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ZHL to diversify revenue streams

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BY MTHANDAZO NYONI

ZIMRE Holdings Limited (ZHL), whose business portfolio includes insurance and property, seeks to further diversify its revenue streams and pursue opportunities for mergers and acquisitions to ensure a post COVID-19 recovery.

In its latest trading update following the 22nd annual general meeting, a diversified investment holding company said it was implementing a number of strategies to ensure post COVID-19 recovery, sustainable business growth and business continuity.

These include technology utilisation and optimisation to ensure the smooth flow of operations and service delivery as well as business survival strategies leveraging on financial strength and regional operations.

The strategies also include capacitating operations for innovative business growth through competitive capital to increase resilience and equip them to absorb further market and economic shocks and consolidate market positions.

“… aggressive investment strategy to augment revenues from core businesses; continued reconfiguration of the property portfolio to enhance rental income performance; diversifying revenue streams and pursuing opportunities for mergers and acquisitions; restoring and strengthening ZHL heartland investments,” the update reads.

“… cost management accompanied by revenue enhancement measures, to ensure moderate profitability is achieved in 2020.”

ZHL, however, said the impact of the COVID-19 pandemic on its performance was expected to be mild given the different responses to contain the disease and stimulate economic recovery in each country where the group has operations.

The group said it started the year on a positive note with insurance revenue in the first quarter growing by 1 055% against the same period last year on a historical basis and 57% ahead of budget.

Its revenue in the same quarter was 638% above last year and 30% above budget.

Overall, all the strategic group business units traded positively in the first quarter with group comprehensive income at $72 million coming ahead of budget and 453% above last year.
“The business growth momentum continued in the second quarter albeit at a slower pace and performance was largely in line with expectations despite the COVID-19 induced lockdowns and limited economic activity,” it said.

“This was achieved mainly against the backdrop of business growth momentum in Malawi, positive recovery in Zambia and sustained growth and profitability at ZPI, and Emeritus Re
Zimbabwe.”

On domestic operations, Reinsurance and Reassurance Emeritus Re Zimbabwe continued to grow on account of increased treaty participation averaging 17% in 2020 from top tier cedants.

Gross premium written as at 31 May 2020 at $$103 million (historical cost basis), was 24 % above the budget and 877% above actual performance for the same period in 2019.

Despite the exchange rate distortions that fuelled increases in claims, the claims ratio of 37% achieved was within industry benchmark levels.

In the period under review, Emeritus Life and Health Division achieved gross premium income of ZW$$15,2 million which was 383% above prior year performance.

“The local insurance sector is continuing to advocate for the issuing of United States Dollar denominated policies following the gazetting of SI 85 of 2020 on the use of free funds for domestic transactions and dual pricing of goods and services,” it said.

Credsure continued to firm up on account of growth in premium income from specialised products especially tobacco, infrastructure sector and benefits of adopting the UMA business acquisition model.

However, the COVID-19 outbreak, the depreciating currency and high inflationary environment impacted negatively on claims and operating expenses putting pressure on bottom line performance.

ZimRe Property Investments rental income exceeded budget by 49% with retail space contributing 56% of the total rental income due to the ongoing reconfiguration of the property portfolio to meet market demands.

Total revenue for the same period at $12,5 million on a historical cost basis was 778% above prior year mainly due to the quarterly rental reviews. The company achieved a 93% rental collection ratio.

The diversified investment holding company said the downside risks to robust performance, include pressure on the uptake of space for renting worsened by the emerging trends and the new normal where employees work from home and delays in the resumption of classes at tertiary institutions resulting in increasing void levels which were at 23% against 22% achieved last year for the overall ZPI portfolio, and declining rental and market values in real terms.

On regional operations, Emeritus Re Mozambique’s performance trailed behind budget due to the existence of a soft insurance market and Covid-19 induced travel restrictions while Emeritus Re Malawi recorded gross premium of K1,85 billion (approximately US$2,4 million).

Emeritus Re Zambia wrote a gross premium of K24,1 million (US$1 3 million) while Emeritus Re Botswana’s performance was generally in line with budget in most key result areas and profitable on account of a favourable claims experience and implementation of cost containment measures.

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