GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS
The half year ended 30 June 2022 comprised two contrasting quarters with relative stability in the first quarter and tremendous volatility in the second quarter caused by soaring inflation and local currency depreciation. Modifications were necessary to enable the Group to continue to fulfill its promise on the core pillars of risk management, wealth creation and wealth management and thus maintain the relevance of our products. The year on year inflation in June 2022 was 192%.
OPERATIONS REVIEW
The commentary below relates to the unconsolidated performance of each subsidiary in both inflation adjusted and historical cost terms for the six months ended 30 June 2022.
LIFE AND HEALTH CLUSTER
First Mutual Life Assurance Company (Private) Limited
GPW grew by 51% to $3 billion in inflation adjusted terms and a 204% growth in historical cost terms to $2 billion. The growth in the Employee Benefits division was mainly due to inflation related adjustments for basic salaries that drive pension contributions and group life assurance covers. The upgrade of ZWL funeral product covers as well as the underwriting of more foreign currency denominated business contributed to higher revenue in the retail division. The claims ratio increased to 25% from 20% in the prior year due to benefits that are based on upgraded policies.
First Mutual Health Company (Private) Limited
The GPW grew by 40% to $8 billion in inflation adjusted terms and by 179% to $5 billion in historical cost terms mainly due to revision of contribution rates in response to health service costs that increased in real terms. In addition, the company experienced growth in foreign currency denominated products. The claims ratio decreased to 77.17%% from 83.69% in the prior period owing to lower claim incidences. Membership was fairly static at 116 516 in June 2022 from 116 916 members in June 2021 reflecting the prioritisation of health services notwithstanding the challenging economic environment which threatened the capacity to pay contributions. The Group continued with initiatives to invest in health service facilities for improved access to affordable services for members with additional pharmacies and clinics being opened across the country.
SHORT-TERM INSURANCE CLUSTER
NicozDiamond Insurance Limited
GPW grew by 27% to $6 billion in inflation adjusted terms and by 195% to $4 billion in historical cost terms. The growth was due to organic growth as well as an increased preference for USD denominated policies as these policies provide a hedge against insurance value erosion. The USD premiums contributed close to 63% of the total premium income for the business. The claims ratio of 42% was higher than the prior year ratio of 40% mainly due to changes in the business mix with classes as well as higher claims incidences due to the easing of COVID-19 lockdown regulations.
Diamond Seguros
GPW grew by 47% in 2022 in inflation adjusted terms to $464 million and 170% in historical cost terms to $327 million as a result of improved broker business following the recapitalisation of the business in the last quarter of 2021. In Mozambican Metical (MZN), the GPW growth was 16% to MZN 117 million compared to MZN101 million for the comparative prior year period.
REINSURANCE CLUSTER
First Mutual Reinsurance Company Limited – Zimbabwe
The GPW increased by 49% to $2 billion in inflation adjusted terms and 259% to $1.5 billion in historical cost terms, principally as a result of improved business written in foreign currency. The reintroduction by the authorities on the 24th of July 2020 through Statutory Instrument 185 of 2020, which permitted the pricing and consequently payment for goods and services in local and foreign currency led to an increase in USD policies which led to more business for reinsurers as there was limited USD underwriting capacity locally. The claims ratio further increased to 62% from 35% in 2021 as a result of increased economic activity and higher claims in agriculture.
FMRE Property and Casualty (Proprietary) Limited – Botswana
GPW grew by 20% to $3 billion in 2022 in inflation adjusted terms and by 154% to $2.3 billion in historical cost terms. The year-on-year growth was 23% in Botswana Pula terms, at BWP141 million compared to BWP 115 million in prior period. This arose from increased market confidence following the BWP40 million recapitalisation that led to improved local and international treaty participation and growth of specialist lines of business under the casualty segment. The claims ratio, at 43%, was marginally higher than the prior period level of 41% and in line with expectations.
PROPERTY AND WEALTH MANAGEMENT BUSINESSES
First Mutual Properties Limited
Rental income grew by 25% to $725 million in 2022 in inflation adjusted terms and by 151% to $468 million in historical cost terms due to rental reviews in response to inflationary trends and an increase in the occupancy rate to 89.60% in 2022 compared to 88.85% in 2021. Independent investment property valuations as at 30 June 2022 resulted in fair value gains of $56 billion reflecting inflationary pressures which impacted expected future rentals from an income capitalisation perspective.
First Mutual Wealth Management (Private) Limited
Investment management fees grew by 55% to $165 million in inflation adjusted terms and by 55% to $106 million in historical cost terms mainly due to the increase in funds under management underpinned by the growth on the ZSE All Share Index performance in Q1 2022 and positive Net Client Cash Flows. Funds under management grew by 43% in inflation adjusted terms during the period under review partly as a result of increased support from third party pension funds.
SUSTAINABILITY
The Group is working on ensuring that the impact of sustainability stretches beyond the core financial services operations and also covers other aspects of the business including the investment philosophy, environmental stewardship, social responsibility and corporate governance. These are considered the critical success factors if the business is to achieve its set goals.
HUMAN CAPITAL
Our employees are considered a key success factor in our business. Despite the continuous challenges and a volatile environment in which the Group operates in, our employees have maintained resilience, steadfastness and commitment to serving our clients and other stakeholders as well implementing our strategy. We will ensure that investment in human capital retention and development programs is prioritised on a group-wide scale in order to improve the skills of our staff to align towards future requirements.
LOOKING AHEAD
The current multiple currency environment results in more volatility in the less stable currency requiring more engagement with customers to maintain the relevance of our products. The solid financial position of the Group, coupled with diversified revenue streams including the growing contribution of regional businesses is expected to contribute towards sustainable growth and value creation for our stakeholders. We will continue investing in technology to improve service delivery channels and product innovations as part of our strategy to meet evolving market requirements.
APPRECIATION
On behalf of First Mutual, I would like to thank all our stakeholders for the continued trust in the Group. We are a reliable partner and remain focused on our customers as we strive to exceed your expectations.
Douglas Hoto
Group Chief Executive Officer
12 September 2022
FMHL 2022 Interim financial results.pdf
Directors: A R T Manzai (Chairman), D Hoto* (Group Chief Executive Officer), W M Marere* (Group Finance Director), G Baines, F Mabena, M Mangoma, A Masiiwa, E Mkondo, E K Moyo, M Mukondomi, I P Z Ndlovu, S V Rushwaya (* Executive Director)
FIRST MUTUAL HOLDINGS LIMITED, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P O Box BW 178, Borrowdale, Harare | Tel: +263 (242) 886 000 – 17 | E-mail: [email protected] | Website: www.firstmutual.co.zw
