branches detailed in (b) below. Indirect expenses for the settlement of claims are included according to an actuarial valuation. Claims recoveries receivable from insurance companies are taken into account in the data base according to which the actuarial valuations of the outstanding claims are calculated.

The actuarial calculation for the Company was made by the appointed actuary, Ms. Liat Cohen, an employee of the Company.

The Company recorded an adequate provision in respect of the aforementioned claims recoveries which is calculated according to an actuarial valuation that is based on past experience with claims recoveries collection. In non-statistical branches the claims recoveries are taken into account when evaluating the overall risk in the claims portfolios on an individual basis.

b) In the branches of comprehensive business premises, third party, employer's liabilities, professional liability and banks for mortgage, the actuary determined that an actuarial model cannot be applied due to lack of statistical significance, the outstanding claims in these branches were calculated on the basis of the valuations of external experts and Company employees who handle the claims, with the addition of IBNR when necessary.

c) Excess of income over expenses:

Regarding all businesses with long tail claims (branches in which the time required for issuing a notice of damage and/or determining damage and its compensation, is long and can be a number of years), such as the liability and motor act branches, calculated up to December 31, 2015 the excess of income over expenses is calculated on a tri-annual cumulative basis ("the excess" or the "the accrual").The excess was calculated according to the reserve calculation regulations and the Commissioner's directives, on the basis of income from premiums, net of the acquisition and claims expenses (up to the limit determined by the Commissioner at a proportion of the premium), with the addition of investment income which is calculated according to the rate of 3% per annum, in real terms (regardless of the actual yield from the investments) net of the reinsurers' share, for each insurance branch and the respective underwriting year. The excess accumulated until its release, from the beginning of the insurance, net of the provision for unearned premium less deferred acquisition costs and net of outstanding claims calculated as aforementioned ("the fund"), is included up to December 31, 2015 under liabilities for insurance contracts and the deficiency is imputed as an expense. For cancellation of the excess, see section 4 below.

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3. Health Insurance (continued)

d) In the opinion of the Company, the outstanding claims are adequate, considering the fact that the outstanding claims are mainly calculated on an actuarial basis and their balance includes sufficient provisions for the IBNR, if necessary.

4. Changes in calculating insurance reserves in general insurance, from December 31, 2015

Control on Financial Services (Insurance) (Insurance Reserve Calculation in General Insurance) 2013 regulations were published in January 2013 (hereunder "The New Regulations") and a circular, that was updated in January 2015. In addition, the position of the Commissioner on the subject of optimal practice for calculating insurance reserves in general insurance for the purpose of the financial statements was published in January 2015 (together hereunder "The Amendment").

The amendment cancelled the Control on Insurance Business Regulations (calculation methods of provisions for future claims in general insurance) 1984, to be replaced by the new regulations. The main change after the amendment becomes effective is the cancellation of the accumulation in the motor act line of insurance and liabilities and implementation of the Commissioner's position on the subject of the optimal practice, specified in Note 34e(2)(4).

The amendment became effective from the financial statements as on December 31, 2015 but its early implementation was allowed from the financial statements as on December 31, 2014.

The amendment was treated as a change in the accounting policy, where its retrospective implementation is not practical, therefore, the effect of the change was recorded as an adjustment of the reserve as at December 31, 2015 without retrospective implementation

The effect of the said amendment on the Company's financial statements as at December 31, 2015 is as follows:

Gross Reinsurance Retention

NIS in thousands(Increase) decrease of insurance liabilities in general insurance and increase (decrease) of reinsurance assets:Due to accumulation cancellation 74,275 (4,452) 69,823Implementation of the optimal practice guidelines in calculating the insurance liabilities calculated by the actuary (22,774) - (22,774)Total decrease of insurance liabilities in general insurance and decrease of reinsurance assets 51,501 (4,452) 47,049

Total effect of the amendment before tax 47,049Effect of the related tax (17,682)Total increase in the surplus clause 29,367

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e) Deferred acquisition costs in general insurance include the portion of marketing, general and administrative expenses with respect to the issuance of polices that relates to the unearned insurance premiums. The acquisition costs are calculated at the lower of the actual costs or standard rates, set by the Supervision Regulations, calculated as a percentage of unearned premiums separately for each branch according to the lowest.

f) Businesses received from the Israeli pool for motor vehicle property insurance of the Association of Insurance Companies in Israel ("the Pool") are included according to the reports received up to the reporting date with the addition of the relevant provisions, based on the Company's rate of participation therein.

3. Health Insurance


b) Liabilities in respect of health insurance contracts:

Liabilities in respect of health insurance contracts are computed according to the Commissioner's directives (regulations and circulars), accounting principles and generally accepted actuarial methods. The liabilities are computed according to the relevant coverage data, such as: the age of the policyholder, number of years of coverage, type of insurance, amount of insurance, etc.

Liabilities in respect of health assurance contracts and the reinsurers' share therein are determined on the basis of actuarial assessments, carried out by the appointed actuary, Ms. Irena Torvilov who is employed by the Company.

c) Outstanding claims:

Outstanding claims, net of the reinsurers' share in such claims are calculated individually, according to estimates of Company's experts, based on notices in respect of insurance events and insurance amounts.The provisions for incurred but not yet reported claims (IBNR) were included under liabilities for insurance contracts.In the travel abroad branch, the actuary determined that an actuarial model cannot be applied due to lack of statistical significance, the outstanding claims in these branches were calculated on the basis of the valuations of external experts and Company employees who handle the claims, with the addition of IBNR when necessary.

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2. Health Insurance

d) Deferred acquisition costs

Deferred acquisition costs include part of the marketing expenses as well as administrative and general expenses related to acquisition of new policies. Deferred acquisition costs in dread disease and hospitalization insurance are amortized at equal rates over the period of the policy, but not more than six years. Deferred acquisition costs relating to cancelled policies are written off on the cancellation date.Each reporting period, the Company's actuary examines the recoverability of the DAC. The examination is performed in order to verify that the liabilities in respect of insurance contracts net of the DAC in respect of the policies are sufficient, and that the policies are expected to produce future income that will cover the amortization of the DAC and the insurance liabilities, the operating expenses and the commissions relating to those policies. The examination is performed at the level of each product (type of insurance) separately.

The assumptions that are used for this examination include assumptions in respect of cancellations, operating expenses, rate of return on assets, mortality and morbidity rates, that are determined by the Company's actuary every year based on a review of past experience and relevant up-to-date research studies.

f. Financial Instruments

1. Non-derivative financial instruments:

Non-derivative financial instruments include financial assets and financial liabilities. Financial assets include financial investments (quoted debt assets, unquoted debt assets, shares and others) and other financial assets such as: outstanding premiums, other debtors and cash and cash equivalents. In addition, financial instruments include financial liabilities such as loans and credit received and suppliers' credit and other creditors.

The initial recognition of non-derivative financial instruments is at fair value, whereas financial instruments that are not reported at fair value are recognized through profit and loss with the addition of all the directly attributable transaction costs. After the initial recognition, non-derivative financial instruments are measured as detailed below.A financial instrument is recognized as an asset or liability upon acceptance of the contractual terms of the instrument by the Company (transaction date).

a) Cash and Cash Equivalent

Cash includes cash balances for immediate withdrawal and deposits on demand. Cash equivalents include highly liquid short-term investments that are readily convertible into known amounts of cash and are exposed to insignificant risk of changes in value and are not restricted.

b) Financial Assets:

In 2010, the Company adopted the provisions of IFRS 9 earlier than required.See details of changes in this standard and continued adoption of these changes in future, in Note 2x.

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f. Financial Instruments (continued)

1. Non-derivative financial instruments (continued)

Measurement upon initial recognition:

Financial assets within the scope of IFRS 9 are initially recognized at fair value plus directly attributable transaction costs, except for financial assets at fair value through profit or loss in respect of which transaction costs are recorded in profit or loss as incurred.

Measurement after initial recognition:

Measurement of debt instruments after the date of initial recognition:

In subsequent periods, debt instruments should be measured at amortized cost if both of the following conditions are met:

- the asset is held within a business model whose objective is to hold assets in order to collect the contractual cash flows.

- the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Notwithstanding the aforesaid, upon initial recognition, the Company may designate a debt instrument that meets both of the abovementioned conditions as measured at fair value through profit or loss if this designation eliminates or significantly reduces a measurement or recognition inconsistency ("accounting mismatch") that would have otherwise arisen.

Subsequent measurement of all other debt instruments and financial assets should be at fair value through profit or loss.

Financial assets which are equity instruments will be measured at fair value in subsequent periods, and the difference allocated to profit or loss or to other comprehensive income (loss), according to Company's choice regarding each instrument and when the choice in question cannot be changed throughout the life of the instrument. Amounts recognized in other comprehensive income will not then be transferred to profit or loss.

Nevertheless, equity instruments that are held for trading, namely instruments that have been purchased or incurred with the aim of selling or buying them back in the short term, and represent on the date of initial recognition part of a portfolio of financial instruments for which there is evidence of an activity pattern recently carried out to earn short-term profits or that represent derivatives not designated as hedges will be measured at fair value through profit or loss (and the differences will not be carried to other comprehensive income (loss)).

Reclassification:

When and only when an entity changes its business model for managing financial assets it shall reclassify all affected financial assets. The reclassification will be done prospectively. If as a result of the reclassification, a financial asset is measured at fair value, any gain or loss resulting from the difference between its previous carrying amount and the fair value will be recognized in profit or loss.

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2. Derivative financial instruments

Financial derivatives are initially recognized at fair value, directly attributable transaction costs are carried to profit or loss as incurred. After initial recognition, derivatives are measured at fair value and changes in fair value are carried to profit or loss.

3. CPI-linked financial assets and liabilities not measured at fair value

The value of CPI-linked financial assets and liabilities that are not measured at fair value is revaluated during each period according to the actual increase in the Israeli CPI.

4. The Company has made decisions to designate the assets as follows

Assets included in the investment portfolios of policies participating in investment incomeThese assets, which include quoted and unquoted financial assets, were designated to the group of fair value through profit or loss, based on the following reasons: these are managed portfolios, separate and identifiable, whose presentation at fair value significantly reduces an accounting mismatch in measurement of financial assets and liabilities at various measurement bases. In addition, the asset management is conducted at fair value, and the portfolio performance is measured at fair value according to a documented risk management strategy, and the information regarding the financial instruments is reported to the management (the relevant investment committee) internally on the basis of fair value. See details of the fair value calculation technique in Note 11(b) below.Financial instruments that include embedded derivatives that should be separatedThose assets were classified to the group of fair value through profit or loss.

Quoted assets that are not included in investment portfolios held against profit sharing policies (Nostro) that do not include embedded derivatives or do not constitute derivatives

These were classified to the group of fair value through profit or loss.

Unquoted assets that are not included in investment portfolios held against profit sharing policies (Nostro)

Unquoted debt assets were measured at amortized cost. Shares and investment funds were classified to the group of fair value through profit or loss.

5. Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position if there is a legally enforceable right to set off the recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.

The right to offset must be enforceable legally not only during the normal business operations of the parties to the contract but also in the event of bankruptcy or insolvency of one of the parties. To ensure immediate availability of the right to offset, it will not be dependent on a future event, or not be inapplicable in certain periods of time, and no events will cause it to expire.

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6. Financial liabilities

Financial liabilities measured at amortized cost

Loans and borrowings are initially recognized at fair value less directly attributable transaction costs (such as loan raising costs). After initial recognition, loans, including debentures, are measured based on their terms at amortized cost using the effective interest method taking into account directly attributable transaction costs.

7. Derecognizing Financial Instruments

Financial Assets

A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or when the company has transferred its contractual rights to receive cash flows from the financial asset or assumes an obligation to pay the cash flows in full without material delay to a third party and has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company transfers its rights to receive cash flows from an asset and neither transfers nor retains substantially all the risks and rewards of the asset nor transfers control of the asset, a new asset is recognized to the extent of the Company's continuing involvement in the asset. When continuing involvement takes the form of guaranteeing the transferred asset, the extent of the continuing involvement is the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Company could be required to repay.

Financial liabilities

A financial liability is derecognized when it is extinguished, namely, when the obligation is discharged or cancelled or expires. A financial liability is extinguished when the debtor:

- discharges the liability by paying in cash, other financial assets, goods or services; or

- is legally released from the liability.

When an existing financial liability is exchanged with another liability from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is accounted for as an extinguishment of the original liability and the recognition of a new liability. The difference between the balance in the financial statements of the above two liabilities is allocated to profit or loss. If the exchange or modification is not substantial, it is treated for as a change in the terms of the original liability and no gain or loss is recognized on the exchange. When evaluating whether the change in the terms of an existing liability is substantial, the Company takes into account both quantitative and qualitative considerations.

g. Fixed assets

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Fixed asset items are measured at cost with added direct acquisition costs, less accumulated depreciation and impairment loss, excluding current maintenance expenses. The cost includes spare parts and accessory equipment which serve the fixed asset.


g. Fixed Assets (continued)

Leasehold improvements are depreciated according to the straight-line method over the lease period (including option period for extending the lease which the Group has and intends to realize), or according to the estimated useful life of the improvement, at the shorter of the two.

The useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted for prospectively as a change in accounting estimate.

Fixed assets items with a significant cost compared to the total cost of the item are depreciated separately according to the components method.

Depreciation is computed in equal annual rates according to the straight-line method over the estimated useful life of the asset, as follows:

i. Real Estate for investment

Real estate for investment is real estate (land or building or both) held by the owners (leased in operational leasing) or a lessee in financial leasing for the purpose of deriving rent or for increase of value, or both, not intended to be used for production or supplying goods or services, nor for administrative or sale purposes during the normal business routine.

Real estate for investment is retired when it is realized or when the usage thereof is terminated and no future economical benefits are expected from its realization. The difference between the net return from realizing the asset and the balance in the financial statements is recognized in profit or loss for the period at which the asset is retired.

Real estate for investment is initially measured at cost, including direct purchase costs. Pursuant to the initial recognition, real estate for investment is recognized at fair value, which reflects the market conditions as at the date of the report. Profit or loss deriving from changes in the fair value of the real estate for investment are charged to profit or loss on the occurrence date. Real estate for investment is not amortized methodically.

The Company determines the fair value of the real estate for investment on the basis of a valuation, conducted by independent external assessors who are experts in real estate valuations and have the required knowledge and experience and by the Management of the Group, which has comprehensive professional knowledge.

j. Leasing

Tests for classifying leasing as financial or operational are based on the nature of the agreements and are measured on the agreement conclusion date according to the following rules, specified in IAS 17:

1. Financial leasing

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%

Leasehold improvements 10%Vehicles 15%Computers and related equipment 25%-33%Office furniture and equipment 6%-15%


Assets for which all the risks and benefits related to the ownership of the asset were transferred to the lessee are classified as financial leasing. the leased asset is measured at the beginning of the leasing period according to the lowest between the fair value of the

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j. Leasing (continued)

1. Financial leasing (continued)

leased asset or the present value of the minimal leasing payments.

The leased asset is amortized along its useful life span, or the leasing period, according to the lowest.

2. Operational leasing

In assets which are not actually transferred, all the risks and benefits included in the ownership of the leased asset are classified as operational leasing. Leasing payments are recognized as expense in profit or loss in a straight line along the leasing period.

k. Intangible assets

Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Costs in respect of internally developed intangible assets, except for discounted development costs, are carried to profit or loss when incurred.

Intangible assets with definite useful lives are amortized over their useful life and are reviewed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

1. Software development costs

Software development costs are only capitalized when the development costs can be measured reliably; the technical and economic feasibility of the software can be demonstrated, there is future financial reward from the development of the product and the Group has the intention and sufficient resources to complete the development and use the software. The capitalized costs include the cost of materials, direct salaries and overheads that are directly attributable to preparation of the asset for its intended use. Other development costs are carried to profit and loss as incurred.

Capitalized software development costs are measured at cost less accumulated amortization and impairment losses.

2. Software

The Company's assets include computer systems comprising hardware and software. Software forming an integral part of the hardware to the extent that the hardware cannot function without the programs installed on it, is classified as fixed assets. In contrast, licenses for independent software that adds functionality to the hardware is classified as an intangible asset.

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k. Intangible assets (continued)

3. Subsequent costs

The item liabilities in respect of insurance contracts, is composed of insurance reserves and outstanding claims, as follows (continued)Subsequent costs are recognized as an intangible asset only when they increase the future economic benefit embedded in the asset for which these expenses were paid. All other expenditure, including expenditure related to goodwill or brands that were developed by the Company, are allocated to profit or loss as incurred.

4. Amortization

Amortization is carried to profit or loss over the estimated useful life of the intangible assets, from the date on which the assets are available for use.

Estimated useful life for the current period and the comparable periods are as follows:

Software is amortized on a straight-line basis over 3-7 years.

The estimates of the amortization method and useful life are retested at least at the end of each reported year.

l. Impairment

The Group assesses at each reporting date whether there is an objective evidence for impairment of the following financial asset or group of financial assets:

1. Financial investments

Financial assets measured at amortized cost

The objective evidence of impairment exists when one or more events that have occurred after the initial recognition has a negative impact on the estimated future cash flows. The amount of the loss carried to profit or loss is measured as the difference between the asset's balance in the financial statements and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset's original effective interest rate. If the financial asset has a variable interest rate, the discount rate is the current effective interest rate. In subsequent periods, the amount of the impairment loss is reversed if the recovery of the asset can be related objectively to an event occurring after the impairment was recognized. The amount of the reversal, as above, is credited to profit or loss up to the amount of any previous impairment.

2. Non-financial assets

The Company evaluates the need to record the Group's impairment of non-financial assets which are not deferred acquisition costs, employee benefit assets and deferred tax assets whenever events or changes in circumstances indicate that the carrying amount of the assets is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount is the higher of the net selling price and value in use. In measuring value in use, the estimated future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are allocated to profit or loss under other expenses.

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l. Impairment (continued)2. Non- financial assets

An impairment loss of an asset is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years, or its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.

m. Provision for doubtful debts

1. Reinsurance

a) The reinsurers' liabilities towards the Company do not release it from its liabilities towards policyholders insured under the insurance policies.

A reinsurer which does not fulfill its obligations under the reinsurance treaties may cause the Company losses.

b) The Company records a provision for doubtful debts in respect of reinsurers' debts whose collection is doubtful on the basis of individual risk estimates and based on the age of the debts.

In addition, in determining the reinsurers' share in the insurance liabilities, the Company takes into consideration, among others, the probability of collection from the reinsurers. When the reinsurers' share is calculated on an actuarial basis, the share of reinsurers in difficulty is calculated according to the actuary's recommendations, which takes all the risk factors into consideration. Furthermore, when the Company sets-up the provisions, it takes into consideration, among others, the willingness of the parties to engage in cut-off agreements (termination of agreements by a final settlement of the debts) in order to reduce the exposure.

2. Outstanding premium

The allowance for doubtful accounts in respect of outstanding premiums in the general insurance business is computed, among others, according to the age of the debt.

n. Fair Value Measurement

Fair value as the price that would be received in a sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in the absence of a principal market, in the most advantageous market.

The fair value of an asset or a liability is measured through use of assumptions which market participants will use when pricing the asset or the liability, assuming that market participants act to benefit their economical interests.

Measuring the fair value of a non-financial asset considers the ability of the market participant to derive economical benefits through the optimal use of the asset or by selling it to another participant in the market who will use the asset in its optimal usage.

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n. Fair Value Measurement (continued)

The Company uses evaluation techniques that are suited to the circumstances and where sufficient obtainable data exist to measure fair value, while maximizing the use of relevant data that can be anticipated and minimizing the use of non-anticipated data.The fair value of quoted financial instruments in an active market is determined by market prices on the reporting date. The fair value of financial instruments which lack an active market is determined by using estimation methods. These methods include reference to transactions concluded recently in market conditions, reference to the current market value of another, essentially similar instrument, cash flows capitalization or other estimation methods. The value of unquoted debentures, loans and deposits is computed according to a model based on capitalization of cash flows, see Note 11b.All assets and liabilities which are measured at fair value, or where their fair value may be disclosed are classified within the fair value hierarchy, based on the lowest data level which is significant for measuring the comprehensive fair value:

Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities.Level 2: data which is not quoted prices included in level 1, anticipated directly or

indirectly. Level 3: data that is not based on anticipated market data (estimation techniques that do not

use anticipated market data).

o. Shares capital

Costs relating directly to the issuance of shares and share options classified as equity are reported as a deduction from equity.

p. Employees Benefits

The Company has a number of employee benefit programs:

1. Short-term employee benefits

Short-term employee benefits are benefits which are expected to be fully settled before 12 months following the end of the annual reporting period during which employees render the respective services. These benefits include salaries, paid annual leave, paid sick leave, recreation and the employer's social security contributions are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized when the Group has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a reliable estimate of the amount can be made.

2. Post-employment benefits

Defined contribution plan

The Group has defined contribution plans pursuant to Section 14 to the Severance Pay Law under which the Group pays fixed contributions and will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient amounts to pay all employee benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plan in respect of severance or retirement pay are recognized as an expense when contributed simultaneously with receiving the employee's services.

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p. Employees Benefits (continued)

2. Post-employment benefits (continued)

Defined contribution plan (continued)

In addition, the Company has a defined benefit plan for its severance pay provision in accordance with the severance pay law. According to the law, employees are entitled to receive severance pay on severance or upon retiring on their own accord. The liability for termination of employment is measured using the actuarial value of the projected unit credit method. The actuarial assumptions include rates of employee turnover and future salary increases based on the estimated timing of payment. The amounts are presented based on discounted expected future cash flows according to interest rates determined by reference to yields of NIS linked high-quality Concerns bonds with a term that matches the estimated term of the benefit obligation.In respect of its severance pay obligation to certain of its employees, the Company makes current deposits in pension funds and insurance companies ("the plan assets"). Plan assets comprise assets held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the Group's own creditors and cannot be returned directly to the Group.The compensation component in policies issued by the Company do not constitute plan assets and offsets from the liabilities in respect of insurance contracts.The liability for employee benefits shown in the statement of financial position reflects the present value of the defined benefit obligation less the fair value of the plan assets, less past service costs. Remeasurement of the net liability is recognized in other comprehensive income.

3. Termination benefits

Employee termination benefits are recognized as an expense when the Company has committed, without realistic possibility of withdrawal, to terminate employees before the normal retirement date according to a detailed formal plan, or when the Company recognizes costs in respect of a structural change which includes payment of benefits in respect of the severance, according to the earliest.

4. Other long-term employee benefits

The Company's employees are entitled to adjustment grants benefits. These benefits are accounted for as other long-term benefits since the Company estimates that these benefits will be used and the respective Company's obligation will be settled during the employment period and after one year from the end of the reporting period during which the employees provided the respective service.The Company's net obligation in respect of other long-term employee benefits, calculated on the basis of an actuarial estimate, is in respect of the future benefit amount due to employees for services rendered in current and prior periods, with due consideration of the anticipated increased salary rates.. This amount of benefits is discounted to its present value. The discount rate is determined by reference to the yields on high quality index linked Concerns bonds whose payment term is consistent with the term of the Company's obligation. Remeasurement of the net liability is recognized in profit or loss in the period in which it occurs.

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q. Share-Based Payment Transactions

Equity-settled transactions

The cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using an acceptable option pricing model.

The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period over which the performance and/or service conditions are to be satisfied, ending on the date on which the relevant employees become fully entitled to the award ("the vesting period"). The cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.If the Company modifies the conditions on which equity-instruments were granted, an additional expense is recognized for any modification that increases the total fair value of the share-based payment arrangement or is otherwise beneficial to the employee at the modification date.If a grant of an equity instrument is cancelled, it is accounted for as if it had vested on the cancellation date, and any expense not yet recognized for the grant is recognized immediately. However, if a new grant replaces the cancelled grant and is identified as a replacement grant on the grant date, the cancelled and new grants are accounted for as a modification of the original grant, as described above.

r. Provisions

A provision in accordance with IAS 37 is recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the Company expects part or all of the expense to be reimbursed to the Company, such as in an insurance contract, the reimbursement is recognized as a separate asset only when it is virtually certain that it will be received by the Company. The expense is recognized in the income statement net of the reimbursed amount.

Legal claims

A provision for claims is recognized if the Group has a present obligation (legal or constructive) as a result of a past event; it is more likely than not that the Group's economic resources will be required in order to settle the obligation; and the obligation can be estimated reliably. When the effect of the time value is material, the provision is measured at its present value. When examining the necessity of recognition of provisions and quantifying them, the Company's management is assisted by its legal advisors.

s. Revenue Recognition

1. Premiums

a) Premiums in life assurance, long-term savings insurance and health insurance segments, including savings premiums but excluding receipts in respect of investment contracts are recorded as income when due. Cancellations are recorded upon receipt of notice from the policyholder or initiated by the Company due to

C - 36


arrears in payments, subject to legal provisions. Policyholders' participation in profits is deducted from the premiums.


s. Revenue Recognition (continued)

1. Premiums (continued)

b) General insurance premiums are accounted for as income based on monthly new business reports. Insurance premiums usually refer to an insurance period of one year. Gross income from premiums and changes in unearned premium are accounted for under gross earned premiums.

Since in the motor act line of insurance, the insurance comes into effect only after payment of the insurance premium, the premium is accounted for on the date of payment.

Premiums from policies that will be in force after the balance sheet date are reported as prepaid income.

Monthly new business reports, primarily in the motor casco and comprehensive residential insurance lines include an automatic renewal of all policies whose renewal date has arrived.

Income included in the financial statements is after cancellation notices received from policyholders and after the deduction of cancellations and provisions due to the non-payment of premiums, subject to legal provisions.

2. Management fees

Management fees in respect of yield-dependent insurance contracts:

The management fees are calculated in accordance with the Commissioner's directives at fixed rates of the accumulated savings of policyholders in the profit-participating portfolio and include fixed management fees only.

3. Commissions

Revenues from commissions from reinsurers in general insurance, life assurance and health insurance are allocated on the basis of entitlement dates.

t. Net investment gains\losses, finance income and expenses

Investment gains\losses, net and finance income include income from interest and linkage differences on debt assets, revenues from dividends, net gains/ loss from sale of financial assets classified as available-for-sale, changes in fair value of financial assets at fair value through profit or loss, exchange rate gains/ loss and gains from the sale of investments calculated as the difference between the net sale proceeds and the original cost or the amortized cost and recognized at the time of the sale. Interest income is recognized as it accrues using the effective interest method. Dividend income is recognized when the Company's right to receive the dividend is established. If the dividend is received on quoted shares, the Company recognizes dividend income on the ex-date.

Finance expenses include interest expenses and linkage difference on subordinated deeds received, interest and rate differences on reinsurers' deposits and on reinsurers' balances. The credit costs are allocated to profit or loss according to the effective interest method.

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Gains and losses from exchange rate differences and changes in the fair value of investments are reported on a net basis.

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u. General and administrative expenses

General and administrative expenses are classified to indirect expenses for settlement of claims (that are included under payments and change in liabilities in respect of the insurance and investment contracts), to expenses relating to acquisitions (included under commissions, marketing, and other acquisition expenses) and to the balance of administrative and general expenses that are included under this item. The classification is made according to the Company's internal models that are based on direct expenses that were allocated and indirect expenses that were burdened.

v. Taxes on Income

The current and deferred income tax expense is allocated to profit or loss unless the tax results from a transaction or an event that are directly recognized in other comprehensive income or equity.

1. Current Taxes

Current taxes liability is determined according to tax rates and existing tax laws or laws which were practically regulated up to the reporting date and also adjustments required for tax liability payable for previous years.

2. Deferred Taxes

Deferred taxes are calculated in respect of temporary differences between amounts included in the financial statements and amounts included in calculations for tax purposes.Deferred taxes are measured according to the tax rates that are expected to apply to the temporary differences on the date they are realized, based on the laws applicable or effectively applicable on the balance sheet date. The deferred tax assets are reviewed at every balance sheet date, and are reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Calculation of deferred taxes excludes taxes which may apply in the event of realizing investments in controlled companies, as long as the sale of the investments in the controlled companies are not expected in the foreseeable future. In addition, deferred taxes in respect of profit participation portfolios by held companies as dividends were not accounted for, since the dividend distribution does not entail another tax liability, or due to the Company's policy to refrain from initiating dividend distribution by a consolidated company, which carries and additional tax liability. Taxes on income relating to distribution of an equity instrument by the holders and to transaction costs of an equity transaction are treated according to IAS 12. Deferred taxes are offset if a valid legal right exists, enabling offset of a current tax asset against a current tax liability and the deferred taxes are related to the same tax liable entity and to the same tax authority.

w. Earning per share

Earnings per share are calculated by dividing the net profit attributable to the Ordinary shareholders of the Company by the weighted average number of Ordinary shares outstanding during the period.Potential ordinary shares are included in the calculation of the diluted earning per share, to the extent that their effect dilutes the profit per share from on-going operations. Potential ordinary shares, converted during the period, are included in the diluted earnings per share calculation to the date of conversion only, and from that date are included in the basic earnings per share. The Company's share in the profits of controlled companies is calculated using its share of the earnings per share multiplied by the number of shares held by the Company.

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x. Disclosure of new IFRS in the period prior to their adoption

1. IFRS 9 - Financial Instruments

As aforementioned in section f(1)(b), the Company adopted IFRS 9 in early and partial adoption.

In July 2014, the IASV published the complete and final version of IFRS 9 - Financial Instruments that replaces the IAS 39 - Financial Instruments: Recognition and Measuring IFRS 9 ("the Standard") focuses mainly on classification and measurement of financial assets and applies to all financial assets subjected to the provisions of IAS 39.The standard states that at the initial recognition, all financial assets will be measured at fair value. In subsequent periods, debt instruments should be measured at amortized cost if both of the following accrued conditions are met:- the asset is held within a business model whose objective is to hold assets in order

to collect the contractual cash flows.- the contractual terms of the financial asset give rise on certain dates to cash flows

that are solely payments of principal and interest on the principal amount outstanding.

The subsequent measurement of all other debt instruments and the other financial assets will be according to fair value. The standard defines a differentiation between debt instrument which will be measured at fair value through profit or loss and debt instruments which will be measured at fair value through other comprehensive income.Financial assets which are equity instruments will be measured at fair value in subsequent periods, and the difference allocated to profit or loss or to other comprehensive income (loss), according to Company's choice regarding each instrument., and when the choice in question cannot be changed throughout the life of the instrument. Equity instruments held for trading will be measured at fair value through profit or loss. Regarding derecognition and financial liabilities, the standard requires that the same provisions required by IAS 39 will continue to apply to derecognition and to financial liabilities for which the fair value option has not been elected. According to the standard, the amount of the adjustment to the liability's fair value that is attributable to changes in credit risk will be presented in other comprehensive income. All other fair value adjustments will be presented in profit or loss. The standard includes new requirements related to hedging accounting.

