GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS
During the year ended 31 December 2021 there was a gradual relaxation of lockdown measures associated with the COVID-19 pandemic as measures to mitigate the impact of the pandemic, particularly vaccination roll out programs, yielded positive results. The easing of COVID-19 restrictions facilitated the recovery of economic activity globally and locally though the tourism sector was adversely affected by the advent of the Omicron variant in the fourth quarter of the year.
The Group remained focused on fulfilling its promise on the core pillars of risk management, wealth creation and wealth management by enhancing access to our products and services through digital platforms to reduce the impact of COVID-19 lockdown measures.
OPERATIONS REVIEW
The commentary below relates to the unconsolidated inflation adjusted performance of each subsidiary, unless stated otherwise.
LIFE AND PENSIONS BUSINESS
First Mutual Life Assurance Company (Private) Limited
GPW increased by 119% to $1.83 billion mainly due to inflation related adjustments by employers to basic salaries that drive pension contributions and group life assurance covers in the Employee Benefits division. The underwriting of foreign currency denominated products as well as higher Zimbabwe dollar assurance covers contributed to higher revenue in the retail division. The company adjusted its operating structure to align to changing market preferences and continued to invest in the funeral services unit. Pending the forensic investigation by IPEC, the regulator has allowed FML to continue its operations.
HEALTH BUSINESS
First Mutual Health Company (Private) Limited
The GPW grew by 70% to $5.4 billion mainly due to revision of contributions to maintain the ability to continue meeting the expectations of members as health service costs increased in real terms. In addition, the company experienced growth in foreign currency denominated premiums which tend to have lower shortfalls relative to ZWL premiums.
The claims ratio increased to 81.17% from 73.21% in the same period owing to increased access to services by members and charges by service providers rising faster than the premiums paid by members. Membership declined in numbers from 131,196 members in December 2020 to 117,880 members by December 2021, reflecting the challenging economic environment which limited the capacity of some clients to pay contributions. The Group continued with initiatives to invest in facilities for improved affordable services for members with additional pharmacies and clinics being opened.
SHORT-TERM INSURANCE BUSINESS
NicozDiamond Insurance Limited
GPW grew by 34% to $4.43 billion due to continuous asset value revisions to protect clients against insurance value erosion through inflation and organic growth within the existing portfolios. There was an increased preference for USD denominated policies by clients as a hedge against insurance value erosion in local currency. The claims ratio at 35% was in line with the prior year ratio of 36% mainly as a result to continued lockdowns.
Diamond Seguros
Diamond Seguros migrated from an associate to a subsidiary with effect from 1 December 2020, however performance analysis is on full year’s financial statements. GPW grew by 75% in 2021 as a result of improved broker business due to improved confidence after recapitalisation of the business in the third quarter of 2020. In Mozambican Metical (MZN), the GPW growth was 29% to MZN193 million. The claims ratio at 32% was higher than the comparative period of 18% due to the stricter lockdowns in 2020. In August 2021, the Group concluded a further capital injection of USD0.9 million through a rights offer to ensure that the company exceeded the revised minimum regulatory capital level, thus increasing its shareholding from 50.4% to 71.4%.
REINSURANCE BUSINESS
First Mutual Reinsurance Company Limited – Zimbabwe
The GPW increased by 70% to $588.3 million principally due to improved business written in foreign currency. The reintroduction by the authorities in July 2020 of the policy permitting the 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 55% from 49% in 2020 as a result of the change in the business mix.
FMRE Property and Casualty (Proprietary) Limited – Botswana
GPW grew by 4% to $2.1 billion in 2021. The annual growth was 14% in Botswana Pula terms, at BWP179.1 million, arising from improved local and international treaty participation and growth of specialist lines of business under the casualty segment. The claims ratio, at 39%, was marginally lower than the prior period level of 41%.
PROPERTY AND WEALTH MANAGEMENT BUSINESSES
First Mutual Properties Limited
Revenue increased by 38% to $582 million in 2021 due to rental reviews in line with inflationary trends and an increase in the occupancy rate to 89.33% in 2021 compared to 88.22% in 2020. Independent investment property valuations as at 31 December 2021 resulted in increased fair value gains in the investment property portfolio value, due to the significant movement in the exchange rate and inflationary pressures which impacted expected rentals in the future from a capitalisation perspective.
First Mutual Wealth Management (Private) Limited
Investment management fees grew by 21% to $83 million in inflation adjusted terms mainly due to the increase in funds under management underpinned by the growth on the ZSE All Index performance. Funds under management grew by 128% during the period under review. The company also saw an improvement in the third party funds under management during the year.
SUSTAINABILITY
Our objective is to create sustainable economic value through the adoption of a long-term approach to environmental stewardship, social responsibility and corporate governance. This is critical to our business success, as we are committed to delivering on our promises to our stakeholders, in particular our customers, investors and society as a whole.
HUMAN CAPITAL
The exceptional quality and resilience of our employees is the core pillar to our success. In spite of the adverse environment, our team remained steadfast in its commitment to serve our clients and implement our strategy. We remained focused on the safety and wellbeing of our employees in the COVID-19 era. Although the remote working concept was in force, the team remained cohesive with a strong sense of togetherness and unity of purpose across the Group. We will continue to invest in human capital retention and development through various programmes which include migrating towards online training platforms.
CORONAVIRUS PANDEMIC
It is difficult to comment on our operational and financial performance without mention of the pandemic which has been in our midst during the last two financial years. First Mutual Health was actively involved in the government driven vaccination exercise by providing human and financial resources. As a Group, we lost two colleagues due to the pandemic and we express our heartfelt condolence to their families. We have continued to take measures to ensure the safety and wellbeing of our employees, customers and other stakeholders.
LOOKING AHEAD
While there are uncertainties, the Group’s solid financial position, coupled with a diversified business model, are expected to deliver sustainable growth and value creation for all our stakeholders. We remain confident in the country’s medium-term economic prospects and will thus continue to invest in core businesses and complementary areas.
During 2021, this approach included the recapitalisation of our insurance subsidiary in Mozambique, Diamond Seguros, to meet regulatory capital requirements and capacitating the unit to underwrite health insurance business. At the close of the year, the Group finalised the capital raise for the reinsurance cluster with BWP61 million raised through a Botswana based financial partner, Aleyo Growth Fund 1 GP (Proprietary) Limited. These two projects and other initiatives created a platform for further growth in the future
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
28 March 2022
