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Fidelity Life Assurance’s Malawi Unit Hedges Group against hyperinflation

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By Alois Vinga


THE ZIMBABWE Stock Exchange (ZSE) listed insurance group; Fidelity Life Assurance (FLA) Malawi unit continues to hedge the group against hyperinflation effects after registering a 64 % revenue contribution to the group.

FLA chairperson, Fungai Ruwende this week revealed that the Malawi unit, Vanguard Life Assurance Company (VLA) performance for the half-year ended June 30 2020 strengthened the group’s financial performance.

“VLA total revenue increased marginally from ZWL$87.6 million in the prior period to ZWL$88. 7 million for the period ended 30 June 2020, with a 64% contribution to Core Insurance revenue of the Group. The subsidiary continues to hedge the group against the effects of hyperinflation currently obtaining in Zimbabwe and is in line with the 2020 regional expansion strategy,” he said.

During the period, VLA recorded a profit before tax of $9.8 million, down 76% from a profit before tax of $41.5 million in 2019.

However, the decrease in profit from the prior year is mostly attributable to inflation restatements on prior period numbers.

FLA took over Vanguard Malawi from the holding company Zimre Holdings Ltd (ZHL) in 2005.

The unpredictable local economic environment has seen several companies opening subsidiaries in neighboring regional nations in the economy in a bid aimed at securing foreign currency availability and sustainable investments.

In terms of financial performance, the group recorded an inflation-adjusted profit before tax of $596.5 million for the period ended 30 June 2020.

Total inflation-adjusted revenue for the period to June 2020 increased by 162% to $1 372.4 million from $523.2 million recorded in 2019.

Revenue was boosted by fair value gains on investment properties which increased from $250.7 million in June 2019 to $975.1 million. Core insurance and noninsurance revenue generally lagged inflation.

The group’s inflation-adjusted expenses for the current period to 30 June 2020 grew by 58% to $775.9million from $490.3 million recorded in the same period in 2019.

The main contributing factor to an increase in total expenses is a change in insurance and investment contract liabilities, which increased from $143.1 million in June 2019 to $402.3 million in June 2020.

The group’s total assets grew by 72% in real terms from L$2 702.2 million as of 31 December 2019 to $4 639.0 million as of 30 June 2020, the significant driver of this growth is the revaluation of investment properties and equity investments.