The standard will be applied from annual periods starting on January 1, 2018. early adoption is possible.

2. Amendments in IAS 7 cash flow report, on additional disclosure regarding financial obligations

IASB published, in January 2016, amendments in IAS 7 cash flow report (hereunder "The Amendments") requiring additional disclosure regarding financial obligations. The amendment requires presentation of movements from the opening balance to the closing balance of financial obligations, including changes deriving from cash flows from financing actions, purchase or loss of control of holding, changes in exchange rates and in fair value.

The amendments will be applied starting from annual periods beginning on January 1, 2017 or later. Inclusion of these disclosures is not required for comparisons to periods preceding the starting date of the amendments. Early adoption is possible

The Company will include the required changes in its relevant financial statements.C - 40



x. Disclosure of new IFRS in the period prior to their adoption: (continued)

3 IFRS 16 leases

IASB published, in January 2016, the international financial reporting standard No. 16 on leasing (hereunder, "The New Standard").According to the new standard, leasing is defined as a contract or part of a contract which transfers the usage right in an asset for a defined time period against payment.Following are the main principles of the new standard:

The new standard requires lessees to recognize all the leases in the asset against an obligation in the report on the financial status (except certain cases) similar to the accounting treatment of financial leasing, according to the existing standard IAS 17 Leases.

Lessees will recognize the obligation in respect of leasing payments and on the other hand will recognize a usage right in the asset. The lessees will also recognize separate interest and amortization expenses.

Variable leasing payments, independent of index or interest, which are based on performance or usage (e.g., percentage of the proceeds) will be recognized as an expense by the lessees or as an income by the lessors, on the creation date.

In the event of a change in index linked variable leasing payments, the lessee must reassess the obligation in respect of the leasing, where the effect of the change will be charged to the usage right in the asset.

The new standard includes two exceptions, whereby the lessee has a right to treat leasing according to the existing accounting treatment in relation to operational leasing in the event of leasing assets with low financial cost, or in the event of leasing for a period of up to one year.

There is no material change in the accounting treatment required from the lessor compared to the current standard, namely, classifying as a financial or operational lease.

The new standard will be applied from annual periods staring on January 1, 2019, or later. Early adoption is possible, as long as IFRS 15 Recognition of Income from Contracts with customers is applied concurrently.

y. Details of the changes in the Israeli CPI and the representative exchange rates of the U.S. dollar

Representative Consumer price index Exchange rate of

Index in respect of Known index US Dollar% % %

Year ended on December 31, 2015 (1.0) (0.9) 0.3Year ended on December 31, 2014 (0.2) (0.1) 12.0Year ended on December 31, 2013 1.8 1.9 (7.0)

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NOTE 3: - OPERATING SEGMENTS

a. The Company operates in the following operating segments:

1. The life assurance and long-term savings segment:

The segment of life assurance and long term savings includes the lines of life assurance and health assurance and it focuses mainly on long term savings (in the framework of various types of life assurance policies), as well as insurance coverage for various risks such as: death, disability, disability income insurance, etc.

2. Health insurance segment

The health insurance segment includes medical expenses insurance, personal accident insurance, surgery, transplants, severe diseases, travel abroad and more.

3. The general insurance segment

The general insurance segment includes the liability and property branches. Pursuant to the Commissioner of Insurance's directives, the general insurance segment is detailed according to the lines of motor act, motor casco, comprehensive property branches and other insurances.

- The motor act insurance line of business

The motor act insurance line of business focuses on mandatory coverage acquired by the owner of the vehicle or the driver which protects it against bodily injuries (caused to the driver of the vehicle, the passengers in the vehicle or to pedestrians), as a result of the use of the motor vehicle.

- The motor casco line of business

The motor casco line of business focuses on the property damage coverage for the insured vehicle and property damages that the insured vehicle will cause to a third party.

- Other property branchesThe other insurance lines of property excluding vehicles and focus mainly on residential property.

- Other liability lines

Liability lines are designated to cover liabilities of the insured in respect of damage caused by that insured to a third party. These lines include: third party and employers liability, and professional liability.

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NOTE 3: - OPERATING SEGMENTS (continued)

b. Hereunder are the operating segment results:

Year ended on December 31, 2015Life

assurance Unattributed

and long term General to operating savings Health insurance segments Total

NIS in thousands

Gross premiums earned 230,430 155,108 1,349,098 - 1,734,636Premiums earned by reinsurers 25,682 11,065 55,859 - 92,606Premiums earned on retention 204,748 144,043 1,293,239 - 1,642,030Investments gains, net and finance income 10,259 3,141 38,244 760 52,404Income from management fees 7,119 - - - 7,119Income from commissions 9,692 2,004 3,419 - 15,115Total Income 231,818 149,188 1,334,902 760 1,716,668Payments and change in liabilities in respect of gross insurance and investment contracts 121,283 55,315 947,653 - 1,124,251Reinsurers' share in payments and in change in liabilities in respect of insurance contracts 15,919 5,699 41,811 - 63,429Payments and change in liabilities in respect of insurance and investment contracts on retention 105,364 49,616 905,842 - 1,060,822Commission, marketing and other acquisition expenses 35,940 30,378 182,855 - 249,173General and administrative expenses 19,888 17,137 76,457 8,449 121,931Finance expenses - - 95 14,907 15,002Other Expenses - - - 207 207

Total Expenses 55,828 47,515 259,407 23,563 386,313Income (Loss) before income taxes 70,626 52,057 169,653 (22,803) 269,533Other comprehensive loss before income taxes (80) (90) (376) - (546)Total comprehensive income (Loss) before taxes on income 70,546 51,967 169,277 (22,803) 268,987

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b. Hereunder are the operating segment results (continued)



and long term General to operating savings Health Insurance segments Total

NIS in thousands

Gross premiums earned 219,237 130,746 1,196,318 - 1,546,301Premiums earned by reinsurers 24,103 12,485 52,337 - 88,925Premiums earned on retention 195,134 118,261 1,143,981 - 1,457,376Investments gains, net and finance income 30,184 1,947 36,547 21,138 89,816Income from management fees 7,224 - - - 7,224Income from commissions 10,548 2,420 4,375 - 17,343Total Income 243,090 122,628 1,184,903 21,138 1,571,759Payments and change in liabilities in respect of gross insurance and investment contracts 139,479 49,935 774,530 - 963,944Reinsurers' share in payments and in change in liabilities in respect of insurance contracts 9,348 6,746 1,262 - 17,356Payments and change in liabilities in respect of insurance and investment contracts on retention 130,131 43,189 773,268 - 946,588Commission, marketing and other acquisition expenses 34,202 28,059 179,417 - 241,678General and administrative expenses: 20,673 15,940 64,273 12,573 113,459Finance expenses - - 86 12,978 13,064Other Expenses - - - 584 584Total Expenses 54,875 43,999 243,776 26,135 368,785Income (Loss) before income taxes 58,084 35,440 167,859 (4,997) 256,386Other comprehensive income before income taxes 328 276 1,459 - 2,063Total comprehensive income (Loss) before taxes on income 58,412 35,716 169,318 (4,997) 258,449

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b. Hereunder are the operating segment results (continued)




NIS in thousands

Gross premiums earned 217,118 107,872 1,054,038 - 1,379,028Premiums earned by reinsurers 22,150 12,979 47,986 - 83,115Premiums earned on retention 194,968 94,893 1,006,052 - 1,295,913Investments gains, net and finance income 34,366 2,929 56,249 24,558 118,102Income from management fees 7,158 - - - 7,158Income from commissions 10,468 2,815 4,210 - 17,493Other income - - - 50 50Total Income 246,960 100,637 1,066,511 24,608 1,438,716Payments and change in liabilities in respect of gross insurance and investment contracts 146,092 47,384 716,181 - 909,657Reinsurers' share in payments and in change in liabilities in respect of insurance contracts 7,785 8,258 6,837 - 22,880Payments and change in liabilities in respect of insurance and investment contracts on retention 138,307 39,126 709,344 - 886,777Commission, marketing and other acquisition expenses 31,464 23,395 153,669 - 208,528General and administrative expenses 18,979 13,888 56,141 30,954 119,962Finance expenses - - 82 24,134 24,216Other Expenses - - - 79 79Total Expenses 50,443 37,283 209,892 55,167 352,785Income (Loss) before taxes on income 58,210 24,228 147,275 (30,559) 199,154

Other comprehensive loss before income taxes (183) (89) (808) - (1,080)Total comprehensive income (Loss) before taxes on income 58,027 24,139 146,467 (30,559) 198,074

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c. Hereunder is the composition of operating segment assets and liabilities

December 31, 2015Life assurance Unattributed


NIS in thousandsASSETSIntangible assets - - - 98,917 98,917Deferred acquisition costs 95,223 56,371 77,686 - 229,280Real estate for investment 64,831 138,829 203,660Reinsurance assets 13,931 7,022 143,394 - 164,347Outstanding premiums 1,015 1,533 361,917 - 364,465Financial investments for yield-dependent contracts 499,510 - - - 499,510Other financial investments:

Quoted debt assets 15,456 10,523 287,098 249,482 562,559Unquoted debt assets 42,854 29,179 876,643 106,964 1,055,640Shares - - 8,588 8,589 17,177Other - - 94,680 94,665 189,345

Total other financial investments 58,310 39,702 1,267,009 459,700 1,824,721Cash and cash equivalents in respect of yield-dependent contracts 15,519 - - - 15,519Other cash and cash Equivalents 25,712 17,507 200,849 - 244,068Other assets 1,164 3 42,797 49,237 93,201

Total assets 710,384 122,138 2,158,483 746,683 3,737,688Total assets for yield-dependent contracts 515,029 - - - 515,029

LIABILITIES

Liabilities in respect of insurance and investment non-yield-dependent contracts

76,81952,305 1,938,404

- 2,067,528

Liabilities in respect of insurance and investment yield-dependent contracts

509,923 - - - 509,923

Financial liabilities - - - 301,423 301,423Other liabilities 33,746 7,547 220,699 65,164 327,156

Total liabilities 620,488 59,852 2,159,103 366,587 3,206,030

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c. Hereunder is the composition of operating segment assets and liabilities (continued)

December 31, 2014Life assurance Unattributed


NIS in thousandsASSETSIntangible assets - - - 81,473 81,473Deferred acquisition costs 85,133 47,832 75,075 - 208,040Reinsurance assets 14,238 863 129,527 - 152,628Outstanding premiums 1,110 1,331 258,350 - 260,791Financial investments for yield-dependent contracts 490,057 - - - 490,057

Other financial investments:Quoted debt assets - - 359,392 359,393 718,785Unquoted debt assets 74,894 55,261 859,678 72,943 1,062,776Shares - - 13,026 13,027 26,053Other - - 72,706 72,603 145,309

Total other financial investments 74,894 55,261 1,304,802 517,966 1,952,923Cash and cash equivalents in respect of yield-dependent contracts

27,222 - - - 27,222

Other cash and cash Equivalents 8,864 6,540 238,455 111,357 365,216Other assets - - 31,463 51,348 82,811

Total assets 701,518 119,827 2,037,672 762,144 3,621,161Total assets for yield-dependent contracts 517,279 - - - 517,279

LIABILITIES

Liabilities in respect of insurance and investment non-yield-dependent contracts

75,485 55,697 1,859,282 - 1,990,464

Liabilities in respect of insurance and investment yield-dependent contracts

512,234 - - - 512,234

Financial liabilities - - - 378,415 378,415Other liabilities 35,463 3,270 184,649 34,087 257,469

Total liabilities 623,182 58,967 2,043,931 412,502 3,138,582

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d. Further data of the General Insurance segment

Year ended on December 31, 2015General insurance:

Motor Motor Property linesLiability branches

act casco and others (*) Others(**) TotalNIS in thousands

Gross premiums 414,478 833,401 159,156 11,784 1,418,819Reinsurance premiums 24,074 1,705 29,671 1,068 56,518Premiums on retention 390,404 831,696 129,485 10,716 1,362,301Change in unearned premium balance, on retention 14,128 47,698 4,793 2,443 69,062Premiums earned on retention 376,276 783,998 124,692 8,273 1,293,239Investments gains, net and finance income 24,793 9,774 3,232 445 38,244Income from commissions - - 3,419 - 3,419Total income 401,069 793,772 131,343 8,718 1,334,902Payments and change in liabilities in respect of gross insurance and investment contracts 293,042 575,552 73,675 5,384 947,653Reinsurers' share in payments and in change in liabilities in respect of insurance contracts 27,225 4,147 9,870 569 41,811Payments and change in liabilities in respect of insurance and investment contracts on retention 265,817 571,405 63,805 4,815 905,842Commission, marketing and other acquisition expenses 52,560 105,922 23,077 1,296 182,855General and administrative expenses 21,552 45,366 8,841 698 76,457Finance expenses - - 95 - 95Total expenses 74,112 151,288 32,013 1,994 259,407Income before taxes on income 61,140 71,079 35,525 1,909 169,653Other comprehensive income before income taxes (101) (229) (43) (3) )376(Comprehensive income before taxes on income 61,039 70,850 35,482 1,906 169,277Liabilities in respect of gross insurance contracts as at December 31, 2015 1,314,487 497,530 99,195 27,192 1,938,404Liabilities in respect of gross insurance contracts in retention as at December 31, 2015 1,183,951 494,917 90,036 26,106 1,795,010

(*) Property and other segments include data from residence insurance lines, in which operation amounts to approximately 92% of the total premiums.

(**) The "other" and liability segments include data from the third party liability and professional liability insurance branches, in which operation constitutes approximately 93% of the total premiums in these branches.

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I.D.I. INSURANCE COMPANY LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTE 3: - OPERATING SEGMENTS (continued)

d. Further data of the General Insurance segment: (continued)

Year ended on December 31, 2014General insurance:



Gross premiums 379,424 723,004 144,802 9,448 1,256,678Reinsurance premiums 23,079 1,049 27,282 944 52,354Premiums on retention 356,345 721,955 117,520 8,504 1,204,324Change in unearned premium balance, on retention 14,780 40,739 4,363 461 60,343Premiums earned on retention 341,565 681,216 113,157 8,043 1,143,981Investments gains, net and finance income 22,565 10,939 2,689 354 36,547Income from commissions - - 4,375 - 4,375Total income 364,130 692,155 120,221 8,397 1,184,903Payments and change in liabilities in respect of gross insurance and investment contracts 237,580 479,509 52,129 5,312 774,530Reinsurers' share in payments and in change in liabilities in respect of insurance contracts (3,099) (3) 3,820 544 1,262Payments and change in liabilities in respect of insurance and investment contracts on retention 240,679 479,512 48,309 4,768 773,268Commission, marketing and other acquisition expenses 52,933 99,992 25,060 1,432 179,417General and administrative expenses 18,759 37,539 7,485 490 64,273Finance expenses - - 86 - 86Total expenses 71,692 137,531 32,631 1,922 243,776Income before taxes on income 51,759 75,112 39,281 1,707 167,859Other comprehensive income before income taxes 432 875 142 10 1,459Comprehensive income before taxes on income 52,191 75,987 39,423 1,717 169,318Liabilities in respect of gross insurance contracts as at December 31, 2014 1,310,529 441,469 85,203 22,081 1,859,282Liabilities in respect of gross insurance contracts in retention as at December 31, 2014 1,190,552 441,465 78,679 19,058 1,729,755

(*) Property and other segments include data from residence insurance lines, in which operation amounts to approximately

92% of the total premiums.(**) The "other" and liability segments include data from the third party liability and professional liability insurance branches,

in which operation constitutes approximately 92% of the total premiums in these branches.

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d. Further data of the General Insurance segment: (continued)

Year ended on December 31, 2013

General insurance:



Gross premiums 346,579 629,857 135,367 6,226 1,118,029Reinsurance premiums 19,849 1,107 26,019 708 47,683

Premiums on retention 326,730 628,750 109,348 5,518 1,070,346Change in unearned premium balance, on retention 13,396 43,553 7,051 294 64,294Premiums earned on retention 313,334 585,197 102,297 5,224 1,006,052Investments gains, net and finance income 36,666 15,466 3,593 524 56,249Income from commissions - - 4,210 - 4,210

Total income 350,000 600,663 110,100 5,748 1,066,511Payments and change in liabilities in respect of gross insurance and investment contracts 233,311 424,614 55,055 3,201 716,181Reinsurers' share in payments and in change in liabilities in respect of insurance contracts (2,676) 1,026 8,054 433 6,837Payments and change in liabilities in respect of insurance and investment contracts on retention 235,987 423,588 47,001 2,768 709,344Commission, marketing and other acquisition expenses 38,945 90,085 23,667 972 153,669General and administrative expenses 16,730 32,179 6,915 317 56,141Finance expenses - - 82 - 82Total expenses 55,675 122,264 30,664 1,289 209,892

Income before taxes on income 58,338 54,811 32,435 1,691 147,275Other comprehensive loss before taxes on income (250) (455) (98) (5) (808)Comprehensive income before taxes on income 58,088 54,356 32,337 1,686 146,467Liabilities in respect of gross insurance contracts as at December 31, 2013 1,266,183 373,953 80,920 18,603 1,739,659Liabilities in respect of gross insurance contracts in retention as at December 31, 2013 1,127,116 373,890 72,956 15,825 1,589,787

(*) Property and other segments include data from residence insurance lines, in which operation amounts to approximately 91% of the total premiums.

(**) The "other" and liability segments include data from the third party liability insurance branches, in which operation constitutes approximately 62% of the total premiums in these branches.

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NOTE 4: - INTANGIBLE ASSETS

Composition and movement

Computer software

Year 2015 NIS in thousands

CostBalance as at January 1, 2015 118,472Additions during the year *) 34,653Disposal during the year **) (6,143)

Balance as at December 31, 2015 146,982Accumulated amortizationBalance as at January 1, 2015 36,999Additions during the year 17,209Disposal during the year **) (6,143)

Balance as at December 31, 2015 48,065

Amortized cost as at December 31, 2015 98,917Year 2014

CostBalance as at January 1, 2014 117,601Additions during the year *) 36,269

Disposal during the year **) )35,398(

Balance as at December 31, 2014 118,472Accumulated amortizationBalance as at January 1, 2013 60,830Additions during the year 11,567

Disposal during the year **) )35,398(


Amortized cost as at December 31, 2014 81,473

*) Additions in respect of computer software include capitalization of expenses in respect of independent development: in 2015 - approximately NIS 23,052 thousand and in 2014- approximately NIS 21,505 thousand.

**) Disposals of assets fully amortized.

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NOTE 5: - DEFERRED ACQUISITION COSTS

a. Composition:

December 31

2015 2014

NIS in thousandsLife assurance and long-term savings (see paragraph b below) 95,223 85,133Health insurance (see paragraph b below) 56,371 47,832General insurance 77,686 75,075

229,280 208,040

b. The movement in deferred acquisition costs in life assurance, long-term savings and health insurance:

InsuranceLife and savings

Long term HealthNIS in thousands

Balance as at January 1, 2014 75,776 42,470Additions (acquisition costs) 31,326 27,849Accumulated amortization (7,820) (11,795)Amortization for cancellations (14,149) (10,692)Balance as at December 31, 2014 85,133 47,832Additions (acquisition costs) 33,344 32,902Current amortization (8,643) (14,364)Amortization for cancellations (14,611) (9,999)

Balance as at December 31, 2015 95,223 56,371

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NOTE 6: - FIXED ASSETS

a. Composition and movement:

Year 2015Office

Leasehold improvement

Furniture and

equipment Computers Vehicles TotalNIS in thousands

CostBalance as at January 1, 2015 26,295 20,251 27,350 17,621 91,517Additions 1,151 1,929 4,997 4,857 12,934Disposals *) - 217 (582) - (799)

Sales - - - (3,413) (3,413)

Balance as at December 31, 2015 27,446 21,963 31,765 19,065 100,239

Accrued depreciationBalance as at January 1, 2015 13,276 11,832 12,185 2,876 40,169Additions 2,422 2,309 5,317 2,907 12,955Disposals *) - 217 (582) - (799)

Sales - - - (1,323) (1,323)


Depreciated cost as at December 31, 2015 11,748 8,039 14,845 14,605 49,237

Year 2014

Office

Leasehold improvement

Furniture and

equipment Computers Vehicles TotalNIS in thousands

CostBalance as at January 1, 2014 24,264 20,374 22,955 16,591 84,184

Additions 2,266 1,012 9,824 8,092 21,194

Disposals *) (235) (1,135) (5,429) - (6,799)

Sales - - - (7,062) (7,062)


Accrued depreciationBalance as at January 1, 2014 10,747 10,546 13,572 3,341 38,206

Additions 2,764 2,421 4,042 2,609 11,836

Disposals *) (235) (1,135) (5,429) - (6,799)

Sales - - - (3,074) (3,074)


Depreciated cost as at December 31, 2014 13,019 8,419 15,165 14,745 51,348

*) Disposals of fully depreciated assets.

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NOTE 7: - INVESTMENT IN INVESTEES

Information regarding companies held directly by the Company

Consolidated company

The Amounts made

available Company's to the subsidiary Scope of

NoteCountry of incorporation

equity and voting rights

by consolidated company

investment in investee

% NIS in thousandsNIS in

thousands2015 and 2014 Name of companyI.D.I. INSURANCE Issues (2010) Ltd. (1) Israel 100 - 1

(1) I.D.I. Issues (2010) Ltd. ("I.D.I. Issues") was established by the Company on August 15, 2010, for raising finances in Israel for the Company through (public and private) issue of debentures and/or bonds and/or capital notes, whose proceeds will be deposited in the Company for its use according to its discretion and at its responsibility and whose repayment is guaranteed by the Company. See Note 24e below regarding issue of debentures by I.D.I. Issues and their rating.

NOTE 8: - REAL ESTATE FOR INVESTMENT

a. Composition and movement:

December 31

2015 2014

NIS in thousandsBalance as at January 1 - -Additions during the yearAcquisitions (1) 200,410 -Capitalized costs and expenses 14,330 -Total additions 214,740 -

Fair value adjustment (11,080) -

Balance as at December 31 203,660 -

(1) On July 29, 2015 (hereunder "The Signing Date") the Company entered agreements with third parties, which are not related to the Company and its controlling parties (hereunder "The Sellers") to purchase their rights in part of an offices building in Tel Aviv named "Beit Psagot" (hereunder "The Asset" and the "Agreements", or "The Transaction", respectively and according to the subject). The purchase of the rights also included the purchase of the sellers rights and liabilities according to existing leasing agreements in the asset, to about 30 lessees under different leasing agreements, for different leasing periods up to 2024 (hereunder "The Lessees").

Pursuant to the initial agreement stage, the Company also conducted a negotiation and reached an agreement with a third party, which holds the balance or the rights in the asset (RIT1), on

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NOTE 8: - REAL ESTATE FOR INVESTMENT (continued)

a. Composition and movement: (continued)

both the division of the rights in the asset and on joint management of the asset. Upon completion of the said negotiation, the Company holds 50% of the entire area of the asset (about 11,000 square meters) for which the Company paid a total amount of some NIS 215 million, including purchase expenses (The purchase expenses were charged to the Profit and Loss statement), for which it is entitled to annual rental fees from the lessees in the amount of some NIS 14.5 million.

After fulfilling all the suspending conditions concluded between the parties, the transaction was concluded to enable the Company to hold 50% of the rights in the asset.

b. Measuring the fair value of the real estate for investment

1. Appraisal processes implemented in the Company and appraisal techniques used to determine the fair value:

Real estate for investment is measured on the fair value basis, as determined by the appraisal conducted by Ms. Olpiner Dovrat, an external, independent appraiser with recognized professional qualifications and extensive experience related to the location and type of the appraised real estate. The fair value was determined on the basis of transactions concluded recently in the market on similar real estate and a similar location to that of the real estate held by the Company and also on the basis of estimated future cash flows expected from the asset. The estimation of the cash flows included in its considerations their inherent risk, and the cash flows are capitalized at a yield rate that reflects the inherent risks of the cash flows, determined according to the accepted yield in the real estate market, with adjustment to the specific characteristics of the asset and the risk level of the expected revenues from it.

2. Fair value hierarchy:

The fair value is measured at level 3 in the fair value hierarchy.

3. The significant data which cannot be expected:

Following are details of the capitalization rates used to determine the fair value:

December 31

2015 2014

NIS in thousandsAsset type:

Offices in Israel 7.5% -

4. Sensitivity analysis

The capitalization rate is a significant estimate in determining the fair value, since any change in it will have a material effect on the value of the real estate for investment.The following sensitivity analysis presents the effect of a change in the capitalization rate at the detailed rates.

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NOTE 8: - REAL ESTATE FOR INVESTMENT (continued)

b. Measuring the fair value of the real estate for investment (continued)

4. Sensitivity analysis (continued)

December 31

2015 2014

NIS in thousandsIncrease of 0.5% (11,420) - Decrease of 0.5% 13,080 -

c. Amounts recognized in the profit and loss statement (except changes in the fair value)

December 31

2015 2014

NIS in thousandsRental income 5,374 -Direct operational costs (118) -Total rental income 5,256 -

NOTE 9: - DEBTORS AND RECEIVABLES

Composition:

December 31

2015 2014NIS in thousands

Prepaid expenses 26,249 23,274Insurance companies and insurance brokers 9,924 5,046Insured 1,929 1,933Receivable interest and dividend 276 334Receivable income 756 -Advance payments to suppliers 2,234 505Others 2,596 371

43,964 31,463

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NOTE 10: - OUTSTANDING PREMIUMS

a. Composition:

December 312015 2014NIS in thousands

Outstanding premiums *) 366,650 262,565

Less - allowance for doubtful accounts (b) (2,185) (1,774)

Total outstanding premiums 364,465 260,791

Includes checks receivable and standing orders*) 26,040 24,083

Regarding linkage terms and risk exposure of outstanding premiums, see Note 34 below.Regarding outstanding premiums from related parties, see Note 35a below.

b. Hereunder is the movement in the allowance for doubtful accounts:

NIS in thousands

Balance as at January 1, 2014 3,097Change in allowance (1,323)Balance as at December 31, 2014 1,774Change in allowance (*) 411Balance as at December 31, 2015 2,185

c. Aging:


Unimpaired outstanding premium :Without arrears 358,874 255,187

In arrears *): Below 90 days 2,968 3,938 Between 90 to 150 days 622 277 Over 180 days 278 160

3,868 4,375

Total unimpaired outstanding premium 362,742 259,562

Unimpaired outstanding premium **) 1,723 1,229

Total outstanding premiums 364,465 260,791*) Includes mainly debts in arrears in the general insurance segment.**) After provision for doubtful debts

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NOTE 11: - FINANCIAL INVESTMENTS FOR YIELD-DEPENDENT CONTRACTS

a. Details of assets presented at fair value through profit and loss:


Quoted debt assets 391,274 382,529Unquoted debt assets 9,875 10,753Shares 20,895 28,932Other financial investments: 77,466 67,843Total financial investments 499,510 490,057Cash and Cash Equivalents 15,519 27,222Total assets for yield-dependent contracts 515,029 517,279

Regarding the exposure in respect of assets for yield-dependant contracts, see Note 34 related to risk management.

b. Classification of financial instruments by fair value hierarchy:

The table below presents an analysis of financial instruments reported at fair value. The various levels are described in the following manner:- Level 1 - Fair value that is measured by using quoted prices (unadjusted) in active

markets for identical instruments.- Level 2 - Fair value that is measured by using anticipated data, directly or indirectly, that

is not included in Level 1 above.- Level 3 - Fair value that is measured by using data that is not based on anticipated market

data.

December 31, 2015Level 1 Level 2 Level 3 Total

NIS in thousandsFinancial investments:Quoted debt assets 391,274 - - 391,274Unquoted debt assets - 9,875 - 9,875Shares 19,562 - 1,333 20,895Other financial investments: 71,632 - 5,834 77,466

Total 482,468 9,875 7,167 499,510

December 31, 2014Level 1 Level 2 Level 3 Total

NIS in thousandsFinancial investments:Quoted debt assets 382,529 - - 382,529Unquoted debt assets - 10,753 - 10,753Shares 28,932 - - 28,932Other financial investments: 63,859 - 3,984 67,843

Total 475,320 10,753 3,984 490,057

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NOTE 11: - FINANCIAL INVESTMENTS FOR YIELD-DEPENDENT CONTRACTS (continued)

c. Movement in financial assets measured at fair value and classified as Level 3:

NIS in thousands

Balance as at January 1, 2015 3,984Purchases 3,593Sales (744)

Total income recognized in profit or loss 334

Balance as at December 31, 2015 7,167Total income in the period recognized in profit or loss In respect of held assets as at December 31, 2015 376

NIS in thousands

Balance as at January 1, 2014 1,906 Purchases 2,330Sales (714)

Total income recognized in profit or loss 462


Total income in the period recognized in profit or loss In respect of held assets as at December 31, 2014 462

There were no transitions between level 1 and level 2 in 2014 and 2015.

NOTE 12: - OTHER FINANCIAL INVESTMENTS:

a. Composition:

December 31, 2015Presented atFair valuethrough Presented at

Profit and Loss

amortized cost Total

NIS in thousandsQuoted debt assets(1) 562,559 - 562,559Unquoted debt assets(2) - 1,055,640 1,055,640Shares (4) 17,177 - 17,177Other (5) 189,345 - 189,345

Total 769,081 1,055,640 1,824,721

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NOTE 12: - OTHER FINANCIAL INVESTMENTS (continued):

a. Composition:

December 31, 2014Presented atFair valuethrough Presented at

Profit and Loss

amortized cost Total

NIS in thousandsQuoted debt assets(1) 718,785 - 718,785Unquoted debt assets(2) - 1,062,776 1,062,776Shares (4) 26,053 - 26,053Other (5) 145,309 - 145,309Total 890,147 1,062,776 1,952,923

(1) Quoted debt assets

2015 2014 2015 2014

Carrying amount Amortized cost

NIS in thousandsGovernment bonds 292,537 516,449 292,135 516,007Other debt assets: Non-convertible other debt assets 270,022 202,336 266,879 199,870Total quoted debt assets 562,559 718,785 559,014 715,877

(2) Unquoted debt assets

Composition:

December 31

Carrying amount Fair value

2015 2014 2015 2014

NIS in thousands NIS in thousands

Non-convertiblePresented in loans and debtors, except bank deposits 324,974 325,809 330,708 326,603

Bank deposits*) 730,666 736,967 780,206 809,983Total non-convertible debt assets

1,055,640 1,062,776 1,110,914 1,136,58

6Fixed impairment losses accrued to profit or loss 2,396 4,509

*) See also Note 26.

