Fair Value Adjustments Wipe-Out First Mutual HY-21 Profits

Author Name
Rugare Mukanganga
Markets 1 month ago

Half-year results for the property and insurance Group largely reflected improvements from prior year performance.

GWP ↑ 71%
Rental Income ↑ 53%
Profit ↓ 121%

The Group’s Gross Premium Written grew to ZWL 5.4 billion in the period, a 71% inflation-adjusted increase.

Despite marginal investment property gains recorded in US$ terms, a ZWL 1.6 billion fair value loss was incurred after conversion of money to the Group’s reporting currency due to a 6% depreciation against the US$ and inflation of 21%.

Net investment income rose to ZWL 1.7 billion, a 79% improvement from the previous half-year. The Group attributes this year’s outperformance to fair value gains on public and private equities held.

A ZWL 1 billion loss was recorded in the period brought about by investment property fair value losses and a rise in First Mutual Health claims ratios.Value of the Group’s assets rose 2% in the period under review, an improvement credited to fair value adjustments on listed equities.

Operational Highlights in the 1st half

In the six months to June 2021, First Mutual Health supported community level clinics with COVID-19 vaccination program resourcing. The Group also supported tertiary-level education in local communities. The Diamond Seguros associate became a Group subsidiary in the half-year period and received a US$900k recapitalisation capital injection, raising it above a revised regulatory required operating capital level. Looking ahead, the Group plans to migrate to online platforms in anticipation of continued physical distancing measures.

What lies ahead?

A diverse portfolio and product offering coupled with a strong capitalisation position the Group for sustainable medium to long-run growth in the uncertain times that lie ahead. Timely transitions to digital platforms should, in addition to yielding health benefits, trim administrative expenses and support recovery of the Group’s margins from losses recorded in this half-year period.

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