eBusiness Weekly
Business Writer
Diversified insurance group, First Mutual Holdings, reported an underwhelming set of numbers for the six months to June 30, 2020, with Gross Written Premium (GPW) sliding 8 percent to $1,5 billion as most of its operations felt the weight of inflationary pressures.
Management said the continuous revaluation of insurance policies to ensure clients have adequate cover fell below the growth in inflation.
But rental income for the period improved by 45 percent to $65,8 million compared to prior year, attributable to quarterly rental reviews and increases in occupancy rates in retail and residential properties.
The group’s health insurance division,
First Mutual Health Company (Private) Limited, recorded a 23 percent dip in GPW to $435,9 million on an inflation adjusted basis, “due to sub-inflationary increases in premium rates as most clients were not in a position to sustain full increases aligned to inflation”.
The subsidiary’s claims ratio declined from 71,3 percent to 66,5 percent, “reflecting lower usage by members due to the Covid-19 induced national lockdown, which has led to member reduction in procuring medical services,” said the group.
Notwithstanding the lower usage, membership increased marginally from 144 215 at the close of 2019 to 145 380 in June 2020.
The life and pensions division — First Mutual Life Assurance Company — similarly hit a difficult patch, with GPW going down 55 percent to $147,4 million in the period to June 2020.
Management said this was reflective of “the below inflation adjustments to basic salaries that drive the Employee Benefits (pensions and group life assurance) division. The subsidiary’s revenue growth was also negatively affected by the slow pace in increasing life cover amounts in the individual life division.
Fee income on insurance and investment contracts increased by 73 percent to $72,7 million due to the inflation driven growth in the value of non-monetary assets.
NicozDiamond Insurance Company’s GPW declined by 22 percent to $498,6 million in the period to June 2020.
“The decrease was mainly due to the decline in US dollar-denominated business after promulgation of Statutory Instruments 141 and 142 of 2019 in June 2019 which resulted in all business being written in local currency, which could not fully match the inflation trends,” said the group.
“Efforts are continuously made to ensure clients are adequately covered through the quarterly review of the sums insured.”
The claims ratio was 48 percent (compared to 51 percent last year comparative) due to a lower claims’ growth relative to income.
The reinsurance business, First Mutual Reinsurance Company Limited, followed a similar path, with its GPW declining 56 percent to $104,6 million at June 30, 2020, which was attributed to “clients’ limited capacity to match the growth in the US dollar — ZWL exchange rate in revision of sums insured and hence revision of premiums.”
The claims ratio deteriorated to 48 percent in 2020 from 39 percent last year.
Perhaps indicative the difficult operating environment that the Zimbabwean divisions are operating in, First Mutual’s Botswana-based entity — FMRE Property and Casualty (Proprietary) Limited Botswana — was the only subsidiary to post improved GPW, which went up by 41 percent to $357 million in 2020.
The growth was 51 percent in Botswana Pula terms, at BWP97,6 million, driven by improved local and international treaty participation and growth of specialist lines of business under the casualty segment, said the group.
The Botswana entity’s claims ratio increased to 40 percent in 2020 from 29 percent in 2019, aligning with long term industry trends.
First Mutual Properties Limited’s revenue declined by 15 percent to $68,3 million in 2020.
“The decrease was due to below inflation rental review rates,” said management.
Occupancy rates, however, improved from 76,64 percent in June 2019 to 88,52 percent at the end of June 2020.
First Mutual Wealth Management (Private) Limited saw a 39 percent dip in investment fees to $9 million — in inflation adjusted terms — mainly “due to the below inflation performance in quarter one of 2020 of some components of funds under management such as quoted equities”.
“This had a negative impact on monthly fee income at the beginning of the year. During the period, the business made significant strides in attracting third-party funds and this trend is expected to continue.”
The group achieved investment income of $407 million for the period under review compared to investment income of $346 million in 2019, which was driven by fair value gains on listed equities.
Going forward, and with regards to the pandemic — which contributed to the business’ weaker performance during the six-month period — the group said it “will retain resources to respond as necessary to the impact of the pandemic.”
The board declared a dividend of 0,5328 cents per share for the period.
