First Mutual Life Assurance collaborates with IPEC to resolve forensic audit concerns, reports 24% revenue growth

Nelson Gahadza

First Mutual Life Assurance Company (FML) says it is continuing to work with the Insurance and Pensions Commission (IPEC) to bring finality to the issues that arose during a forensic audit.In 2022, FML, a subsidiary of First Mutual Holdings (FMHL), was subjected to a forensic audit by

IPEC following an asset separation exercise, which investigated potential breaches of compliance and their impact on policyholders. Findings of the audit revealed that FML had not properly separated assets between policyholders and shareholders, potentially leading to losses for policyholders.

Group chairman Amos Manzai, in a statement of financials for the year ended December 31, 2024, said following the withdrawal of a Corrective Order, FML and IPEC came to a settlement agreement.

“This agreement incorporated steps to resolve outstanding issues. This included the appointment of independent experts to consider reviewing issues in contention,” he said.

He added that the independent experts submitted their findings, which FML has accepted, and IPEC subsequently asked FML to resubmit some information that had already been supplied and to provide some additional information, which was done.

According to IPEC, the asset separation exercise was necessitated by the notable non-compliance by several insurance companies against the aforementioned legal requirements, which had the potential to prejudice policyholders in favour of shareholders.

Concerning FML, the assessment done by IPEC was to verify the extent to which FML complied with the provisions on asset separation, which the regulator said warranted an in-depth investigation. The objective of the asset separation exercise was to enforce compliance with the requirements of the new industry legal provisions. The exercise was done to identify assets that may have been misappropriated from policyholders to shareholders or vice versa, quantify the assets that may have been misallocated and apportion them to their rightful owners, and enhance compliance with the legal requirements for asset separation as a way of improving good governance in the insurance and pension sectors.

In the year to December 31, 2024, First Mutual Life achieved insurance contract revenue (ICR) of US$10.5 million, representing growth of 24 percent compared to the prior year.

“The growth from the comparative period was largely due to client migration from local currency-denominated policies on Group Life Assurance policies in line with the general trend to convert a portion of USD-denominated allowances to pensionable basic salaries,” said Manzai.

The business’s profit for the period was US$0.8 million, a 26 percent decline from the previous year, with the negative variance mainly arising from exchange losses on local currency-denominated monetary assets in the first and third quarters of the year when there was accelerated depreciation of the local currency (ZWL and ZWG, respectively).