HARARE – First Mutual Holdings has reported a return to profitability for the year ended 31 December 2025, posting a net profit of US$14.3 million after a US$26.3 million loss in the prior year. However, analysts caution that the recovery was largely driven by property revaluation gains rather than core insurance performance.
According to Equity Axis News, the turnaround was underpinned by a significant swing in the fair value of investment properties, which moved from a US$50.5 million loss in 2024 to a US$3.9 million gain in 2025. This US$54.4 million reversal accounted for the bulk of the group’s improved bottom line.
Revenue Growth Fails to Lift Core Margins
Group insurance contract revenue rose 10% to US$176.8 million, supported by increased uptake of US dollar-denominated policies, which now make up approximately 85% of total revenue. This shift reflects growing demand for currency stability among policyholders in Zimbabwe’s volatile economic environment.
Despite this growth, underwriting performance weakened. The insurance service result—a key measure of core profitability—edged down slightly to US$27.6 million from US$28.0 million, while margins compressed as claims costs rose sharply.
Claims and related expenses increased 20% to US$93.3 million, pushing the claims ratio up from 48.5% to 52.8%. Equity Axis News noted that this divergence between revenue growth and rising claims signals mounting pressure on underwriting profitability.
Health and Life Segments Show Mixed Fortunes
The group’s health insurance arm, First Mutual Health, recorded a 22% increase in revenue to US$73.5 million but saw profits decline by 6%, as higher utilisation of medical services drove up claims. This trend highlights the challenge of balancing growth with cost control in the health insurance segment.
In contrast, the life insurance business delivered strong momentum. First Mutual Life achieved a 22% increase in revenue and a 313% surge in profit to US$3.5 million, supported by growth in group risk products and funeral cover. While still smaller in scale, the life segment is increasingly viewed as a key driver of long-term value.
General Insurance and Regional Operations Under Pressure
The group’s general insurance subsidiary, NicozDiamond, reported a 3% decline in revenue and a 12% drop in profit, reflecting changes in customer behaviour following the introduction of “cash-before-cover” regulations. These rules have shortened policy durations and reduced premium stability.
Meanwhile, the Mozambique-based unit, Diamond Seguros, slipped into a loss due to rising reinsurance costs, highlighting the challenges of operating in regional markets with limited risk absorption capacity.
Investment and Property Exposure Remain Key
Investment income improved significantly, rising to US$7.2 million from US$1.7 million, supported by stronger equity market performance, higher interest income, and gains on alternative assets such as gold.
However, the group’s large property portfolio—valued at approximately US$139.7 million—remains both a major asset and a source of earnings volatility. Rental income continues to provide steady cash flow, but valuation movements can significantly impact reported profits.
Equity Axis News also highlighted uncertainty surrounding First Mutual Properties, which is currently under a cautionary announcement regarding a potential delisting from the Zimbabwe Stock Exchange. Any restructuring of this unit could materially affect group earnings and asset valuation.
Outlook: Focus Shifts to Core Performance
While First Mutual’s return to profitability marks a positive shift, analysts argue that the quality of earnings remains a concern. The reliance on non-cash property revaluation gains raises questions about the sustainability of the recovery.
Looking ahead, the key metric will be the group’s ability to improve underwriting margins and contain claims growth. Without this, revenue expansion alone may not translate into stronger profitability.
As Equity Axis News notes, the group’s long-term performance will depend less on accounting adjustments and more on the strength and discipline of its core insurance operations.
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