First Mutual Holdings FY2023: Migration to US$ boosts revenue, US$1m dividend declared

KINGSTONE ZIMUNYA

Listed diversified insurance firm First Mutual Holdings Limited (FMHL) presented its financial results for the year ended 31 December 2023 in ZW$, in accordance with the Zimbabwe Stock Exchange’s (ZSE) Practice Note 13. In reality, though, the Group’s increasing preference for the US$ for both insurance contracts and rental leases made for a successful 2023. 

Driven towards US$-denominated transactions due to the depreciating local currency, First Mutual Holdings enjoyed a successful 2023. 

According to the group, consolidated profit for the year to December 31, 2023 rose by a whopping 285% to ZW$348,3 billion compared to the same prior year period. The group attributed the growth to increases in insurance contract revenue (ICR), rental income; and net fair value gains in investment properties as well as listed equities.

ICR grew by 172 % in inflation-adjusted terms to ZW$1,1 trillion compared to the prior year. In historical cost terms, ICR growth to ZW$503,3 billion was recorded, representing a 966 % bump on the prior year.

Group chief executive officer Mr Douglas Hoto explained that the notable growth in comparison to the previous year was largely driven by the migration from Zimbabwe dollar to US dollar policies as well as continued revaluation of local currency insurance policy values to ensure adequate cover.

“The actual US dollar business written by the group for the twelve months constituted 74 % of the total ICR, at US$98,4 million, a growth of 53 % compared to a prior year figure of US$62,7 million,” he alluded. 

The performance update for the year shows that the insurance service result grew by 89 % to $141,3 billion compared to the prior year in inflation-adjusted terms. In historical cost terms, there was an increase of 724% compared to the prior year’s figure of $6,7 billion. The growth was primarily due to the increase in insurance contract revenue.

Rental income grew by 199% to ZWL39.1 billion compared to the prior year figure of ZWL13.1 billion in inflation adjusted terms. In historical cost terms, a rise of 1,029% to ZWL23.7 billion compared to the prior year was recorded. As with ICR, the growth arose from a migration to US$-denominated leases as well as inflation-driven adjustments on ZW$ rentals.

Although there was a slight decrease in occupancy to 76,7% from 85,52%, the context of new investments resulted in increased available space. The average rental income per square metre also increased to US$5,29 from US$3,51, which can be attributed to the group expanding its US dollar-based product portfolio to stay relevant in the ever-changing macro-economic environment.

“The stable US$ currency constituted the bulk of transactions in both the formal and informal sectors thereby allowing economic agents to trade profitably as well as hedge against the weakness of the local currency,” noted Group chairman, Mr Amos Manzai. 

During the review period, consolidated total assets grew by 104% to $1,7 trillion on the back of positive net fair value adjustments on investment properties and quoted and unquoted equities as well as the impact of the depreciation of the Zimbabwe dollar on US dollar-denominated current assets, including cash and balances with banks.

The total investment property value grew by 102% compared to last year in inflation-adjusted terms and 862% in historical cost terms.

The Group reported a substantial increase in overall net investment returns. In hyperinflation-adjusted terms, the increase is 146%, while in historical terms, it’s a remarkable 1 860 % above the previous year. The positive investment out-turn was mainly due to fair value gains on the ZSE.

The Group also witnessed significant growth in its businesses domiciled in Mozambique and Botswana. Diamond Seguros, its general insurance venture in Mozambique saw growth mainly driven by continued improvements in broker business, reflecting increasing market confidence. In Mozambican Metical (MZN) terms ICR grew by 37% to MZN 258.4 million compared to the prior year.

In Botswana, FMRE Property and Casualty (Proprietary) Limited’s ICR grew by 11% to BWP 257.4 million from BWP232.6 million in the prior year. The growth during the year was partly attributable to improved local and international treaty participation and growth of specialist lines of business under the casualty segment. The business achieved a profit of BWP 26 million in 2023 8.86% below prior year profitability of BWP 28.6 million. 

Likewise, First Mutual Holdings declared a final dividend of US$1 million payable in US dollars from the profits of the company for the year ended December 31, 2023, which represents US$0,136 cents per share.

This dividend, when combined with the interim dividend of US$500 000 results in total dividends for the year of US$1,5 million. The dividend will be payable from the company’s operating cash flows on or about June 26 to all shareholders of the company registered at the close of business on June 21 this year. 

Looking forward, the group maintains a positive economic outlook for 2024, in spite of growth projections being reviewed downwards to 3,5 % for 2024 owing to lower than anticipated output from the agricultural sector as a result of the drought.

“The group will continue to employ an agile strategy framework to navigate these emerging risks and utilise group synergies to respond to the macro-economic environment in the pursuit of profitable returns to its stakeholders,” concluded Mr Hoto.

As at close of business on June 3, First Mutual Holdings [FML.zw] was trading at 200 ZiG cents on the Zimbabwe Stock Exchange.