Staff Writer
Fidelity Life Assurance of Zimbabwe’s earnings came under significant pressure in the first half of 2026, with group profit falling 74% to US$1.57 million as rising insurance service costs overwhelmed weaker insurance revenue growth.
According to financials of the group’s unaudited interim financial statements for the six months to June 30, 2026, the business remains profitable but is facing a more difficult underwriting environment, particularly in Zimbabwe.
The financials show that group insurance contract revenue declined 4% to US$8.27 million from US$8.64 million in the comparative period, which the company attributed to slower-than-expected conversion of new business.
The more significant concern, however, was the sharp deterioration in the insurance service result.
Fidelity moved from a positive insurance service result of US$2.87 million in the first half of 2025 to a US$502,445 loss during the period under review.
Insurance service expenses increased 57% to US$8.68 million from US$5.52 million, with the group pointing to elevated claims and an increase in the loss component.
That deterioration means Fidelity’s core insurance operation was not generating a positive underwriting contribution before investment and other income were taken into account.
The pressure was particularly visible in Zimbabwe, which remains the group’s largest market.
Zimbabwe generated US$5.88 million of insurance contract revenue, accounting for about 71% of the group total, but recorded a US$717,035 insurance service loss.
Malawi, by contrast, generated US$2.39 million in insurance revenue and posted a positive insurance service result of US$214,590.
While Zimbabwe continues to provide the bulk of Fidelity’s insurance business, the market also appears to be carrying a disproportionate share of the group’s underwriting pressure.
The company will therefore need to improve claims experience and pricing discipline if revenue growth is to translate into sustainable insurance profits.
In the period under review, net investment income increased to US$7.40 million from US$6.51 million, supported by fair-value gains on investment properties and financial assets.
Investment property generated a US$2.71 million fair-value gain during the period, while financial assets measured through profit or loss contributed a further US$1.31 million in fair-value adjustments.
But relying heavily on investment performance to offset weaker underwriting presents an important strategic question for a life assurer.
Investment markets can support earnings, but they cannot permanently substitute for a healthy insurance margin.
The company’s own decision to focus on rebuilding its top line and strengthening underwriting capacity, rather than paying an interim dividend, suggests management recognises this challenge.
Total assets increased to US$155.79 million at June 30 from US$148.84 million at December 2025. Investment property rose to US$59.93 million, while financial assets at fair value through profit or loss stood at US$64.21 million.
However, cash and bank deposits declined from US$6.67 million to US$5.20 million.
More importantly, Fidelity reported negative ordinary shareholders’ equity of US$7.48 million, although total equity remained positive at US$5.08 million because of the insurance reserve and non-controlling interests.
In the period under review, the group generated a net cash outflow of US$710,369 from operating activities, compared with a US$284,908 inflow in the comparable period.
Overall cash and cash equivalents fell by US$1.47 million during the six months to US$5.20 million.
At the same time, borrowings fell to US$2.62 million from US$3.60 million, reflecting repayments during the period.
The largest facility is a US$2.4 million AFC Bank loan obtained to finance development of Stoneridge stands under the Vaka Yako product.
Fidelity is also carrying substantial insurance obligations. Insurance contract liabilities increased to US$101.72 million from US$96.74 million at December 2025, while investment contract liabilities without discretionary participation features stood at US$33.40 million.
What Fidelity needs to do
Fidelity needs to determine whether the jump in claims is temporary or indicative of a structural deterioration in the risk profile of its book. Product-level claims data, loss ratios and claims trends will be critical in determining whether premium increases, tighter underwriting or product redesign are necessary.
The company should also ensure that growth in new business does not come at the expense of margins. Its diversification away from dependence on Vaka Yako is strategically sensible, but new products should be judged not simply by sales volumes but by their contribution to sustainable insurance profitability.
Cost control will also matter. Operating and administrative expenses increased to US$6.76 million from US$4.96 million.
The expansion of low-cost mobile service booths and digital servicing could help Fidelity reach informal-market and diaspora customers, but technology investment must ultimately translate into lower acquisition costs, better retention and improved claims administration.
For investors, the sharp rise in headline earnings per share is not the story. Basic EPS fell to 2.02 US cents from 5.07 cents, while headline EPS increased to 2.04 cents from 0.63 cents because the prior year benefited from a US$3.89 million once-off profit on disposal of subsidiaries.
The more useful measure is whether Fidelity can restore positive insurance service results.
Fidelity remains profitable and has a sizeable investment base, diversified operations and a growing product platform. But the first-half results are a warning that investment gains cannot be allowed to mask weakness in the underlying insurance business.
