HARARE — Fidelity Life Assurance’s insurance business slipped into the red in the first half of 2026 as claims and insurance service costs rose sharply, leaving investment income and property gains to carry a growing share of the group’s earnings.
The deterioration exposes a key issue for Zimbabwe’s insurance industry: a company can report positive earnings from a large investment portfolio while its core business of underwriting insurance is losing money.
Fidelity’s insurance contract revenue fell 4% to US$8.27 million in the six months to June, from US$8.64 million a year earlier. At the same time, insurance service expenses jumped 57% to US$8.68 million, turning the insurance service result from a US$2.87 million profit in HY25 into a US$502,445 loss.
Management attributed the deterioration primarily to elevated claims and an increase in the loss component of insurance contracts.
The divergence between revenue and costs is the most important feature of the results. Insurance revenue declined moderately, but the cost of servicing the underlying insurance book increased far more rapidly.
Analysts who spoke to The Zimbabwe Financial Mail said the numbers point to an underwriting problem rather than simply a weak earnings period. The immediate priority, they said, is to restore the profitability of the insurance franchise through stronger new-business conversion, appropriate pricing and tighter claims management, rather than relying increasingly on investment returns to compensate for underwriting weakness.
The pressure was particularly pronounced in Zimbabwe, Fidelity’s largest market.
The domestic operation generated US$5.88 million in insurance revenue, approximately 71% of group insurance revenue, but its insurance service result swung from a US$1.69 million profit to a US$717,035 loss.
Insurance service expenses in Zimbabwe increased to US$6.53 million, from US$4.23 million previously.
That makes the domestic market the critical battleground for Fidelity’s recovery. The company said slower-than-expected conversion of new business contributed to weaker insurance revenue, despite efforts to expand distribution through mobile service booths, informal-market channels and diaspora business.
The problem is particularly relevant in Zimbabwe, where household incomes remain under pressure and the insurance market competes with immediate consumption needs, informal financial arrangements and other forms of savings and investment.
For insurers, the challenge is therefore not simply selling policies. It is converting a population with limited disposable income into a sustainable pool of policyholders while keeping premiums adequate relative to claims and administration costs.
Fidelity’s investment portfolio provided an important earnings buffer.
Net investment income rose to US$7.40 million, from US$6.51 million in HY25, allowing the combined insurance and investment result to remain positive at US$6.07 million, despite the insurance service loss.
Property was particularly important. Fair-value gains contributed about US$2.69 million, while interest revenue reached US$1.23 million.
By June, Fidelity held approximately US$59.93 million in investment property and US$64.21 million in financial assets measured at fair value through profit or loss.
Together, those portfolios represented close to 80% of the group’s US$155.79 million asset base.
That asset structure explains why Fidelity can remain profitable while its insurance operation is under pressure. The investment portfolio effectively acts as an earnings shock absorber.
But it also introduces a different form of risk.
Investment income is inherently sensitive to asset valuations, interest rates, market conditions and the performance of property and financial markets. Underwriting income, by contrast, is the recurring economic engine of an insurance company.
The longer the insurance service result remains negative, therefore, the greater the importance of investment performance becomes.
Analysts told The Zimbabwe Financial Mail that this distinction will be important when assessing Fidelity’s underlying quality of earnings. Investment gains can protect reported profitability during a difficult underwriting cycle, but they cannot indefinitely substitute for profitable insurance operations.
The headline group numbers illustrate the problem.
Reported profit fell 74% to US$1.57 million, from US$6 million in HY25. However, the comparison is distorted by a US$3.9 million once-off gain from the disposal of subsidiaries recorded in the previous period.
A closer look at underlying earnings produces a substantially different picture.
Headline earnings attributable to ordinary shareholders increased to US$2.20 million, from US$676,981, while headline earnings per share rose to 2.04 US cents, from 0.63 US cents.
That means the headline 74% decline in profit does not tell the entire story. The prior-year disposal gain inflated the comparative period, making the underlying performance appear weaker than it was.
Profit attributable to owners of the parent was US$2.18 million, while non-controlling interests recorded a loss of US$610,717.
For investors, the more important question is therefore not whether Fidelity made a profit in the six months, but where that profit came from.
The answer is increasingly clear: investment assets provided a substantial cushion while the insurance operation deteriorated.
That makes management’s decision to withhold an interim dividend particularly significant.
Fidelity said capital would instead be directed towards rebuilding revenue and strengthening underwriting capacity, leaving open the possibility of a more meaningful dividend at year-end.
The decision reflects the economics of an insurance business. Capital is required not only to support regulatory solvency but also to absorb claims volatility and provide capacity for future underwriting.
Returning capital to shareholders while the core insurance operation is producing a loss could weaken the balance sheet at precisely the point when management needs resources to rebuild the franchise.
The second half will therefore be less about investment gains and more about whether Fidelity can reverse the deterioration in its insurance service result.
New business conversion will be critical.
If additional policies can be written at commercially viable premiums, the company can begin rebuilding insurance revenue. But higher volumes alone will not solve the problem if claims costs continue rising faster than premiums.
The company therefore faces a three-part test: grow the insurance book, improve claims performance and protect underwriting margins.
Zimbabwe’s broader economic environment makes that task more complicated.
Stable exchange rates and lower inflation can improve household and corporate planning, but insurance demand ultimately depends on disposable income, asset ownership and confidence in long-term financial products. At the same time, insurers must manage claims in an economy where replacement costs, imported equipment and medical expenses can remain highly sensitive to currency movements.
Fidelity’s investment portfolio gives the group considerable financial depth, but the strategic objective should be to ensure that investments supplement rather than subsidise underwriting.
The distinction matters because a strong investment portfolio can generate attractive returns during favourable market conditions, but the long-term value of an insurer is ultimately determined by its ability to price risk correctly and generate sustainable insurance margins.
For Fidelity, the first-half results therefore represent less a balance-sheet crisis than an earnings-quality warning.
The group has substantial assets and its headline earnings, after stripping out the prior-year disposal gain, improved. But the core insurance operation has moved in the wrong direction, particularly in Zimbabwe.
The second half will show whether management can turn the investment cushion into a bridge back to underwriting profitability — rather than allowing it to become a permanent crutch.
For shareholders, that is likely to matter more than the next investment-property valuation.
Fidelity does not simply need to make money. It needs its insurance business to make the money.
