FBC Insurance units in hyperinflation induced losses
Staff Writer.
HARARE, Zimbabwe’s unrelenting hyperinflationary environment has hit hard FBC Insurance and Reinsurance units with both recording losses in the year ended December 31 2019 although its full impact on traditional business was reduced by the in-house investments strategies that increased investment income.
FBC insurance recorded an inflationary loss before tax of ZW$26,9 million and a loss after tax of ZW$ 23,6 million while FBC Reinsurance recorded a loss of ZWL$ 43,1 (inflation adjusted) compared to a loss of ZW$21,6 million prior year .
The performance was mainly driven by the hyperinflationary operating economic environment low liquidity, low productivity, low employment levels and foreign currency shortages.
FBC Insurance was hit hard by claims and operating expenses and with total revenues of ZW78,1 million inadequate to cover inter-alia insurance claims of ZW$32,2 million ,operating expenses of ZW$ 45,9 million and a monetary loss of ZW$22,6 million.
During the period the hyperinflationary environment continued to negatively impact on disposable incomes of clients making it difficult for them to purchase insurance while the continued devaluation of the local currency also resulted in claims costs increasing as most businesses and individuals preferred the index pricing of goods and services to the United States dollar.
Acting FBC Insurance chairperson John Mushayavanhu in a statement of results said as inflationary continued to negatively affect premium revenues with attention shifting to hedging via a robust investment strategy.
“The resurgence of hyperinflation in Zimbabwe, the Covid 19 pandemic and a series of extreme weather events could all have adverse effects on macroeconomic prospects. Key economic statistics point to a weak economic outlook as the country is vulnerable to exogenous and endogenous factors.
Policy consistency and sequencing remains pivotal in turning the economic fortunes of the economy.
The company will continue to adopt various business models suited to the environment in order to further consolidate its position in the local market as well as exploring initiatives on the opening of regional offices,” he said.
FBC reinsurance total assets closed the year at ZW4 198,5 million down from ZW4200 million prior year indicative of the loss of value due to the prevailing hyperinflationary environment.
.
