First Mutual In $1b Loss Due To External Factors

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By Alois Vinga

FIRST Mutual Holdings Limited (FMHL) experienced a loss totaling $1 billion due to external factors which include fair value loss on property investments and higher claims ratio.

Presenting the group’s 2021 first-half report FMHL chairperson Amos Manzai said despite net investment income surging to $1,7 billion and an increase of 79% against the same period in 2020 attributable to investment gains, the company still suffered a huge loss.

“Overall, the group incurred an inflation-adjusted loss for the period of $1 billion mainly due to the fair value loss on investment property and higher claims ratios in the health subsidiary,” he said.

As opposed to fair market value, fair value is a legal construct rather than a value set by the market.

During the period under review, Gross Premium Written, at $5,4 billion, increased by 71% in inflation-adjusted terms as a result of organic growth on the existing portfolio and the continuous revaluation of insurance policy values in line with inflation to ensure clients have adequate cover.

Investment property had marginal growth in United States of America Dollar values determined as of June 30 2021 and converted to Zimbabwe Dollar at the prevailing auction rate.

“However, the Zimbabwe dollar depreciated by 6% against an inflation movement of 21%, hence the fair value loss of $1,6 billion. Net investment income of $1,7 billion was an increase of 79 % against the same period in 2020.

“The investment gains were driven by fair value gains on listed and unlisted equities in line with the general performance of the ZSE Industrial Index,” said Manzai.

The group made significant progress towards the commissioning of the First Mutual Park solar power project and remains optimistic of opportunities for business growth in the foreseeable future.