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FINANCIAL HIGHLIGHTS (HISTORICAL COSTS)

Net premium income up 181 212%

Underwriting surplus up 183 473%

Investment income up 79 096%

Profit before tax up 80 345%

Total income up 82 774%

Basic earnings per share up 119 967%

The Operating Environment

Zimbabwe’s GDP declined by 6% in 2007, after consecutive declines of 4.8% in 2006, and 5.3% in 2005.The GDP decline is a result of output slump across all sectors of the economy, except for agriculture, which grew by a marginal 1.4%. Shortages of foreign currency with which to import raw materials and spare parts, the frequent power cuts, shortages of fuel, and increasing production costs all resulted in lower industry capacity utilization.

Year on year inflation rose from 1 593.6% in January 2007 to 66 212% by December 2007, exposing consumers’ disposable incomes to unbearable pressure for the whole of the year 2007. The insurance industry, whose core business relies heavily on the level of consumer disposable incomes, faced enormous challenges to increase business volumes in the face of the hyperinflationary environment.

Money market investment rates remained depressed for the whole of the year 2007, with short-term interest rates hardly exceeding 300%. The equities market, on the other hand, achieved a brilliant year, recording a 335 338% growth during the year 2007.

Financial Performance Overview

Faced with the above challenges, management deployed various strategies not only to preserve shareholders’ value, but also to grow it in real terms. These strategies enabled your company to achieve an excellent set of results for the year ended 31 December 2007.

At $61.1 trillion profit before tax for the year ended 31 December 2007 was 80 345% higher than the $76.4 billion recorded for the year 2006.

Total income for the year 2007 amounted to $64.3 trillion, representing a growth of 82 774% over the $77.6 billion achieved in the year 2006. Investments income remained the dominant contributor, accounting for 93.2% of total income for the year 2007. It should be noted that the growths in both total income and profit before tax was higher than the year on year inflation, which was 66 212% as at 31 December 2007.

Administration expenses, however, went up by 222 482% from $892.7 million in 2006 to $1.99 trillion for the year ended 31 December 2007. This was reflective of the hyperinflationary environment that we are operating in, and the staff remuneration measures that management implemented during the year to retain essential skills.

Fidelity Life Assurance

Total premiums income for the year 2007 amounted to $223.1 billion, which was a 16 738% growth over the $1.3 billion recorded in the year 2006. The growth in premiums, though lower than inflation, was higher than the claims growth of 11 198%, from $169.9 million in the year 2006 to $19.2 billion in 2007. Realised income on equities grew by 338 725% to 4.7 trillion in 2007, and equities revaluation increased by a massive 514 867% from $9.4 billion in 2006 to $48.6 trillion as at 31 December 2007. This growth is higher than both the industrial index growth of 335 338% in 2007, and the December 2007 year on year inflation of 66 212%. Our investments strategy was biased towards those asset classes that will ensure consistently high returns that are above the prevailing inflation rates.

The Company’s profit before tax for the year 2007, at $59.5 trillion, was 78 086% above the prior year figure of $76.1 billion.

Vanguard Life Assurance

This subsidiary, based in Malawi, posted a profit before tax of $864 billion for the year ended 31 December 2007. This was a 2 864 787% growth over the $30.2 million recorded for the year 2006.

Fidelity Life Asset Management

The asset management subsidiary posted a profit before tax of $810.6 billion for the year ended 31 December 2007. This represents a growth of 405 200% from the $210 million recorded in the year 2006.

Fidelity Funeral Assurance

Fidelity Funeral Assurance is now up and running and the company has recorded a profit in its first 6 months of operation. The company currently has a client base of about 5 000, which includes corporate clients.

Dividend Recommendation

An interim dividend of $300 per share was declared and paid in December 2007. Your board has recommended a final dividend of $1500 per share for the trading year ended 31 December 2007.

Outlook

Despite the deteriorating operating environment, management will continue to ensure that the Group achieves superior results going into the future. We will continue re-capitalising and consolidating our local subsidiaries, and at the same time pursue regional opportunities. We seek to ensure that the interests of all our stakeholders are preserved.

Appreciation

I would like to commend my fellow directors, management and staff for the efforts made during the past year. Special mention should go to Mr C. R. Maradza who retired from the board for the diligent service during his time as a board member. Clients and other stakeholders’ support is greatly appreciated.

C. Tembo

Chairman