Investment income boosts Fidelity revenue

LIVINGSTONE MARUFU


Listed life assurer, Fidelity Life Assurance revenue was up 1,037% up to ZWL$413.3m for the first four months of the year to April 30 2020 from ZWL$36.3m in the same period last year fuelled by a growth in investment
income.


Investment income contributes 83% of total revenue and was up to ZWL$346m from ZWL$22m.


The development comes at a time when the insurance sector packages are losing value due to high cost of doing business and high cost of living.


Experts say the insurance sector will suffer the heaviest whenever there is an unstable economic environment as the packages are often viewed as
luxury since people will be living for bread and butter issues.


Fidelity chief executive Rueben Java told shareholders at the company’s 41st annual general meeting last week that the impact of Covid-19
has led to a general decline in economic activity and in some places total recession which will impact negatively on revenue and capacity utilisation across the globe.


“Total revenue; shows a growth of 1,037% to ZWL$413.3m for the four
months to 30 April 2020, up from ZWL$36.3m as at 30 April 2019, an indication that the business is on a strong growth path. Core revenue at
ZW$70.4m constitutes 17% of total revenue, the balance 83% is made up of investment income,” Java said.


He said gross insurance premium which now makes up 77% of core revenue, recorded growth of 381% to ZWL$54.5m from ZWL$11.3m.
The gross premium income is split 28% and 72% to Fidelity Life and its Malawian subsidiary, Vanguard Life Assurance respectively.


The increased contribution by Vanguard reflects the value of having a foreign asset when faced with hyperinflation incountry.


Revenue from the other subsidiaries (microfinance, asset management, medical aid and actuarial services) making up 23% of Core Revenue
contributed ZWL$15.9m, themselves showing a 217% increase from ZWL$5m as at April 30 2019.


Java said Fidelity Life’s business has shown growth in nominal terms compared to last year.


The total expense outgo increased by 997.1% to ZWL$316.4m as at April
30, 2020, from ZWL$28.8m as at April 30, 2019, and the major drivers are the changes in actuarial liabilities and South View water pipeline costs contributing close to 80% (65% and 13%) of the total costs.


Java said despite the unbearable upward pressures on the cost of doing business in this country, it is a good thing that we have been able to contain expense growth to less than growth in revenue.


Fidelity Life assumed that the cost pressures will remain and probably get worse due to unbudgeted expenditures arising from Covid-19 and in-country hyperinflation and will continue to monitor expenses closely and
implement responsible cost containment measures, an exercise which the company has already started.


Profit before tax increased to ZWL$96.8m from ZWL$7.5m, a growth of
1,191% from prior year.


This growth is significantly above published price inflation of 766%, an indication that the company has so far succeeded in protecting value
for its shareholders from the value-eroding hyperinflation engulfing the economy.


Total assets grew by 935% to ZWL$1.8bn in the period under review from
ZWL$182m in the prior year, implying a net real growth of above price inflation of 766%.

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