Migdal Insurance (TASE: MGDL ) had a horrible second quarter.

The company's net profit dived 90% to NIS 14.2 million, it divulged on Tuesday after the bell. In the parallel quarter, it netted NIS 149.8 million.

Life insurance profits plunged 68% to NIS 58.3 million in the second quarter versus the parallel. General insurance earnings contracted 73% to NIS 4.6 million.

The worst pain came from capital market investments, on which it lost NIS 27.3 million, compared with netting NIS 56.4 million in the parallel quarter on that activity.

Migdal did not write down the value of its holdings in Bank Leumi (TASE: LUMI ) .

On June 30, 2002 Migdal's balance stood at NIS 36.1 billion, of which shareholders equity comprised 5%.

Ilanot Batucha insurance analyst Alon Glazer said that the steep drop in its results was expected. But most of its travails resulted from capital market losses, not a decline in its insurance business, he stressed.

"Note that life insurance premiums dropped by about 9.5% compared with the parallel quarter, because of the recession and the fact that the parallel quarter was unusually strong," Glazer added.

As for general insurance, if the capital market adventures are discounted, Migdal would have posted impressive profit growth because of improved underwriting quality, Glazer said.