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NOTE 12: - OTHER FINANCIAL INVESTMENTS (continued)

a. Composition: (continued)

(3) Details regarding interest and linkage in respect of debt assets

December 312015 2014

Effective interest%

Quoted debt assetsLinkage basisLinked to CPI 1.98 3.50NIS 0.41 0.55Linked to foreign Currency 3.51 4.30


Effective interest%

Unquoted debt assetsLinkage basisLinked to CPI 2.91 2.77NIS 0.78 1.36

(4) Shares

December 31Carrying amount Cost2015 2014 2015 2014NIS in thousands NIS in thousands

Quoted 17,177 26,053 15,828 23,851

(5) Other financial investments

December 31

2015 2014 2015 2014

Carrying amount Cost

NIS in thousandsQuoted financial investments 140,813 128,245 121,748 108,911Unquoted financial investments 48,532 17,064 49,244 20,225

Total other financial investments 189,345 145,309 170,992 129,136

Other financial investments mainly include investments in basket certificates, investment funds, infrastructures, options and structured products. Regarding the Company's liabilities to invest in investment funds, see Note 36e below.

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a. Composition: (continued)

(6) Derivative instrumentsHereunder is the amount of net exposure to the base asset, presented in delta terms of the financial transactions prepared as at the date of the financial reporting:

December 31

2015 2014

NIS in thousands

Foreign currency 16 104

b. The interest rates used to determine the fair value

The fair value of the unquoted debt assets that are measured at fair value through profit and loss and the unquoted financial debt assets measured at their amortized cost, for which information regarding the fair value is given for Note purposes only is determined through the capitalized estimate of the anticipated cash flows in their respect. The capitalization rates are mainly based on the yields of the Government bonds and the corporate bonds' margins, as measured in the TASE. The price quotations and interest rates used for capitalization are determined by the company which had won a tender for the construction and operation of stock price quotations and interest rates pool for institutional entities. Beginning from March 20, 2011, the Fair Value Ltd., provides price quotations and discounted interest rates to institutional entities for revaluation of unquoted debt assets. The fair value model is based mainly on the division of the quoted market into deciles in accordance with the yield, by stating the debt asset and determining the location of the unquoted asset in those deciles, in accordance with the risk premium derived from the transaction/issue prices in the unquoted market ("The Fair Value Model").

Following the Supreme Court's ruling which ordered the cancellation of the tender which the Fair Value group had won, a new tender was published.

According to the letter published by the Ministry of Finance in September 2014, the Tenders Committee decided to announce that Fair Value if the winner of the new tender. This letter also stated that a separate announcement will be published about the timetable for assimilating the updated model of Fair Value. At this stage, the Company cannot assess the effect of the expected methodology change on the fair value of unquoted debt assets, if any.


%Financial AssetsFor unquoted debt assets - in Israel, according to local rating*):AA and above 1.3 1.1A 0.9 8.5BBB and lower 11.7 5.6Non-rated 16.1 13.4

*) The sources for the level of rating in Israel are the rating companies of Ma'alot and Midroog. The data from Midroog was transferred to the rating categories according to the

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generally accepted conversion coefficients. Each rating includes all the ranges: for example, rate A includes A- up to A+.

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c. Classification of financial instruments by fair value hierarchy

The table below presents an analysis of financial instruments reported at fair value. The various levels are described in the following manner:- Level 1 - Fair value that is measured by using quoted prices (unadjusted) in active

markets for identical instruments.- Level 2 - Fair value that is measured by using anticipated data, directly or indirectly, that

is not included in Level 1 above.- Level 3 - Fair value that is measured by using data that is not based on anticipated market

data.

The balance in the financial statements of cash, outstanding premiums and debtors and receivables matches or almost matches their fair value.

December 31, 2015

Level 1 Level 2 Level 3 Total

NIS in thousandsQuoted debt assets 562,559 - - 562,559Shares 17,177 - - 17,177Other financial investments 140,829 - 48,516 189,345Total 720,565 - 48,516 769,081Unquoted debt assets for which fair value was presented (12a above) - 1,110,914 - 1,110,914

December 31, 2014

Level 1 Level 2 Level 3 Total

NIS in thousandsQuoted debt assets 718,785 - - 718,785Shares 26,053 - - 26,053Other financial investments 128,347 - 16,962 145,309

Total 873,185 - 16,962 890,147Unquoted debt assets for which fair value was presented (12a above) - 1,136,586 - 1,136,586

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d. Movement in financial assets measured at fair value and classified as Level 3

NIS in thousands

Balance as at January 1, 2015 16,962Purchases 36,242Sales (3,469)Total loss recognized in profit or loss (1,219)

Balance as at December 31, 2015 48,516Total loss for the period included in profit and loss in respect of assets held as at December 31, 2015

(1,078)

NIS in thousands

Balance as at January 1, 2014 8,649Purchases 7,493Sales (1,302)Total income recognized in profit or loss 2,122

Balance as at December 31, 2014 16,962Total income for the period included in profit and loss in respect of assets held as at December 31, 2014

2,122

There were no transitions between level 1 and level two during 2014 and 2015.

e. The Company does not present an appendix for additional information regarding other financial investments since the required disclosure is presented in this Note above.

f. Investments aging in unquoted financial debt assets


NIS in thousandsUnimpaired debt assetsWithout arrears 1,055,162 1,054,781Impaired debt assets(*)Impaired assets, gross 2,874 12,504Provision for loss (2,396) (4,509)

Impaired debt assets, net 478 7,995

Total unquoted debt assets 1,055,640 1,062,776

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NOTE 13: - CASH AND CASH EQUIVALENTS

a. Cash and cash equivalents in respect of yield-dependent contracts

December 31

2015 2014

NIS in thousandsCash for immediate withdrawal 15,519 27,222

The cash in banking corporations as of the date of the statement of financial position bears current interest based on the interest rate in respect of daily bank deposits 0.01% (as at December 31 2014, 0.13%).

b. Other cash and cash Equivalents

December 31

2015 2014

NIS in thousands

Cash and deposits for immediate withdrawal 22,241 11,340

Short term deposits 221,827 353,876

244,068 365,216

The cash in banking corporations as at the date of the statement of financial position bears current interest based on the interest rate in respect of daily bank deposits 0.12%-0.13% (as at December 31 2014, 0.8%-0.89%).

Other deposits in banking corporations are for periods of between one week to three months. The deposits bear interest determined in accordance with the deposit period (0.3%-0.06 %). (as at December 31 2014, 0.21%-0.25%).As for linkage and interest terms of cash and short-term deposits, see Note 34c below.

NOTE 14: - EQUITY AND CAPITAL REQUIREMENTS

a. Composition of share capital

Composition:December 31

2015Issued and outstanding Registered

Ordinary shares of NIS 1 par value each 14,428,941 500,000,000

December 312014

Issued and outstanding Registered

Ordinary shares of NIS 1 par value each 14,188,097 500,000,000

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NOTE 14: - EQUITY AND CAPITAL REQUIREMENTS (continued)

a. Movement in Share Capital

Issued and outstanding share capital

NIS 1 par value Balance as at January 1, 2014 13,759,125Shares conversion 403,972Issuance of shares capital 25,000Balance as at December 31, 2014 14,188,097

Options exercised into shares 240,844

Issuance of shares capital -

Balance as at December 31, 2015 14,428,941

c. Rights attached to shares

1. Voting rights in the general meeting, right to receive dividends, rights upon liquidation of the Company and right to appoint the Company's directors.

2. Trading in the Tel-Aviv Stock Exchange.

d. Capital fund in respect of transactions with controlling shareholders

The capital fund arises from a bonus to the Company's controlling shareholder for the grant of an unlinked and interest free capital note to the Company, which represents a shareholders' investment.

e. Dividends

The following dividends were declared and paid by the Company:

Year ended on December 31, 2015 2014 2013

Dividend (in NIS thousands)) 150,000 130,000 85,000Dividend per share (in NIS) 10.48 9.32 6.09

On the dividend declared after the balance sheet date, see Note 37 below.

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f. Capital management and requirements

1. The Company's required and existing capital

The Company's required and existing capital was determined pursuant to the Supervision of Financial Services Regulations (Insurance) (Minimum Solvency Margin Required from an Insurer), including amendments 1998 ("the Capital Regulations") and the Commissioner's directives.

Hereunder are details with respect to the Company's required and existing capital:

December 31 2015 2014NIS in thousands

Amount required as per the Capital Regulations and the Commissioner's directives (a)

622,073 544,299

Existing amounts calculated as per the Capital Regulations:Core tier 1 capital 531,658 482,579

Subordinate tier 2 capital (b) 297,833 246,680

Hybrid tier 3 capital (b) - 75,038

Total hybrid tier 2 and tier 3 capital 297,833 321,718

Total existing capital calculated as per the Capital Regulations: 829,491 804,297

Surplus 207,418 259,998

Capital actions after the balance sheet date

Dividend declared:Effect on tier 1 capital (100,000) (75,000)

Effect on tier 2 capital (10,061) (50,000)

Surplus with consideration to events after the balance sheet date 97,357 134,998

(a) The required amount including capital demands in respect of:Activity in general insurance 182,538 177,091Deferred purchase expenses in life assurance and in disease and hospitalization insurance

151,384 132,811

In respect of exceptions in life insurance 106,374 91,746Unrecognized assets as defined in the capital regulations and according to the Commissioner's guidelines

6,933 2,352

Investment assets and other assets 89,129 58,117Catastrophe risks in general Insurance 44,617 42,311Operational risks 41,098 39,871

622,073 544,299

*) Restated due to exclusion of accidental death risk in personal accidents policies.

(b) As for the issuance of debentures whose proceeds are used as the Company's complex capital, see Note 24 below.

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f. Capital management and requirements (continued)

2. Solvency II

The Commissioner's letter of November 2014, to the managers of the insurance companies ("The Letter") outlines the application of a Solvency II based solvency regimen. The Commissioner notes in this letter that the European Parliament decided to apply this directive at the beginning of 2016 and defined timetables for implementing the final guidelines.

Insurance companies in Israel will be required to conform with the new capital guidelines starting from the financial statements of 2016. The change in the capital requirements is subject, inter alia, to the change in the Supervision of Financial Services (Insurance) (minimum equity required of the insurer), 1998.

During 2016, before the new regimen becomes effective, The Ministry of Finance intends to require a quarterly report to the Commissioner on indications of the new solvency ratio, in parallel to reporting capital requirements according to the current regulations.

In July 2015, the Commissioner published a letter to insurance companies managers on transition orders for applying Solvency II, based on the directive, stating mainly:

An insurer who fails to fulfill the capital requirements in the first year of applying the directive will be required to take the required steps to cover the deficit in the capital or decrease the risk profile, to ensure fulfillment of the capital requirements up to December 31, 2018.

Decreased capital requirement on part of the shares held by the Company on December 31, 2016, where this requirement will increase gradually over 7 years until the capital requirement in respect of these shares will reach its maximum rate.

The Commissioner intends to publish guidelines on capital management and on setting an internal capital goal; on the gaps survey which the companies will be required to conduct regarding the risks management, controls and corporate rule system and a consultation paper to promote the Own Risk Solvency Assessment (ORSA) process.

Several exercises (IQIS - simulations of the directive's effect on the insurer's capital, given his current business mix and balance) were conducted as part of the preparations for implementing the model, aimed at calibrating the model. The last performed exercise related to 2014 (hereunder, "IQIS4") and was based on the final regulations and technical implementation guidelines published by the European Commission and also on a performance guiding circular published by the Commissioner in April 2015. Another IQIS exercise is scheduled to be conducted for 2015 (hereunder "IQIS5").

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f. Capital management and requirements (continued)

2. Solvency II (continued)

As part of the preparations, the Commissioner published in April 2015, a letter stating that "the exercise to be conducted on financial statements for 2014 reflects the European guidelines. To remove any doubt and to prevent uncertainty in the preparation process, we wish to emphasize that the exercise expresses the decisions of the supervision regarding the adjustments required for the Israeli economy and will be expressed in the new guidelines. We will continue to track the developments in the European guidelines, if any, in preparation for the IQIS5 exercise and will discuss the adjustments that will be required for Israel.

According to the IQIS4 exercise performed on year end data of 2014, the Company's capital surplus increased according to the Solvency II based regimen, compared to the capital surplus in the existing Israeli regimen.

g. the Company adopted a dividend policy whereby, subject to the provisions of the law, the Company will distribute dividends at not less than 50% of its annual profits, as defined in Section 302 of the Companies Law, 1999.

NOTE 15: - LIABILITIES IN RESPECT OF NON-YIELD-DEPENDENT INSURANCE CONTRACTS

December 312015 2014 2015 2014 2015 2014

Gross Reinsurance On retentionNIS in thousands

Life assurance and long-term savings 76,819 75,485 13,931 14,238 62,888 61,247Insurance contracts included in the health insurance segment (see Note 19 below) 52,305 55,697 7,022 8,863 45,283 46,834Insurance contracts included in the general insurance segment (see Note 17 below) 1,938,404 1,859,282 143,394 129,527 1,795,010 1,729,755Total liabilities in respect of non-yield-dependent insurance contracts 2,067,528 1,990,464 164,347 152,628 1,903,181 1,837,836

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NOTE 16: - LIABILITIES IN RESPECT OF INSURANCE AND INVESTMENT YIELD-DEPENDENT CONTRACTS


Gross and on retentionNIS in thousands

Life assurance and long-term savings:Insurance contracts 483,951 488,671Investment contracts 31,205 28,535

515,156 517,206Less - amounts deposited in the Company under defined benefit plan for its employees 5,233 4,972

Total liabilities in respect of insurance and investment yield-dependent contracts

509,923 512,234

In yield-dependent contracts, the insurance benefits to which the beneficiary is entitled depend on, or are linked to yields that are generated by certain investments of the Company net of management fees. In non-yield-dependent insurance contracts, the insurance benefits to which the policyholder is entitled do not depend on gains or losses from the Company's investments.The distinction between yield-dependent and non-yield-dependent contracts is performed at the single coverage level, thus there are insurance policies with several types of coverage some of which are yield-dependent and others are non-yield-dependent.

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NOTE 17: - LIABILITIES IN REPSECT OF INSURANCE CONTRACTS INCLUDED IN THE GENERAL INSURANCE SEGMENT

a. 1. Liabilities in respect of insurance contracts included in the general insurance segment according to type:

December 312015 2014 2015 2014 2015 2014


Motor act and liability branches

Provision for unearned premium 187,947 171,377 - - 187,947 171,377Excess of income over expenses (accrual) (see Note 2(2)(d)(4) - 121,772 - 7,447 - 114,325

Outstanding claims 1,153,732 1,039,461 131,62

2 115,552 1,022,110 923,909

Total motor act and liability branches **) 1,341,679 1,332,610 131,62

2 122,999 1,210,057 1,209,611

Property and other branchesProvision for unearned premium 450,527 397,376 5,508 4,848 445,019 392,528Outstanding claims 146,198 129,296 6,264 1,680 139,934 127,616

Total property and other branches (see b2 below) 596,725 526,672 11,772 6,528 584,953 520,144Total liabilities in respect of insurance contracts included in the general insurance segment 1,938,404 1,859,282

143,394 129,527 1,795,010 1,729,755

Deferred acquisition costs: Motor act and liability branches 21,281 22,621 - - 21,281 22,621 Property and other branches 56,405 52,454 1,927 640 54,478 51,814

Total deferred acquisition costs 77,686 75,075 1,927 640 75,759 74,435Total liabilities in general insurance contracts net of deferred acquisition costs:

Motor act and liability branches (Note 17b(1)) 1,320,398 1,309,989 131,62

2 122,999 1,188,776 1,186,990Property and other branches (Note 17b(2)) 540,320 474,218 9,845 5,888 530,475 468,330

Total liabilities in general insurance contracts net of deferred acquisition costs: 1,860,718 1,784,207

141,467 128,887 1,719,251 1,655,320

**) Of this total liabilities in respect of motor act branch 1,314,487 1,310,529

130,536 119,977 1,183,950 1,190,552

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NOTE 17: - LIABILITIES IN REPSECT OF INSURANCE CONTRACTS INCLUDED IN THE GENERAL INSURANCE SEGMENT (continued)

a. 2. Liabilities in respect of insurance contracts included in the general insurance segment according to calculation methods

December 312015 2014 2015 2014 2015 2014

Gross Reinsurance On retention

NIS in thousandsActuarial valuations : Mrs. Liat Cohen *) 1,299,930 1,168,757 137,886 117,232 1,162,044 1,051,525Provisions on the basis of other valuationsProvision for unearned premium 638,474 568,753 5,508 4,848 632,966 563,905Excess of income over expenses (accrual) (see Note 2(2)(d)(4) - 121,772 - 7,447 - 114,325

638,474 690,525 5,508 12,295 632,966 678,230

Total liabilities in respect of insurance contracts included in the general insurance segment 1,938,404 1,859,282 143,394 129,527 1,795,010 1,729,755

*) See actuarial declaration attached as an appendix to the financial statements.

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NOTE 17: - LIABILITIES IN REPSECT OF INSURANCE CONTRACTS INCLUDED IN THE GENERAL INSURANCE SEGMENT (continued)b. Movement in liabilities in respect of insurance contracts included in the general insurance segment, net of deferred acquisition costs

1. Motor act and liability branches

Year that ended on December 31, 2015 2014 2015 2014 2015 2014


Balance at the beginning of the year (1) 1,309,989 1,261,366 122,999 141,845 1,186,990 1,119,521

Accumulated claims cost in respect of current underwriting year (2) 365,599 315,100 12,316 14,334 353,283 300,766Change in balances as at the beginning of the year as a result of linkage to the CPI (10,660) (1,100) (1,037) (132) (9,623) (968)

Change in accumulated claims cost estimate in respect of previous underwriting years (4) 8,893 (39,976) 19,508 (17,360) (10,615) (22,616)

Total change in accumulated claims cost 363,832 274,024 30,787 (3,158) 333,045 277,182

Payments for settlement of claims during the year:

In respect of current underwriting year (8,505) (7,217) - - (8,505) (7,217)

In respect of previous underwriting years (229,407) (203,094) (14,718) (16,291) (214,689) (186,803)

Total payments for the period (3) (237,912) (210,311) (14,718) (16,291) (223,194) (194,020)

Accruals in respect of current underwriting year 8,271 29,150 3,077 881 5,194 28,269

Accruals allocated to profit in respect of the released underwriting year (55,080) (67,642) (5,523) (5,923) (49,557) (61,719)

Balance of change in accruals (688) 23,402 (548) 5,645 (140) 17,757

Total change in the accruals for the period (47,497) (15,090) (2,994) 603 (44,503) (15,693)Effect of changes in insurance reserves in general insurance (see Note 2e(2)(d)(4)) (68,014) - (4,452) - (63,562) -

Balance at year end 1,320,398 1,309,989 131,622 122,999 1,188,776 1,186,9901. The opening and closing balances include: outstanding claims, accruals, unearned premium, net of deferred acquisition costs.2. Ultimate claims cost is: outstanding claims balance (without accruals), provision for premium deficiency, unearned premium, net of deferred acquisition costs

with the addition of the total claims payments, including direct and indirect expenses for claims settlement.

3. The payments include indirect payments for the settlement of claims (administration and general expenses that are recorded under claims) relating to the respective

C - 77


underwriting years.4. The change in accumulated claims cost estimate for previous underwriting years is mainly due to negative development in respect of large claims with

reinsurance in the motor act segment, partially offset by a positive development in small claims without reinsurance.


b. Movement in liabilities in respect of insurance contracts included in the general insurance segment, net of deferred acquisition costs (continued)

2 . Property and other branchesYear that ended on December 31,

2015 2014 2015 2014 2015 2014Gross Reinsurance On retention

NIS in thousands

Balance at the beginning of the year (1) 474,218 402,034 5,888 7,302 468,330 394,732Accumulated claims cost in respect of events in the reporting year (2) 657,667 529,104 14,132 4,284 643,535 524,820Change in accumulated claims cost in respect of events before the reporting year (8,439) 2,533 (114) (469) (8,325) 3,002

Total change in accumulated claims cost 649,228 531,637 14,018 3,815 635,210 527,822Payments for settlement of claims during the year (3)

In respect of events in the reporting year (556,861) (412,985) (7,704) (2,781) (549,157) (410,204)In respect of events before the reporting year (91,978) (91,970) (1,730) (2,549) (90,248) (89,421)

Total payments (4) (648,839) (504,955) (9,434) (5,330) (639,405) (499,625)

Change in provision for unearned premium net of deferred acquisition costs 49,200 45,502 (627) 101 49,827 45,401Effect of changes in insurance reserves in general insurance (see Note 2e(2)(d)(4)) 16,513 - - - 16,513 -

Balance at year end 540,320 474,218 9,845 5,888 530,475 468,330

1. The opening and closing balances include: outstanding claims, with added unearned premium, net of deferred acquisition costs.2. Accumulated claims cost in respect of events during the reporting year includes the outstanding claims balance as at the end of the reporting year

plus the total claim payments during the reporting period, including direct and indirect expenses for settlement of claims. 3. The payments for claims settlement during the year include payments in respect of events prior to the reporting year with the addition of changes

in the balance of outstanding claims in respect of events prior to the reporting year.4. Payments for claims settlement include direct and indirect expenses for claims settlement (general and administrative expenses that are recorded

under claims) relating to the respective years of damage.

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c(1).Examination of run-off of valuation of liabilities in respect of insurance contracts net of gross deferred acquisition costs, in the motor act and liability insurance branches (1)

As at December 31, 2015Underwriting year

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 TotalNIS in thousands adjusted to the November 2015 index *)

Claims paid (accumulated) as at the end of the year:After the first year 3,331 6,619 3,509 4,204 8,743 6,588 5,331 6,579 7,153 8,505After two years 28,924 28,513 30,460 27,223 27,809 24,599 27,059 30,494 33,949After three years 56,566 58,596 62,353 60,628 59,494 64,708 68,063 78,564After four years 80,421 100,287 92,590 95,707 100,183 103,182 112,413After five years 111,128 125,958 126,998 124,838 127,573 127,365After six years 130,255 142,398 151,674 148,091 149,345After seven years 161,412 159,419 173,874 167,970After eight years 184,408 166,760 194,930After nine years 193,876 174,254After ten years 199,588Accumulated claims estimate (including payments and accruals) at the end of the year:After the first year**) 217,005 238,809 248,899 273,537 286,036 282,958 294,423 312,609 342,496 373,870

After two years 246,864 270,811 274,846 290,881 299,633 289,799 301,411 315,997 352,514

After three years 242,736 273,676 279,303 296,087 305,894 295,517 308,286 330,926After four years 205,340 229,251 243,465 229,413 240,101 231,178 253,116After five years 210,896 211,876 235,332 219,667 231,040 230,052After six years 212,143 209,565 230,787 217,280 232,838After seven years 218,180 199,284 220,978 207,446After eight years 212,768 194,857 222,034After nine years 209,603 193,882After ten years 209,424Excess (shortage) related to the first year which excluded accrual ***) (4,084) 35,368 21,431 21,967 7,262 1,126 83,070

Deviation rate related to the first year which excluded accrual in percentage (1.99%) 15.4% 8.80% 9.58% 3.02% 0.49% 6.03

Accumulated claims cost as at December 31, 2015 209,424 193,882 222,034 207,446 232,838 230,052 253,116 330,926 352,514 373,870 2,606,102

Effect of changes in insurance reserves in general insurance (see Note 2e(2)(d)(4)) 1,256 1,104 1,771 3,189 1,955 (557) (1,477) (39,299) (32,605) (11,293) (75,956)Accumulated payments up to December 31, 2015 199,588 174,254 194,930 167,970 149,345 127,365 112,413 78,564 33,949 8,505 1,246,884

Outstanding claims balance 11,092 20,732 28,875 42,665 85,449 102,129 139,226 213,063 285,960 354,071 1,283,262

Outstanding claims for the years up to and including the 2005 underwriting year 37,135Total liabilities in respect of insurance contracts in motor act and liability branches net of deferred acquisition costs as at December 31, 2015

1,320,398

*) The above amounts are adjusted to inflation to make it possible to examine the claims run-off on the basis of real values.**) The accumulated claims estimate at the end of the first year includes the reserve for unearned premium net of deferred acquisition costs.***) The gap between the accumulated claims valuation in first year which excludes the accumulated claims valuation as at December 31, 2015, is mainly due to changes in insurance reserves in general insurance.(1) Based on an examination made by the Company in the property and other branches, the uncertainty regarding the amount and timing of claims cost is generally resolved within one year. Accordingly, no information was provided regarding the run-

off of claims in these branches.

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NOTE 17: -LIABILITIES IN REPSECT OF INSURANCE CONTRACTS INCLUDED IN THE GENERAL INSURANCE SEGMENT (continued)c(2).Examination of run-off of valuation of liabilities in respect of insurance contracts net of deferred acquisition costs, in the motor act and liability insurance branches

on retention (1)



Claims paid (accumulated) as at the end of the year:After the first year 2,899 6,608 3,507 4,202 8,743 6,585 5,329 6,585 7,153 8,505After two years 28,491 28,500 30,448 27,208 27,379 24,583 27,052 30,494 33,941After three years 56,129 58,573 62,326 60,600 59,017 64,518 67,646 78,555After four years 79,983 89,198 92,517 92,989 94,793 102,652 108,314After five years 107,606 114,817 119,421 124,255 122,169 126,608After six years 126,626 130,845 141,710 145,081 141,267After seven years 149,212 143,276 156,180 163,930After eight years 164,025 149,274 174,372After nine years 173,323 156,053After ten years 178,677Accumulated claims estimate (including payments and accruals) at the end of the year:After the first year**) 203,352 215,038 231,170 256,686 264,826 267,639 278,869 300,221 327,418 358,477After two years 217,966 219,801 236,769 259,513 264,298 266,700 276,226 294,199 322,956After three years 217,303 224,304 241,978 265,438 270,590 272,849 283,076 301,661After four years 180,158 190,414 203,303 206,162 210,825 216,764 234,810After five years 179,545 178,814 202,193 204,702 208,514 214,895After six years 184,901 181,280 199,820 208,347 209,070After seven years 192,490 176,193 194,128 200,267After eight years 190,175 172,651 197,370After nine years 187,711 172,107After ten years 187,787Excess (shortage) related to the first year which excluded accrual ***) (7,629) 18,306 5,933 5,895 1,755 1,869 26,129

Deviation rate related to the first year which excluded accrual in percentage (4.23%) 9.61% 2.92% 2.86% 0.83% 0.86% 2.16%

Accumulated claims cost as at December 31, 2015 187,787 172,107 197,370 200,267 209,070 214,895 234,810 301,661 322,956 358,477 2,399,401Effect of changes in insurance reserves in general insurance (see Note 2e(2)(d)(4)) 1,256 1,104 1,771 3,189 1,955 (557) (1,477) (38,712) (31,816) (8,216) (71,504)Accumulated payments up to December 31, 2015 178,677 156,053 174,372 163,930 141,267 126,608 108,314 78,555 33,941 8,505 1,170,221


Outstanding claims for the years up to and including the 2005underwriting year 31,100Total liabilities in respect of insurance contracts in motor act and liability branches net of deferred acquisition costs as at December 31, 2015 1,188,776

*) The above amounts are adjusted to inflation to make it possible to examine the claims run-off on the basis of real values.**) The accumulated claims estimate at the end of the first year includes the reserve for unearned premium net of deferred acquisition costs.***) The gap between the accumulated claims valuation in the first year that excludes the accumulated claims valuation as at December 31, 2015, is mainly due to changes in insurance reserves in general insurance.

C - 80

I.D.I. INSURANCE COMPANY LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(1) Based on an examination made by the Company in the property and other branches, the uncertainty regarding the amount and timing of claims cost is generally resolved within one year. Accordingly, no information was provided regarding the run-

off of claims in these branches.

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NOTE 17: - LIABILITIES IN REPSECT OF INSURANCE CONTRACTS INCLUDED IN THE GENERAL INSURANCE SEGMENT (continued)c(3). Examination of run-off of valuation of liabilities in respect of insurance contracts net of gross deferred acquisition costs, in the motor act insurance branch (1)



Claims paid (accumulated) as at the end of the year:After the first year 3,313 6,608 3,507 4,191 8,742 6,575 5,316 6,421 6,894 8,209After two years 28,881 28,490 30,422 27,159 27,726 24,455 26,985 30,215 33,609After three years 56,511 58,547 62,177 60,500 59,155 64,411 67,265 78,200After four years 80,348 100,119 92,233 95,331 99,764 102,624 111,402After five years 110,969 125,375 126,298 124,270 127,033 126,749After six years 129,837 141,797 150,617 147,135 148,621After seven years 160,992 158,759 172,686 167,013After eight years 183,828 165,941 193,742After nine years 193,289 173,407After ten years 199,000

Accumulated claims estimate (including payments and accruals) at the end of the year:

After the first year**) 214,997 236,850 246,525 270,574 283,070 279,329 290,334 307,204 334,362 363,992After two years 244,772 268,483 271,976 287,439 296,580 286,047 297,279 310,468 344,251After three years 240,576 271,056 276,276 292,460 302,786 291,689 304,062 325,228After four years 203,769 228,064 241,915 227,242 238,042 229,536 250,964After five years 209,438 210,600 233,805 218,064 229,195 228,419After six years 210,678 208,346 229,434 215,750 231,280After seven years 216,691 198,019 219,658 205,951After eight years 211,656 193,663 220,565After nine years 208,555 192,832After ten years 208,721Excess (shortage) related to the first year which excluded accrual ***) (4,952) 35,232 21,350 21,291 6,763 1,118 80,802




Outstanding claims for the years up to and including the 2005 underwriting year 35,426Total liabilities in respect of insurance contracts in motor act and liability branches net of deferred acquisition costs as at December 31, 2015 1,293,793

*) The above amounts are adjusted to inflation to make it possible to examine the claims run-off on the basis of real values.**) The accumulated claims estimate at the end of the first year includes the reserve for unearned premium net of deferred acquisition costs.***) The gap between the accumulated claims valuation in the first year that excludes the accumulated claims valuation as at December 31, 2015, is mainly due to changes in insurance reserves in general insurance. (1) Based on an examination made by the Company in the property and other branches, the uncertainty regarding the amount and timing of claims cost is generally resolved within one year. Accordingly, no information

was provided regarding the run-off of claims in these branches.

