• Profit after tax rose 222% to US$19.8 million in H1 2026, driven heavily by investment and property gains
• Insurance service result fell 7% to US$13.2 million despite 6% growth in insurance contract revenue
• Claims pressure increased as the health claims ratio rose to 83.95% from 82.15%

Harare- First Mutual Holdings has recorded a 222% increase in first-half profit, which also conceals a weaker performance from its core insurance operation, with investment returns and property revaluations providing much of the earnings uplift while claims pressure increased across the health business.

This is according to the latest half-year results to 30 June 2026.

The group reported profit after tax of US$19.8 million for the six months ended June 2026, compared with US$6.2 million in the comparable period. Insurance contract revenue increased 6% to US$92.8 million, yet the insurance service result declined 7% to US$13.2 million.

The difference between the headline profit and the underlying insurance result becomes more pronounced after insurance finance effects. The group  recorded a negative US$9 million insurance finance result, leaving net insurance and reinsurance performance at US$4.2 million, compared with US$12.8 million a year earlier.

Investment performance supplied the largest counterweight. Net investment return increased 568% to US$13.7 million from US$2.1 million, while fair-value gains on investment property rose to US$13.8 million from US$1.0 million. Combined, those two sources produced about US$27.5 million in gains during the period, exceeding the group’s reported US$19.8 million profit after tax.

That earnings composition matters because the investment and property gains are sensitive to market conditions and valuations. First Mutual recorded US$8.0 million of fair-value gains on quoted equities and US$3.9 million on unquoted equities, while the investment-property portfolio generated US$13.8 million in fair-value gains.

The insurance operation therefore needs to be assessed separately from the investment portfolio. Insurance contract revenue reached US$92.8 million, with health insurance revenue increasing 17% to US$39.7 million and life assurance revenue rising 19% to US$8.0 million. Property and casualty insurance revenue declined 4% to US$45.1 million.

The deterioration in the insurance service result means that revenue growth is currently requiring closer examination at the claims and margin level. First Mutual Health's claims ratio increased to 83.95% from 82.15%, with management attributing the movement to higher claims volumes, a growing chronic disease burden and increased claim frequency.

This is particularly relevant because health is a substantial component of the group’s insurance business. First Mutual Health generated US$8.7 million in profit during the period, a sharp increase from the prior year, but the rise in claims costs places greater importance on pricing, utilisation management and the ability to contain medical-cost inflation.

The group therefore enters the second half with two different earnings drivers. The insurance business needs to generate stronger service results through premium growth and claims management, while the investment portfolio remains exposed to movements in equities, property valuations and interest-bearing assets.

First Mutual’s balance sheet shows the scale of that investment exposure. Investment property stood at US$150.0 million at June 2026, up from US$139.7 million at December 2025. The group also held US$55.6 million in equity securities measured at fair value through profit or loss and US$31.2 million in debt securities measured at amortised cost.

The property portfolio has become particularly influential in the income statement. Its US$13.8 million fair-value gain during the first half compared with US$1.0 million a year earlier. The increase helped lift total assets to US$306.0 million at June from US$280.8 million at December.

Cash generation provides a further measure of the quality of the earnings improvement. First Mutual generated US$4.4 million in net cash from operating activities, compared with US$4.1 million a year earlier. Profit before tax, meanwhile, reached US$22.0 million.

The reconciliation of profit to operating cash flow shows why the two measures diverged. First Mutual removed US$13.8 million of investment-property fair-value gains and US$12.3 million of equity-investment fair-value adjustments in the reconciliation because these movements did not generate cash during the period.

That makes the US$4.4 million operating cash flow an important second measure for assessing the first-half result. Reported profit increased by US$13.6 million year-on-year, while operating cash generation increased by only about US$300,000. The difference is largely explained by the contribution of valuation and investment movements to reported earnings.

Currency composition also provides an important indication of how customers are managing insurance risk. USD-denominated income accounted for approximately 89% of First Mutual’s total revenue in the first half, compared with 85% a year earlier. Management attributed the preference to customer demand for USD products and the greater certainty over the currency in which benefits will be paid when claims arise.

The rising USD component gives First Mutual a closer match between premiums and future liabilities where claims are expected to be settled in foreign currency. It also provides evidence of continued customer preference for hard-currency insurance products even as Zimbabwe's local-currency environment has become more stable.

For First Mutual, the second-half test is therefore increasingly concentrated in the relationship between premium growth, claims costs and investment income. A stronger insurance service result would demonstrate that the group is converting revenue growth into recurring underwriting earnings. Continued reliance on property valuations and investment-market gains would leave reported profitability more dependent on conditions outside the insurance franchise.

The H1 numbers already establish the distinction. First Mutual generated US$19.8 million in profit after tax, while its insurance service result fell to US$13.2 million and net insurance and reinsurance performance after insurance finance declined to US$4.2 million. At the same time, investment returns and property revaluations generated US$27.5 million.

The next results therefore need to be read through the earnings mix rather than the headline growth rate. Claims ratios, insurance service performance and operating cash generation will show whether the insurance franchise is strengthening, while investment and property gains will determine how much additional support the balance sheet provides.

For shareholders, the central issue is the durability of the earnings base. First Mutual has demonstrated that its investment portfolio can materially lift group profitability when market and property valuations move favourably. The H1 figures also show that the underlying insurance engine has yet to deliver a comparable improvement in service earnings.

The immediate operational task is consequently clear: revenue growth needs to translate into better insurance service results while the claims ratio is brought under control. That would provide a stronger recurring earnings base alongside the investment portfolio, rather than leaving group profitability heavily influenced by valuation movements.

The first-half result is therefore a strong profit story with a more complicated earnings structure underneath it. First Mutual’s US$19.8 million profit demonstrates substantial earnings capacity across the group, while the decline in the insurance service result and higher health claims ratio establish the areas that will determine whether that performance can be sustained through the remainder of 2026.

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