First Mutual banks on Zim debt plans

HARARE - Financial services group First Mutual Holdings (First Mutual) says it is banking on Zimbabwe’s re-engagement discussions with multilateral lenders to access a capital injection and boost operations.

“We are sure the re-engagement talks are going to be successful and we will get equity partners from the arrangement. We are very positive we will get the partners before the end of the year,” First Mutual chief executive Douglas Hoto told analysts yesterday.

This comes as Zimbabwe, whose voting rights were suspended by the International Monetary Fund in 2003 for failing to service its debt, has crafted a plan to pay $1,8 billion to preferred creditors by end of May this year.

The country has an estimated $10 billion external debt.

First Mutual, which has been in the market for an equity partner for the past three years has not been able to find “the right partner” due to the country’s high political risk profile.

“It is a love affair, we have not found the one yet. So, we hope it will happen this year,” the First Mutual boss said.

Meanwhile, First Mutual returned to profitability in the full year to December 2015, after posting a $131 000 profit for the period on the back of a $5 million loss for the year 2015 driven by a $116 million Gross Profit Written (GPW) recorded at the close of the year.

Hoto said the group’s one percent increase in GPW had been driven by improved performance from the health business.

“The operating profit, before the outturn on the investment portfolio, improved from a loss of $4,4 million in prior year due to a profit of $3,1 million largely due to $1,8 million increase in net premium earned …,” he said.

Hoto added that the group  suffered investment losses of $4,7 million in 2015, compared to 3,8 million prior year, in line with the developments on the stock market.

At $67,7 million, claims declined by $2,3 million from prior year mainly due to reduced retrenchments in the life and pensions segment and lower claims incurred in the health insurance business.

Hoto said First Mutual had concluded major phase of the organisational transformation programme focus on efficiency of the business during the year under review after selling off its entire stake in the actuarial business.

First Mutual  also reclassified its investment in local hospitality group, RTG, from a strategic investment to one available for sale “because we believe we have no competence in hospitality business.”

The life unit, First Mutual Life (FML) recorded a one percent decrease to $35,7 million from $356,1 million.

However, TristarInsurance recorded a 27 percent slump in GPW to $4,6 million.

“TristarInsurance struggled during the year after an actuarial review process in which the group undertook a reversal of a provision to deal with clients unable to pay,” he said.

FML recorded a two percent revenue decline from $1,3 million to $1 million.

“The current levels of operating profit at FML are currently below our expectations but we expect this to change in the coming year,” said Hoto.

The Botswana business grew 15 percent in Pula terms but was one percent down in US dollar terms due to exchange rates.

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