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NOTE 17: LIABILITIES IN REPSECT OF INSURANCE CONTRACTS INCLUDED IN THE GENERAL INSURANCE SEGMENT (continued)

c(4). Examination of run-off of valuation of liabilities in respect of insurance contracts net of deferred acquisition costs, in the motor act insurance branch on retention (1) As at December 31, 2015

Underwriting year2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total

NIS in thousands adjusted to the November 2015 index *)Claims paid (accumulated) as at the end of the year:After the first year 2,892 6,597 3,507 4,098 8,742 6,575 5,316 6,421 6,894 8,209After two years 28,460 28,480 30,422 27,065 27,331 24,455 26,985 30,215 33,609After three years 56,090 58,537 62,177 60,406 58,727 64,240 66,984 78,200After four years 79,927 89,078 92,233 92,551 94,449 102,178 107,455After five years 107,477 114,326 118,959 123,625 121,718 126,083After six years 126,291 130,340 140,892 144,080 140,669After seven years 148,876 142,714 155,231 162,926After eight years 163,535 148,594 173,423After nine years 172,826 155,360After ten years 178,180Accumulated claims estimate (including payments and accruals) at the end of the year:After the first year**) 201,355 213,102 228,872 253,954 262,199 264,430 275,208 295,510 320,223 349,667After two years 215,934 217,660 234,291 256,488 261,745 263,515 272,653 289,327 315,641After three years 215,227 222,102 239,432 262,276 267,976 269,578 279,412 296,626After four years 178,742 189,542 202,105 204,073 208,948 215,289 232,868After five years 178,290 177,798 200,906 203,083 206,907 213,369After six years 183,591 180,317 198,706 206,816 207,645After seven years 191,138 175,203 193,048 198,753After eight years 189,160 171,690 196,140After nine years 186,752 171,308After ten years 187,175Excess (shortage) related to the first year which excluded accrual ***) (8,433) 18,234 5,965 5,321 1,303 1,920 24,310




Outstanding claims for the years up to and including the 2005 underwriting year 30,023Total liabilities in respect of insurance contracts in motor act and liability branches net of deferred acquisition costs as at December 31, 2015 1,163,257

*) The above amounts are adjusted to inflation to make it possible to examine the claims run-off on the basis of real values.**) The accumulated claims estimate at the end of the first year includes the reserve for unearned premium net of deferred acquisition costs.***) The gap between the accumulated claims valuation in the first year that excludes the accumulated claims valuation as at December 31, 2015, is mainly due to changes in insurance reserves in general insurance. (1) Based on an examination made by the Company in the property and other branches, the uncertainty regarding the amount and timing of claims cost is generally resolved within one year. Accordingly, no information was provided regarding the run-off of claims in these branches

C - 83


NOTE 17 - LIABILITIES IN REPSECT OF INSURANCE CONTRACTS INCLUDED IN THE GENERAL INSURANCE SEGMENT (continued)

c(5). Accumulated data of underwriting years in the motor act insurance branch

Underwriting year 2015 2014 2013 2012 2011 2010 2009

NIS in thousands

Year ended on December 31, 2015:

Gross premiums 417,526 380,676 345,616 319,444 303,086 293,814 290,852Accumulated comprehensive income (loss) on retention in respect of underwriting year - - - 52,399 63,659 67,690 73,933Excess of income over expenses on retention (*) - - - - - - -Effect of accumulated income from investments on the accumulated comprehensive income on retention in respect of the underwriting year 3,553 10,714 19,855 28,765 33,941 38,161 44,379

c(6). Accumulated data of underwriting years in other liabilities insurance branch:

Underwriting year2015 2014 2013 2012 2011 2010 2009

NIS in thousandsYear ended on December 31, 2015:Gross premiums 11,791 9,377 6,295 4,808 4,075 3,213 3,044Accumulated comprehensive income (loss) on retention in respect of underwriting year (63) (181) (143) 1,810 1,774 1,257 1,484Excess of income over expenses on retention (*) - - - - - - -Effect of accumulated income from investments on the accumulated comprehensive income on retention in respect of the underwriting year 94 250 336 405 444 435 571

(*) On the subject of cancelling income surplus over expenses see Note 2e(2)(d)(4).

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NOTE 18: - ADDITIONAL INFORMATION REGARDING LIFE ASSURANCE SEGMENT AND LONG- TERM SAVINGS

a. Details of the liabilities in respect of insurance and investment contracts according to exposure

Data as at December 31, 2015Policies including saving Policies not

component(including riders) according

including saving component risk sold

to policy's date of issue as a separate policyUp to From2003 2004 Individual Group Total

NIS in thousands(a) According to insurance exposure:

Liabilities in respect of insurance contractsAnnuities without secured coefficients - 1,358 - - 1,358

Annuities with secured coefficients From June 2001 170 258,304 - - 258,474Lump-sum - (without annuity option) 63,693 160,426 - - 224,119Other risk components 986 9,745 63,569 2,519 76,819Total in respect of insurance contracts 64,849 429,833 63,569 2,519 560,770Liabilities in respect of investment contracts 4,406 26,799 - - 31,205Total 69,255 456,632 63,569 2,519 591,975

(b) According to financial exposure:Yield dependent 68,269 446,887 - - 515,156Non-yield dependent 986 9,745 63,569 2,519 76,819Total 69,255 456,632 63,569 2,519 591,975

Data as at December 31, 2014

Policies including saving Policies not component(including

riders) according including saving

component risk sold to policy's date of issue as a separate policy

Up to From2003 2004 Individual Group Total

NIS in thousands(a) According to insurance exposure:

Liabilities in respect of insurance contractsAnnuities without secured coefficients - 674 - - 674Annuities with secured coefficients From June 2001 602 254,424 - - 255,026Lump-sum - (without annuity option) 68,054 164,917 - - 232,971Other risk components 680 9,934 62,699 2,172 75,485Total in respect of insurance contracts 69,336 429,949 62,699 2,172 564,156Liabilities in respect of investment contracts 4,476 24,059 - - 28,535Total 73,812 454,008 62,699 2,172 592,691

(b) According to financial exposure:Yield dependent 73,132 444,074 - - 517,206Non-yield dependent 680 9,934 62,699 2,172 75,485

C - 85


Policies including saving Policies not

component(including riders) according

including saving component risk sold

to policy's date of issue as a separate policyUp to From2003 2004 Individual Group Total

NIS in thousands

Total 73,812 454,008 62,699 2,172 592,691

NOTE 18: - ADDITIONAL INFORMATION REGARDING LIFE ASSURANCE SEGMENT AND LONG- TERM SAVINGS (continued)

b. Details of the results according to policy type


Policies including saving component Policies not including (including riders) Saving component

according to policy's risk sold as a date of issue separate policy


NIS in thousandsGross premiums:Saving component 2,362 57,008 - - 59,370

Other 1,683 7,654 160,841 882 171,060

Total 4,045 64,662 160,841 882 230,430

Revenues in respect of investment contracts allocated directly to insurance reserves

102 6,566 - - 6,668

Fixed management fees 994 6,125 - - 7,119

Payments and change in liabilities in respect of gross insurance contracts

3,494 63,642 52,343 1,456 120,935

Payments and change in liabilities in respect of investment contracts

55 293 - - 348

Income from the life assurance business 1,660 3,210 66,113 (357) 70,626Other comprehensive income from life assurance business

(2) (22) (56) - (80)

Comprehensive income from the life assurance business

1,658 3,188 66,057 (357) 70,546

Annualized premium in respect of insurance contracts – new business

- 3,789 38,265 - 42,054

Annualized premium in respect of investment contracts – new business

- 1,278 - - 1,278

Transfers from the Company in respect of insurance and investment contracts

476 2,160 - - 2,636

1.Increases in existing policies are not included in the framework of the annualized premium in respect of new business, but in the framework of the original policy's activity results.

C - 86


C - 87

I.D.I. INSURANCE COMPANY LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTE 18: ADDITIONAL INFORMATION REGARDING LIFE ASSURANCE SEGMENT AND LONG-TERM

SAVINGS (continued)

b. Details of the results according to policy type (continued)


Policies including saving component Policies not including (including riders) Saving component



NIS in thousandsGross premiums:Saving component 2,946 64,074 - - 67,020

Other 1,841 8,449 140,344 1,583 152,217

Total 4,787 72,523 140,344 1,583 219,237

Revenues in respect of investment contracts allocated directly to insurance reserves

56 5,222 - - 5,278

Fixed management fees 1,065 6,159 - - 7,224


6,623 88,854 42,476 13 137,966


253 1,260 - - 1,513

Income from the life assurance business 1,607 1,801 53,211 1,465 58,084Other comprehensive income from life assurance business

7 108 213 - 328

Comprehensive income from the life assurance business

1,614 1,909 53,424 1,465 58,412

Annualized premium in respect of insurance contracts – new business

- 3,821 31,960 - 35,781


- 985 - - 985


437 2,957 - - 3,394

1. Increases in existing policies are not included in the framework of the annualized premium in respect of newbusiness, but in the framework of the original policy's activity results.

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NOTE 18: ADDITIONAL INFORMATION REGARDING LIFE ASSURANCE SEGMENT AND LONG-TERM SAVINGS (continued)

b. Details of the results according to policy type (continued)


Policies including saving component Policies not including (including riders) saving component



NIS in thousandsGross premiums:Saving component 3,507 72,153 - - 75,660Other 1,945 9,077 126,256 4,180 141,458

Total 5,452 81,230 126,256 4,180 217,118Revenues in respect of investment contracts allocated directly to continues insurance reserves

116 2,566 - - 2,682

Fixed management fees 1,109 6,049 - - 7,158


7,546 98,695 36,133 2,162 144,536


277 1,279 - - 1,556

Income from the life assurance business 1,549 2,086 52,847 1,728 58,210

Other comprehensive loss from life assurance business

(5) (68) (106) (4) (183)

Comprehensive income (loss) from the life assurance business

1,544 2,018 52,741 1,724 58,027

Annualized premium in respect of insurance contracts – new business (1)

- 4,402 27,595 - 31,997


- 648 - - 648


901 4,618 - - 5,519

1. Increases in existing policies are not included in the framework of the annualized premium in respect of new business, but in the framework of the original policy's activity results.

C - 89


NOTE 18: - ADDITIONAL INFORMATION REGARDING LIFE ASSURANCE SEGMENT AND LONG-TERM SAVINGS (continued)

c. Information regarding yields and management fees in respect of yield-dependent liabilities

Average nominalannual yield

5 years Manage-ment fees:

Gross nominal annual yield Before after Year

2011 2012 2013 2014 2015

Management fees

Manage-ment fees 2015

%NIS in

thousandsInvestment baskets:Bonds 80 (without shares) (0.6) 9.5 5.8 4.8 1.1 4.0 2.5 1,602

Bonds 75 (without shares) 0.6 8.2 4.9 4.8 0.7 3.8 2.3 2,366

Bonds 60 (up to 15% shares) (0.5) 8.2 5.6 5.0 1.0 3.8 2.3 897

General (up to 50% shares) (7.1) 9.3 10.4 8.5 2.6 4.5 3.0 515

General (4.4) 10.0 9.0 7.1 1.8 4.5 3.0 1,739

Capacity*) 0.1 2.8 - - -

Total 7,119

*) Action stopped in March 2013.

d. Information about funds transfer

1. The Company does not have transfers from other entities.

2. Transfers from the Company to other entities:

For year ended onDecember 31

2015 2014NIS in thousands

Transfer to other insurance companies 69 765Transfer to pension funds 596 894Transfer to provident funds 1,971 1,735Total transfers from the Company 2,636 3,394

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NOTE 19: - ADDITIONAL DATA OF THE HEALTH INSURANCE SEGNENT

a. (1). Detailed liabilities in respect of insurance contracts according to financial exposure

Data as at December 31, 2015Long term Short term Total

NIS in thousands

Non-yield dependent 50,390 1,915 52,305

Total 50,390 1,915 52,305

Data as at December 31, 2014Long term Short term Total

NIS in thousands

Non-yield dependent 53,437 2,260 55,697

Total 53,437 2,260 55,697

The most material coverage included in long term health insurance is personal accidents and in short term is travel abroad.

a(2). Detailed liabilities in respect of insurance contracts according to insurance exposure

The Company does not have paid allowances at this stage and all components of liabilities specified in section a(1) relate to other risk components.

e. Details of the results according to policy type

Data for year Ended on December 31, 2015

Long term Short term Total

NIS in thousands

Gross premiums 146,443*) 8,708 155,151

Income from the health insurance business 51,354 703 52,057Other comprehensive income from health insurance business (88) (2) (90)

Total comprehensive income from health insurance business

51,266 701 51,967

Annualized premium - new business 43,160 - 43,160

*) Comprised mostly of individual policies.

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NOTE 19: - ADDITIONAL DATA OF THE HEALTH INSURANCE SEGNENT (continued)

e. Details of the results according to policy type (continued)



NIS in thousands

Gross premiums 125,465*) 5,408 130,873

Income from the health insurance business 35,384 56 35,440Other comprehensive loss from health insurance business 270 6 276


35,654 62 35,716





NIS in thousandsGross premiums 106,346*) 1,613 107,959Income from the health insurance business 23,966 262 24,228Other comprehensive income from health insurance business (88) (1) (89)


23,878 261 24,139



C - 92


NOTE 20: MOVEMENT IN LIABILITIES IN RESPECT OF YIELD AND NON-YIELD-DEPENDENT LIFE ASSURANCE CONTRACTS, INVESTMENT CONTRACTS AND HEALTH INSURANCE

Life assurance and long-term savingsInsurance Investment Health Contracts Contracts Total Health Reinsurer

NIS in thousandsBalance as of January 1, 2014 539,597 25,077 564,674 53,817 10,157Interest, linkage differences and investment gains (1) 19,799 1,138 20,937 - -Increase in respect of premiums allocated to liabilities (2) 68,457 5,278 73,735 - -Decrease in respect of claims, surrenders and maturities (66,076) (2,958) (69,034) - -Changes in respect of changed assumptions 1,008 - 1,008 (3,522) (1,369)

Other changes (3) 1,371 - 1,371 5,402 75Balance as of December 31, 2014 564,156 28,535 592,691 55,697 8,863Interest, linkage differences and investment gains (1) (548) (64) (612) - -Increase in respect of premiums allocated to liabilities (2) 61,251 6,668 67,919 - -Decrease in respect of claims, surrenders and maturities (63,380) (3,934) (67,314) - -Changes in respect of changed assumptions (4) 4,292 - 4,292 - -

Other changes (3) (5,001) - (5,001) (3,392) (1,841)Balance as of December 31, 2015 560,770 31,205 591,975 52,305 7,022

1. Interest, linkage differences and investment gains - this item includes interest, linkage differences and investment gains in respect of the balance as at the beginning of the year, with the addition of interest, linkage differences and investment gains in respect of premiums for savings only, recorded during the reporting period.

2. Increase in respect of premiums allocated to liabilities – this premium does not include all the premium recorded as income in the Company. The premium includes the premium for savings and part of the premium in products with fixed premium.

3. Other changes – the item includes changes in reserve in respect of outstanding claims, reserve for future claims, IBNR (according to assumptions used at the end of the previous year). In addition, the item includes the interest effect, linkage differences and investment income not included in the "interest, linkage differences and investment income" item, such as: interest, linkage differences and investment gains for claims payment and non-saving premiums.

4. Changes in 2015 are mainly due to updated capitalized interest rate assumptions and also estimated average claim duration, used to determine the reserve of on-going claims in payments in respect of incapacity to work and income to family claims, based inter alia, on reinsurers' research.

C - 93


NOTE 21: - TAXES ON INCOME

a. Tax laws applicable to the Group companies

1. General

The Company is a "financial institution" as defined by the Value Added Tax Law, 1975. The tax applicable to financial institutions is comprised of corporate tax and profit tax.

2. Income Tax Law (adjustments due to inflation), -1985

The Income Tax (Inflationary Adjustments) Law, 1985 ("the Law") is applicable to the Company and its investees, up to the end of 2007. According to the Law, the results for tax purposes are measured after adjustment to the changes in the CPI.

In February 2008, the Knesset passed an amendment to the Law (Inflationary Adjustments) 1985, which prescribed that the applicability of the adjustments law will be terminated in the 2007 tax year and as of the 2008 tax year, the provisions of said Law shall not longer be applicable, with the exception of the transfer provisions which were for the purpose of preventing distortion of the tax calculations. As of the 2008 tax year and onwards, results for tax purposes are measured in nominal values, except for certain adjustments in respect of changes in the CPI for the period up to December 31, 2007. The amendment to the Law includes, among others, the cancelation of the adjustment of the addition and the deduction due to inflation and the additional deduction for depreciation (for depreciable assets that were acquired after the 2007 tax year) from 2008.

3. Tax arrangements that are unique to the insurance industry

a) Agreements with the tax authorities

The insurance companies association and the Tax Authorities signed an agreement ("the tax agreement") which is renewed and updated every year, which arranges the unique tax issues of the insurance business. The provision for tax in the financial statements for the years 2013 and 2014 were prepared on the basis of the agreement for 2012. The provision for tax in the financial statements for 2015 is based on an agreement entered in February 2016 applied for the years 2013 to 2020. The aforementioned tax agreements relate, among others, to the following issues:

1. Deferred Acquisition Costs ("DAC") – direct expenses of insurance companies for the acquisition of life assurance policies for underwriting years up to and including 2014 are deductible for tax purposes in equal portions over a period of four years and for underwriting years 2015 to 2020 over a period of ten years. DAC in morbidity and hospitalization insurance are amortized over a period of 6 years, like the period of amortization in the books.

2. Allocation of expenses to preferred income – expenses will be allocated to income that is subject to reduced tax rates and to the tax exempt income of insurance companies ("preferred income"), which means that part of the preferred income becomes income subject to the full rate of tax, according to the rate of allocation. The rate of allocation prescribed in the agreement depends on the source of the money creating the preferred income.

C - 94


NOTE 21: -TAXES ON INCOME (continued)

a. Tax laws applicable to the Group companies (continued)

3. Tax arrangements that are unique to the insurance industry (continued)

a) Agirrmrnts witu the tax authorities (continued)

3. Provision for indirect expenses for claims settlement

The provision for indirect expenses for settling claims in the field of general and health insurance will be partially adjusted in respect of every underwriting year, starting from 2013 up to 2020, where the adjusted amount will be recognized for tax purposes over the next three tax years.

b) Tax applicable to cancellation of provision for extraordinary risks in life assurance:

The Economic Arrangements Law for the State Budget (Amendments to Attain Budget Goals and Economic Policy for Fiscal Year 2007), 2007, from January 11, 2007 determines principles regarding tax applicable to cancellation of the provision for extraordinary risks in life assurance included in the financial statements until December 31, 2006. According to the principles, the part of the provision calculated at the rate of 0.17% of the amount of the insurance at risk, on retention, in respect of which capital requirements were defined, will be exempt from tax. The tax agreement in the industry states that the exemption is based on the capital requirement expressed, as stated above, and in the event that the capital requirement is cancelled or decreased, the parties will discuss the tax implications thereof, insofar as such exist.

b. Tax rates applicable to the Company

1. The statutory tax rate applicable to financial institutions, among which the Company, is comprised of corporate tax and profit tax.

2. A V.A.T. order, published in November 2015 (Tax Rate for Non-Profit Institutes and Financial Institutes) (Amendment), 2015, determines that the tax rate on wages applied to financial institutes will amount to 17% of the wages paid for work from October onwards and the tax on profit will amount to 17% of the derived profit. The tax on profit instruction will only apply to the relative part of the profit in 2015.

3. Hereunder are the statutory tax rates applicable to financial institutions, among which the Company, pursuant to the aforesaid change:

Corporate tax rate Profit tax rate

Overall tax rate in

financial institutions

Year %

2013 25.0 17.58 *) 36.22 2014 26.5 18.00 37.71 2015 26.5 (*17.75 **) 37.58 2016 and thereafter 26.5 17.00 37.18

*) Weighted rate.**) Compared to a tax rate of 37.71% before the amendment's publication.

C - 95


The aforementioned change in the profit tax rate does not have a material effect on the Company's comprehensive profit.

NOTE 21: -TAXES ON INCOME (continued)

b. Tax rates applicable to the to the income of the Company (continued)

4. On January 4, 2016, the Knesset approved in the second and the third reading of law to amend the Income Tax Act (decrease in corporate tax rate), 2015, which enacted, inter alia, a decrease in the corporate tax rate from 26.5% to 25%, effective from January 1, 2016. According to the said amendment, the total tax rate applied to Financial Institute' including the Company from January 1, 2016 onward will amount to 35.90%.

Outstanding balance of the deferred taxes included in the financial statements as at December 31, 2015, are calculated according to the effective tax rates on the balance sheet date and do not include the effects which may arise from the change in the tax.

The Company estimates that if the change in the tax would have been completed up to December 31, 2015, it would have decreased the balance of the reserve for deferred taxes by about NIS 0.7 million, against a decrease in tax expenses.

The said effects will be included in the financial statements which will be published from the actual tax enactment date, namely, in the first quarter of 2016.

c. Tax assessments

1. Final tax assessments

The Company received final tax assessments up to tax year 2012, inclusive.

d. Taxes on income included in the statements of profit and loss

Year ended on December 31,


Current Taxes 98,090 100,031 72,393Taxes in respect of previous years (1,710) (797) 483

Deferred taxes relating to creation and reversal of timing differences, see also g' below 5,125 (1,211) 5,013

101,505 98,023 77,889

e. Taxes in income relating to other comprehensive income items



Actuarial income (loss) in respect of a defined benefit program (203) 778 (407)

C - 96


NOTE 21: - TAXES ON INCOME (continued)

f. Taxes in income relating to capital sections



Accumulated effect, net, as on December 31, 2015 of changes in insurance reserves in general insurance (see Note 2(e)(2)(d)(4) 17,682 - -

g. Deferred Taxes:

Deferred acquisition costs in life assurance

Financial Assets Others Total

NIS in thousandsBalance of deferred tax asset (liability) as at January 1, 2014 (16,943) (7,698) 8,240 (16,401)

Changes carried to profit or loss (2,172) 6,201 (2,818) 1,211

Changes carried to other comprehensive income - - (778) (778)Balance of deferred tax asset (liability) as at December 31, 2014 (19,115) (1,497) 4,644 (15,968)

Changes carried to profit or loss (868) (5,175) 918 (5,125)

Changes carried to other comprehensive income - - 203 203Balance of deferred tax asset (liability) as at December 31, 2014

(19,983) (6,672) 5,765 (20,890)

The Company has capital loss for tax purposes amounting to approximately NIS 947 thousand, for which no deferred taxes assets were declared, in the absence of a forecast utilization in the foreseeable future.

The net deferred taxes are reported in the balance sheet in the item or liabilities in respect of deferred assets.

C - 97


NOTE 21: - TAXES ON INCOME (continued)

h. Theoretical tax

Following is the reconciliation between the amount of the tax were all income and expenses, profits and losses in the statement of income subject to tax according to the statutory tax rate and the amount of the taxes on income recorded in the statement of profit and loss:



Income before taxes on income 269,533 256,386 199,154

Overall statutory tax rate applicable to financial institutions 37.58% 37.71% 36.22%Tax computed at the overall statutory tax rate applicable to financial institutions 101,289 96,688 72,125Increase (decrease) in taxes on income resulting from the following factors:Unallowable expenses for tax purposes 1,511 2,239 4,691Tax exempt revenues (59) (262) (181)Profit tax exempt revenues from rent (290) - - Addition due failure to apply profit tax in calculating deferred tax assets 1,016 - -Change in deferred taxes following change in tax rates (307) - 596Capital loss for which no deferred taxes were created 55 155 -Taxes in respect of previous years (1,710) (797) 483Others - - 175Taxes on income 101,505 98,023 77,889

Average effective tax rate 37.66% 38.23% 39.11%

C - 98


NOTE 22: - EMPLOYEE BENEFIT ASSETS AND LIABILITIES

Employee benefits include short-term benefits, post-employment benefits, other long-term benefits, and termination benefits. As for share-based payments, see Note 32 below.

Other benefits

The Company grants all its headquarter employees annual bonuses in accordance with criteria it determines, including the Company's compliance with its objectives, and each of the Company's individual unit's compliance with objectives, derived from the Company's goals and their achievement. Each Company management level has personal objectives which must be met as a condition for receiving the annual bonus. In this framework, a designated compensation plan was determined for the Company's senior managers on a triennial basis beginning from 2015, according to which, subject to meeting annual and triennial targets relating to revenues, Embedded Value (EV), income before tax and net income, this group of officers will be eligible for a pre-determined bonus amount, based on a pre-determined gradual distribution mechanism over a period of three years.

Short term employees benefits and other benefits are presented under the accounts payables and credit balances item.

Post-employment benefits

According to the labor laws and Severance Pay Law in Israel, the Company is required to pay compensation to an employee upon dismissal or retirement or to make current contributions in defined contribution plans pursuant to Section 14 to the Severance Pay Law, as specified below. The Company's liability is accounted for as a post-employment benefit.

The computation of the Company's employee benefit liability is made in accordance with a valid employment contract based on the employee's salary and employment term which establish the entitlement to receive the compensation.

The post-employment employee benefits are normally financed by contributions classified as defined benefit plans or as defined contribution plans, as detailed below:

Defined contribution plans

Section 14 to the Severance Pay Law, 1963, applies to part of the compensation payments, pursuant to which the fixed contributions paid by the Company into pension funds and/or policies of insurance companies release the Company from any additional liability to employees for whom said contributions were made. These contributions and contributions for compensation represent defined contribution plans.



The expenses in respect of the defined contribution plans 7,793 6,620 5,998

Defined benefit plan

The Company accounts for that part of the payment of compensation that is not covered by contributions in defined contribution plans, as above, as a defined benefit plan for which an employee benefit liability is recognized and for which the Company deposits amounts in central severance pay funds and in qualifying insurance policies.

C - 99


NOTE 22: - EMPLOYEE BENEFIT ASSETS AND LIABILITIES (continued)

a. Changes in the present value of liabilities in respect of defined benefit plan

Year 2015

Expenses (revenues) carried to profit or loss Loss (income) in respect of remeasurement in other comprehensive income

Balance as at January 1,

2015

Current service

cost

Interest expenses,

net

Past service cost and

deconsolidation effect

Total expenses carried to

profit or loss in the period

Payments from the plan

Plan's assets yield (except

amounts recognized in

interest expenses net)

Actuarial (income) loss in

respect of changes in

demographic assumptions

Actuarial (income) loss in respect of changes in financial

assumptions

Actuarial loss in respect of deviations in

past experience

Total effect on other

comprehensive income

for the period

Deposits deposited by the employer

Balance as at

December 31, 2015

Liability in respect of a defined benefit 30,642 11,367 1,021 622 13,010 (4,711) - - 539 453 992 - 39,933

Liability in respect of adjustment grant 1,946 - 55 - 55 - - - (12) (66) (78) - 1,923

Fair value of plan assets (21,460) - (788) - (788) 3,932 (299) - (69) - (368) (7,388) (26,072)

Liability net in respect of employees benefits

11,128 11,367 288 622 12,277 (779) (299) - 458 387 546 (7,388) 15,784

Year 2014

Expenses (revenues) carried to profit or loss Loss (income) in respect of remeasurement in other comprehensive income

Balance as at January 1,

2014

Current service

cost

Interest expenses,

net

Past service cost and

deconsolidation effect

Total expenses carried to

profit or loss in the period

Payments from the plan

Plan's assets yield (except

amounts recognized in

interest expenses net)

Actuarial (income) loss in

respect of changes in

demographic assumptions

Actuarial (income) loss in respect of changes in financial

assumptions

Actuarial (income) loss in respect of deviations in

past experience

Total effect on other

comprehensive income

for the period

Deposits deposited by the employer

Balance as at

December 31, 2014

Liability in respect of a defined benefit 22,663 8,109 541 484 9,134 (3,794) - 648 (818) 2,809 2,639 - 30,642

Liability in respect of adjustment grant 1,738 - 47 292 339 - - 50 (66) (115) (131) - 1,946

Fair value of plan assets (13,042) - (434) - (434) 1,305 (4,393) (824) 646 - (4,571) (4,718) (21,460)

Liability net in respect of employees benefits

11,359 8,109 154 776 9,039 (2,489) (4,393) (126) (238) 2,694 (2,063) (4,718) 11,128

C - 100


C - 101


NOTE 22: - EMPLOYEE BENEFIT ASSETS AND LIABILITIES (continued)

b. The principal actuarial assumptions used in determining the obligation for the defined benefit plan

2015 2014%

Discount rate of the plan liabilities 3.28 3.57

Expected rate of return on plan assets 3.92 4.12

Future salary increases rate 5.00 – 1.69 5.00 – 1.69

c. Amounts, timing and uncertainties of future cash flows Following are possible changes, considered as reasonable for the end of the reporting period, for actuarial assumptions, assuming that all other actuarial assumptions remained unchanged:

The Change in the obligation for a defined benefit

NIS in thousandsAs at December 31, 2015:Sensitivity test to the change in the expected salary increase rateThe change due to:Expected salary increase rate of 1% 2,041

Sensitivity test to the change in the capitalization rate of the plan's liability and assets of the plan

The change due to:Increased capitalization rate of 0.5% (736)Decreased capitalization rate of 0.5% 869

NOTE 23: - CREDITORS AND PAYABLES


Employees and other liabilities due to wages and salary 27,020 34,288Expenses payable 19,878 13,911Suppliers and service providers 48,559 41,988Government authorities and institutions 12,171 9,521Related companies 122 418Deferred acquisition costs in respect of reinsurance 1,927 640Insurance companies and insurance brokers: Deposits by reinsurers 20,276 16,411 Other accounts 16,865 17,189

Total insurance companies 37,141 33,600Policy holders 47,239 33,370Prepaid premium 55,980 41,918Others 688 2,600

250,725 212,254

C - 102


NOTE 24: - FINANCIAL LIABILITIES

This Note provides information regarding the contractual conditions of financial liabilities. Additional information regarding the Group's exposure to interest risks, foreign currency and liquidity risks is provided in Note 34.

a1. Financial liabilities reported at amortized cost, additional information

As at December 31, 2015

Series B Series C Series D

Capital type Secondary Secondary Secondary

Offering date 11.2010 12.2012 7.2014

Original amount (in NIS’000) 51,000 120,000 126,775

Issuing party I.D.I. Issues I.D.I. Issues I.D.I. Issues

Debt rating and rating company

Midroog A2 (rating on issue date A3)


Midroog A2

Linkage terms Linked to CPI Linked to CPI Unlinked

Quoted/ unquoted Quoted Quoted Quoted

Stated interest Fixed 5% Fixed4.3% Fixed4.35%

Effective interest 4.57% 4.54% 4.55%

Books value in NIS'000 54,096 119,496 127,831

Fair value in NIS'000 (*) 58,854 133,320 135,573

Principal payment dates In one payment, December 2021

In one payment, December 2023


Interest payment dates In June and December of each of the years 2011 up to 2021 (inclusive)

In June and December of each of the years 2013 up to 2023 (inclusive)

In January and July of each of the years 2015 up to 2025 (inclusive)

Right to early maturity Yes (see a2 below) Yes (see a2 below) Yes (see a2 below)

(*) Fair value at level 1.

