FBC Insurance units in hyperinflation induced losses

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.