• First Mutual Holdings posted a profit after tax of $14.3 million for 2025, reversing a $26.3 million loss in 2024, driven largely by a $54.4 million swing in investment property fair values
• Despite 10% revenue growth, the insurance service result fell slightly from $28.0 million to $27.6 million, with a rising claims ratio (48.5% to 52.8%) indicating cost pressures
• The life insurance unit delivered a 22% revenue increase and 313% profit growth, but property revaluation gains ($3.9 million) drove profit recovery, masking underwriting margin compression

Harare- First Mutual Holdings, Zimbabwe's largest listed insurer, has  posted a profit after tax of $14.3 million for the year ended 31 December 2025, against a loss of $26.3 million in 2024. The rehabilitation of the bottom line is presented as a vindication of strategic resilience and diversified operations by the group and, on one level it is, but on another, its a story about a single accounting entry doing the work of an entire business.

The bridge from loss to profit requires close inspection. The $40.6 million swing in the fair value of investment properties  from a $50.5 million loss in 2024 to a $3.9 million gain in 2025, a combined reversal of $54.4 million  accounts for the entirety of the profit recovery and then some. When it is striped out, that non-cash swing,  the underlying business, on a comparable basis, went backwards.

The 2024 loss was itself largely an artefact of IAS 21 functional currency transition adjustments, the same technical distortion that the 2025 gain now partially unwinds. What looks like a $40.6 million improvement in operational performance is, at its core, an accounting pendulum completing its arc.

The profit waterfall in the chart above makes this visible. The investment property contribution of $54.4 million is the single largest input into the 2025 profit figure,  larger than the insurance service result itself. The improvement in investment returns, at $5.5 million, adds genuinely but modestly. The rising claims cost subtracts $15.6 million. The net of everything else is a small drag. The final $14.3 million profit is real, but it rests on a foundation that cannot be built upon.

Insurance contract revenue increased 10% to $176.8 million from $160.4 million,  a solid advance underpinned by genuine volume growth and the continued migration of clients to USD-denominated products. USD-denominated income now accounts for 85% of total revenue, up from 75% in 2024, a shift that reflects both deliberate repricing and the rational behaviour of policyholders who want claims certainty in a currency that does not depreciate.

However,  the insurance service result,  the underwriting profit after all claims, acquisition costs and reinsurance  fell from $28.0 million to $27.6 million, despite the 10% revenue increase. The insurance service margin compressed from approximately 17.5% to 15.6%. The Group wrote more premium, assumed more risk, and retained less of the value created.

The core driver were claims. Incurred claims and directly attributable expenses rose from $77.7 million to $93.3 million, a 20% increase against 10% revenue growth. The claims ratio accordingly climbed from 48.5% to 52.8% of insurance contract revenue, as illustrated in the central panel of the chart above. The insurance service result bar barely moves between 2024 and 2025 while the gold claims ratio line rises sharply. For an insurer, that divergence is the most important signal in the results.

First Mutual Health Company, the group's fastest-growing unit, delivered a 22% increase in insurance contract revenue to $73.5 million, but saw its profit decline 6% as members made "greater use of their benefits." In health insurance, this is the classic adverse selection and utilisation trap: as medical costs rise, members increase their claim frequency, compressing the underwriting margin precisely when the revenue line is at its strongest.

The health unit's growing network of medical facilities adds long-term strategic value but near-term cost, funded from a claims ratio that is trending in the wrong direction.

Against the pressure in health and general insurance, the life insurance unit stood out as the most important development in these results. First Mutual Life reported a 22% increase in insurance contract revenue to $15.3 million, driven by group risk schemes and retail funeral products, and delivered a 313% increase in profit after tax to $3.5 million.

The numbers are modest in absolute terms but the trajectory is significant: effective cost management, revenue growth and positive investment returns compounding in the same year is the combination that builds durable value in a life book.

