eBusiness Weekly
Enacy Mapakame
Insurance firm, Zimre Holdings Limited (ZHL), says profit for the nine months to September 30, 2019 surged 2 992 percent above budget on gains from property and foreign currency revaluations following the change of functional currency.
The firm also attributed the growth to increased share of profits from associates, turnaround in the performance of the rental income revenue line following the commissioning and release of high value rental space at Sawanga Mall in Victoria Falls and Bulawayo Nicoz House student accommodation.
This year, Government implemented some currency reforms for instance the floating of the exchange rate, introduction of local currency and abolishment of the multi-currency system.
During the period under review, property division, ZPI’s state-of-the-art Sawanga Mall opened its doors to tenants as well as the student accommodation facility (Nicoz House) in Bulawayo and indications are both offerings are performing well.
Total comprehensive income was 5 949 percent above budget mainly due to exchange differences on translation of foreign operations and investments.
Revenue for the period was, however, 14 percent below budget on hushed performance by regional operations in Malawi and Zambia due to low capital bases and existence of soft insurance markets.
“Most Southern African economies in which the ZHL Group operates, recorded mixed economic performances but generally displayed stable macro-economic conditions in the first nine months of 2019,” said ZHL in a trading update for the nine months under review.
Botswana and Mozambique operations, however, continued to record strong performance and it is expected that their full potential will be realised once competitive capital has been injected into the businesses.
In Zimbabwe, reinsurance operations remained upward notwithstanding the mounting challenges in the domestic business environment. The inflationary pressures have had a knock-on effect on disposable incomes while increasing costs for companies as they adjust numbers in line with the rising cost of living.
Regional operations contributed 69 percent of the premium written “thus emphasising the positive hedging effect of these operations in light of weakening economic fundamentals in Zimbabwe.”
The group also instituted a deliberate slowdown in stand sales at ZPI in order to minimise the recovery of less than fair value for its properties following the change of functional currency, which also had an impact on revenue slowdown.
Management at ZHL, however, remains upbeat of managing through the economic headwinds on both the domestic and regional markets.
Following the currency reforms implemented in the period under review, ZHL has, however, expressed concerns the insurance may face challenges especially in discharging foreign currency denominated insurance claims and related liabilities as insufficient foreign currency reserves had been accumulated when the directive to stop issuing foreign currency denominated insurance policies for local risks was issued in June 2019.
“The Group reinsurance operations are implementing strategies to mitigate the effects of this potential exposure and have adequate retro cession arrangements with international reinsurance companies to absorb this risk,” said ZHL.
