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Enacy Mapakame
Listed diversified insurance firm First Mutual Holdings Limited’s (FMHL) consolidated profit for the year to December 31, 2023 surged by 285 percent to $348,3 billion compared to the same prior year period.
The group attributed the growth to increases in insurance contract revenue (ICR), rental income, net fair value gains in investment properties as well as listed equities.
According to the group, ICR grew by 172 percent in inflation-adjusted terms to $1,1 trillion compared to prthe ior year. In historical cost terms, ICR growth to $503,3 billion was recorded, representing a 966 percent bump on the prior year.
Group chief executive officer Mr Douglas Hoto explained that the notable growth in comparison to the previous year was largely driven by the migration from Zimbabwe dollar to US dollar policies as well as continued revaluation of local currency insurance policy values to ensure adequate cover.
The actual US dollar business written by the group for the twelve months constituted 74 percent of the total ICR, at US$98,4 million, a growth of 53 percent compared to a prior year figure of US$62,7 million.
The performance update for the year shows that the insurance service result grew by 89 percent to $141,3 billion compared to the prior year in inflation-adjusted terms.
In historical cost terms, there was an increase of 724 percent compared to the prior year’s figure of $6,7 billion. The growth was primarily due to the increase in insurance contract revenue.
During the review period, consolidated total assets grew by 104 percent to $1,7 trillion on the back of positive net fair value adjustments on investment properties and quoted and unquoted equities as well as the impact of the depreciation of the Zimbabwe dollar on US dollar-denominated current assets, including cash and balances with banks.
In recent periods the investment properties have witnessed significant growth in both foreign currency and Zimbabwe dollar values largely due to higher real rental income. The Zimbabwe dollar continued to decline in comparison to the US dollar for the period under review, which had an impact on the forward-looking information utilised in the valuations by property experts, hence the net fair value gains of $528,7 billion in inflation-adjusted terms and $952,5 billion in historical cost terms.
The total investment property value grew by 102 percent compared to last year in inflation-adjusted terms and 862 percent in historical cost terms.
The year under review had its challenges although the country registered a gross domestic product growth of 5,5 percent, which was achieved under volatile macroeconomic conditions, with the local currency depreciation for the greater part of the year.
The increasing use of the US dollar was a critical mitigating factor against continued local currency weakness. On the money market front, the Zimbabwe dollar devaluation resulted in negative real local currency returns whilst activity for the US dollar money market picked up significantly.
“This was due to economic agents preferring the more stable USD for access to real returns on the part of lenders and the preference by borrowers of funds to utilise foreign currency given the increasing dollarisation of the economy,” said Mr Hoto.
As for the region, GDP growth for Botswana was firm at 3,8 percent, supported by recovering diamond prices, tourism and efforts to diversify the economy which were anchored on low inflation and a stable Botswana Pula.
In Mozambique, despite lingering insurgency risk, the economy registered growth of 6 percent supported by initiatives such as the resumption of key energy projects.
“The FMHL Group continued to exploit opportunities arising from this regional growth and stability to further grow its market share and return value to its shareholders,” said Mr Hoto.
While the growth projections were reviewed downwards to 3,5 percent for 2024 owing to lower than anticipated output from the agricultural sector as a result of the drought, the group maintains a positive economic outlook.
“The group will continue to employ an agile strategy framework to navigate these emerging risks and utilise group synergies to respond to the macro-economic environment in the pursuit of profitable returns to its stakeholders,” said Mr Hoto.
Online Reporter