Unamortized issuance expenses and premium

C - 103


The balance of the liability component as at December 31, 2015, is with the addition of premium of NIS 623 thousand and less issuance expenses of NIS 3,026 thousand which are amortized using the effective interest method.

C - 104


NOTE 24 - FINANCIAL LIABILITIES (continued)

a1. Financial liabilities reported at amortized cost, additional information (continued) Unamortized issuance expenses and premium


Series A Series B Series C Series D

Capital type Tier 3 Secondary Secondary Secondary

Offering date 11.2010 11.2010 12.2012 7.2014

Original amount (in NIS’000) 71,000 51,000 120,000 126,775

Issuing party I.D.I. Issues I.D.I. Issues I.D.I. Issues I.D.I. Issues

Debt rating and rating company Midroog A1 (rating on issue date A2)



Midroog A2

Linkage terms Linked to CPI Linked to CPI Linked to CPI Unlinked

Quoted/ unquoted Quoted Quoted Quoted Quoted

Stated interest Fixed 3.7% Fixed 5% Fixed4.3% Fixed4.35%

Effective interest 3.10% 4.57% 4.54% 4.55%

Books value in NIS'000 75,780 54,675 120,401 127,559

Fair value in NIS'000 (*) 76,240 60,874 135,600 132,848

Principal payment dates In one payment, December 2017




Interest payment dates In June and December of each of the years 2011 up to 2017 (inclusive)



In January and July of each of the years 2015 up to 2025 (inclusive)

Right to early maturity Yes (see a2 below)

Yes (see a2 below) Yes (see a2 below) Yes (see a2 below)

(*) Fair value at level 1.

Unamortized issuance expenses and premiumThe balance of the liability component as at December 31, 2014, is with the addition of premium of NIS 1,328 thousand and less issuance expenses of NIS 3,774 thousand which are amortized using the effective interest method.

C - 105


NOTE 24: - FINANCIAL LIABILITIES (continued)

a2. Upon advance approval of and terms determined by the Insurance Commissioner, the Company will be entitled to redeem in full or partial early redemption the debt certificates (Series A) after five (5) years from the issue date and debt certificates (Series B), debt certificates (Series C) and debt certificates (Series D) after eight (8) years from their issuance date ( "The first early redemption date"). After the first early redemption date, in relation to each series, the Company will be entitled to redeem in full or partial early redemption the debt certificates of the relevant series, on every interest payment date. When the Company will not exercise its right to early redemption of any of the debt certificates on the first early redemption date of each series, additional interest will be paid to holders of the relevant debt certificated on top of the interest which the relevant debt certificates bear on that date, in respect of the balance of the period at a 30% rate of the original risk spread determined at the issue regarding debt certificates (Series A), of 50% of the original risk spread determined at the issue regarding debt certificates (Series B), of debt certificates (Series C) and of debt certificates (Series D) respectively. Nevertheless, when the recognized equity rate of I.D.I after the early redemption will exceed 120% of the minimal equity required from the Company, the Company will be able to conduct early redemption without the advance approval of the Insurance Commissioner.

On December 1, 2015, the Company exercised, according to the mechanism of the debt certificates, a full early redemption of the Company's debt certificates (Series A). as aforementioned, where the total amount (including interest and linkage) amounted to NIS 76,278 thousand. Through this early redemption, the company paid off in full, its obligations to the holders of the Company's debt certificates (Series A). The said early redemption had no effect on the profit and loss of the Company.

December 31

2014 2014

NIS in thousands A3. Maturity dates:

First year - 78,383

Second year - -

Third year 54,096 -

Fourth year - 53,029

Fifth year and onwards 247,327 247,003

301,423 378,415

Subordinated deeds constituting subordinate tier 2 capital (a5) 297,833 246,680

Subordinated deeds constituting subordinate tier 3 capital (a5) - 75,038

Total subordinated deeds constituting tier 2 and 3 capital 297,833 321,718

a.4 The unique features of the subordinated deeds, as specified below

a) In the occurrence of "delaying circumstances for hybrid tier 2 capital", the principal and/or interest payments on debt certificates (series B, series C and series D) whose consideration had been recognized as hybrid tier 2 capital by the Commissioner of Insurance will be deferred."Delaying circumstances for hybrid tier 2 capital" pursuant to the directives of the Commissioner of Insurance consist of one or more of the following:With respect to deferral of interest payment - the absence of distributable earnings in the Company, as defined in the Israeli Companies Law, 1999 ("the Companies Law"), based on the latest (annual or interim) financial statements that preceded the relevant interest payment date;

C - 106


NOTE 24: - FINANCIAL LIABILITIES (continued)

a4. The unique features of the subordinated deeds, as specified below

a) (continued)With respect to deferral of principal and/or interest payments - (1) if the Company's recognized shareholders' equity falls below the minimum required capital (based on the legal provisions applicable to the Company according to the guidelines of the Commissioner of Insurance ("the regulation"), based on the latest (annual or interim) financial statements that preceded the relevant principal and/or interest payment date; (2) the Company's Board has ordered the deferral of an interest or principal payment after deciding that there is real concern regarding the Company's ability to meet the minimum required capital (according to the regulation), provided that an advance approval has been obtained from the Commissioner of Insurance; (3) the Company's Board has ordered the deferral of an interest and/or principal payment after deciding that there is real concern regarding the Company's ability to repay liabilities whose priority is superior to that of the debt certificates, provided that an advance approval has been obtained from the Commissioner of Insurance; (4) the Commissioner of Insurance has ordered the deferral of an interest or principal payment due to significant impairment of the Company's recognized shareholders' equity or after deciding that there is real concern regarding the Company's ability to meet the minimum required capital (according to the regulation).

b) In the occurrence of "delaying circumstances for hybrid tier 3 capital", the principal payments on debt certificates (series A) whose consideration had been recognized as hybrid tier 3 capital by the Commissioner of Insurance will be deferred."Delaying circumstances for hybrid tier 3 capital" pursuant to the directives of the Commissioner of Insurance consist of one or more of the following: (1) if the Company's recognized shareholders' equity falls below the minimum required capital (based on the regulation), based on the latest (annual or interim) financial statements that preceded the relevant principal payment date; (2) the Commissioner of Insurance has ordered the deferral of a principal payment due to significant impairment of the Company's recognized shareholders' equity or after deciding that there is real concern regarding the Company's ability to meet the minimum required capital (according to the regulation).

b. Use of the issuance proceeds of debt certificates:The issuance proceeds of debt certificates have been placed at the Company's disposal, at its discretion and responsibility for paying the holders of the debt certificates the amounts due to them based on the terms of the debt certificates. The Company's liability in connection with these debt certificates cannot be cancelled and is equal in priority to the subordinated deeds that have been issued/will be issued by the Company but subordinate to the Company's other liabilities to its creditors.

c. Pledges:According to the deed of trust, the debt certificates are not secured by any charge. The subsidiary will be entitled to issue additional debentures as well as additional series of debentures and/or liability certificates which will be ranked superior, identical or inferior to the debt certificates and issue subordinated deeds and series of subordinated deeds.

d. RatingIn July, 2014, Midroog announced that the rating of debt certificates of Series D at A2 rating and raising the financial strength rating of the Company (IFSR) is raised from A1 to Aa3 and the rating of the debt certificates series A is raised from A2 to A1 and the rating of series B and C is raised from A3 to A2, with a stable outlook.In November 2015, Midroog reconfirmed the financial strength rating of the Company (IFSR) and the rating of the aforementioned debt certificates.

C - 107


NOTE 25: - EARNED PREMIUMS

Year Ended on December 31, 2015

InsuranceGross Reinsurer On retention

NIS in thousandsPremiums in life assurance and long-term savings 230,430 25,682 204,748Premiums in health insurance 155,151 11,065 144,086

Premiums in general insurance 1,418,819 56,518 1,362,301Total premiums 1,804,400 93,265 1,711,135

Change in unearned premium balance *) (69,764) (659) (69,105)

Total earned premiums 1,734,636 92,606 1,642,030


Insurance Gross Reinsurer On retention

NIS in thousandsPremiums in life assurance and long-term savings 219,237 24,103 195,134Premiums in health insurance 130,873 12,485 118,388


Change in unearned premium balance *) (60,487) (17) (60,470)



Insurance

Gross Reinsurer On retentionNIS in thousands

Premiums in life assurance and long-term savings 217,118 22,150 194,968Premiums in health insurance 107,959 12,979 94,980


Change in unearned premium balance *) (64,078) 303 (64,381)


*) The change in the unearned premium balance mainly derives from general insurance.

C - 108


NOTE 26: - INVESTMENTS GAINS, NET AND FINANCE INCOME

Year Ended on December 31


Gains on assets held against liabilitiesYield dependentFinancial investments:Quoted debt assets 607 13,083 13,949Unquoted debt assets 282 284 510Shares 3,277 2,705 6,856Other 2,168 11,324 8,646Cash and cash equivalents 11 303 139

Total gains on assets held against yield-dependent liabilities, net 6,345 27,699 30,100Gains (losses) on assets held against non-yield-dependent liabilities, capital and other:Income from real estate for investment:

Revaluation of real estate for investment (11,080) - -

Current revenues in respect of real estate for investment 5,256 - -Total income from real estate for investment (5,824) - -

Gains (losses) on financial investments, excluding interest, linkage differences, exchange differences and dividend for:

Assets at fair value through profit or loss (5,128) 17,045 17,912Assets presents at amortized cost (a) 29,992 (1,770) (932)

24,864 15,275 16,980Income from interest *) and linkage differences on financial assets not at fair value through profit or loss 14,832 28,588 44,910Income from interest, linkage and exchange differences on financial assets at fair value through profit or loss 7,174 14,140 26,017

Income (loss) from exchange differences on investments not measured at fair value through profit or loss and on other assets (270) 727 (1,567)Dividend income 5,283 3,387 1,662Total investments gains, net and finance income 52,404 89,816 118,102*) The above income includes interest in respect of impaired financial assets

not presented at fair value through profit or loss 30 504 528

C - 109


NOTE 26: - INVESTMENTS GAINS, NET AND FINANCE INCOME (continued)

a. Investment gains (losses) in respect of assets presented at amortized cost:



Net gains (losses) from sale of assets presented at amortized cost 27,879 (106) (506)Net value increase (impairment) allocated to profit and loss 2,113 (1,664) (426)

Total investment gains (losses) in respect of assets presented as loans and debit balances

29,992 (1,770) (932)

*) In view of the significant decrease in market interest rate, the Company decided to realize part of its long term deposits in banks. Out of the deposits for terms longer than one year as at December 31, 2014, in the amount of about NIS 587 million, the Company realized during the period of the report deposits in the amount of about NIS 353 million for which it recorded a profit before tax of about NIS 29 million, where the major effect is in the general insurance segment.

NOTE 27: - INCOME FROM MANAGEMENT FEES



Fixed management fees in respect of life assurance contracts 6,707 6,849 6,787Fixed management fees in respect of investment contracts 412 375 371

Total income from management fees 7,119 7,224 7,158

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NOTE 28: - PAYMENTS AND CHANGE IN LIABILITIES IN RESPECT OF INSURANCE AND INVESTMENT CONTRACTS ON RETENTION



In respect of life insurance contracts:Claims paid and outstanding for deaths, disability and other cases 50,264 41,952 37,711Less - reinsurance 15,827 8,991 6,307

34,437 32,961 31,404Policies surrendered 63,380 66,076 70,174Total claims 97,817 99,037 101,578Increase in liabilities for life assurance contracts (except for change in outstanding claims) on retention 7,199 29,581 35,173Increase (decrease) in liabilities for investment contracts due to the yield component 348 1,513 1,556Total payments and changes in liabilities for life assurance and investment contracts on retention 105,364 130,131 138,307Total payments and changes in liabilities for general insurance contracts:Gross 947,653 774,530 716,181Reinsurance 41,811 1,262 6,837On retention 905,842 773,268 709,344Total payments and changes in liabilities for health insurance contracts:Gross 55,315 49,935 47,384Reinsurance 5,699 6,746 8,258On retention 49,616 43,189 39,126Total payments and changes in liabilities for insurance and investment contracts on retention 1,060,822 946,588 886,777

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NOTE 29: - COMMISSION, MARKETING AND OTHER ACQUISITION EXPENSES



Acquisition costs:Acquisition costs 250,365 236,138 223,921Change in deferred acquisition costs (21,240) (13,535) (33,809)Total acquisition expenses 229,125 222,603 190,112Other current commissions 7,842 7,338 7,289Other marketing expenses 12,206 11,737 11,127Total commission, marketing and other acquisition expenses

249,173 241,678 208,528

NOTE 30: - GENERAL AND ADMINISTRATIVE EXPENSES



Salaries and related expenses 254,779 234,834 212,986Shares based payment 2,321 6,076 13,431Depreciation and amortization 30,164 23,403 17,342Maintenance of offices and communications 50,301 48,829 48,005Marketing and advertising 67,071 68,648 64,506Management fees to parent company (see Note 35f) 5,878 5,920 16,409Credit card and bank commissions 15,604 15,383 14,793Vehicles maintenance 3,798 3,792 4,692Legal and professional consulting 7,693 7,271 7,098Other 22,301 16,941 16,688Total **) 459,910 431,097 415,950Less:Amounts classified under change in liabilities and payments in respect of insurance contract

75,408 69,763 60,940

Amounts classified in commissions, marketing and other acquisition expenses 262,571 47,875 235,048

General and administrative expenses 121,931 113,459 119,962

**) General and administrative expenses include expenses in respect of

automation of 46,128 37,830 37,184

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NOTE 31: - FINANCE EXPENSES



Interest expenses and linkage differences in respect of:Liabilities to banks *) - - 8,478Subordinated deeds 13,970 12,978 14,790Income tax interest expenses 937 - 781Expenses in respect of interest to reinsurers 95 86 83Other finance expenses - - 84

Total finance expenses 15,002 13,064 24,216

*) Including an approximate amount of NIS 3.2 million in 2013 in respect of prepayment of capital notes defined as secondary capital.

NOTE 32: - SHARES BASED PAYMENT

a. Expense recognized in the financial statements

The expense recognized in the financial statements for services received from employees



Total expense recognized from share-based payment transactions

2,321 6,076 13,431

b. The Company's share-based payment plans

(1) On December 21, 2011 the Company's Board decided to adopt an option plan for 2012 for the Company's employees, consultants, service providers and directors based on the Law for Revising the Income Tax Ordinance (No. 132), 2002 ("The Plan").

In keeping with the plan, on August 21, 2012 the Company's audit committee recommended that the Company's Board approve the allocation of options to officers ("the optionees") in the Company pursuant to the plan, in accordance with the Law for Revising the Income Tax Ordinance (No. 132), 2002.

Accordingly, on August 29, 2012, the Company's Board approved the allocation, with no consideration, of 775,702 options to the CEO which are exercisable into 775,702 Ordinary shares of NIS 1 par value each of the Company and a total of 542,990 options which are exercisable into 542,990 Ordinary shares of NIS 1 par value each of the Company to eight officers in the Company. Assuming full exercise, the allocated options represent about 8.6% of the Company's issued and outstanding share capital. The options are not listed for trade on a stock exchange ("The Allocated Shares"). The options were allocated to a trustee pursuant to the provisions of Article 102 to the Income Tax Ordinance.

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NOTE 32: - SHARES BASED PAYMENT (continued)

b. The Company's share-based payment plans (continued)

(1) (continued)Details of the allocated options1. The exercise price of the allocated options is NIS 45.12, linked to the Israeli CPI. 2. The allocated options may be exercised according to the conditions of the plan and

subject to the occurrence of one or more of the following events: (1) merger and/or acquisition and/or restructuring of the Company with or into another company whereby the Company will cease to operate and/or exist (even if not removed from the Registrar of Companies) and/or change and/or actual transfer of the control over the Company from Zur Shamir Holdings Ltd. and/or companies (directly and/or indirectly) under its control to any third party ("a transaction"); (2) the Company's shares become listed for trade on a known stock exchange or an international trading system and/or floor. On August 13, the Company turned into a public company and its shares are listed for trade in the Tel Aviv Stock Exchange Ltd. Starting from 2013, the Company decided to recognized expenses in respect of the period from August 29, 2012 up to December 31, 2013.Subject to the provisions discussed above and below, the allocated options will be exercisable by each of the optionees based on the following vesting dates: a. 50% of the options allocated to each of the optionees will be exercisable by

them starting from May 21, 2014.b. 25% of the options allocated to each of the optionees will be exercisable by

them starting from May 21, 2015.c. 25% of the options allocated to each of the optionees will be exercisable by

them starting from May 21, 2016.The expiration date of the allocated options is May 21, 2017.In the event of termination of employer-employee relations, the optionee will be entitled to exercise the options which had already vested within six months from the date of termination of employment. The options which have not yet vested on the aforementioned date to the employment terminations date will expire. In the event of termination of employer-employee relations due to conviction and/or embezzlement and/or breach fiduciary duty and/or refusal to obey a reasonable order by superiors and/or act of failure which are significantly harmful to the Company and/or dismissal under circumstances in which the employee is not entitled to full severance pay, the options will expire immediately. The option agreements signed with the optionees include various provisions, including regarding accelerated vesting, redemption by the Company and adjustment mechanisms, among others, in cases of the performance of a transaction, change in the Company's issued share capital (including capital split, capital consolidation or similar event), distribution of bonus shares, dividends and issue of rights ("the transaction").

3. Exercise mechanism:The optionees may choose whether to exercise their options through a normal exercise process for all or part of the vested options or through a cashless exercise mechanism (according to which the optionee does not actually pay the Company the exercise price but rather is allocated the shares against their par value in a number that reflects the benefit component inherent in the exercised options).

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c. Movement during the year

The following table includes the number of share options, weighted average exercise price and changes in employee option plans during the current year:

2014 2014 2013Weighted average

Weighted average

Weighted average

Number exercise Number exercise Number exercise of options price of options price of options price

Share options as at the beginning of the year 620,596 42.45 1,241,192 45.13 1,318,692 45.12Options granted during the year

- - - - - -

Options forfeited during the year

- - - - - -

Share options exercised during the year*) (310,298) 40.67 (620,596) 43.89 - -Options expired during the year

- - - - - -

Waiver of options - - - - (77,500) 45.89

Share options as at the end of the year 310,298 39 620,596 42.45 1,241,192 45.13

*) The weighted average of the share price in respect of options exercised in 2015 is NIS 172.

d. The weighted average remaining contractual life of the share options as of December 31, 2015, is 1.4 years (2014 - 2.4 years).

e. The exercise price of the share options as at December 31, 2015 is NIS 37.84-41.01. (2014 - NIS 43.81-40. 7)

f. Measurement of the fair value of equity-settled share options:

The Company uses the binomial model for measuring the fair value of equity-settled share options.

The following table presents the Company's share data utilized to measure the fair value of equity-settled share options:

2012 PlanExpected share price volatility 31.48%Risk-free interest rate 1.1%Expected life of the share options 4.4 years

Based on the above data, the fair value of the options granted to the Company's CEO and to other officers in the Company is NIS 12,830 thousand (after waiver of options aforementioned in item g below) and NIS 9,589 thousand, respectively.

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g. In July 28, 2013 the Company's CEO announced that subject to the completion of the listing for trading of Company's share in the stock exchange, he renounces 77,500 options out of the 775,702 options granted to him.

Upon completions of the listing of Company's shares for trade on the Tel Aviv Stock Exchange Ltd., and pursuant to the aforementioned 's renouncement of shares granted to him and according to the decision of the Company's Board on July 28, 2013, the Company allocated a sum of NIS 2 million fund for stipends and support to Company employees and members of their families who are not stake holders or position holders in the Company. The stipend and support amounts will be divided on a quarterly basis over two and a half years (30 months), starting from January 1, 2013, thus dividing one tenth of the amount of the fund every quarter.

The balance of the fund which will not be used will be derived from the Company's success and from the gap between the quoted price of the Company shares in the stock exchange and the added exercise of employees entitled to options according to the options plan of the Company in respect of the calculation period. The Company will include in its consideration on the subject of determining the amount of the quarterly allocation to the fund, the change in the benefit amount which employees entitled to options according to the Company's options plan would have received if they would have exercised the options and sell the shares derived from the exercise on the last trading day of that quarter. The quarterly allocation to the fund will increase at the increase rate of the benefit amount and as the benefit amount will decrease this amount will decrease as well.

Funds that are not utilized during a calendar year (2014, 2015, 2016) will be donated by the Company to non-profit organizations that support the Ethiopian communities at the end of each calendar year. The Company's control committee will be responsible for all the aforesaid details of implementation and for establishing and operating the fund. Among other things, the committee will determine the exact amounts which the Company will allocate to the fund according to the aforementioned basic guidelines and also the rules of entitlement to the stipends and support and the application filing rules and will supervise the implementation of the rules and distribution of the stipends and support.

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NOTE 33: - EARNING PER SHARE

Basic earnings per share

The calculation of the basic earnings per share is based on the income attributed to the holders of Ordinary shares divided by the weighted average number of Ordinary shares as follows:



Net income attributable to holders of Ordinary shares (of NIS 1 par value each) 168,028 158,363 121,265

Number of shares in thousandsWeighted average number of Ordinary sharesBalance as of January 1 14,188 13,759 13,963Effect of shares amortized due to conversion - - (126)Effect of shares issued during the year 148 153 15Weighted average Ordinary shares used to calculate basic earnings per share 14,336 13,912 13,852

Diluted earning per share



Net income attributable to holders of Ordinary shares (of NIS 1 par value each) 168,028 158,363 121,265

Number of shares in thousandsWeighted average Ordinary shares used to calculate basic earnings per share 14,336 13,913 13,852Effect of potentially diluting ordinary shares 232 369 436Weighted average Ordinary shares used to calculate diluted earnings per share 14,568 14,282 14,288

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NOTE 34: - RISKS MANAGEMENT

General The Company operates in the following operating segments: general insurance, life assurance, long-term savings and health. The Company's activities expose it to the following risks:

- Market Risks;- Liquidity Risks;- Insurance risks;- Credit Risks;- Operating risks.

These risks are accompanied by general risks, such as: legal risks, goodwill risks, business risks (e.g., change is public preferences, etc. ) and geographical risks.Market RisksThe risk that the fair value or future cash flows of financial assets, financial liabilities or insurance liabilities will change as a result of changes in the market prices. Market risks include, among others, risks resulting from changes in the interest rates, stock exchange rates, changes in the CPI and in foreign currency exchange rates.Liquidity RisksThe risk that the Company will be required to dispose of its assets at a reduced price in order to meet its obligations.Insurance risksThe main insurance risks derive mostly from pricing, underwriting, estimations of insurance reserves and catastrophes.Credit RisksRisk of loss caused by failure of a borrower/ reinsurer to meet its liabilities or caused by changes in the credit margins in the capital market.Operational risksRisk of loss caused by inadequacy or failure of internal processes, personnel and systems or caused by external events. A significant part of the Company's operations relies on different information systems. Lack of satisfactory infrastructures and/or faults or failures in the information systems may expose the Company to failure in fulfilling regulatory requirements and also faulty operation of the different processes.a. Statutory Requirements

Institutional entities are legally required to appoint a risk manager whose principal role is:

To identify the insurance and financial risks that are material to the insurer's strength and compliance with its liability to its present and future policyholders, including material risks that stem from the assets held against yield-dependent liabilities (profit participation).

To quantify the exposure and assess the potential effect of the material risks that were identified according to the criteria that will be defined by the insurer for future periods that will be determined.

To assess the minimum solvency margin (the economic capital) that is required from an insurance company in order to bear the material risks, while taking the level of correlation between the various risks into account.

To submit periodic reports on risks to the CEO, the Board of Directors and to the Investment Committees.

To relate to risks included in new products, changes in Articles, entry to a new investment area and when entering a transaction, which, as stated by the Company's Board, may have a potential material effect on the business results of the institution or its customer's funds.

The Company appointed a Risks Manager, who acts, among others, to implement the regulatory requirements in this field.

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NOTE 34: - RISKS MANAGEMENT (continued)

a. Statutory Requirements (continued)Various regulatory requirements on the subject of risks management apply to the Company. The main requirements are:- Circular 1-9-2014, Chapter 10 of the Regulation Codex on the subject of "Risks Management in

Institutional Entities". - Requirement to define a risks exposure policy, ceilings of exposure, procedures and tools for risks

management and control.- Instructions on the subject of credit risks management, estimation and control thereof.- Instructions on the subject of managing the exposure to reinsurers.- Instructions on the subject of treatment of specific categories of operating risks: Embezzlement and

fraud, information security, outsourcing, compliance and control of financial reporting (SOX).- Protection of Privacy Law, 1981.

In addition, the Commissioner announced his intention to develop a risks based solvency regimen, in line with the Solvency II Directives. See more details in Note 14.For details on statutory requirements and capital management policy, see Note 14f.

b. Description of procedures and methods of risk management

The Company's risk management policy aims to ensure a controlled exposure to these risks, while complying with regulatory requirements and predetermined risks levels and maintaining the Company's business objectives and its financial strength.

The Company acts to implement a comprehensive enterprise risk management framework, aimed at creating awareness to risk in all operations, creating the ability to estimate the various risks, assimilate risks measuring in business processes and adjusting the overall exposure to the risk appetite and risk tolerance of the Company. Actions are taken under this framework to build a processes infrastructure for handling the main risks to which the Company is exposed. The financial, insurance and operational risks are identified, mapped, estimated and quantified, and risks controls are assessed across the Company's operations, constantly improving the quantifying ability of the different risks.

The Company's risks management is based on three defense levels:- The First line of defense - Business Units: Responsible for risks in their field of activity.- The Second line of defense - Supporting Units: Risks management, actuary, control system,

accounting and more. The duties if these units is, inter alia, to ensure presence of consistent processes for identifying, controlling, tracking and reporting risks.

- The Third line of defense: Internal Audit: Responsible for conducting independent and unaffected audits of the first and second lines of defense.

As part of the preparations to implement a solvency regimen, based on the Solvency II principles in Israel, the Company acts to create an ability to self assess the economical capital required for its operations. At the first stage, based on the standard approach methodology of the first stage of Solvency II, the Company conducts quantitative surveys and then the Company will make preparations for implementing the second stage.

The Company views this methodology as a basis for assessing the comprehensive risk to which it is exposed, on an economical basis and reviews the capital adequacy of its estimated economical capital in relation to this comprehensive risk. In addition, the Company builds processes for examining its capital adequacy compared to the comprehensive risk while including in the considerations the effect of the changes in risk factors on its recognized regulatory capital, which is determined on the basis of its financial statements. This examination is conducted on the basis of risk factors' scenarios and provides the company with an indication regarding the capital adequacy in relation to the risks.

The Company's Board provides written principles for the overall risk management, as well as the specific policy for risk appetite, certain exposures to risks (such as insurance risks, exchange rate risks, interest rate risks, credit risks, and the use of derivative and non-derivative financial

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instruments), measuring methods thereof, limits of the various risks and ways to control and report these risks. The Board follows compliance with the defined limits through reports it receives.

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b. Description of procedures and methods of risk management (continued)

The Company's risk management policy is aimed at supporting achievement of its business goals and the maintaining its financial strength, while estimating losses that can derive from exposure to risks that it faces as a result of its business operations and limit such losses according to the determined risk appetite and policy while addressing the changes in the business environment and in regulatory requirements and guidelines.

The Company's Board of Directors receives information from the various fields in respect of the following:

(1) The extent of the maximum anticipated loss as a result of the exposure to a single large damage, or an accumulation of damages in respect of an extremely large event, as well the exposure to an unexpected change of the risk factors that are covered by policies sold by the Company, at a given level of certainty during the period of one year.

(2) The effect of the measures taken by the Company for dispersion, reduction or limitation of the insurance risks, by underwriting procedures and principles for receiving business, as well as by reinsurance arrangements, in order to reduce the aforementioned anticipated loss as a result of the exposure to insurance risks.

(3) The potential effect of the exposures to significant insurance risks on the Company's future financial position and the required shareholders' equity against these risks (economical capital) taking into consideration the Company's actions to reduce/limit the risks, including reinsurance arrangements.

The risks management systemThe Company appointed a Risks Manager who acts to implement the policy in this field.The risk management is concentrated by the risk management department in accordance with the policy approved by the Board of Directors and the Insurance Commissioner's requirements. Risks management is a cross organizational activity, based on the responsibility assumed by the business officials in the Company for the risks they undertake. The risks management department is responsible for managing the main subjects, jointly with units that are responsible for the different areas. The supporting units include among others, the actuary, investments, reinsurance, accounting, information security, legal advisors, control system and internal audit. These main subjects include, among others, identification, mapping, assessment, measuring and reporting current and exceptional risks (to Investment Committees, Board of Directors, Risks Management Forum, etc.), implementation of the risks assessment system and management thereof and implementation of the regulation directives on all matters related to the various aspects of risks management.

Market risks The Company manages its investments according to the directives of any law and the general risks policy, approved by the Board and the investment committees of the assets profit sharing portfolios policies and also profits of the Nostro assets files. The Board set limitations of general exposure (including bonds, loans, shares. etc.), where the limitations relate to a single borrower, a group of borrowers and rating. The Back Office Investments Department constantly controls conformance with the limitations of the Board, Investment Committees and Investment Regulations. The investment committees receive reports on the exposure of the different investment files of the Company to the changes in the finance and capital markets, which include interest rates, inflation rates and foreign currency exchange rates, including assets management versus liabilities. Therefore limits of exposure to different investment channels are defined as frameworks for performing investments by the Company's investments manager and subject to investment ways regulations. See information on exposure to linkage bases in item c below.

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I.D.I. INSURANCE COMPANY LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTE 34: - RISKS MANAGEMENT (continued)


Liquidity Risk Is managed by the by the risks manager by on-going tracking the assets average duration compared to the average duration of the liabilities in the investment file, as well as quantifying the expected loss in an extreme scenario of immediate assets realization. The subject is discussed by the Board and the investment committees of the Nostro files and the profit participation policies. The limits of exposure to risk factors of the assets in the managed files are determined according to these data.In addition, the investments Back Office team examines the Company's cash balances through a comprehensive view of the Company's liquidity needs. Insurance risks Are managed by the Actuary division management jointly with the reinsurance department and the risk manager. The Company's Board determines the risk appetite and the Company's exposure to insurance risks and to the actuarial risk according to the estimated exposure of the Company.Moreover, the Company implements a strict claims inspection policy, on-going inspection of claims handling processes and conducts investigations to detect fraud, to reduce its exposure to risks. The Company also acts according to an active on-going claims management policy to reduce exposure to unexpected developments that may have an adverse effect.

