FMHL to expand USD based product portfolio

FMHL to expand USD based product portfolio

Staff Writer

First Mutual Holdings (FMHL) says as the local economy increasingly dollarized, the group continued to expand its USD-based product portfolio to maintain product relevance.

Economists say already 80 percent of transactions in the economy are in US dollars, despite the government’s efforts to promote wider usage of the local currency.

FMHL is a leading financial management group in Zimbabwe, offering services in risk management, wealth creation, and wealth management in the insurance sector.

Mr Amos Manzai, the group’s chairman, said in a statement of financials for the period to June 30, 2023, that the group also maintained its stance of diversifying its pool of investment assets with a skew towards real assets to minimize the impact of the volatility in the macro-economic environment.

“Save for the VFEX-listed equities, there was a positive real return on the remaining components of the investment portfolio, including ZSE-listed shares, investment property, and alternative investments,” he said.

During the period under review, Mr. Manzai said insurance contract revenue (ICR), at $199,5 billion, grew by 105 percent compared to the prior year’s $106,4 billion.

“The growth in comparison to the same period last year was largely driven by the continued revaluation of ZimDollar insurance policy values to ensure adequate cover for clients as well as a migration of more policies to the USD for value restoration in case of the occurrence of an insured event.

“The proportion of the USD business being written by the group constituted 74 percent of the total ICR at US$45,8 million,” he said.

Rental income for the period grew by 117 percent to $7,9 billion compared to the prior year’s $3,7 billion.

Mr. Manzai said the growth arose from a combination of factors, which included a migration to USD-denominated leases as well as inflation-driven adjustments to ZimDollar rentals.

The group’s occupancy levels stood at 88.10 percent compared to the prior year’s 89.99 percent, and the average rental per square meter was $4,02 per square meter compared to the prior year’s $3,03 per square meter.

The group’s total assets grew by 125 percent to $1,4 trillion in inflation-adjusted terms and by 591 percent to $1,3 trillion in historical cost terms compared to December 31, 2022.

“Growth in both inflation-adjusted and historical cost terms was mainly driven by positive fair value adjustments on investment properties and the impact of the depreciation of the ZimDollar on USD-denominated current assets, including balances with banks and insurance contract assets,” said Mr Manzai.

In terms of operations review, group chief executive Mr. Douglas Hoto said at First Mutual Life Assurance, ICR for the period amounted to $15,7 billion, being 343 percent above prior, driven by the regular revisions in sums assured with the objective of retaining the value of policyholder benefits.

“Growth in premiums from the retail segment was largely due to significant growth in USD-denominated premiums on the Eternal Life Plan and E-FML Gold Funeral products,” he said.

Mr Hoto said in the corporate segment, growth in premiums was attributable to growth in the group Life Assurance portfolio arising from new business and organic growth.

“The organic growth stemmed from the effect of employee salary increases as employers sought to attain the target financial security benefits of this product,” he said.

First Mutual Health Company ICR of $82,1 billion, which represented a growth of 117 percent compared to prior, and the growth was largely driven by the regular exchange rate linked reviews to premiums in response to increased medical benefit costs in order to cushion members from the negative impact of shortfalls driven by price increases effected by medical service providers.

“There were also modest adjustments of USD premiums on account of rises in USD costs of medical benefits by service providers, resulting in a gradual growth in pure USD medical policies as members are migrating to a more stable product,” said Mr Hoto.

First Mutual Properties (FMP) rental income for the period under review grew by 121 percent to $7,9 billion compared to the prior year, largely attributed to the migration to USD foreign-denominated leases, with those maintained in the local currency being adjusted for inflation-linked reviews.

Mr Hoto said growth in revenues occurred despite a decrease in the occupancy rate to 88.10 percent in 2023 compared to 89.61 percent in 2022.