FMHL strengthens regional reinsurance operations
First Mutual Holdings (FMHL) has moved to strengthen its regional reinsurance operations after the Group raised BWP60 million in Botswana as well as capitalising the Diamond Seguros in Mozambique.
A Botswana based firm Aleyo Capital did the bidding for FML for an amount approximately equivalent to US$5,02 million.
The Botswana-based investment management firm, Aleyo Capital in 2020 bought a 29,1 percent stake in First Mutual Reinsurance Holdings Limited (FMRHL)which houses FMHL’s two re-insurance businesses in Botswana.
Douglas Hoto, the group’s chief executive, said the group’s fund raising initiative was aimed at o strengthening reinsurance operations through recapitalization to enable underwriting of more businesses.
“At the close of 2021, we finalised the capital raise for the reinsurance cluster with BWP61 million raised through a Botswana based financial partner, Aleyo Growth Fund 1 GP (Proprietary) Limited,” he said in a statement of the Group’s 2021 financial year.
He said during the year under review, the group recapitalised its insurance subsidiary in Mozambique, the Diamond Seguros, to meet regulatory capital requirements and to capacitate the unit to underwrite health insurance business.
“These two projects and other initiatives created a platform for further growth in the future,” he said.
According to Hoto, the completion of the foreign capital raise for the reinsurance units will lead to increased revenue and presence in the region and enhance opportunities for further strategic alliances.
The Group acquired, through its subsidiary NicozDiamond Insurance Company Limited, a controlling stake in Diamond Seguros, a general insurance company incorporated and domiciled in Mozambique, on November 24, 2020 following the completion of a rights offer by that company. Diamond Seguros had been an associate of the Group prior to the attainment of control.
Hoto indicated that during the year, 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 Hoto.
He added that in August 2021, the Group concluded a further capital injection of USD0,9 million through a rights offer to ensure that 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.
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 USD 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 had its GPW grew by 4 percent to $2.1 billion in 2021.
Hoto said the 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.