The Company limits exposure to catastrophes by determining maximum coverage amounts in certain contracts and also by the acquisition of suitable reinsurance coverage. The objective of the underwriting and reinsurance policy is, among others, to limit exposure to catastrophes at a predetermined maximum probable loss, according to the risk appetite of the Company, as determined by the board. Investments credit risks Are managed by the investments manager and controlled by the risks manager according to directives of the law and the general policy of the Board and the investments committee. The policy includes exposure limitations which are mainly exposures to a single borrower, a group of borrowers, exposure to credit risk rating, liquidity, securities, etc. Definition of the aforesaid limitations also include the regulatory requirements in the considerations. The Company's credit committee discusses and approves transactions according to its authority level, as granted by each of the various investment committees. See information of credit rating of the assets in the managed files in item f, below.Credit risks of reinsurersAre managed by the Deputy CEO, Risks and Reinsurance, who presents the exposure to credit risks in respect of reinsurers to the Board. The Board determines the exposure limits for credit risk rating of reinsurers, relating, among others to the type of the long/ short tail insurance branch, to a single reinsurer, which due consideration of the limitations specified by the law. See information of reinsurers outstanding balances rating in item g below.Operational risksAre managed by the risks manager and supported by different parties in the organization, including the control system, compliance officer, SOX manager, information security manager and the internal auditor. The operational risks management and control is conducted as part of the routine organizational work. The business managers are responsible for this work, with professional support of the risks management department. The organizational system for the management and control of the operational risks includes the following parties:Control unit.SOX field manager;Regulation officer and the legal adviser;Information security manager; The internal audit that audits different fields of operation, and also identifies operational risks and

assess the exposure and controls efficiency.The managers identify operational exposures in their units and act to decrease them while ensuring observance of correct processes from numerous aspects, including prevention of embezzlement and fraud, compliance with the regulations and procedures and fulfilling the requirements of the financial reporting policy and adequacy.

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Information and cyber security - operations of the Company rely on information systems. Systems availability, data reliability and maintaining confidentiality of data vital for adequate business operation. The advancing technology and the increased level of cyber threats in Israel and throughout the world raise the risk level for both the Company and its customers.The Company acts to contend with cyber threats and invests considerable resources in protecting the survivability of its information systems and data of its customers.

In the capacity of his position, the risks manager is responsible for professional guidance of the different units, for coordination between the regulation parties and the controllers, for monitoring the results, concentration of the overall exposures status and reporting it. The exposure to operational risks is also performed within risks survey under the preparations for Solvency II.The risks management policy, as defined by the Board, is also related to the management of the operational risks. In addition, a specific policy was determined for the different categories of operational risks, including prevention of embezzlements and fraud, information security, business continuity, outsourcing and compliance, also related to the regulation directives on these subjects.The Company conducted a risks survey to identify and assess the material operational risks and a risks survey to assess the potential effect of information technology risks. In addition, the Company maintains a regular process of assessing risks embedded in its information systems. The risks assessment defines the sensitivity level of the systems and relates to all risks of information security and operation of the business systems. Risk surveys of the information systems and controlled hacking tests are conducted according to the risks assessment and also prior to assimilating significant changes in the system.

The Company established risks management forums which convene periodically to identify and asses risks; assess the controls and management tools thereof and define their risk appetite. Work procedures in the Company are arranged according to procedures and the Company acts to attain on-going improvement of work processes and control and reporting systems.

New Products

The process of launching new products includes identification and comprehensive examination of the risks involved with the product and determining ways to manage and control them. When a concern arises that there is a deterioration in the underwriting results, that are not derived from random fluctuations, in-depth examinations are carried out, among others, to assess the risks involved, and if necessary, the estimate of the reserve is adjusted. Similar examinations are performed at the time of renewal of the transactions.

Risks control

The Company views effective control as an important component of the risks management system. The Company operates an organizational control system. This system is responsible for controlling all aspects of the Company's operation, including control of all types of risks.

In addition, the independent operation of the risks management department, the actuary division and the finance division provides an additional risks control layer.The risks management department specifically controls the overall exposure to risks in the Company's operations and conducts control of market risks, credit and liquidity, including control of compliance with market risk limitations in the nostro and participating operations of the Company in limitations of exposure to reinsurers and limitations to credit risks determined by the risks management policy..

Moreover, the internal auditor of the Company conducts periodic controls, based, among others, on risks surveys performed by the risks management department.

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c. Market Risks

A market risk is the risk that the fair value or future cash flows of financial assets, financial liabilities or insurance liabilities will change as a result of changes in the market prices. Market risks include, among others, risks resulting from changes in the interest rates, stock exchange rates, changes in the CPI and in foreign currency exchange rates.

1. Yield-dependent contracts Yield-dependent liabilities are liabilities in respect of contracts in which the insurance benefits to which the beneficiary is entitled depend on the yield that certain investments of the Company generate, net of fixed management fees.Regarding assets and liabilities in respect of these products, the insurance companies are not directly exposed to changes in interest, in the fair value of the investments, or in the CPI. The effect of the monetary results on the insurance company's profits is reduced to the exposure that is derived from the management fees from the volume of the assets.In view of the above, the sensitivity tests and maturity dates of the liabilities detailed in the following paragraphs do not include yield-dependent contracts.

2. AnalysesThe Company uses a computerized risks management system to compute, quantify and examine market risks. This system performs, among others, the following analyses:Value at Risk - VaR. The VaR estimates the maximum expected loss resulting from changes in market prices for a given period and security level. There are several accepted methods for calculating the VaR, e.g., historical simulation, Monte Carlo simulation and the covariance matrix method. The at risk is computed based on changes in the fair value or the accounting outstanding balance of the assets. The Company chose the historical simulation method, which simulates the value of the Company's financial instruments portfolio in the chosen period. The value of the portfolio is examined against changes in market prices and yields over a determined sequence of past time periods. The historical simulation assumes that what happened in the past will happen in the future.

Asset Liability Management - ALM - is a process that includes dynamic adjustment between assets and liabilities. This is an on-going process of building, implementation, control and change of strategy regarding assets and liabilities aimed at achieving financial goals, according to the risk appetite of the Board and the investment committees, as determined by them. ALM includes reports for analyzing the Company's positions in the different segments and estimating the exposure in the linkage and bases and the exposure to interest.

The main reports are1. Linkage balance report according to segments.2. Estimation of the average duration and the internal yield rate for each of the items report.3. Comparative report between fair value and accounting value.

Stress Model - scenarios and sensitivity tests. These tests are intended to estimate losses in extreme cases. Scenarios building is expected to answer questions, as: What will the loss be in a given scenario, which event can cause an exceptionally high loss.

Risk indices - tests designated to estimate the Company's relative risk in a manner that will enable comparison of different investment channels.

Marker file - enables comparison of monthly results on a consistent basis for the investments committee. Comparison results are constantly reported to the investments committee.

The investment committees determine the investments policy according to the law, within the framework of the annual investment policy. The Company's Board defines the risk appetite for each of the following parameters. The risks manager verifies compliance with the policy according to the defined risk appetite.

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c. Market risks (continued)

3. Sensitivity tests relating to market risks

Hereunder is an analysis of the sensitivity regarding the effect of the change in these variables on the profit (loss) for the period. The sensitivity analysis relates to the carrying amount of the financial assets and liabilities and liabilities for insurance and investment contracts in respect of the relevant risk variable as at each reporting date, and under the assumption that all the other variables are fixed. Thus, for example, the change in interest is under the assumption that all the other parameters have not changed. The sensitivity analysis does not include, as mentioned, the effect of the yield-dependent contracts as detailed above. In addition, it was assumed that the said changes do not reflect a permanent impairment of the assets that are reported at amortized cost or of the assets reported at fair value. Therefore, the sensitivity analysis detailed below did not include impairment losses in respect of these assets.The sensitivity tests only reflect the direct effects and do not reflect the ancillary effects. It should also be noted that the sensitivity is not linear, hence larger or smaller changes in relation to the changes described below are not necessarily a simple extrapolation of the effect of those changes.


Rate of change Investments in

equity Rate of change in foreign currency Interest rate (1) instruments (3) in CPI exchange rate (4)

1%+ 1%- 10%+ 10%- 1%+ 1%- 10%+ 10%-

NIS in thousandsGain (loss) (2) (1,684) 1,673 12,890 (12,890) (4,516) 4,516 8,625 (8,625)


Rate of change Investments in

equity Rate of change in foreign currency Interest rate (1) instruments (3) in CPI exchange rate (4)

1%+ 1%- 10%+ 10%- 1%+ 1%- 10%+ 10%-

NIS in thousandsGain (loss) (2) (1,939) 2,019 10,676 (10,676) (1,788) 1,788 6,572 (6,572)

(1) The sensitivity analysis regarding change in interest also applies to instruments at fixed interest and to instruments at variable interest. Regarding instruments at fixed interest, the exposure relates to the carrying amount of the instrument and regarding instruments at variable interest, the exposure relates to cash flows from the financial instrument. The sensitivity analyses are based on the carrying amount and not on the economic value. Therefore, the sensitivity tests do not take into account unquoted debt assets, reinsurance assets, financial liabilities and liabilities in respect of insurance and investment contracts, out of the assets with a direct interest risk.The sensitivity analysis includes a possible effect on life insurance liabilities, which are capitalized at risk free interest. Regarding general insurance: pursuant to the first time implementation of the optimal practice, the Company started capitalizing the insurance liabilities as on December 31, 2015, however, this implementation had no effect on the profit, since the effect in this year was included directly in the capital and therefore excluded from the sensitivity analysis. Starting from 2016, the change in interest will affect the Company's profit and loss.

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(2) The results of the sensitivity tests are reported in their net amount after deduction of the tax effect, in accordance with the tax rate applicable in the reporting year.

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3. Sensitivity tests relating to market risks (continued)

(3) Investments in instruments that do not have a permanent flow, or alternatively, the Company has no information regarding such flow.

(4) The change rate in foreign currency exchange rates includes financial instruments which are not financial items.

4. Direct interest riskDirect interest risk is the risk that the change in the market interest will cause a change in the fair value of the financial asset or liability. This risk relates to assets settled in cash. The addition of the word "direct" emphasizes the fact that the interest change can also effect other types of assets but not directly, such as the effect of the interest change on the share rates.Hereunder are details of assets and liabilities according to exposure to interest risks:

December 31, 2015Non-yield dependent Yield dependent Total

NIS in thousandsAssets with direct interest risk: Quoted debt assets 562,559 391,274 953,833Unquoted debt assets 1,055,640 9,875 1,065,515Cash and cash equivalents 244,068 15,519 259,587

Reinsurance assets 164,347 - 164,347Total assets with direct interest risk 2,026,614 416,668 2,443,282

Assets without direct interest risk (1) 1,196,045 98,361 1,294,406

Total assets 3,222,659 515,029 3,737,688

Liabilities with direct interest risk:Financial liabilities (2) 301,423 - 301,423Liability due to employees benefits 10,551 5,233 15,784Liabilities in respect of insurance and investment contracts 2,067,528 509,923 2,577,451

Total liabilities with direct interest risk 2,379,502 515,156 2,894,658Liabilities without direct interest risk (3) 311,372 - 311,372

Equity 531,658 - 531,658

Total equity and liabilities 3,222,532 515,156 3,737,688

Total assets net of liabilities 531,785 (127) 531,658

1. Assets with no direct interest risk include real estate for investment, shares, intangible assets deferred acquisition costs, fixed assets and balance sheet groups of financial assets. Hence, the interest risk in their respect is relatively low (outstanding premiums, current balances of insurance companies, debtors and receivables).

2. The Company's financial liabilities include three series of quoted bonds.3. Liabilities without direct interest risk include deferred taxes and creditors and

payables.

Comments: In respect of the Company's others investments in the framework of life assurance business, there is an exposure to the interest rates that will prevail when the investments whose term might be lower than the average term of the insurance liabilities, are recycled.

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4. Direct interest risk (continued)

December 31, 2014Non-yield dependent

Yield dependent Total

NIS in thousandsAssets with direct interest risk: Quoted debt assets 718,785 382,529 1,101,314Unquoted debt assets 1,062,776 10,753 1,073,529Cash and cash equivalents 365,216 27,222 392,438Reinsurance assets 152,628 - 152,628Total assets with direct interest risk 2,299,405 420,504 2,719,909Assets without direct interest risk (1) 804,477 96,775 901,252Total assets 3,103,882 517,279 3,621,161

Liabilities with direct interest risk:Financial liabilities (2) 378,415 - 378,415Liability due to employees benefits 6,156 4,972 11,128Liabilities in respect of insurance and investment contracts 1,990,464 512,234 2,502,698Total liabilities with direct interest risk 2,375,035 517,206 2,892,241Liabilities without direct interest risk (3) 246,321 20 246,341Equity 482,579 - 482,579Total equity and liabilities 3,103,935 517,226 3,621,161

Total assets net of liabilities 482,526 53 482,579

1. Assets with no direct interest risk include shares, intangible assets, deferred taxes, deferred acquisition costs, fixed assets and balance sheet groups of financial assets. Hence, the interest risk in their respect is relatively low (outstanding premiums, current balances of insurance companies, debtors and receivables).

2. The Company's financial liabilities include four series of quoted bonds.3. Liabilities without direct interest risk include deferred taxes and creditors and

payables.

Comments: In respect of the Company's others investments in the framework of life assurance business, there is an exposure to the interest rates that will prevail when the investments whose term might be lower than the average term of the insurance liabilities, are recycled.

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5. Details of assets and liabilities distributed into linkage bases

December 31, 2015Denomin

ated

In NIS in

foreign Non-Assets in respect of

In unlinked

linked to the

currency or linked

monetary and other

Yield dependent

NIS CPI thereto items contracts TotalNIS in thousands

Intangible assets - - - 98,917 - 98,917Deferred acquisition costs - - - 229,280 - 229,280Fixed assets - - - 49,237 - 49,237Real estate for investment 230,660 203,660Reinsurance assets 5,508 158,839 - - - 164,347Outstanding premiums 321,360 43,105 - - - 364,465Debtors and receivables 17,715 - - 26,249 - 43,964Financial investments for yield-dependent contracts - - - - 499,510 499,510Other financial investments:Quoted debt assets 339,562 218,122 4,875 - - 562,559Unquoted debt assets 556,769 498,871 - - - 1,055,640Shares 14,455 - 2,722 - - 17,177Other 64,660 - 124,685 - - 189,345Total financial investments 975,446 716,993 132,282 - - 1,824,721Cash and cash equivalents in respect of yield-dependent contracts - - - - 15,519 15,519Other cash and cash Equivalents 238,175 - 5,893 - - 244,068


4 918,937 138,175 607,343 515,029 3,737,688

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5. Details of assets and liabilities distributed into linkage bases (continued)

December 31, 2015Deno-

minated in foreign Non-

Liabilities in respect of

In unlinked

In NIS linked to

currency or linked

monetary other

Yield dependent

NIS the CPI Thereto items contracts TotalNIS in thousands

Total equity - - - 531,658 - 531,658Subordinated deeds 127,830 173,593 - - - 301,423Liabilities in respect of non-yield-dependent insurance contracts 638,474 1,429,054 - - - 2,067,528Liabilities in respect of insurance and investment yield-dependent contracts - - - - 509,923 509,923Deferred tax liabilities - - - 20,890 - 20,890Employee benefit liabilities, net 10,551 - - - 5,233 15,784Current tax liabilities - 39,757 - - - 39,757Creditors and payables 172,940 - - 77,785 - 250,725Total Liabilities 949,795 1,642,404 - 98,675 515,156 3,206,030Total equity and liabilities 949,795 1,642,404 - 630,333 515,156 3,737,688Total balance sheet exposure 608,409 (723,467) 138,175 (22,990) (127) -

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December 31, 2014Denomin

ated

In NIS in

foreign Non-Assets in respect of

In unlinked

linked to the

currency or linked

monetary and other

Yield dependent

NIS CPI thereto items contracts TotalNIS in thousands

Intangible assets - - - 81,473 - 81,473Deferred acquisition costs - - - 208,040 - 208,040Fixed assets - - - 51,348 - 51,348Reinsurance assets 4,848 147,780 - - - 152,628Outstanding premiums - 260,791 - - - 260,791Debtors and receivables 8,189 - - 23,274 - 31,463Financial investments for yield-dependent contracts - - - - 490,057 490,057Other financial investments:Quoted debt assets 388,919 324,972 4,894 - - 718,785Unquoted debt assets 392,604 670,172 - - - 1,062,776Shares 22,200 - 3,853 - - 26,053Other 50,382 - 94,927 - - 145,309Total financial investments 854,105 995,144 103,674 - - 1,952,923Cash and cash equivalents in respect of yield-dependent contracts - - - - 27,222 27,222Other cash and cash Equivalents 363,379 - 1,837 - - 365,216


1 1,403,71

5 105,511 364,135 517,279 3,621,161

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December 31, 2014Deno-

minated in foreign Non-

Liabilities in respect of

In unlinked

In NIS linked to

currency or linked

monetary other

Yield dependent

NIS the CPI Thereto items contracts TotalNIS in thousands

Total equity - - - 482,579 - 482,579Subordinated deeds 127,559 250,856 - - - 378,415Liabilities in respect of non-yield-dependent insurance contracts 568,753 1,421,711 - - - 1,990,464Liabilities in respect of insurance and investment yield-dependent contracts - - - - 512,234 512,234Deferred tax liabilities - - - 15,968 - 15,968Employee benefit liabilities, net 6,156 - - - 4,972 11,128Current tax liabilities - 18,119 - - - 18,119Creditors and payables 155,765 - - 56,469 20 212,254Total Liabilities 858,233 1,690,686 - 72,437 517,226 3,138,582Total equity and liabilities 858,233 1,690,686 - 555,016 517,226 3,621,161Total balance sheet exposure 372,288 (286,971) 105,511 (190,881) 53 -

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6. Details of exposure to economic lines of business for investments in equity instruments

December 31, 2015Traded on

Traded on TATA 100 MidCap %index index Overseas Total of Total

NIS in thousandsEconomic lines of business:Banks 4,768 807 - 5,575 32.5Software and internet 786 - 2,722 3,508 20.4 Construction and real estate 2,087 962 - 3,049 17.7Security 1,932 - - 1,932 11.2Information services 1,632 - 1,632 9.5Electronics and optics - 1,273 - 1,273 7.4

Biotechnology 208 - - 208 1.2Total 11,413 3,042 2,722 17,177 100.0

December 31, 2014Traded on

Traded on TATA 100 MidCap %index index Overseas Total of Total

NIS in thousandsEconomic lines of business:Information services 1,705 6,647 - 8,352 32.1Software and internet 690 - 3,853 4,543 17.4Banks 3,609 577 - 4,186 16.1Construction and real estate 3,040 948 - 3,988 15.3Security 1,341 - 1,341 5.1Chemistry, rubber and plastic 1,004 169 - 1,173 4.5Electronics and optics - 1,168 - 1,168 4.5Oil and gas drilling 922 - 922 3.5Biotechnology 380 - - 380 1.5Total 12,691 9,509 3,853 26,053 100.0

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d. Liquidity risks

Liquidity risk is the risk that will require the Company to dispose of its assets at a reduced price in order to meet its obligations.

1. The Company is exposed to risks resulting from uncertainty regarding the date on which the Company will be required to pay claims and other benefits to policyholders in relation to the scope of the monies that will be available for that purpose at that time. However, a significant part of its insurance liabilities in the life assurance segment are not exposed to the liquidity risks due to the nature of the insurance contracts as described below. It should be noted, however, that an unexpected necessity to raise funds within a short timeframe might require quick disposal of a large portion of assets that will be sold at prices that will not necessarily reflect their market value.

2. Yield-dependent contracts in life assurance – according to the terms of the contracts, the owners are entitled to receive only the value of the said investments. Hence, if the investment value decreases for whatever reason, there will be a corresponding decrease in the Company's liabilities.

3. The Company's liquidity risk is mainly due to the balance of assets that are not held against yield dependent contracts. These assets constitute about 86% (approximately NIS 3,223 million) of the Company's total assets.From the said balance of assets, an amount of approximately NIS 965 million constitutes cash and liquid assets that can be immediately disposed of.

4. According to the Ways of Investment Regulations, the Company is required to hold liquid assets against the equity and against other liabilities in the amount of not less than 30% of the minimum required capital, with adjustments specified by the Ways of Investment Regulations.

Management of assets and liabilities

The Company manages its assets and its liabilities in accordance with the Supervision Law requirements and regulations.

The tables below concentrate the estimated maturity dates of the Company's non-capitalized insurance and financial liabilities. Since these are non-capitalized sums, no match is found between these sums and the outstanding insurance liabilities in the balance sheet.

1) The estimated maturity dates of the liabilities in life assurance, long-term savings and health insurance were included in the tables as follows:

Savings - contractual maturity dates, namely retirement age, without cancellation assumptions, under the assumption that the savings will be withdrawn as a lump sum and not as annuity.

Reserve from premium - according to the end of insurance coverage date.

Occupational disability annuity - on the basis of an actuarial estimate.

Outstanding claims and IBNR - reported under the column "undefined maturity date"

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d. Liquidity risks (continued)

2) Estimated maturity dates of gross general insurance liabilities are calculated on the basis of an actuarial estimate, which allocates an estimated date for the total non-capitalized liabilities, drawing on past experience of claims payments. Total liabilities also include a reserve for yet unearned premium, less deferred purchase expenses.

3) The maturity dates of subordinated deeds and liabilities for investment contracts are included based on contractual maturity dates. In contracts in which the counterparty is entitled to determine the timing of the maturity date, the liability is included based on the earliest date on which the Company may be required to pay the liability.

Liabilities in respect of life assurance and health insurance contracts*)

Over Over 5 Over 10

Up to one year and up to

years and up to

years and up to Over 15

Undefined maturity

one year 5 years 10 years 15 years Years date TotalNIS in thousands

December 31, 2015 5,988 13,167 7,930 3,673 5,998 92,368 129,124December 31, 2014 5,674 12,192 4,041 3,967 5,923 99,385 131,182*) Does not include yield-dependent contracts.

Liabilities in respect of general insurance contracts

Over Over 3one year years undefined

Up to and up to and up to Over maturityOne year 3 years 5 years 5 years date Total

NIS in thousands

December 31, 2015 725,881 561,683 318,925 296,986 - 1,903,475

December 31, 2014 667,084 486,144 269,926 239,281 121,772 1,784,207

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d. Liquidity risks (continued)

Subordinated deeds and liabilities for yield-dependent investment contracts:

Over Over 5one year years

Carrying amount Up to one and up to and up to Over 10

value Year*). 5 years 10 years years Total NIS in thousands

December 31, 2015:Subordinated liabilities deeds 301,423 13,375 222,228 137,805 - 373,408Liabilities for yield-dependent investment contracts 31,205 - - - 31,205December 31, 2014:Subordinated liabilities deeds 378,415 91,401 105,149 270,144 - 466,694Liabilities for yield-dependent investment contracts 28,535 - - - 28,535

*) Liabilities for yield-dependent investment contracts are repayable upon demand. These liabilities were classified as repayable in up to one year even though the actual maturity dates are likely to be in later years.

e. Insurance risks

The insurance risks are the foundation of the Company's business. These risks include, among others - Underwriting risks: the risk of using incorrect pricing due to deficiencies in the

underwriting process and due to the gap between the risk when pricing and establishing the premium and the actual occurrence, so that the collected premiums are insufficient for covering future claims and expenses. The gaps may arise from accidental changes in business results and from changes in the cost of the average claim and/or the frequency of the claims as a result of various factors.

- Reserve risks: the risk of an incorrect assessment of the insurance liabilities which might cause the actuarial reserves to be inadequate for covering all the liabilities and claims. The actuarial models according to which the Company estimates its insurance liabilities are based on the fact that the pattern of behavior of past claims represents forward looking information. The Company's exposure is comprised of the following risks:1) Model risk – the risk of choosing an incorrect model for pricing and/or estimating

the insurance liabilities;2) Parameter risk – the risk of using wrong parameters including the risk that the

amount paid for settling the Company's insurance liabilities or the date of settlement of the insurance liabilities, will not be as expected.

- Catastrophe risk : the exposure to the risk that a single event with a significant effect (catastrophe) such as war, natural disaster, terrorism, nature damages or earthquake will lead to an accumulation of a large volume of damages. The material catastrophe to which the Company is exposed in Israel is earthquake.

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e. Insurance risks (continued)

The size of the anticipated maximum loss in the general insurance business due to the exposure to a single large damage or an accumulation of damages arising from a particularly large event at a Maximum Probable Loss (MPL) of about 1.9%, is about NIS 1,644 million gross and about NIS 25 million on retention.Regarding data in respect of the various insurance products in respect of which the insurer has an exposure to the aforementioned insurance risks see Note 3d – additional data regarding the general insurance segment, and Note 18a – details of the liabilities in respect of life assurance and investment contracts according to insurance exposure

(1) Insurance risk in life assurance and health insurance contractsGeneralFollowing is a description of the various insurance products and the methods and assumptions used to calculate their respective liabilities based on product type.According to the Commissioner's directives, the insurance liabilities are usually calculated by an actuary according to standard actuarial methods and consistently with the previous year. The liabilities are computed according to the relevant coverage data, such as: age and gender of the policyholder, term of insurance, date of commencement of insurance, type of insurance, periodic premium and amount of insurance.

The actuarial methods used to calculate the insurance liabilities

1. "Investment tracks" insurance programs:In "Investment track" insurance programs there is an identified savings component. The basic and main reserve is at the level of the accumulated savings plus the yield according to the policy's terms as follows:

- Principal linked to the investment portfolio yield (yield dependent contracts).In respect of insurance components that are attached to these policies (occupational disability, death, etc.), the insurance liability is calculated separately as mentioned below.

2. Pure risk products with fixed premium (mainly mortgage at fixed premium and occupational disability). This reserve is calculated for each covered aspect as a capitalization of the cash flows in respect of the anticipated claims, net of future anticipated premiums. This calculation is based on assumptions according to which the products were priced, including the interest rates ("tariff interest"), mortality or morbidity tables. The calculation is according to the net premium reserve method, whereby the expenses and commissions are not taken into account directly, but rather the calculation is based on the “net premium” that includes the anticipated cost in the claims component only and does not include the rate that is included in the tariff for the commissions and expenses, according to the calculation assumptions.

3. Prolonged payment claims

- For payment of claims due to occupational disability insurance, the reserve is calculated according to the reinsurers' reserves coefficients, which are based on the age of the policyholder on the date of the claim, as well as the seniority of the claim and anticipated future payment of the claim.

- For payment of claims for family income, in which the Company undertakes to pay the annuities until the end of the insurance period, the reserve is calculated as the capitalization of the balance of payments as at the date of the financial statements at the capitalization interest that is the risk free long term interest rate.

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e. Insurance risks (continued)(1) Insurance risk in life assurance and health insurance contracts (continued)

4. Liabilities in respect of annuities paid for life for policies in force (paid and settled) which have not yet reached the stage of realization of annuity or the policyholder has reached retirement age and the actual payment did not yet begin, include a basic reserve which reflects the accrued maturity value for the policyholder and a complementary reserve for annuity.

Liabilities in respect of annuities paid for a lifetime in respect of valid annuity policies which have not yet reached the annuity realization stage or where the policyholders have not yet reached retirement age are calculated according to the probability of the withdrawal of annuities, life expectancy and expected cancellation rates until retirement. These estimates are calculated based on the Company's experience in conjunction with data published in the Ministry of Finance's circular.Changes in assumptions regarding the capitalization rate, life expectancy or the percentage of policyholders who choose to withdraw their annuities will affect the outstanding liabilities as above.

The provision for supplementation of the annuity reserve is performed in a gradual manner using the K discount factor, calculated in such a manner that it leads to a proper gradual accrual of reserve until expected retirement age. This factor is limited up to the rate of expected future income from management fees, or from financial margin, which arise from the investments held against the insurance reserve in respect of the policy, or from premium payments for the policy less related claims and expenses. A gradual provision will be calculated in a similar manner for premiums received in future from policies, from the premiums receipt date.The supplement that will be spread in future through the K factor is minor.

5. IBNR reserve (claims incurred but not yet reported), in pure risk products, sever morbidity, medical expenses and individual accidents is calculated based on past experience, using statistical models with the accepted conservative margin for reserves calculation.

6. The insurance liability in respect of group insurance consists of a liability in respect of unearned premium, IBNR reserve (claims incurred but not yet reported), a provision for continuity and a provision for future losses, if necessary.

7. The liabilities for outstanding claims in life assurance and health insurance are based on the valuations of the claims department and include indirect expenses.

Principal assumptions used for calculating insurance liabilities

1. The capitalization rate

In respect of pure risk products with fixed premium, a capitalization interest rate of 2.5%, linked is used.

The capitalization rate can change as a result of significant changes in the long-term market interest rate.

Changes in long-term interest rate may increase or decrease the insurance reserves as a result of providing an additional reserve in the context of the Liability Adequacy Tests (LAT). The Company has performed a liability adequacy test of the insurance contracts and found that given the amount of the existing reserves, there is no need for supplementation arising from the liability adequacy test.

2. Mortality and morbidity rates

a) The mortality rates used in the calculation of insurance liabilities for mortality of policyholders prior to attaining the age of retirement (namely excluding the mortality of policyholders who receive retirement pensions and those receiving

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monthly compensation for occupational disability or long term care) are generally identical to the rates used for determining the tariff.

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Principal assumptions used for calculating insurance liabilities (continued)

2. Mortality and morbidity rates (continued)

b) The liability for annuities payable for life is calculated according to updated mortality tables.An increase in the mortality rate assumption, due to increase in the actual mortality rate to a level exceeding the existing assumption, shall result in an increase in insurance liabilities for mortality of policyholders before they reach the age of retirement and a decrease in the liability for annuities payable for life. It should be noted that in recent decades there has been a reversed trend of increase in the life expectancy and decrease in mortality rate. The mortality assumption used in the calculation of the liability for annuity takes into account an assumption of future increase in life expectancy.

The Company does not have any payable annuities at this stage.

c) The morbidity rates relate to the frequency of claims for morbidity from dread diseases, occupational disability, surgeries and hospitalization, disability from accidents, etc. These rates were determined based on the company's experience or researches of reinsures. In the branches of occupational disability, the period for payment of annuities is determined according to the Company's experience or reinsurers' research.If the assumption regarding the morbidity rate increases, the insurance liability in respect of illnesses due to dread diseases, occupational disability, surgeries and hospitalization and disability from accidents will also increase.

