Zambia-listed reinsurer Klapton Re reported a 28% increase in first-half profit in kwacha, but the gain was substantially larger when adjusted for the currency's appreciation against the U.S. dollar. The company, which takes on part of the risks written by insurance companies, keeps its books in U.S. dollars but reports in kwacha. The kwacha gained almost 20% against the dollar in the six months to June, moving from about K22.14 to K18.05. That reduces the kwacha value of dollar-denominated earnings when they are translated into the reporting currency.

In kwacha, profit after tax rose 28% to K165.1 million. Using the exchange rates implied by the company's own premium figures, the increase was about 93% in dollar terms.

Underwriting drove the gain. Klapton's combined ratio, which measures claims and expenses against insurance revenue, fell from 85% to 65%, leaving an underwriting margin of about 35 cents per dollar of insurance revenue, compared with 15 cents a year earlier. Its insurance service result rose 42% to K293.6 million. Investment income slipped to K25.8 million from K29.4 million, and insurance finance expenses more than doubled to K85 million. Neither offset the underwriting improvement.

Growth is narrower than it looks

Gross written premiums rose 14.8% to $62.8 million, while the kwacha figure fell 23.5% to K1.17 billion. The increase came from two lines: motor added about $15.5 million and fire $2.5 million. Together that is roughly $18 million, more than double the total increase of about $8 million. Klapton's other business therefore shrank by close to $10 million.

 Insurance revenue, which recognizes premiums as coverage is provided, fell 38% in kwacha to K850.6 million. Converted at the same implied rates, that is a decline of about 7% in dollars. Currency explains most of the drop, but not all of it.

Cash that cannot be spent

Klapton's cash more than doubled to K623.1 million, and operations generated K271.5 million after a K35.7 million outflow a year earlier. But the company says $25 million of that cash is held in a U.S. trust account to settle claims from its securitized American business. That money cannot fund dividends or day-to-day operations. What remains is about K172 million, below the K248.2 million the company held at the start of the period.

The currency hit also lands on the balance sheet. Klapton booked a K358.2 million foreign-currency translation loss in other comprehensive income, more than twice its profit, turning the half into a total comprehensive loss of K193.1 million. Equity fell to K510.7 million from K637.1 million in June 2025. The loss involves no cash, and the capital adequacy ratio, the regulator's solvency measure, rose from 138% at end-2025 to 142%. Outstanding claims barely moved in dollars, at about $60.5 million.

Zambia Re shows what a mostly domestic book looks like under the same currency environment. Its reinsurance revenue was flat at K72.4 million. Lower expenses and retrocession costs lifted its service result 72% to K12.4 million, and profit after tax rose from K2 million to K6.1 million. Fair-value gains on investments of K5.1 million pushed equity to K154.3 million.

Its cash position is thin. The company held K4 million at the end of June, and operating cash flow fell to K3.2 million from K5 million. Management expects increased local reinsurance cessions as Zambia progressively enforces new rules aimed at retaining more domestic risk within the country, but the first half shows no sign of that growth in revenue.

With the kwacha near K18 to the dollar at the end of June, currency translation remains an important factor in reading Klapton's reported figures. Another figure to watch is how much of its cash remains available outside the U.S. trust as claims on the American book are settled.