Rating Action: Moody's affirms The Phoenix Insurance Company Ltd.'s A2 IFSR; outlook changed to negative

1 November 2023

London, November 1, 2023 - Moody's Investors Service (Moody's) has today affirmed the A2 insurance financial strength ratings (IFSRs) of The Phoenix Insurance Company Ltd. (Phoenix Insurance). Phoenix Insurance is the principal insurance operating subsidiary of The Phoenix Holdings Ltd. (Phoenix), a diversified financial services group based in Israel. The outlook has been changed to negative from stable.

Today's rating action follows the review for downgrade on the Government of Israel's A1 long-term issuer ratings, opened by Moody's on 19 October 2023. For further information on the sovereign rating action, please refer to Moody's press release: "Moody's places Israel's A1 ratings on review for downgrade" (https://ratings.moodys.com/ratings-news/410047).

RATINGS RATIONALE

--NEGATIVE OUTLOOK

The change in outlook to negative is triggered by the unexpected and violent conflict between Israel and Hamas and the potential impact on Phoenix, primarily through its concentrated exposure to the financial markets and economy of Israel, and to a lesser extent through its direct insurance exposures. The longer and more severe the military conflict, the greater its impact is likely to be on the economy and on Phoenix.

Phoenix is exposed to Israeli invested assets through its Nostro (shareholder) portfolio and with respect to its pension, provident and asset management businesses where fee income is dependent on assets under management (AuM). It is also exposed to Israeli government bond yields, which have an impact on Solvency capital and net income, albeit with rising yields having a positive impact on solvency coverage. On the insurance side, Phoenix's exposures to mortality and disability risks are moderated by reinsurance protection and are not expected to have a material impact on the Group outside of longer duration and more severe scenarios. Property insurance is not expected to be meaningfully impacted and inflationary pressures are expected to be more than offset by lower claims frequency as activity declines. Weakening of the economy and operating environment will have a negative impact on new business flows and could potentially lead to redemptions of balances held within savings and investment products.

--RATING AFFIRMATION

The affirmation of Phoenix Insurance's A2 IFSRs reflects its strong capital and liquidity buffers, the range of management actions available to support solvency and liquidity through a challenging environment and Phoenix's very strong market position and good business diversification. That notwithstanding, Moody's expects that Phoenix's asset quality and profitability will deteriorate, at least temporarily, because of the impact the military conflict will have on Israel's economy. The extent of this will depend on its duration and scale, as well as actions by the authorities to cushion the impact on affected businesses and households.

Under the scenarios that Phoenix has considered, it expects for its Solvency II ratio to remain above 130% (excluding transitional provisions) compared to 149% at year-end 2022. Because Solvency

II coverage is significantly impacted by government bond yields, the recent rise in yields provides support to the coverage ratio. More severe scenarios, in terms of the intensity and duration of the conflict, would likely have a more significant impact on liquidity and profitability, even though Solvency coverage could remain relatively less affected.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Given the negative outlook, there is currently no upward pressure on Phoenix Insurance's ratings. However, the outlook could be changed back to stable if the sovereign rating is confirmed with stable outlook or Moody's considers that deterioration in the economy and operating environment will not have a material or sustained negative impact on Phoenix.

Phoenix Insurance's ratings could be downgraded in the event of negative rating action on the sovereign rating that either causes the insurer's ratings to be constrained at the level of the sovereign debt rating, or leads Moody's to consider that deterioration in the economy and operating environment will have a material and sustained negative impact on Phoenix. A significant escalation in intensity and severity of the conflict could lead to Moody's taking negative action earlier than the typical 12 to 18 month outlook time period.

PRINCIPAL METHODOLOGIES

The methodologies used in these ratings were Life Insurers Methodology published in January 2023 and available at https://ratings.moodys.com/rmc-documents/397713, and Property and Casualty Insurers Methodology published in January 2023 and available at https://ratings.moodys.com/ rmc-documents/397707. Alternatively, please see the Rating Methodologies page on https:// ratings.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https:// ratings.moodys.com.

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The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

The Global Scale Credit Rating(s) discussed in this Credit Rating Announcement was(were) issued by one of Moody's affiliates outside the EU and is(are) endorsed for use in the EU in accordance with the EU CRA Regulation.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Brandan Holmes VP-Sr Credit Officer Financial Institutions Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

Simon James Robin Ainsworth Associate Managing Director Financial Institutions Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London, E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

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The Phoenix Holdings Ltd.

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