First Mutual Sees Sustained Growth

Senior Business Reporter

First Mutual Holdings Limited (FMHL) expects its diversified business model to deliver sustainable growth while fulfilling promises on the core pillars of risk management, wealth creation and management.

Douglas Hoto, the group's chief executive officer, in a statement of financials for the year ended 31 December 2021, said the group remained confident in the country's medium-term economic prospects and will thus continue to invest in core businesses and complementary areas.

"During 2021, this approach included the recapitalisation of our insurance subsidiary in Mozambique, Diamond Seguros, to meet regulatory capital requirements and capacitating the unit to underwrite health insurance business.

"At the close of the year, the group finalised the capital raise for the reinsurance cluster with 61 million Botswana Pula raised through a Botswana based financial partner, Aleyo Growth Fund 1 GP (Proprietary) Limited.

"These two projects and other initiatives created a platform for further growth in the future," he said.

Mr Hoto said the group's consolidated gross premium written (GPW) growth for the year was ahead of inflation and real growth was achieved through NicozDiamond, First Mutual Health and First Mutual Life while there was growth in the USD denominated business. He said during the year, there was mixed cost performance amongst the group's SBUs with lower claims ratios for the short term insurance businesses owing to Covid-19 related incidence reductions arising from lockdowns, curfews and restricted movement.

Mr Hoto said the property and life business expenses grew due to cost push alternative exchange rate related costs and higher claims respectively for the two SBUs during the year.

"Higher health services claims as the absorbed part of increases in health service costs for the benefit of clients," said Mr Hoto.

In terms of individual SBU performance, GPW at First Mutual Life Assurance Company (Private) Limited increased by 119 percent to $1,83 billion mainly due to inflation related adjustments by employers to basic salaries that drive pension contributions and group life assurance covers in the employee benefits division.

"The underwriting of foreign currency denominated products as well as higher Zimbabwe dollar assurance covers contributed to higher revenue in the retail division," said Mr Hoto.

He added that the company adjusted its operating structure to align to changing market preferences and continued to invest in the funeral services unit.

First Mutual Health Company's GPW grew by 70 percent to $5,4 billion mainly due to revision of contributions to maintain the ability to continue meeting the expectations of members as health service costs increased in real terms.

Mr Hoto said in addition, the company experienced growth in foreign currency denominated premiums which tend to have lower shortfalls relative to ZWL premiums.

The company's claims ratio increased to 81,17 percent from 73,21 percent in the same period owing to increased access to services by members and charges by service providers rising faster than the premiums paid by members.

He said membership declined in numbers from 131 196 in December 2020 to 117 880 members by December 2021, reflecting the challenging economic environment which limited the capacity of some clients to pay contributions.

In the short term business, NicozDiamond Insurance GPW grew by 34 percent to $4,43 billion due to continuous asset value revisions to protect clients against insurance value erosion through inflation and organic growth within the existing portfolios.

Mr Hoto said there was an increased preference for US dollar denominated policies by clients as a hedge against insurance value erosion in local currency. He said the claims ratio at 35 percent was in line with the prior year ratio of 36 percent mainly as a result of continued lockdowns.

Mr Hoto said Diamond Seguros migrated from an associate to a subsidiary with effect from 1 December 2020, however performance analysis is on full year's financial statements.

He said GPW grew by 75 percent in 2021 as a result of improved broker business due to improved confidence after recapitalisation of the business in the third quarter of 2020.

"In Mozambican Metical (MZN), the GPW growth was 29 percent to MZN193 million. The claims ratio at 32 percent was higher than the comparative period of 18 percent due to the stricter lockdowns in 2020," said Mr Hoto.

He added that in August 2021, the group concluded a further capital injection of USD0,9 million through a rights offer to ensure the company exceeded the revised minimum regulatory capital level, thus increasing its shareholding from 50,4 percent to 71,4 percent.

First Mutual Reinsurance Company's GPW increased by 70 percent to $588,3 million principally due to improved business written in foreign currency.

Mr Hoto said the reintroduction by the authorities in July 2020 of the policy permitting the payment for goods and services in local and foreign currency led to an increase in US dollar policies, which led to more business for reinsurers as there was limited USD underwriting capacity locally.

"The claims ratio further increased to 55 percent from 49 percent in 2020 as a result of the change in the business mix."

FMRE Property and Casualty (Proprietary) Limited, Botswana, saw its GPW grow by 4 percent to $2,1 billion in 2021.

Mr Hoto said the operation's annual growth was 14 percent in Botswana Pula terms, at BWP179,1 million, arising from improved local and international treaty participation and growth of specialist lines of business under the casualty segment.

The claims ratio, at 39 percent, was marginally lower than the prior period level of 41 percent.

First Mutual Wealth Management saw its investment management fees grow by 21 percent to $83 million in inflation adjusted terms mainly due to the increase in funds under management underpinned by the growth on the ZSE All Index performance.

Mr Hoto said funds under management grew by 128 percent during the period under review and the company also saw an improvement in the third party funds under management during the year.