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Fidelity Life’s Malawi asset in key contribution

FIDELITY Life Assurance’s Malawi unit, Vanguard’s increased contribution to the group reflects the value of a foreign asset when faced with hyperinflation.
Zimbabwe’s inflation rate as at June stands at 786 percent, a development that has wiped off value and savings, with companies reporting inflation adjusted numbers.
Rueben Java, the group’s chief executive, said overall revenue for the four months to April grew 1 037 percent to $413 million largely boosted by investment income.

“Within the core revenue income, gross insurance premium had grown 381 percent to $54 million contributing 77 percent. The premium is split 28 percent and 72 percent between Fidelity Life Zimbabwe and Vanguard Life Assurance in Malawi,” he told shareholders at the company’s annual general meeting.

He added that the nominal growth in total revenue showed that the group was on a strong growth path, despite that core revenue contributing 17 percent to total revenue at $70 million.
Revenue from microfinance, asset management, medical aid and actuarial service combined contribution was 23 percent up at $16 million.
Investment income was at $346 million, increasing from $22 million largely due to fair value gains of investment properties.

The group’s profit before tax increased to $97 million from last year and was significantly above inflation, according to Java, who added that this indicates that the company has succeeded in protecting value for shareholders from hyperinflation.

During the period under review, total expenses increased by 997 percent to $316 million driven by major changes in actuarial liabilities and the provision to cover for the South View water pipeline.
“These two put together constitute 80 percent of the total outlay, 65 percent of which is for actuarial liabilities,” Java said.
He noted that despite the “unbearable” upward pressure on costs, the business managed to maintain expenses growth to less than revenue growth.
“It was more likely that the cost pressures will remain and get worse in light of Covid-19, but the group will implement responsible cost containment measures,” he said.
Java said the group plans to build a new level of resilience, which includes accelerating its digitalisation strategy after introducing end-to-end automation in some of the units.
“Focus will also be on extracting value which the group considers trapped. The group would also protect revenue, preserve value of existing assets and create positioned channels of delivery,” he said.

At Vanguard, Java said the greater focus will be on market segmentation, channel effectiveness and a review of the product mix. He also said opportunities will be pursued in other regional markets.

On Langford Estates, Java said the group was waiting for a final judgment on the matter after this was reserved in May.
“The matter is still pending but we argued on preliminary issues that the transaction went through in 2015 and that it was valid after CFI shareholders voted in favour. Seeking a reversal is not correct and proper at law,” Java said.