CHAIRMAN’S STATEMENT
Economic Overview
The Gross Domestic Product for 2017 is projected to grow by 3.7% from an initial forecast of 1.7% owing to a good agriculture season. The economy, however, continues to experience challenges including weak aggregate demand and foreign currency shortages. Year-on-year inflation stood at 0.31% as at 30 June 2017, having crossed into positive territory in February 2017 after being in the negative since November 2014. The Zimbabwe Stock Exchange (“ZSE”) traded in the positive to 30 June 2017 with the mainstream Industrial Index registering a year to date growth of 36% while the Mining Index grew by 19%. The activity in the local bourse has been spurred by investors piling into the equities market in search of real assets amid limited viable investment options and currency risks.
The property market fundamentals remained depressed on the back of low demand for rental space, increased voids and downward rental review requests from tenants.
FINANCIAL POSITION & PERFORMANCE ANALYSIS
Statement of financial position
The Group’s total assets grew to US$247.6 million as at 30 June 2017 from US$229.7 million as at 31 December 2016. Notable growth came from debt securities contributing US$9.1 million and equity securities, driven by positive fair value movements on the ZSE amounting to US$10.8 million. There were no significant movements in the fair values of the investment property portfolio.
Statement of comprehensive income
Consolidated GPW for the six months to 30 June 2017 at US$61.5 million (2016: US$60.6 million) went up 1% compared to the same period in 2016. The slight increase in GPW is a result of growth in the health business, life assurance and property and casualty insurance segments that was offset by the 18% decline in pensions business driven by a slump in single premiums. The decrease in single premiums is in line with the general slow down on retrenchments in the country in 2017 compared to the experience in 2016.
Consolidated rental income went down 8% from US$3.5 million in 2016 to US$3.2 million in 2017 due to downward rental review pressure from tenants. The average rental per square metre decreased from US$7.02 in 2016 to US$6.94 in 2017. This contributed to an increase in the occupancy rate from 72% to 73%. Significant efforts have been made by management in the period under review to improve the ambience of the properties with property expenses going up 88% compared to the same period in 2016.
Operating profit, a measure of the Group’s performance before factoring in the investment performance, went down 61% from US$4.2 million to US$1.6 million. The major contributing factors to the lower operating profit were higher claims, particularly in agriculture under the reinsurance segment, as well as a higher claims ratio in health insurance.
The Group had an investment profit of US$13.0 million in the period to 30 June 2017 compared to a profit of US$0.5 million in 2016. The favourable out-turn in 2017 is mainly attributed to an increase in the fair values of counters held by the Group on the ZSE. The Group also increased its held to maturity investments which resulted in an increase in interest income.
Overall, the Group achieved a profit for the period of US$4.3 million (2016: US$2.6 million). The profit attributable to equity holders of the parent for the six months to June 2017 was US$4.0 million (2016: US$3.2 million).
Statement of cash flows
Cash and cash equivalents increased significantly when compared to the comparative period after deliberate management efforts to restructure money market investments to shorter maturities as a risk management initiative and to ensure availability of funds to cater for short-term operational obligations such as claims and reinsurance commitments.
FIRST MUTUAL IN THE COMMUNITY
The Group continues to impact positively on the future of young Zimbabweans with educational assistance through the First Mutual Foundation. The Foundation is celebrating three years of partnering World Education Inc. Bantwana and has since launched a Scholarship Fund to assist the less privileged with university scholarships. The Foundation has unveiled a bursary worth US$80 000 to the Reformed Church University over a four year period. In total the Foundation assists more than a 100 children in primary and secondary schools countrywide as well as some physically handicapped students at tertiary level.
The Group, through its Employee Corporate Social Responsibility initiatives, assisted victims of the Tsholotsho flooding disaster through groceries and clothes.
CAPITAL RAISE AND ACQUISITION OF NICOZDIAMOND INSURANCE
On 31 August 2017, the shareholders approved the acquisition of up to the entire issued share capital of NicozDiamond Insurance Company Limited (”NDIL”) and a US$17.3 million Rights offer. The acquisition will enhance the Group’s market share in the short-term insurance industry while the capital raise will be utilised to recapitalise some Group businesses, repay borrowings and complete the NDIL transaction.
OUTLOOK
The economy is expected to continue on a growth trajectory driven mainly by mining due to the partial recovery in international commodity prices and agriculture on account of timeous support from both the Government and the private sector. The positive developments from the two sectors are expected to benefit the rest of the economy.
The Board remains confident that business process efficiencies and enterprise risk management initiatives that are being implemented will contribute positively to enhancing shareholder value. Further efforts being channelled towards improving business processes, working capital management and development of sustainable products relevant to our environment are also expected to deliver value to stakeholders.
DIRECTORATE
Subsquent to the period end, Mr Chakanyuka Nziradzemhuka was appointed as a non-executive director, effective 8 September 2017. On behalf of the Board, I welcome him and look forward to his positive contribution.
DIVIDEND
In view of the need to focus on strategic partner initiatives and improve the operations of Group companies, the directors recommend that no dividend be paid from the profits of the Group for the half year ended 30 June 2017.
APPRECIATION
On behalf of the Board of Directors, I would like to thank our clients, management and staff, the regulatory authorities and other stakeholders for their continued support and confidence in us to deliver sustainable value. I would like to also thank my fellow Directors for their continued support.
Oliver Mtasa
Chairman
8 September 2017
