FMHL posts $4m loss

HARARE - Insurance firm First Mutual Holdings Limited (FMHL) incurred a $4,1 million loss in the half year to June 2014 compared to a $2,4 million profit after tax realised in prior comparable period.

Douglas Hoto, the group’s chief executive, said the depressed performance was largely a result of investment losses, once-off staff rationalisation costs and investment impairments.

During the period under review, the insurer incurred an overall investment loss of $1,7 million compared to a $7,5 million investment gain in the six months to June 2013.

The Zimbabwe Stock Exchange-listed group incurred staff rationalisation costs of $2,3 million as it aligned its operating structures with the environment.

“The payback period of this exercise is expected to be 1,7 years. The group incurred a cost of $1,8 million following the impairment of money market investments with banks that are no longer operational,” Hoto said.

He added: “Rental income declined by two percent from $3,9 million in 2013 to $3,8 million in 2014 as occupancy levels shrank driven by voluntary space surrenders and evictions”.

The group recorded gross premium income of $59,2 million, up 14 percent from same period last year.

“It is encouraging to note that revenue growth was significantly above the inflation rate, with growth in market share for the group businesses.

“Life assurance and health insurance businesses contributed $41,6 million (2013: $33,7 million) while short term insurance and reinsurance businesses contributed $17,6 million (2013: $18,5 million),” Hoto said.

“The provision for credit losses on trade receivables was increased by $900 000 to take into account collection challenges mainly associated with rental customers,” he said.

The decline in premium written for the short term insurance and reinsurance businesses was mainly as a result of non-renewal of some accounts due to risk considerations and changes in the structure and timing of the renewal of some accounts.

The group recorded $5,9 million (10 percent) of the gross premium written, achieving a net premium income of $53,3 million (June 2013: $44,1 million).

Total expenditure for the period amounted to $58,1 million, an increase of 20 percent from the $48,2 million incurred to June 2013.

“A major contributor to the increase was the 46 percent increase in claims from $22,9 million in 2013 to $33,6 million in 2014.

“The increase in claims was mainly driven by higher claims ratio in the health business and increased retrenchment withdrawals in the life company,” said Hoto.

Net transfers to the policyholder reduced from $8,1 million in 2013 to $400 000 in 2014 as a result of the investment losses incurred and increased retrenchment withdrawals in the period under review.

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