Fidelity seeks to manage Zim risk



Fidelity Life Assurance (Fidelity Life) has turned greater focus on export earning equities, property and its Malawi business Vanguard Life Assurance to manage growing risk in Zimbabwe’s turbulent economic environment now suffering from high inflation which neared 100 percent last month.

CEO Reuben Java told the company’s AGM yesterday that  the group is focused on value and assets preservation for policyholders, shareholders and employees cognisant of the current operating environment where inflation is now at 97,85 percent.

“On investments, we will focus on restructuring our property portfolio in line with our property strategy of diversifying from residential stands into retail, office and SME operating space,” Java said, adding “our equities portfolio will continue to be skewed towards export oriented counters.”

Java said product pricing reviews will reflect economic realities.

“Greater focus and oversight will be on our Malawian subsidiary.  The subsidiary remains a key strategic asset to the group. Its country diversification value comes to the fore now as we are experiencing high inflation,” he said.

In the first five months to May, Java said, Fidelity life reported revenue growth of 88 percent to ZWL$25,4m, up from ZWL$13,5m as at May 31 2018.

Gross premium income grew 176 percent to ZWL$20,4m largely driven by 638 percent growth from Malawi and 14 percent growth from the Zimbabwe business.

The gross premium as a proportion of total revenue is about 80 percent.

Revenue from other subsidiaries -microfinance, asset management, medical aid, funeral services and actuarial services- contributed ZWL$4,1m, 78 percent increase from ZWL$2,3m as at May 31 2018.

“Income from stand sales decreased to ZWL$0,1 million as at 31 May 2019 from ZWL$1,3 million 2018. Other income from residential stands decreased by 54 percent from $2,6 million to ZWL$1,2 million,” Java said.

The total expense increased by 136 percent from ZWL$8 million as at May 2018 to ZWL$18,9 million as at May 2019. The major driver being claims and commission which increased by 195 percent and operational expenses which increased by 128 percent in line with inflation pressures permeating the Zimbabwe economy.

Java said claims are expected to grow significantly going forward as they tend to respond to inflation-induced revaluation of underlying assets.

Operating expenses, he said, are impacted negatively by price inflation, itself driven by the heavy devaluation of the local unit (the RTGS$) against the US$.

Fidelity Life, he said, is committed to ensuring ensure that our operating expenses do not grow at a rate higher than revenue growth.

‘At an operating level and in an extremely difficult economic environment, we have delivered a 19 percent growth in operating/underwriting profit from ZWL$5,5 million as at May 2018 to ZWL$6,5 million as at May 2019,” Java said.

“We have recorded a combined investment income of ZWL$40,8 million compared to an investment loss of ZWL$0,4 million in 2018. This reflects massive property uplifts due to currency change and fair value adjustment of our equities portfolio.”

Total combined surplus for policyholder and shareholder before tax and any exceptional movements increased from ZWL$5,1 million to ZWL$47,3 million May 2019 YTD, a strong 667 percent growth.

“Other comprehensive income consisting of  exchange rate differences arising from translation of our foreign business plus revaluation of land and building less provision to complete Southview water works results in total combined surplus for policyholder and shareholder of ZWL$54,2 million, a 1042 percent increase from $4,7 million reported same period last year,” Java added.