Fidelity completes asset separation exercise

LIVINGSTONE MARUFU

Fidelity Life Assurance of Zimbabwe Limited (FLA) has completed the long-awaited asset separation exercise aimed at distinguishing the assets of shareholders from those of policyholders, in a move designed to protect the integrity of client funds and prevent the intergenerational transfer of wealth to unintended beneficiaries.

The exercise follows a directive by the Insurance and Pensions Commission (IPEC), which requires all insurance companies to ring-fence policyholder and shareholder assets to eliminate the risk of cross-subsidisation between the two groups.

FLA managing director Reginald Chihota told Business Times that the asset separation implementation plan was approved by the regulator based on submissions that underwent thorough actuarial review and independent assessments.

“Physical separation of assets as per the approved implementation plan on the company’s balance sheet was completed for all assets except for unquoted equities, which form the final phase of the plan,” Chihota said.

He explained that the notional allocation for the unquoted equities remained at a 94:6 ratio in favour of policyholders until the disposal of these assets to shareholders is approved by IPEC and policyholders are compensated accordingly.

“Notional splits of assets between policyholders and shareholders were completed as of December 31, 2022,” he added.

Chihota noted that several meetings and correspondences were held with IPEC to finalise the physical allocation of assets between policyholders and shareholders. Fidelity also submitted detailed documentation demonstrating how premiums and investment returns accrued to policyholders between December 31, 2018, and December 31, 2022, were treated.

“The valuations for unquoted equities and property were conducted by independent consultants, and actuarial assessments were also completed. We submitted the final valuations to the regulator and now await the way forward to conclude the exercise,” Chihota said.

IPEC introduced the asset separation framework to safeguard the interests of policyholders and pension fund members. The separation ensures assets are distinctly assigned to specific sub-accounts, mitigating the risk of intergenerational wealth transfers and fund misallocations.

In its guidance, IPEC stressed: “Assets must be allocated to specific sub-accounts to ensure proper accounting and to prevent the shifting of funds between different groups of beneficiaries.”

Pension funds are mandated to submit annual reports to IPEC, including comprehensive asset separation reports that clearly demonstrate compliance. Assets must be valued at fair market value, with marketable securities assessed at bid prices as of the reporting period.

To further enforce accountability, IPEC monitors contribution arrears and mandates repayment agreements for certain employers. In cases of liquidation, the commission may also write off arrears. Non-compliance attracts penalties, as the regulator moves to protect the long-term interests of pension members and insurance policyholders.

By ensuring sound accounting practices and transparent governance, asset separation is seen as a vital tool for maintaining the credibility and financial health of Zimbabwe’s insurance and pension sector.

In a trading update, FLA reported a 154% surge in profit after tax to US$6.1m (ZWG164.2m) for the five months to May 31, 2025, up from US$2.4m  (ZWG64.6m) recorded in the prior comparable period.

The growth was driven by strong insurance contract revenues and robust investment income, particularly from unquoted equity investments.

Chihota said the life and pensions division—FLA’s flagship unit—remained resilient, recording a 3% increase in insurance contract revenue.

“The division posted revenue of US$6m (ZWG161.5m), up from US$5.8m (ZWG156.1m) in the previous corresponding period,” he said.

He also highlighted the performance of the individual life division, which contributed 79% of total revenue during the review period, primarily due to the continued success of the Vaka Yako product.

“We are also working on launching new, innovative products to expand our current offering and meet the evolving needs of the market,” he added.

Vanguard Life Assurance (VLA), FLA’s Malawi-based subsidiary, contributed 27% of total revenue and is currently on an aggressive expansion drive.

According to Chihota, the unit is exploring new markets, launching new products, and establishing strategic business units to fuel further growth.

“The much-anticipated turnaround of the funeral services business is on track, supported by the deployment of a newly acquired fleet of hearses and buses,” Chihota said.

He cited branch expansion, strategic partnerships, and product innovation—including the popular “Bury Now, Pay Later” scheme—as key drivers behind the improved performance in the funeral business. The imminent commissioning of an executive funeral centre is also expected to enhance service delivery.

Non-insurance businesses, meanwhile, contributed 6% of the group’s total income.

Looking ahead, Fidelity Life Assurance remains optimistic and committed to navigating the evolving financial services landscape with innovation and discipline.

The company intends to leverage its strong brand presence to deliver tailored products that address Zimbabweans’ increasing demand for financial security and long-term planning.

“Our goal is to continue delivering value for all stakeholders by aligning our offerings with the market’s dynamic needs,” Chihota said.