3. Annuity rates

Life assurance contracts, that include a savings component, were managed, in respect of monies deposited up to the year 2008, in two tracks: a lump sum track or an annuity track. In part of the contracts the policyholder is entitled to choose the track at the time of retirement. Since the amount of the insurance liability is different in each of these two tracks, the Company is required to determine the rate of policies that the policyholders will chose in the annuity track. This rate is determined according to the Commissioner's directives and in alignment with the Company's experience.

4. Cancellation rates

The cancellation rates affect the insurance liabilities in respect of part of the health insurances and the annuities paid for life during the period before beginning the payments. The cancellation of insurance contracts can be due to the cancellation of policies initiated by the Company due to discontinuation of the premium payments or surrenders of policies at the policyholders' request. The assumptions regarding the cancellation rates are based on the Company's experience and they are based on the type of product, the life span of the product and sales trends.

5. Continuity rates

There are collective life assurance policies in which the policyholders are entitled to continue to be insured under the same conditions, even if the collective contract is not renewed. In respect of this option of the policyholders, the Company has a liability that is based on assumptions regarding the continuity rates of the collective insurances and the continuity rates of the contracts with the policyholders after the collective contract expires.

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(1) Insurance risk in life assurance and health insurance contracts

5. Continuity rates (continued)

The higher the probability that the collective contract will not be renewed (a higher continuity rate), the higher the insurance liability, since the insurance is continued under the previous conditions and the underwriting is not adjusted to the change in the policyholders' state of health.

6. Sensitivity analysis in life assurance:

December 31, 2015 and 2014 Rate of cancellations

Annuity rate*)(surrenders, settlements

and decreases) Mortality rate *) Morbidity rate *)10%+ 10%- 10%+ 10%- 10%+ 10%- +5% -5%

Profit (Loss) - - - - - - - -

*) The need to increase the reserves resulting from the adequacy calculation under the conditions described above is being examined. The examination revealed that there is no affect on the profit and loss according to these scenarios.

Changes in main estimates and assumptions used to calculate insurance liability

1. The changes in 2015 derive mainly from updating interest and capitalization assumptions and the estimated average claim duration, used to determine the reserve for prolonged payment claims in respect of occupational disability and income to the family, which were based, inter alia, on reinsurers' research. These caused an increase in insurance liabilities (pursuant to reinsurer's effect) amounting to some NIS 3,255 thousand and a decrease in the same amount in profit before taxes on income.

2. Liability Adequacy Tests (LAT)An insurance circular, published in August 2015, related to the calculation method of Liability Adequacy Tests (LAT), in life and Health insurance ("The LAT Circular"). The circular related to the following subjects: Measuring guidelines of two characteristic of the future cash flows: Insufficient

liquidity (through Liquidity Premium) and Cost of Non-Hedgeable Risks (CNHR). Demographic assumptions for calculating the current estimates will be chosen at the

Best Estimate level, while exercising discretion. The interest and adequate yield assumption will be according to the no-risk interest

curve on the reporting date. Use of updated value of assets which are not measured at fair value (except designated

bonds).The circular applies to the financial statements from June 30, 2015, onwards.

(2) Insurance risk in general insurance contracts

(1) Summarized description of the main insurance branches in which the Company operates

The Company writes general insurance contracts mainly in the branches of motor act, liabilities, motor casco, and property, residence, business and liabilities insurance.

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(2) Insurance risk in general insurance contracts (continued)

The motor act insurance policy covers the owner of the policy and the driver for any liability they may incur pursuant to the Road Accident Victims Compensation Law, 1975, due to bodily damage that was caused to the driver of the vehicle, the passengers in the vehicle, or to the pedestrians that were injured by the vehicle, as a result of the use of the motor vehicle. The claims in motor act insurance are characterized by a long tail, namely, sometimes a long time passes from the date of the event to the time the claim is finally settled. The tariff for motor casco insurance requires the approval of the Commissioner of Insurance and is published in the Commissioner's internet website. The tariff is a differential tariff based on parameters recommended by the Commissioner and limited to a maximum risk premium.

Liability insurance is designed to cover the policyholders' liability in respect of damage that they may cause to any third party. The main types of insurance are: liability insurance towards a third party and employers' liability and professional liability. The claims in liabilities field insurance are characterized by a long tail, namely, sometimes a long time passes from the date of the event to the time the claim is finally settled.

The insurance policy for third party motor vehicle damages and motor casco damages provide the policyholder with a coverage for property damage. The coverage is usually limited to the value of the vehicle that was damaged and the coverage in respect of the third party is limited to the amount that is stated in the policy. The policy as a whole, requires the approval of the Commissioner of insurance. The tariff also requires approval. The tariff is an actuarial tariff which is partly differential, namely, it is not uniform for all policyholders and is modified according to the risk. The above tariff is based on several parameters that relate both to the vehicle insured by the policy (such as the type of vehicle, year of manufacture, etc.) as well as the parameters that relate to the policyholders' characteristics (the age of the driver, history of claims, etc.). The underwriting process is partly done by the tariff itself and partly by a system of procedures which are designated to examine the history of claims of the policyholders including the presentation of a certificate from the former insurer that there were no claims during the last three years, presentation of a certificate of updated means of protection, etc. and they are combined in the computer in the policies issuance process.In most cases, the motor casco insurance policies are issued for a period of one year. In addition, in most cases, the claims in respect of these policies are handled close to the time the insurance event had occurred. Residence property insurances and business property insurance are designated to grant the policyholder coverage against physical damage to his property and loss of profits due to the damage to the property. The main risks covered by property policies are fire risks, explosions, theft, earthquake and natural disasters. The property insurances sometimes include coverage for loss of profits damages due to the physical damage that was caused to the property. In most cases, the claims in respect of these policies are handled close to the time the insurance event had occurred.

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(2) Principles for calculating actuarial valuations in general insurance

General

a) Liabilities in respect of general insurance contracts include the following main components:

- Provision for unearned premium- Provision for premium deficiency

- Outstanding claims - less - deferred acquisition costs

The provision for unearned premium and deferred acquisition costs are calculated regardless of any assumptions. Therefore they are not exposed to the reserve risk. Regarding the manner in which these provisions are calculated see the Accounting Policy Note.

b) In accordance with the Commissioner's directives, the outstanding claims are calculated by the actuary, according to standard actuarial methods, consistently with the previous year. The choice of an actuarial method that is suitable for each insurance branch and for each event/underwriting year, is determined according to the compatibility of the method to the branch and sometimes there is a combination of the different methods. The valuations are mostly based on past experience of claim payments run-off and/or the run-off of the amount of the payments and individual valuations. The valuations include assumptions regarding the average cost of claim, cost of handling the claims and frequency of the claims and timing of payments. Payment of claims include direct and indirect expenses for settlement of claims.

c) The use of actuarial methods that are based on the claims run-off is mainly adequate when there is stable and sufficient information regarding the payment of the claims and/or the individual valuations in order to estimate the total anticipated cost of claims. When the available information regarding the actual claims experience is insufficient, sometimes the actuary uses a computation that weighs the known estimate (in the company and/or the branch) such as Loss Ratio and Risk premium versus the actual claims run-off. A larger weight is given to the valuation based on experience as time passes and additional information is accumulated regarding the claims.

d) Also quality valuations and judgments are taken into account as to the degree that past trends will not continue in the future. For instance: due to a onetime event (e.g., exceptional natural damage), internal changes such as change in the portfolio mix, in the underwriting policy and in the claims handling procedures and in respect of the impact of external factors such as legal rulings, legislation, etc. If the above changes were not fully reflected in past experience, the actuary updates the models and/or sets-up specific provisions on the basis of statistical and/or legal estimates, as the case may be.

e) In large claims with a non-statistical nature, the reserve (gross and on retention) is determined on the basis of the opinion of the Company's experts and in accordance with the recommendations of their legal advisors.

f) The reinsures' share in outstanding claims is estimated with reference to the type of agreement (proportional/non-proportional) and the actual claims experience.

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(2) Principles for calculating actuarial valuations in general insurance (continued)

g) The valuation of the outstanding claims for the Company's share in the Pool, is based on the calculations made by the pool.

(3) Details of the actuarial methods in the main insurance branches

Actuarial models used to determine the outstanding liabilities in general insurance

Chain ladder/Link Ratio

These methods are based on the development of historical claims (development of payments and/or development of amount of claims, development of the number of claims, etc.), in order to evaluate the anticipated development of existing and future claims. The necessary condition for the use of these methods is the existence of enough information from previous claims in the past in order to evaluate the total anticipated claims. The difference between the two methods is the manner of calculating the average development (simple average or weighted average).

Bornhuetter Ferguson

This method combines early estimates known in the insurance subsidiary or branch and an additional estimate based on the claims themselves. The early estimate utilizes premiums and loss ratio for evaluating the total claims. The second estimate utilizes actual claims experience based on other methods (such as chain ladder). The combined claims valuation weighs the two estimates. As time goes by and information accumulates about claims a greater weight can be given to the evaluation based on actual claims experience. The use of this method is mainly suitable for the recent period where there is not enough information from the claims. The use of this method requires the attention of the actuary when choosing the period to be used for calculating the early estimate. The estimate must be sufficiently reliable and relevant to the said period.

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(3) Details of the actuarial methods in the main insurance branches (continued)

a. The motor casco insurance sector

The model used by the Company is the Link Ratio, which is based on the actual accumulated cost (payments plus outstanding claims) (including deductible amounts), excluding claims recoveries at the one-month damage level. The data are on a gross basis.

In the last months of damage, the Company uses the Bornhuetter Ferguson method, which is based on inherent claims.

As for claims recoveries, a separate calculation is made (at the damage year level) which is also based on actual accumulated cost at the damage year level. The Company had the experience needed to statistically study the run-off of claims recoveries and assess the provisions using actuarial tools.

b) The motor act sector

The liabilities for the motor act sector are divided into four categories:

1. Provisions net of excess of loss reinsurance (excluding damages deriving from the portfolio of Direct Personal Insurance Company Ltd,. for the underwriting period up to March 31, 2001);

2. Provisions in respect of excess of loss reinsurance (excluding damages deriving from the portfolio of Direct Personal Insurance Company Ltd., for the underwriting period up to March 31, 2001);

3. Provisions in respect of damages deriving from the portfolio of Direct Personal Company Ltd., for the underwriting period of up to March 31, 2001;

4. Provisions in respect of the insurer's share in the Pool's damages.

For the first provision component two methods were calculated and an average was set as follows:

- The first method is based on the development of net payments averaging between two of the four basic models at different levels of underwriting, three of them according to the Link Ratio method and the fourth according to the Chain Ladder method. The final results are the average of two of the four models.In the last underwriting years, the Company uses the Bornhuetter Ferguson method on the basis of inherent claim in order to estimate the reserves.

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(3) Details of the actuarial methods in the main insurance branches (continued)

b) The motor act sector (continued)

- The second method based on the development of the net outstanding claims payments is calculated according to the Chain Ladder method. In the last underwriting years, the Company uses the Bornhuetter Ferguson method on the basis of inherent claim in order to estimate the reserves.

The average between the two methods, one based on claims paid and the second based on paid claims and net outstanding claims limits the IBNR to a large sum equaling zero, to ensure that the actuarial valuations will not be lower than the claims department's valuation.

Both methods address large claims in a special and identical manner. Since the model that calculates the net reserves is based on retention data only, the Company calculates additional reserves for claim which will develop to the maximum retention.

The provisions in respect of reinsurance are based on the payment developments of outstanding claims and the database includes all the claims which are above the amount of NIS 1 million.

The provisions in respect of damages deriving from the portfolio of Direct Personal Insurance Company Ltd., are calculated on the basis of the claims data in the portfolio of Direct Personal and are based on an average final model of Direct Insurance, as mentioned above.

The provisions in respect of the insurer's share in the Pool's damages are based on the valuation of the Pool's actuary regarding the Pool's total outstanding claims, and the direct expenses deriving from them as at December 31, 2015 (including a provision for claims which have not yet been reported).

c) Comprehensive residential branch

The Company uses the Link Ratio model on the basis of accumulated claims cost. The model is applied at the level of the month of damage and the data used is at the level of gross claims.In the last months of damage, the Company uses the Bornhuetter Ferguson method, which is based on inherent claims.

d) Collective branches

The following branches are among the collective branches: business premises, third party liability, employers' liability, professional liability and mortgage banks. No actuarial calculation was made for these branches and the outstanding claims are based on the claims department's valuations.

e) Calculation of indirect expenses for claims settlement

In accordance with the IFRS regulations, the indirect expenses for claims settlement are calculated for all the outstanding claim regardless of the underwriting year. The

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calculation is based on the average term method which basically allocates indirect expenses according to the average term at the branch level.

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(4) Changes in the main assumptions used for calculation of insurance liabilities in general insurance contracts

The Company entered changes in the calculation of insurance reserves in general insurance, according to Commissioner's instructions, as detailed in Note 22(2)(s)(4).

The Company implemented the Commissioner's position regarding actuarial best practices for the calculation of insurance reserve in general insurance, including, inter alia, the following determinations:

a) "Caution" means that regarding a reserve calculated by an actuary as an "Adequate reserve to cover the insurer's liabilities" means that it is fairly likely that the determined insurance liabilities will suffice to cover the insurer's liabilities. Regarding outstanding claims in insurance act branches and liabilities, the examination of a "fairly likely" means a probability of 75% at least.In examining the "caution" principle, as defined in the circular, the Company calculated the random risk and the systemic risk. The systemic risk was calculated after mapping all the external effects.The Company allocated a reserve for the insurance act and liability branches to ensure the adequacy required in the circular.In property branches, the reserves were calculated according to the required to ensure that it is fairly likely that the said sum will suffice to cover the Company's liabilities.

b) Cash flow capitalization rate - in determining the interest rate for capitalizing the liabilities flow, the actuary is required to include the subjects specified in the capitalization standard for the Israeli Actuaries Society in the calculations and present the considerations (including assumptions and limitations) for choosing the capitalization rates. According to the aforesaid standard, the suitable capitalization rate for the examination will be based on risk free interest curve, while adjusting it to the non-liquid character of the insurance liabilities.The calculated reserves were capitalized on the basis of risk free interest curve with the addition of 50% liquidity premium.

c) Collective treatment - for the purpose of calculating the margins in respect of the uncertainty in statistical branches (as defined in the Circular), each branch must be treated separately, however, the risks from all underwriting (or damage) years in the branch may be collected together.

In non-statistical branches, all of the margins may be treated as a single unit.d) The determination of the total amount of insurance liabilities in respect of

policies sold in time periods adjacent to the balance sheet date, and to risks subsequent to the balance sheet date.

It should be noted that according to Insurance Circular 2015-1-14, implementation or the said caution principle is a sufficient calculation for examining reserves adequacy in general insurance.

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The reserves calculation method on the basis of stochastic models was adopted according to the Commissioner's requirement.

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(5) The main assumptions that were taken into consideration for the actuarial valuation:

a) Outstanding liabilities were capitalized according to risk free interest with the addition of 50% liquidity premium.

b) No addition was included for a risk margin (standard deviation) underlying the reserve in the motor act and liability, yet there are compensating margins introduced for prudence sake that in the Company's current method of calculation.

c) The basic assumption in all the actuarial models is that the claims run-off in the past reflect a similar behavior in the future.

(6) Provisions sensitivity to changes in assumptions

- The actuarial estimate is subject to considerable uncertainty. Actuarial estimates for forecasting outstanding claims relate to claims expectations. Due to the stochastic nature of claims payments, deviations are possible regarding the expectation. In addition, the statistical estimate is based on different assumptions the may not necessarily materialize. In the event of a change in the claims payment method, or alternately, in the volume of the reported claims, a gap may occur between the actuarial estimate and the actual result. A change in the yield rate may also cause gaps between the estimates and the actual results.

- Since the actuarial model is based on past experience, an unexpected change in assumptions of the model or the claims behavior will cause a change in the reserve.

- It should be noted that these risks were taken into account in estimates of the systemic risks, in accordance with the requirements of the Commissioner's position.

f. Information regarding credit risks

A credit risk is an insolvency risk and an impaired credit quality risk of the borrower. The Company invests part of its assets in quoted and unquoted government and concern bonds and in deposits in banks. Consequently, the stability of these entities and the value of the placed securities can affect the value of the bonds and the deposits deposited by the Company.

1. Breakdown of debt assets according to their location

December 31, 2015

Quoted Unquoted Total

NIS in thousandsIn Israel 557,684 1,055,640 1,613,324Abroad 4,875 - 4,875

Total debt assets 562,559 1,055,640 1,618,199

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f. Information regarding credit risks (continued)

1. Breakdown of debt assets according to their location (continued)

December 31, 2014

Quoted Unquoted Total

NIS in thousandsIn Israel 713,891 1,062,776 1,776,667Abroad 4,894 - 4,894

Total debt assets 718,785 1,062,776 1,781,561

2. Details of assets according to ratings

a1. Debt assetsLocal rating *)

December 31, 2015

AA BBBLower than

and above to A BBB Unrated TotalNIS in thousands

Debt assets in Israel:Quoted debt assets:Government bonds 292,537 - - - 292,537Corporate bonds 192,780 72,176 191 - 265,147

Total quoted debt assets in Israel 485,317 72,176 191 - 557,684Unquoted debt assets:Corporate bonds 84,060 10,947 - - 95,007Deposits in banks and financial institutions 730,666 - - - 730,666Other debt assets based on guarantees: Loans on policies 48 48 Other guarantees - - - 229,468 229,468

Unguaranteed - - - 451 451

Total unquoted debt assets in Israel 814,726 10,947 - 229,967 1,055,640

Total debt assets in Israel 1,300,043 83,123 191 229,967 1,613,324

International rating *)December 31, 2015

ALower than

and above BBB BBB Unrated TotalNIS in thousands

Quoted debt assets abroad:

Corporate bonds - 4,875 - - 4,875

*) Each rating includes all the ranges, for example: A includes A- up to A+.

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2. Details of assets according to ratings (continued)

Local rating *)December 31, 2014

AA BBBLower than

And above To A BBB Unrated TotalNIS in thousands

Debt assets in Israel:Quoted debt assets:Government bonds 516,449 - - - 516,449

Corporate bonds 91,446 105,811 185 - 197,442Total quoted debt assets in Israel 607,895 105,811 185 - 713,891

Unquoted debt assets:

Corporate bonds 80,317 14,141 65 1,382 95,905

Deposits in banks and financial institutions 736,967 - - - 736,967Other debt assets based on guarantees:

Loans on policies - - - 99 99

Other guarantees - - - 229,101 229,101

Unguaranteed - - - 704 704

Total unquoted debt assets in Israel 817,284 14,141 65 231,286 1,062,776

Total debt assets in Israel 1,425,179 119,952 250 231,286 1,776,667


ALower than

and above BBB BBB Unrated TotalNIS in thousands

Quoted debt assets abroad:Corporate bonds - 4,894 - - 4,894Total quoted debt assets abroad


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f. Information regarding credit risks (continued)2. Details of assets according to ratings (continued)

Breakdown of debt assets according to their location:

a2. Credit risks in respect of other assets (in Israel)

Additional Information


AA BBBLower than


Debtors and receivables, except reinsurers' outstanding balances - - - 36,574 36,574

Cash and cash equivalents 207,159 33,629 - 3,280 244,068

Total 207,159 33,629 - 39,854 280,642


AA BBBLower than


Debtors and receivables, except reinsurers' outstanding balances - - - 28,524 28,524

Cash and cash equivalents 284,900 32,052 - 48,264 365,216

Total 284,900 32,052 - 76,788 393,740


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3. Additional information about credit risks

a) The Company relies on the ratings received from the rating companies.

b) There is a difference in the rating scales between debt assets in Israel and debt assets abroad. It should be noted that in accordance with the Capital Market Circular 2008-6-1, regarding the publication of the conversion scale between the Israeli rating scale and the International rating scale, the Commissioner instructed that up to January 1, 2009, the rating companies which received approval from the Commissioner of the Capital Market, Insurance and Savings should operate as a rating company in accordance with the Capital Market Circular 2004/1, and to publish a conversion scale between the local and international rating scales.

c) Information regarding the credit risks in this Note do not include the assets for yield dependent contracts presented in a separate note.

d) Regarding outstanding premium balances in the amount of NIS 364,465 thousand, see Note 10 above.

4. Details of exposure of investments in quoted and unquoted financial debt assets according to industries:

December 31, 2015Balance sheet credit risk

Amount %NIS in thousands

Banks (including deposits) 951,848 58.8Loans to private people 229,966 14.2Electricity, water and commerce 60,688 3.8Investments and holdings 31,527 1.9Construction and real estate 29,488 1.8Communications and media 11,374 0.7Insurance 10,771 0.7

1,325,662 81.9

Government bonds 292,537 18.1

Total 1,618,199 100.0

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4. Details of exposure of investments in quoted and unquoted financial debt assets according to industries (continued)

December 31, 2014Balance sheet credit risk

Amount %NIS in thousands

Banks (including deposits) 880,450 49.4Loans to private people 229,904 12.9Electricity, water and commerce 55,354 3.1Construction and real estate 39,021 2.2Investments and holdings 34,124 1.9Communications and media 11,349 0.7Insurance 10,781 0.6

Other 4,129 0.2 1,265,112 71.0

Government bonds 516,449 29.0

Total 1,781,561 100.0

g. Reinsurance1. The Company insures part of its business by reinsurance, most of which is done through

reinsurers abroad. However, the reinsurance does not release the direct insurers from their commitment towards their policyholders according to the insurance policies. The Company is not dependent on any reinsurer. The reinsurance arrangements entered by the Company transfer insurance risk to the reinsurers. However, the liabilities of the reinsurance to the Company do not release the Company from its commitment towards its policyholders. In reinsurance, a premium is paid to the reinsurers and in return the reinsurers pay benefits in respect of claims as well as commissions.The Company is exposed to risks resulting from uncertainty regarding the reinsurers' ability to pay their share in the liabilities in respect of insurance contracts (reinsurance assets) and their debts in respect of claims paid. This exposure is managed by a current follow-up of the reinsurers rating in the international market and their following through on monetary liabilities.The Company is exposed to concentrated credit risk to an individual reinsurer, due to the reinsurance market structure and the limited amount of reinsurers with sufficient rating. In accordance with the Commissioner's directives, once a year, the Company's Board of Directors determines the limits of the maximum exposure to the reinsurers with whom the Company has engaged and/or will engage, which is mainly based on their international rating. These exposures are managed in the Company by individual valuation of each of the reinsurers separately and according to the risk appetite of the Company.In addition, the Company's exposures are dispersed between various reinsurers, and the principal ones are reinsurers who are rated at high international ratings.

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g. Reinsurance (continued)

2. Information regarding exposure to reinsurers' credit risks

DECEMBER 31, 2015 Reinsurance assets

General insurance

UnearnedTotal premium

reinsurance Debit in property Outstanding claims

premiums for(credit) balances In life In health and liability In property in liabilities Deposits by Total

Rating group: 2015 Net (b) assurance insurance insurance insurance insurance reinsurers Exposure (a)NIS in thousands

AA and above

Caisse Centrale de Reassurance SA 4,150 483 - - 551 187 16,222 563 16,880

Swiss Reinsurance Co 18,685 (2,580) 5,026 5,759 - (1) 762 7,398 1,568

R+V Versicherung AG 4,078 632 - - 496 173 15,271 450 16,122

SCOR 8,051 828 1,590 112 716 316 24,627 2,034 26,155

Others 19,366 (1,803) 6,793 767 276 396 3,221 6,242 3,408

Total 54,330 (2,440) 13,409 6,638 2,039 1,071 60,103 16,687 64,133

A 37,973 3,297 522 43 3,469 5,193 70,885 3,589 79,820

BBB 962 (569) - 341 - - - - (228)

Lower than BBB- or unrated - 37 - - - - 634 - 671

Total 93,265 325 13,931 7,022 5,508 6,264 131,622 20,276 144,396

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g. Reinsurance (continued)2. Information regarding exposure to reinsurers' credit risks (Continued)

DECEMBER 31, 2014 Reinsurance assets

General insurance

UnearnedTotal premium Debts in

reinsurance Debit in property Outstanding claims In arrears

premiums for(credit) balances In life In health and liability In property in liabilities Deposits by Total

Rating group: 2014 Net (b) assurance insurance insurance insurance insurance reinsurers Exposure (a) One yearNIS in thousands

AA and above

Caisse Centrale de Reassurance SA 3,800 574 - - 485 161 15,229 487 15,962 -

Swiss Reinsurance Co 19,379 (4,209) 5,398 7,204 - 71 3,758 6,405 5,817 -

R+V Versicherung AG 3,814 825 - - 436 110 14,985 389 15,967 -

Others 21,129 (2,437) 6,702 1,028 679 256 4,661 5,297 5,592 -

Total 48,122 (5,247) 12,100 8,232 1,600 598 38,633 12,578 43,338 -

A

SCOR Global P&C 6,624 (460) - - 630 172 22,418 563 22,197 -

SCOR Global Life 2,525 (573) 1,798 130 - - - 681 674 -

Everest Reinsurance Co 2,740 1,540 - - 533 153 13,867 476 15,617 -

Others 27,912 (1,245) 340 58 2,085 757 47,405 2,113 47,287 13

Total 39,801 (738) 2,138 188 3,248 1,082 83,690 3,833 85,775 13

BBB 1,019 (689) - 443 - - - - (246) -

Lower than BBB- or unrated - 21 - - - - 676 - 697 -

Total 88,942 (6,653) 14,238 8,863 4,848 1,680 122,999 16,411 129,564 13

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g. Reinsurance (continued)

Comments

(a) The total exposure to reinsurers is: the reinsurers' total share in insurance reserves and outstanding claims, net of the reinsurers deposits as a guarantee to their liabilities, and with the addition (deduction) of the current debit (credit) balances, net.

(b) This year, the Company did not record an allowance for doubtful accounts.

(c) The rating is determined mainly according to the S&P rating company. In cases where S&P did not provide the ratings, the rating was determined by the rating company AMbest whose rating was converted according to the index outlined pursuant to the Ways of Investment Regulations.

(d) The total exposure of the reinsurers in general insurance in the event of an earthquake at the feasibility of damage of 1.9% (MPL) is NIS 1,669 million (2014 - NIS1,434 million) of which the portion of the reinsurer which has the most significant part in this exposure is 21% (2014 - 19%).

(e) There are no other reinsurers apart from those specified above in respect of which the exposure is higher than 10% of the total exposure of reinsurers, or in respect of which the premium is higher than 10% of the total premiums for reinsurance for 2015.

(f) Outstanding balances in respect of outstanding claims through brokers are included in the non-rated group, up to and including 2002, for which the exposure amounts to NIS 671 thousand (2014 - NIS 697 thousand).

h. Geographical Risk

Composition:As on December 31, 2015

Government Concern Exchange Real estate Other

Bonds bonds Shares Traded bonds For

InvestmentInvestments(*

) TotalNIS in thousands

Israel 292,537 365,029 14,455 27,740 203,660 1,253,326 2,156,747U.S.A - - 2,722 104,098 - 23,006 129,826France - - - - - 44,320 44,320Switzerland - - - - - 30,130 30,130Germany - - - 2,244 - 27,687 29,931Other - - - 6,731 - 39,111 45,842Total 292,537 365,029 17,177 140,813 203,660 1,417,580 2,436,796

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h. Geographical Risk (continued)

Composition: (continued)

As on December 31, 2014

Government Concern Exchange Other

Bonds bonds SharesTraded bonds Investments(*) Total

NIS in thousandsIsrael 516,449 298,241 22,200 28,782 1,349,594 2,215,266U.S.A - - 3,853 93,950 24,075 121,878France - - - - 42,789 42,789Switzerland - - - - 31,473 31,473Germany - - - 1,673 27,293 28,966Other - - - 3,840 26,555 30,395Total 516,449 298,241 26,053 128,245 1,501,779 2,470,767

*) Other investments include reinsurance assets, cash and other financial investments, not included in the other columns.

i. Information regarding financial investments for yield-dependent contracts

1. Composition of investments according to linkage basis

December 31, 2015Denominated

In NIS in foreign In NIS

unlinkedlinked to the

CPIcurrency or

linked thereto TotalNIS in thousands

Cash and cash equivalents 15,378 - 141 15,519Quoted assets 386,392 38,526 57,550 482,468Unquoted assets 1,379 9,830 5,833 17,042

Total assets 403,149 48,356 63,524 515,059

December 31, 2014Denominated

In NIS in foreign In NIS

unlinkedlinked to the

CPIcurrency or

linked thereto TotalNIS in thousands

Cash and cash equivalents 26,042 - 1,180 27,222Quoted assets 364,651 57,351 53,318 475,320Unquoted assets 831 10,708 3,198 14,737

Total assets 391,524 68,059 57,696 517,279

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i. Information regarding financial investments for yield-dependent contracts (continued)

2. Credit risk for assets in Israel

December 31, 2015

Local rating *)

AA BBB Lower than

and above to A BBB Unrated Total **)NIS in thousands

Debt assets in Israel:Government bonds 338,823 - - - 338,823Other debt assets - quoted 34,390 16,330 40 - 50,760Other debt assets - unquoted 8,753 1,077 45 - 9,875

Total debt assets in Israel 381,966 17,407 85 - 399,458

December 31, 2014

Local rating *)

AA BBB Lower than

and above to A BBB Unrated Total **)NIS in thousands

Debt assets in Israel:Government bonds 332,105 - - - 332,105Other debt assets - quoted 30,484 18,199 38 - 48,721Other debt assets - unquoted 9,451 1,124 65 113 10,753

Total debt assets in Israel 372,040 19,323 103 113 391,579

*) The sources for the level of rating in Israel are the rating companies of Ma'alot and Midroog. The data from Midroog was transferred to the rating categories according to the generally accepted conversion coefficients. Each rating includes all the ranges, for example: A includes A- up to A+.

**) The carrying amount approximates the maximum credit risk. Therefore, the "total" column represents the maximum credit risk.

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i. Information regarding financial investments for yield-dependent contracts (continued)

3. Credit risk for assets abroad


A Lower than Total

and above BBB BBB Unrated **)NIS in thousands

Total debt assets abroad 1,691 - - - 1,691


A Lower than

and above BBB BBB Unrated Total **)NIS in thousands

Total debt assets abroad 162 1,541 - - 1,703

*) The sources for the rating level abroad are the rating companies S&P, Moody's and Fitch, which were approved by the Commissioner.Each rating includes all the ranges, for example: A includes A- through A+.

**) The carrying amount approximates the maximum credit risk. Therefore, the "total" column represents the maximum credit risk.

