GROUP CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS
The year under review consisted of quarters of relative stability intermingled with volatility, including significant depreciation of the local currency, high inflation and increasing use of the USD for transacting purposes. During the second quarter of 2022 the Government implemented policy interventions to enhance confidence in the local currency and curb speculative behaviour. The Group focused on maintaining the relevance of its products in the core pillars of risk management, wealth creation and wealth management. There was an increasing preference by clients for USD priced products in order to ensure that the value of the benefit was retained.
OPERATIONS REVIEW
The commentary below relates to the unconsolidated performance of each business unit in both inflation adjusted and historical cost terms for the period ended 31 December 2022.
LIFE AND HEALTH CLUSTER
First Mutual Life Assurance Company (Private) Limited
Gross Premium (“GPW”) for the year to date amounted to $7.9 billion in inflation adjusted terms which was 26% above the prior year and $6.1 billion in historical terms, representing a 381% increase over the prior year. The year-on-year growth was largely driven by the regular revisions in sums assured with the objective of retaining value of policyholder benefits. Growth in premiums from the Retail segment was largely driven by significant growth in USD denominated premiums on the e-FML Gold Funeral Plan . In the Corporate Segment, growth in premiums was attributable to growth in the Group Life Assurance portfolio arising from two fronts; new business development and organic growth. The organic growth stemmed from the effect of employee salary increases, as employers sought to attain the target financial security benefits of this product.
In inflation adjusted terms, the business achieved a profit for the period of $4.8 billion that reflected a decline of 22% compared to the prior year. In historical cost terms, there was an increase in the profit for the period of 1,350% compared to the prior year. The profit after tax growth in historical cost terms was driven by increases in premiums as noted above and fair value gains on investment property.
First Mutual Health Company (Private) Limited
The business achieved GPW of $30.2 billion which represents a growth of 61% compared to prior year in inflation adjusted terms. In historical cost terms, the GPW amounting to $21.9 billion grew by 404% compared to prior year. The growth in premiums was driven by inflation linked reviews of both ZWL and USD premiums in response to increased medical benefits in order to cushion members from the negative impact of shortfalls driven by price increases effected by medical service providers. The business generated a profit for the period of $2.1 billion in inflation adjusted terms, which was 24% below prior year. In historical cost terms, the profit was $4.6 billion which was higher than prior year by 380%. The business implemented a framework that aligned members benefits with premiums in early 2022. The negative outturn in real terms in 2022 of the ZSE following Government policy pronouncements meant to contain speculative activity had a significant negative impact on profit for the period in 2022.
On a related note, the business continued the project to roll-out medical services (clinics, pharmacies, hospitals, dental, optometry, etc) as a long-term strategic priority. Our objective in this space is to complement Government efforts to provide greater access to Zimbabweans to quality healthcare at affordable prices.
GENERAL INSURANCE CLUSTER
NicozDiamond Insurance Limited
The business’ GPW grew by 51% to $21.1 billion in inflation adjusted terms and by 372% to $15.5 billion in historical cost terms. The growth was largely as a result of an increase in foreign denominated business, organic growth as well as the review of statutory covers in line with movements in exchange rates and premium reviews for specific accounts mainly driven by unfavourable loss ratios. The business recorded a profit after tax of $1.9 billion, 147% higher than the same period last year in inflation adjusted terms and, in historical cost terms, the profit for the period recorded amounted to $3.3 billion, which was 578% above the prior year amount. The improved performance was mainly driven by a notable growth in net earned premium income which compared favourably to the lower growth on the main expense items, net fair value gains in equities and investment properties in nominal terms.
Diamond Seguros
The business recorded a GPW of $1.9 billion which was 25% above the prior year amount in inflation adjusted terms. In historical terns the GPW recorded was $679 million which was 166% higher in historical cost terms. The growth was a result of continued improvements in broker business following the recapitalisation of the business by the Group in 2021. In Mozambican Metical (MZN) terms, the GPW growth was 21% to MZN 232.6 million compared to MZN 192.5 million for the comparative prior year period.
REINSURANCE CLUSTER
First Mutual Reinsurance Company Limited – Zimbabwe
The GPW increased to $7.8 billion, 128% above prior year in inflation adjusted terms and 686% to $6.2 billion in historical cost terms. The growth was due to a significant part of the premium being written in foreign currency. The increased demand for USD policies led to more business for reinsurers as there was limited USD underwriting capacity at local direct insurers. However, the business incurred a loss for the period of $675.8 million, 155% below the prior year inflation adjusted terms. There was a 1,333% uplift to $757 million, in historical cost terms, due to the growth in revenue and investment income. The losses in inflation adjustments were driven by investment losses in real terms as the ZSE grew at a lower rate than inflation.
FMRE Property and Casualty (Proprietary) Limited – Botswana
GPW for the period went up by 39% to $10.1 billion in inflation adjusted terms and 315% to $6.7 billion in historical cost terms. The year-on-year growth was 19% in Botswana Pula (“BWP”), at BWP241.8 million compared to BWP 203.5 million in prior period. This continued double digit growth was partly attributable to increase in market confidence following the investment by our Botswana based partner, Aleyo Capital, following the conclusion of the capital raising project in December 2021. This led to improved local and international treaty participation and growth of specialist lines of business under the casualty segment. The BWP stood at 11.07:1 to the USD at the beginning of the year, closing at 12.79:1 by 31 December 2022, losing a value of 15.5% in the process. However, this movement in the rate was still lower than the growth in revenue in both BWP and ZWL terms.
INVESTMENTS CLUSTER
First Mutual Properties Limited
Rental income for the period grew by 41% to $2.8 billion in inflation adjusted terms and by 338% to $2.1 billion in historical cost terns. This was due to migration of a significant portion of the leases from the ZWL to the USD currency while those that were maintained in the local currency were indexed with the movement in the exchange rate. The growth in revenues occurred despite a decrease in the occupancy rate to 86.04% in 2022 compared to 89.33% in 2021. Independent investment property valuations as at 31 December 2022 resulted in fair value gains of $33.5 billion.
First Mutual Microfinance (Private) Limited
Interest income grew by 88% to $724.7 million in 2022 in inflation adjusted terms and by 442% to $504.1 million in historical cost terms. The growth was propelled by increasing market share for the business. The corresponding interest costs amounted to $273.6 million in inflation adjusted terms and $187.1 million in historical costs terms which represented an increase of 51% and 322% respectively, resulting in a net interest income position in either term. However, business incurred an overall loss as it had not attained critical mass.
First Mutual Wealth Management (Private) Limited
In inflation adjusted terms, the business recorded investment management fees of $494.2 million compared to the comparative period of $356.6 million which represented a growth of 39% as a result of higher funds under management due to increased third party business. Growth of 251% to $322.2 million was realised in historical cost terms mainly due to the increase in funds under management underpinned by the growth on the ZSE All Share Index performance for the year. Funds under management grew by 12% in inflation adjusted terms during the period under review partly as a result of increased support from third party contributions.
HUMAN CAPITAL
As a Group involved in the provision of services, we consider our employees a key success factor in our businesses in a volatile and complex operating environment. Amidst the challenges, our employees have maintained resilience, steadfastness and commitment to serving our clients and other stakeholders as well as implementing our consensus driven 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 existing multi-currency economic environment requires more engagement with customers to maintain the relevance of our products. The solid financial position of the Group, coupled with diversified revenue streams and 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, l would like to thank all our stakeholders for their 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
21 March 2023
Unaudited Financial Results For the year ended 31 December 2022
