Home » Business » FML Gets Asset Management Licence

FIRST Mutual Holdings has obtained an asset management licence from the Securities Exchange and Commission of Zimbabwe as the group seeks to enhance profitability. The investment unit will start operations in the second half of the year, chief executive Mr Doug Hoto told an analyst and media briefing on Thursday last week. Mr Hoto said the approval of the application for an asset management company would enable the group to offer a wider array of investment services to customers.

“We are nonetheless still searching for a strategic partner who is expected to bring in technical assistance in the group’s business lines,” said Mr Hoto.

Mr Hoto said the group had also obtained approval to merge its reinsurance businesses which will be called FMRE Reinsurance. This was to strengthen the balance sheet and to enable the group to match competition in the region. The combined capital of the merged entity is $6,6 million more than twice the minimum threshold.

Mr Hoto said FML was going through a transformation phase and introduced the actuarial control cycle in 2013 as the management continue focusing on cost reduction with emphasis on re-aligning the business in response to the difficult operating environment.

The cycle will result in the insurance operations being managed based on actuarially determined parameters, which is anticipated to lead to more efficiency and consistency.

“The company continues to build the foundation of doing our business and in 2013 we introduced what is called the actuarial control cycle. Each insurance contract that we sell must have a premium for the risk, a premium for the expense and premium for the profit,” said Mr Hoto.

“This cycle is a proactive role where management of expenses must be derived from the expenses margins in the price of the product and the reserve that you set aside for future must be derived from the risk premium of the product.”

As a result, the group has significantly increased reserves by $5,5 million, which has however led to a fall in profits.

In 12 months to December 2013, the group reported a 14 percent increase in gross premium written to $101,1 million. FML Health care was the biggest contributor at 40 percent or $43,8 million followed by Life Assurance at $28,8 million.

Reinsurance businesses contributed 20 percent or $21,8 million. Rental income was up 6,8 percent to $7,8 million mainly due to an increase in the contribution of turnover-based rental income. FML Health Care’s contribution to bottom line was severely impacted by the rise in claims to 80 percent from 68 percent in the comparable period.

Consequently, the technical profit declined 93 percent to $1,1 million for the division.

Net premium earned rose by 20 percent to $89,4 million as the reinsurance business retained a large amount of its premium. The group’s technical profit declined by 83 percent to about $3 million on higher claims ratio for the health care insurance business and the adaptation of a more prudent approach to technical reserves following the introduction of the actuarial control cycle during the year.

As a result, shareholder risk reserves and incurred but not reported claims provision increased by $4,4 million. The board declared a dividend for the first time since 2009 of $0,1c.

Pearl Properties’ acquisition of 24 hectares of land in Harare at $9,6 million coupled with reclassification of properties led to a 16 percent increase in total assets. Cash and cash equivalents shrunk by 24 percent to $18,4 million due to Pearl Properties withdrawal.

Source : The Herald