Fidelity Life Assurance says the increase in the costs of basic goods against stagnant wages reduced spending on insurance products.
BY FIDELITY MHLANGA
The company’s chief executive officer, Reuben Java, told shareholders at the firm’s annual general meeting yesterday that developments in the economy, since November 2018, had increased negative pressure on revenue and adverse cost pressures.
“Outside of the so-called hardship allowances to cushion employees, salaries and wages across the economy have largely been stagnant, actually declining in real terms because whatever choice of price inflation you choose to look at, it is way above any salary increases that may have been granted, if at all. It’s a scenario where prices for basic goods are escalating at much higher levels compared to wages, which means the share of wallet towards insurance has been diminishing,” he said.
In the first five months of the year, Fidelity’s total revenue grew 88% to ZWL$25,4 million up from ZWL$13,5 million in same period last year, driven by gross premium income, which contributed 80% to revenue.
Gross premium income grew 176% from ZWL$7,4 million to ZWL$20,4 million, largely driven by the company’s Malawi subsidiary, Vanguard Insurance, which saw revenue growing 638%, whereas Zimbabwe investments grew 14%.
Revenue from other subsidiaries (microfinance, asset management, medical aid, funeral services and actuarial services) contributed ZWL$4,1 million up from ZWL$2,3 million last year.
Income from stand sales decreased to ZWL$0,1 million from ZWL$1,3 million prior year.
Total expenses increased 136% from ZWL$8 million as at May 2018 to ZWL$18,9 million as of May this year, driven by claims and commission, which increased 195%.
Operational expenses grew 128% in line with inflationary pressures.
The company increased its shareholding in its Malawi Vanguard Insurance from 57% to 62% after some shareholders failed to follow a rights issue, Java said.
Cognisant of the current operating environment, where inflation is now at 98% as at May 2018, the group will focus on value and assets preservation for key stakeholders.
“We have faith that continued investment in property and equities will maintain full value,” Java said.
The group’s chairman Fungayi Ruwende noted that the company still held its strategic asset in the form of a land bank through its subsidiary Langford Estates and awaits resolution of the outstanding legal case. Fidelity entered into a land for debt swap deal, which saw it assume CFI’s $18 million in debts, but the deal is now under contest.