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NOTE 35: - BALANCES AND TRANSACTIONS WITH STAKEHOLDERS AND RELATED PARTIES NOTE

a. Composition

DECEMBER 31, 2015 Controlling shareholder

Interested party and other

(parent company) Related partiesNIS in thousands

Creditors and payables - (504)Debtors and outstanding balances 17 -Outstanding premiums 68 221

DECEMBER 31, 2014 Controlling shareholder

Interested party and other

(parent company) Related partiesAssets (liabilities) NIS in thousandsCreditors and payables - (602)Outstanding premiums 20 278

b. Transactions with interested and related parties:


See detailsBelow inparagraph

Controlling shareholder Interested party

and otherRelated parties

(parent company)

Expenses NIS in thousandsManagement fees f(1) 5,878 -Operating fees f(4) - 250Rent f(3) - 6,033

5,878 6,283


See detailsBelow inparagraph

Controlling shareholder Interested party

and otherRelated parties

(parent company)

NIS in thousandsManagement fees f(1) 5,920 -Operating fees f(5) - 577Rent f(3) 88 6,162

6,008 6,739

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NOTE 35: - BALANCES AND TRANSACTIONS WITH STAKEHOLDERS AND RELATED PARTIES NOTE (continued)

b. Transactions with interested and related parties (continued)


See detailsControlling shareholder Interested party

and otherRelated partiesBelow in

(parent company)

Expenses paragraph NIS in thousandsManagement fees F(1) 16,409 -Operating fees f(4) - 1,114Rent f(3) - 5,350

16,409 6,464

The officers and controlling shareholders in the Company may acquire, from time to time, insurance contracts, investment contracts or other financial products issued by the Company, at market conditions and during the ordinary course of business. These transactions are not details above.

c. Benefits to key management personnel employed by the Company

In addition to salary, the Company's CEO is entitled to non-cash benefits (such as a vehicle). The Company also deposits funds on behalf of the CEO in a defined benefit plan.


Number of

Number of

Number of

people Amount people Amount people AmountNIS in

thousandsNIS in

thousandsNIS in

thousandsShort-term benefits 1 5,376 1 8,506 1 12,715Long-term benefits 1 - 1 - 1 644

5,376 8,500 13,359

d. Benefits to related and other interested parties not employed by the Company


Number of

Number of

Number of

people Amount people Amount people AmountNIS in

thousandsNIS in

thousandsNIS in

thousandsDirectors' fees 5 909 8 974 6 889

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e. Appointment and confirmation of the Company's CEO's employment conditions

On May 25, 2008, the Company's audit committee and Board of Directors approved the appointment of Mr. Raviv Zoller as the Company's CEO, effective from May 1, 2008, under the following terms:

1. Following an update approved on May 16, 2010, by the Company's audit committee and Board of Directors, the CEO's monthly salary as of May 1, 2010, totals NIS 135,000, linked to the increase in the Israeli CPI. In addition, the CEO is entitled to standard social benefits such as a company car, cellular phone and full reimbursement of reasonable expenses incurred in connection with performing his duties as well as a monthly fee of US$ 3,000 in return for the CEO's non-competition commitment for a period of 18 months beginning on the date of termination of the CEO's work relations with the Company. The parties may terminate the CEO's employment agreement by providing an advance notice of six months.

According to the recommendation of the bonus committee, a new bonus plan was approved for the years 2015-2017, including, inter alia, spreading the bonus payment in respect of each entitlement year over 4 years. According to the conditions of the plan, the CEO is entitled, subject to attaining annual goals and triennial goals of revenues, EV, income before tax and net profit, to receive a bonus amount within a predefined framework, in graded division according to predefined principles, over the three years of the plan. The bonus to the CEO is calculated by multiplying the success rate of the Company to achieve its annual goals by the maximum bonus for each year, amounting 12 monthly salaries. The actual payment of the annual bonus is spread in a manner that only 50% is paid in 2016 and the balance is spread in a straight line over the next three years, subject to adhering to the payment ceiling determined by the Company in its bonus policy.

In early 2016, in the context of the approval of the distribution of bonuses based on the aforementioned plan, the Company's audit committee and Board of Directors approved the grant of a bonus of about NIS 1 million to the Company's CEO in respect of 2015.

f. Income and expenses from interested and related parties

1. Management agreement

The Company and the parent company signed a management agreement, in effect from April 6, 2008, according to which, in consideration for management and consultation services detailed in the agreement, the Company will pay the parent company a monthly payment equal to 0.065% of the Company's total assets according to the last audited annual balance sheet, linked to the Israeli CPI plus VAT as required by law. On February 15, 2012, the Company's audit committee and Board of Directors both approved an amendment in the terms of this transaction effective from July 2012 and onwards, to the Company's benefit. According to this amendment, the management fees will be fixed at approximately NIS 23.5 million a year, linked to the Israeli CPI plus VAT as required by law (the amount will be derived from the terms of the original agreement based on the balance sheet as of December 31, 2011). On August 21, 2012, in the backdrop of transferring part of the consulting services rendered to the Company by the parent company to the Company itself, the Company's audit committee and Board of Directors approved another amendment to the agreement whereby the management fees were reduced once more to approximately NIS 22.6 million a year, linked to the Israeli CPI plus VAT as required by law. The agreement will be reexamined by the audit committee annually even if neither of the parties seeks to cancel it.

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f. Income and expenses from interested and related parties (continued)

1. Management agreement (continued)

In July 29, 2013, following Battery's investment in the Company and in preparation of turning the Company into a public company and its wish to reduce its dependency on "Direct Holdings" and in view of the Company's increased independence, inter alia, through transferring the reinsurance management system and the supervision and control of the actuary and the management of risks of financial investments to the Company; establishing the investments department in the Company during 2013 for the purpose of independent management of the nostro and participating investments portfolios under the supervision of the investment committee; and following the establishment of mechanisms to maintain the Company's management, the Company and Direct Holdings decided to reduce the scope of management services from Direct Holdings to the Company and require the Company to incur monthly management fees of NIS 417,000 linked to the Israeli CPI as published on July 15, 2013, plus VAT as required by law and various incidental expenses against receipt of Chairman of the Board of Directors services (through Mr. M. Schneidman) and Deputy Chairman of the Board of Directors services (through Mr. Doron Schneidman) from Direct Holdings. The agreement includes various ancillary instructions, all as stated in the management agreement.

2. Indemnification and insurance of directors and officers

The Company's regulations allow indemnification and insurance of directors and officers under the law. Accordingly, the Company determined an indemnification policy and decided to insure the liability of officers, subject to the provisions of the law and additional restrictions.

The indemnification policy, as stated above, also applies to officers in consolidated companies.

The amount paid for indemnification and insurance of officers in the Company and in subsidiaries is as follows:


2015 2014 2013

NIS in thousandsFor directors' and officers' insurance 320 295 215For insurance against embezzlement 226 252 244

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f. Income and expenses from interested and related parties (continued)

3. Office lease agreement with related company

Since April 2006, the Company operates from offices located at Adgar House on 35 Efal Street, Kiryat Arie, Petach Tikva. Adgar House is jointly owned in equal parts by Adgar Investment and Development Ltd. (which is a subsidiary of the parent company and held by Zur Shamir Holdings Ltd. – the controlling shareholder of the parent company) on the one hand, and by a number of other companies in the Clal Group – headed by Clal Insurance Company Ltd., on the other hand (collectively, "the lessor"). According to the lease agreement, the lease period is for 10 years (up to April 2016) and certain CPI-linked price brackets were determined per sq. m. for the period. The price per sq. m. of office space in 2012 approximated NIS 75. It was also decided that the Company will have the option to lease additional spaces under the same terms. On December 26, 2012, the lease agreement was updated such that the price per sq. m. of office space was reduced to NIS 70, effective from January 1, 2013, and the lease period was extended by 10 years to March 31, 2026 under the updated terms. The updated agreement was approved by the Company's audit committee and Board of Directors in their meetings of December 19, 2012. As of the date of the approval of the financial statements, the Company leases areas totaling about 10,342 sq. m. The Company has also signed an agreement for the use of the conference rooms and catering service in the building and the parking lot adjacent to the building, which was acquired by Adgar during the lease period. The two above agreements are at market conditions and were approved by the Company's audit committee and Board of Directors.

4. Agreement with a related company

In respect of collection services granted by the financing company, the Company pays monthly operation fees in accordance with the number of outstanding loans at the beginning of the month. A mechanism was also determined which awards the financing company an additional compensation if the percentage of credit damages is lower than 1.3%.

5. There are premium payments which are made by related parties insured by the Company in insignificant amounts.

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NOTE 36: CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES

a. Requests to approve claims as class actions

In recent years there has been a significant increase in the number of motions filed for the approval of class action filed against various companies and in the number of claims which have been recognized by the Court as class actionss part of a general increase in motions for approval of claims as class actions in general, including against companies in the Company's line of business, arising mainly from the enactment of the Class Action Law, 2006 (hereunder "The Class Actions Law"). The above trend significantly increases the Company's potential exposure to losses arising from the approval of claims as class actions.

Motions for approval of claims as class actions are filed through the procedural mechanism prescribed in the Class Action Law, 2006 ("the Law"). The procedural mechanism for approval of claims as class actions is comprised of two main stages: The first stage consists of a procedure for discussing the motion for approval as a class action ("motion for approval" or "Approval Stage", respectively). If the motion for approval forfeited, the procedure is concluded at the representation level. The decision on the approval may be appealed by filing a motion for appeal to the appeals court. In the second stage, if the motion for approval is granted, the nature of the class action will then be discussed ("Claim as Class Action Stage").

An appeal may be filed on the ruling in a class action with the appeals court. According to the mechanism prescribed in the Law, there are specific arrangements regarding settlement agreements, both during the approval stage and during the class action stage, as well as arrangements regarding the plaintiff's withdrawal of a motion for approval or class action.

The motions for approval of class actions detailed below are in various stages of litigation.

No provision has been recorded in the financial statements for motions for approval of class actions detailed below in which the Company's defense arguments are assessed by management, based on legal counsel, as more likely than not to be accepted and the motion for approval to be dismissed. Motions for approval of class actions in which it is more likely than not that the Company's defense arguments will be dismissed, in whole or in part, have been provided for in the financial statements in amounts that are sufficient for covering the exposure estimated by the Company. Motions for approval of class actions whose chances to be accepted cannot yet be assessed at this early stage have not been provided for in the financial statements.In the event that the Company is willing to settle in any of the above processes, is provided for in the amounts for which the Company is willing to settle, even when it is more likely than not that the defense arguments of the Company will be accepted, or when the process is at an early stage in which its chances cannot yet be assessed.

1. On December 7, 2011, a claim was filed against the Company with the Central District Court, together with a request to approve the claim as a class action, contending that the Company unlawfully renews the motor casco insurance policies of its customers without receiving their prior approval, and when they request to cancel the renewal they are refunded by the premium that was collected without adding the linkage differences and the interest. Furthermore, any policy that is renewed, as mentioned above, without contacting the Company, does not receive the renewal discounts that he would have easily received if he had contacted the Company.

The claim was filed in the name of two groups. The first group, all the Company's customers whose motor casco policy was renewed automatically without obtaining their positive consent, it is requested to refund them for the total premium, or - regarding those for whom it will be proven that they wanted the renewal, to refund them for the discount that they would allegedly receive if there was any contact with them at the time of the renewal, at the rate of 11.5% of the amount of the premium. The second group, all the Company's customers to whom it granted refunds in nominal values only, without linkage differences and interest, as well as regarding the automatic renewal of insurance policies for which the aforementioned refund of differences is requested.

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NOTE 36: CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES (continued)

a. Requests to approve claims as class actions (continued)

1. (continued)The personal claim is in the amount of NIS 5,441 and the request to approve it as a class action set the total claim against the company at the sum of NIS 200,000,000.

At the end of the proof stage, dates were scheduled for filing the conclusions of the parties in the claim. On September 30, 2014, a new circular, published by the Supervision, arranges the subject of policies renewal in a future outlook. The court was notified about it and consequently instructed the parties to refer to it in their summations. As on December 1, 2015, summations of the parties were filed and the claim is awaiting the court's decision on the request for approval.

2. On December 6, 2012, a claim was filed with the Central District Court against the Company and six other insurance companies and a motion for approval of the claim as a class action, alleging that the motor act and/or casco insurance tariff for owners of SUVs and minivans made before 2007 (inclusive) is calculated according to commercial vehicles although SUVs and minivans are defined by the Ministry of Transport as private vehicles, a classification which will lower the motor act and property insurance tariff for these vehicles significantly.

The group which the petitioners seek to represent consists of all the holders of motor act and/or casco insurance policies issued by the Company starting from January 9, 2007, the date on which Amendment No. 3 to the Transportation Regulations became effective, whose vehicle license features/featured the M-1 classification and who had been required to pay insurance premium based on the assumption that their vehicle was commercial and not private.

The petitioners' personal claim amounts to NIS 14,577. The amount of the class action against all the respondents is estimated at NIS 550,213 thousand. The amount of the class action against the Company is NIS 42,071 thousand for motor act insurance and NIS 54,244 thousand for motor casco insurance.

At the end of the proofs hearing stage, the court set dates for filing summations. As on February 1, 2016, the parties summations were filed and the case is awaiting the court's decision on the request for approval.

3. On January 13, 2013, a claim was filed with the Central District Court against the Company, the Pool and 14 other insurance companies as well as a motion for approval of the claim as a class action, alleging that the Pool and the respondents, as the co-sponsors of the Pool, illegally collected excess premiums from policyholders who had purchased motor act insurance policies and were late in paying the insurance fees stated in the certificate compared to the date of commencement of the insurance period stated in the insurance certificate, since, as stated in the certificate, the insurance becomes effective on the date of commencement of the insurance period or on the date of actual payment, whichever is later. The claim is seeking, among others, a monetary relief for the recovery of insurance fees collected for the period during which no actual insurance coverage is provided.

The group of plaintiffs which the petitioner seeks to represent has been defined as all the motor act policyholders of the 15 insurance companies mentioned in the motion, who had paid the insurance premium after the date of commencement of the insurance period stated in the insurance certificate issued to them over a period of seven years which preceded the date of filing the motion. Alternatively, the group of plaintiffs is defined as the group of Pool's motor act policyholders only who were late in paying the insurance premium over a period of seven years which preceded the date of filing the motion.

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3. (continued)

Following the instruction of the court, the claim was amended on February 16, 2014. This claim relates to only 8 groups, including the pool and the claim amounts were stated as follows: The personal claim against the Company amounts to NIS 73.29. The amount of the class action filed by the entire group of plaintiffs in the amended claim is NIS 26,732 thousand, of which the amount of the class action against the Pool alone is NIS 3,422 thousand, without stating that the amount claimed from the Company is on behalf of all its relevant policyholders.

The response to the amended motion was filed on September 21, 2014. The position of the Insurance Commissioner was filed on January 26, 2015 and on April 14, 2015, updated dates were set for filing summations by the parties and for response of the Commissioner on the summations of the parties, the last of which were filed on October 25, 2015. As on the date of this report, the response of the Commissioner to the summations was not filed. Insofar as it will be filed, the parties will have the right to respond to it. The file is awaiting the decision of the court on the request for approval

4. On September 12, 2013, a claim was filed with the Central District Court against the Company and another insurance company as well as a motion for approval of the claim as a class action, alleging that the respondents, illegally collected excess premiums from policyholders who had purchased motor act insurance policies, since they collected insurance amounts according to the driver's age at the entering date of the insurance contract and not in relation to the driver's age throughout the insurance period.

The group of plaintiffs which the petitioner seeks to represent has been defined as all the motor act policyholders who entered a motor act insurance contract with these companies, who had paid excessive insurance premium due to calculating the age of the young driver who drives the vehicle regularly, as at the entry date of the insurance contract and not in relation to the insurance period.The personal claim amounts to NIS 258.5 and the amount of the class action filed by the entire group of plaintiffs is estimated at NIS 36,750 thousand, of which the amount of the class action against the Company is estimated at NIS 8,750 thousand.On April 9, 2014, the Company filed its response to the motion for approval of the claim as a class action and the plaintiffs files their response on August 25, 2014. The proof hearing in the case is scheduled for March 29, 2016.

5. On November 10, 2013, a claim was filed with the Tel Aviv District Court against the Company, as well as a motion for approval of the claim as a class action, alleging that there is a difference between the insurance amounts of the luggage presented in the different parts of the Company's travel abroad insurance policy, in a manner that the insurance amount according to which the Company actually pays is lower than the maximum amount presented as the coverage limit, in a manner that allegedly causes incorrect calculation of the premium by the Company. The group of plaintiffs which the petitioner seeks to represent has been defined as all the travel abroad policyholders whose contract with the Company includes a luggage insurance component. The motion does not include detailed total claimed damage for all group members. The personal claim against the Company ranges from NIS 48.25 to NIS 50.16. The Company filed its response to the motion on August 26, 2014, and the plaintiffs filed their response on February 5, 2015. A proof hearing of the case is scheduled for April 11, 2016.

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6. On January 8, 2014, a monetary claim was filed with the Tel Aviv District Court against the Company and two other insurance companies as well as a motion for approval of the claim as a class action, alleging that the motor casco insurance rate calculated by the Company according to the "full" vehicle value at the insurance purchase date or shortly later does not include special variables which reduce the vehicle's value as at the policy's acquisition date, which as claimed by the plaintiffs, should have decreased the premium respectively.

The group of plaintiffs which the petitioners seek to represent are policyholders in period of seven years preceding the date of filing the motion, who purchased casco insurance from the respondents for a vehicle with special variables according to the policy, where the insurance policy states that in an insurance event of a total loss or a constructive total loss, a certain rate will be deducted from the value of the vehicle, without decreasing the insurance premiums accordingly.

The amount filed by the entire group amounts according to the plaintiffs estimate at NIS 200,000 thousand. The personal claim amount against the Company is approximately NIS 350.

The Company filed its response to the motion on July 31, 2014, and the plaintiffs filed their response on December 2, 2014. The parties are waiting for the scheduled date of the pre-trial hearing of the case.

7. On May 7, 2014, a claim was filed with the Central District Court against the Company, as well as a motion for approval of the claim as a class action, alleging that the Company collets deductibles in respect of a wheel replacement service in an event of a puncture only from men, while women are exempt from this charge in a manner that affects equality contrary to the law.

The group which the petitioner seeks to represent are: (1) men who actually used the wheel replacement service and paid a deductable; (2) all the public who was exposed to the advertising of the Company about this service, due to its alleged discrimination.

The personal claim amounts to NIS 65 thousand, which is the amount, as claimed, that can be claimed as compensation without proving damage by force of the Discrimination Prohibition Law. Consequently, the amount claimed as damage by all members of the groups is NIS 108,000 thousand, which also includes a claim on behalf of men who used the service, and are entitled according to the claim to reimbursement of the deductible rate.

At the end of the proof hearing stage in the requests, dates were set for filing the parties summations, where that last summations were filed to the court on February 14, 2016. The file is awaiting the decision of the court..

8. On June 23, 2014, a claim was filed with the Jerusalem District Court against the Company and six other insurance companies as well as a motion for approval of the claim as a class action, alleging that the life assurance rate for securing a loan for residence (mortgage) is calculated on the basis of an insurance amount that is higher than the outstanding balance of the loan to the bank in a manner that grants the Company surplus premium compared to the amount it will be required to pay upon maturity.

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8. (continued)

The group of plaintiffs which the petitioners seek to represent are policyholders insured by any of the companies in period of seven years preceding the date of filing the motion by a life assurance policy for the purpose of securing a mortgage loan they received from one of the mortgage banks in Israel, where the insurance amount in the said policy, exceeded during the said period the outstanding balance of the loan in the bank, allegedly resulting in excessive premium payments. The personal claim amounts to NIS 389 and the amount of the class action filed by the entire group of plaintiffs against the Company amounts to approximately NIS 15,158 thousand. The amount claimed from all insurance companies is approximately NIS 1,182,285 thousand. The Company filed its response to the motion for approval on January 5, 2015. A pre-trial hearing of the case was held on July 20, 2015, in which the court requested to receive the response of the Insurance Commissioner to several subjects. At the Commissioner's request the date for filing the required response was postponed to February 25, 2016 and the nearest pre-trial hearing was scheduled for April 10, 2016. .

9. On October 27, 2014, a claim was filed with the Central District Court against the Company, as well as a motion for approval of the claim as a class action, alleging that the Company collects installment payments fees in individual insurance policies at a higher than agreed upon rate in the policy and at a higher rate than that permitted by the law. The group of plaintiffs which the petitioners seek to represent are all policyholders insured by the Company over a period of seven years preceding the date of filing the motion, from whom, credit fees and/or installments scheduling fees were collected at a rate exceeding the annual interest rate presented to them and/or at the rate exceeding the legal credit fees ceiling, defined by the supervision guidelines. The personal claim amounts to NIS 18 and the amount of the class action filed by the entire group of plaintiffs against the Company is estimated at NIS 58,548 thousand. On April 19, 2015, the parties filed a request for approving a compromise and a request to issue instructions according to the compromise. A notice on the compromise will published in the newspapers in accordance with the court's instructions and on May 5 and 14, 2015 and on October 12, 2015, the parties field a request, asking the court to validate the compromise as a court decision. On December 6, 2015, the court approved the compromise and validated it as a court decision. In addition, the court approved the version of the notice and advertisement of the Company according to the compromise and an internal reminder on the announcement of the parties on completing the compromise was scheduled to February 15, 2016. The parties filed the required notice on February 10, 2016.

10. On December 31, 2014, a claim was filed against the Parent Company with the Haifa District Court, together with a request to approve the claim as a class action, relating to the Company's operations, contending that the Company collects premiums for full casco motor insurance even when the Company changes the insurance policy to a modular motor insurance policy (partial coverage) due to the failure of the policy holder to install protection means and contending that "Reinstatement Fees" were collected at an allegedly higher than required rate when the insurance amount in the polity is reinstated following occurrence of an insurance event.

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10. (continued)

The group of plaintiffs which the petitioners seek to represent are all customers/ policyholders insured by the Company over a period of seven years preceding the date of filing the motion up to its approval date. (a) purchases a full casco motor insurance policy which was changed during the insurance period into a modular motor insurance policy; and (b) purchased casco motor insurance and when the insured vehicle sustained damage they received insurance benefits net of "Reinstatement fees" ("Reinstating the Coverage Fees") at the rate that fails to match the calculation formula presented in the specification of the insurance policy. The total claim for all group members is NIS 30,000 thousand as well as charging the Company with legal expenses, benefit to the plaintiffs at a 5% rate of the compensation for the group and fees at a 20% rate of the compensation to the group to the attorneys of the group. On May 31, 2015, the parties filed a notice, stating that the plaintiffs decided to withdraw their claim regarding the full casco motor insurance policy fees compared to the modular motor insurance policy and that the withdrawal from this claim will be submitted later. On August 16, 2015, the parties filed an agreed upon request to withdraw the request for approving the claim and on October 12, 2015, the court approved the request for withdrawal and the rejection of the plaintiff's personal claim.

11. On May 20, 2015, a claim was filed against the Company with the Jerusalem District Court, together with a request to approve the claim as a class action, claiming that the Company sends advertising contents through SMSs to the cellular phone, without receiving the consent of the addressees and without an ability to be removed from the Company's information banks.Members of the Group in whose name the plaintiff wishes to act are all those who received advertising messages from the Company without giving their explicit consent, without enabling them to remove their names from the distribution list in accordance with the manner specified by the law.The amount claimed by the individual plaintiff is NIS 90. The amount claimed for the group action is estimated at about NIS 3,600 thousand.The Company filed its response to the motion for approval on November 8, 2015. On December 7, 2015, the plaintiff filed a request to withdraw from the claim without demanding expenses. The court ruled that the request to withdraw receives the status of a court decision on December 23, 2015.

12. On September 8, 2015, a claim was filed against the Company with the Tel Aviv District Court, together with a request to approve the claim as a class action, claiming that the Company violates its duty to attach the legal linked interest to the insurance benefits it pays, as interpreted by the plaintiff.The group of plaintiffs which the petitioners seek to represent are all those who received over a period of seven years preceding the date of filing the motion, or at least over the three years preceding the date of filing the motion up to its approval date, insurance benefits from the Company without adding the legal interest to the insurance benefits, as interpreted by the petitioner.The amount claimed by the individual plaintiff is NIS 47.82, in the event that the interest is calculated from the date of the insurance event, or NIS 20.98, in the event where interest is calculated starting at the end of 30 days from filing the claim. The amount claimed for the group action is estimated at about NIS 30,000 thousand.

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I.D.I. INSURANCE COMPANY LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTE 36: CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES (continued)


12. (continued)

This request was filed against the Company after a similar request against several insurance companies was approved as a class action at the District Court. Those insurance companies filed a request to appeal against this decision to the Supreme Court. On February 24, 2016, the Supreme Court instructed to delay the hearing at the District Court and the transfer of the request to appeal to a hearing before a panel of three judges.

13. On September 29, 2015, a claim was filed against the Company with the Tel Aviv District Court, together with a request to approve the claim as a class action, claiming that the Company violates various directives of the law regarding calculation of salaries and provisions for pensions to its employees.The petitioners wish to represent different groups of employees, relating to each of the claimed violations they attribute to the Company, over a period of seven years preceding the filing of the clam.The petitioners estimate the total amount of the claim at about NIS 13,699 thousand.The date for filing the Company's response to the petition is scheduled on March 16, 2016, to be followed by the response of the plaintiffs, as provided by their right. A hearing of the request is scheduled for May 5, 2016.

14. On November 25, 2015, a claim was filed against the Company and other insurance companies with the Lod District Court, together with a request to approve the claim as a class action, claiming that the Company charges reserve soldiers will a full and excessive insurance premium, ignoring the fact that they receive partial and under-insurance, the value of which is lower than the collected premium, due to lack of insurance coverage during the military reserve service.

The group of plaintiffs which the petitioners seek to represent are all those who had or have an insurance policy that included exception of the reserve service, who paid over a period of seven years preceding the date of filing the motion up to its approval date, insurance premiums during the period in which the insured was performing his/her military reserve duties.The group estimates the total damage to all its members at "tens millions NIS" and the compensation demanded by the petitioner for its efforts during the proceedings is at the rate of 5% of the amount that will be repaid to group members.The scheduled date for filing a response is not due as yet, but a preliminary hearing of the case is scheduled to September 18, 2016.

15. On February 9, 2016, a claim was filed against the Company and other insurance companies with the Lod-Center District Court, together with a request to approve the claim as a class action, claiming that the Company does not return the difference in motor act insurance amounts deriving from replacing the vehicle during the insurance period, according to the relevant difference in rates.

The group of plaintiffs which the petitioners seek to represent are all those who were insured by the Company who cancelled the motor acr insurance policy and are entitled to a relative refund of the insurance fees according to any law, over a period of seven years preceding the date of filing the motion.The personal claim amounts to NIS 77 and the amount of the class action filed by the entire group of plaintiffs against the Company is estimated at NIS 7,000 thousand. The Company did not file its defense against this request as yet.

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I.D.I. INSURANCE COMPANY LTD.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTE 36: CONTINGENT LIABILITIES, COMMITMENTS AND GUARANTEES (continued)

b. Other legal procedures

On March 15, 2012, a monetary claim in the sum of about NIS 2.500 thousand, together with a demand for a permanent injunction and related remedies, was filed with the Tel-Aviv District Court, against the Company, against two of its officers and against its two brand names ("the defendants"). The claim was filed by the Insurance Agents Association in Israel and 8 insurance agents, contending that the advertising campaign for the Company's "Nine Million" brand name is slanderous towards the insurance agents and constitutes unfair competition and unlawful enrichment by the Company. The request for a temporary injunction that had been filed about a year ago by the Insurance Agents Association and several insurance agents against the same ad campaign contained similar allegations and was totally dismissed at the time. However, in the statement of claim it was contended that despite the dismissal, there are grounds for the claim, in the opinion of its issuers. The defendants submitted a statement of defense and a motion for dismissal in limine. In response to the defendants' motion, on November 26, 2012, the Court ordered that the Company's brand names be stricken from the claim and also ruled that the issue of expenses will be discussed at the close of the proceeding.

Following the proofs hearing stage in the request, dates were scheduled for filing the summations of the parties on the request. As on January 31, 2016, the parties filed their summations an await for the court to publish its decision.

Summary in the form of a table

The following table summarizes the amounts being claimed in the various pending motions for approval of claims as class actions and other material claims filed against the Company, as stated by the plaintiffs in the various letters of claim filed by them. It should be clarified that the amounts being claimed are not necessarily a quantification of the amounts of exposure as estimated by the Company since the claimed amounts represent the plaintiff's estimate which will be later discussed in litigation. It should also be clarified that the following table does not include concluded procedures, including procedures concluded after the end of the reporting period. All calculations are based on assumptions and conjectures regarding the sizes of groups and amounts of insurance which are relevant to the calculation.

Number of claims

Amounts claimedNIS in

thousandsOutstanding requests to approve claims as class actions: The amount attributable to the Company was specified 9 537,470 The claim relates to a number of companies and no specific

amount was attributed to the Company 2 226,732The claim amount was not stated 2 -Other material claims: 1 2,500Total 14 766,702

The provision included in the financial statements as at December 31, 2015, in respect of all the legal claims amounts to NIS 1,000 thousand.

d. There is a general exposure, which cannot be estimated and/or quantified, that stems, among others, from the complexity of services provided by the Company to its policyholders. Inter alia, the complexity of these arrangements involves potential claims relating to a long list of commercial and regulatory conditions.

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d. (continued)

One cannot anticipate the type of claims and interpretations that may be raised in this field and the exposure relating to these and other claims.

Moreover, there is a general exposure, which derives from the fact that complaints against the Company are filed from time to time with the various Government authorities such as the Commissioner, in relation to the rights of insured parties under insurance policies and/or under the law. These complaints are treated by the complaints staff of the Company as a matter of routine. The decisions made by the Government authorities in respect of these complaints, if and so far as a decision is made in their respect, may be given as lateral decisions. Sometimes, the parties who file the complaint even threaten to initiate legal proceedings in respect of their complaints within the framework of a class action. At these early stages it is not possible to assess what outcome these proceedings will yield and in any event to estimate their potential exposure, or the very initiation of such proceedings. Accordingly, no provision was recorded in respect of the said exposure.

e. Obligations for investments

The Company has obligations for making additional investments in investment funds which amount as on December 31, 2015, to some NIS 5,691 thousand.

NOTE 37: SUBSEQUENT EVENTS

a. On February 28, 2016, the Company's Board of Directors approved the distribution of a dividend of approximately NIS 100 million.

b. For details on the request to approve a class action, filed on February 9, 2016, see Note 36 above.

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