This matters beyond its current scale because the life and health cluster combined, at $92.8 million in gross ICR in 2025, up 26%,  is now the group's largest revenue segment, having overtaken general insurance. The panel on the left of the chart shows this structural shift clearly. Life and health has become the engine; general insurance and reinsurance are the stabilisers. How the claims ratio in health develops over the next two years will determine whether that engine generates surplus or consumes it.

Meanwhile, NicozDiamond Insurance, the group's geneal insurance flagship, reported a 3% decline in insurance contract revenue to $40.4 million and a 12% fall in profit after tax to $2.1 million. The decline was attributed to the "cash-before-cover" regulatory framework, which has altered the buying behaviour of clients toward shorter-term policies. This structural shift deserves more analytical weight than the results accord it.

Cash-before-cover, introduced by IPEC to address premium default, has had the unintended consequence of compressing the policy durations that general insurers rely on for float and premium stability. Clients who once renewed annual policies now buy on a rolling monthly basis, reducing the advance premium pool, increasing policy administration costs per unit, and making revenue less predictable. NicozDiamond's revenue erosion is not a temporary volume blip,  it is the business model adapting, under duress, to a regulatory constraint that is not going away.

Diamond Seguros in Mozambique added texture to the picture. ICR grew 3% to $4.9 million but the business swung to a $0.2 million loss from a $0.1 million profit, hit by "adverse reinsurance performance." A loss-making international operation in a growth market signals that the cost of buying protection against catastrophic claims is rising faster than the premium income available to fund it, a problem that afflicts every small insurer operating in underinsured markets where the reinsurance market prices volatility at a premium the local business cannot absorb.

Net investment return grew from $1.7 million to $7.2 million, a fourfold improvement driven by a combination of higher interest rates on the debt securities book, improved equity market performance on the ZSE, and gains on gold coins held as an inflation hedge. Total financial assets reached $42.9 million in listed equities plus $30.4 million in debt securities, with $1.1 million in gold coins. Funds under management at First Mutual Wealth Management grew from $151 million to $170.8 million, demonstrating continued client mandate growth even as fee rate compression reduced the unit's profitability by 30%.

The investment property portfolio at $139.7 million, the single largest line on the balance sheet outside of insurance contract liabilities, is both First Mutual's most valuable asset and its most volatile one. Knight Frank's upward revaluation of $3.9 million in 2025 compared to a $50.5 million write-down in 2024 demonstrates the swings this asset can generate. The group's investment property strategy, through First Mutual Properties, which is now trading under a cautionary announcement regarding a potential ZSE delisting, adds a layer of uncertainty that the parent company's results do not fully price in.

The potential delisting of First Mutual Properties, disclosed as a subsequent event, is the most consequential undisclosed variable in this entire set of results. If First Mutual Properties is taken private or restructured, the consolidated property portfolio, generating $8.1 million in annual rental income and carrying $139.7 million in fair value, will be substantially affected in terms of how it contributes to group earnings and equity. The note discloses that "engagements are at a preliminary stage." Preliminary stages have a way of moving quickly in Zimbabwean corporate restructurings.

Therefore, the group enters 2026 as a stronger business than it was twelve months ago. Revenue is growing, and the life unit is demonstrating what the group can become. The Botswana reinsurance operation delivered a 49% profit increase, while the balance sheet expanded 9.5% to $280.8 million. The USD dividend commitment, $2.05 million for the full year, signals controlled confidence.

However,  the insurance service result that barely moved, the claims ratio that is trending upward, the property portfolio that is both the group's largest asset and its most volatile earnings contributor, and the potential restructuring of First Mutual Properties are not peripheral to the investment thesis but are the investment thesis. A profit turnaround built on a $54.4 million reversal in property fair values, a line that the prior year's IAS 21 distortions artificially depressed,  is not a business that has fundamentally healed, but that has stopped bleeding from a wound that was never as deep as it appeared.

The task for 2026 is to demonstrate that the core underwriting engine,  which generated $27.6 million on $176.8 million of revenue, can grow without the claims ratio consuming the gain. That is the number to watch when the interim results are published. Everything else is noise.

Equity Axis News