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After declining by 6% in 2007, Zimbabwe’s GDP is estimated to have declined by a further 7% in 2008. The GDP decline is a result of output slump across all the major sectors of the economy, particularly agriculture, mining, manufacturing, and tourism. The agricultural sector suffered from lack of inputs. The mining sector saw some mining houses closing shop or suspending operations citing foreign currency shortages and the central bank’s delay in releasing proceeds from mineral sales. The manufacturing sector still has low capacity utilization of below 15% as a result of shortages of raw materials, foreign currency, and a whole host of other production bottlenecks.

Although no official figures have been forthcoming from the Central Statistical Office, hyperinflation continued to wreck havoc throughout the economy, with the result that by year end, the local currency had ceased to be accepted for commercial transactions in most sectors of the economy. The decision by the authorities to allow the use of multiple foreign currencies is a welcome development as hyperinflation had rendered the use of the local currency impractical.

Money market investment rates remained depressed for the whole of the year 2008, with short-term interest rates hardly exceeding 200% against inflation rate in excess of 231m%. Despite a sharp decline towards the end of the year, the equities market, on the other hand, achieved a brilliant performance, recording a 30.3 sextillion percent growth during the year 2008.

While we acknowledge that due to the hyperinflationary environment, detailed presentation of financial statements in Zimbabwe dollar terms does not allow for meaningful analysis and interpretation, the same figures are presented to comply with regulatory requirements.

Financial Performance Overview

Given the hyperinflationary environment, management must be commended for having employed strategies that not only preserve shareholder’s value, but also grew the business in real terms through investing in properties and the stock market, resulting in a profit before transfer to policyholders and tax of $143.3 sextillion, for the year ended 31 December 2008.

Total income for the year 2008 amounted to $155.2 sextillion, representing a growth of 39.5 quintillion percent over the $6 430 achieved in the year 2007. Investments income remained the dominant contributor, accounting for 99.6% of total income for the year 2008.

Administration expenses went up from $1.99 thousand in 2007 to $10.2 sextillion for the year ended 31 December 2008. This was reflective of the hyperinflationary environment that we are operating in, and the staff remuneration measures that management implemented during the year to retain essential skills.

Fidelity Life Assurance

Reflecting the dwindling disposable incomes as a result of the hyperinflationary environment, total premium income grew by 5 quadrillion percent from $22.3 in 2007 to $11.2 quintillion for the year ended 31 December 2008. The growth in premiums, though lower than inflation, was higher than the claims growth of 14.3 trillion percent, from $1.9 in the year 2007 to $2.7 quadrillion in 2008.

Realised income on equities grew marginally to $1.2 quadrillion in 2008, as the strategy was to hold inflation hedging assets.

The company’s profit before tax for the year 2008, at $134.7 sextillion, was above the prior year figure of $5.95 thousand.

Vanguard Life Assurance

This subsidiary, based in Malawi, posted a profit before tax of $2.55 sextillion for the year ended 31 December 2008 compared to $86 recorded for the year 2007.

Fidelity Life Asset Management

The asset management subsidiary posted a profit before tax of $4.09 sextillion for the year ended 31 December 2008. This compares favourably to the $810 recorded in the year 2007.

Fidelity Funeral Assurance

Fidelity Funeral Assurance in its second year of operating managed to post $167 quintillion before tax.

Cavmont Life and Asset Management Company (Pvt) (Ltd) (Zambia)

Cavmont Life and Asset Management Private Limited based in Zambia posted a profit before tax of $1.24 sextillion for the year. The premium income generated for the period ended 31 December 2008 was $3.63 sextillion and other income was $0.52 sextillion. The results exceeded expectations since it was the first year of operation under the group.

Zimbabwe Actuarial Consultancy

The subsidiary posted a profit before tax of $325 quintillion for the year.

Dividend

The Board has not declared a dividend in respect of the 2008 financial year.

Outlook

The recent reforms introduced by both the monetary and fiscal policies will help improve the business landscape in the country, and Fidelity Life Assurance is well positioned to take advantage of the arising opportunities, as well as deal with the associated challenges. The company welcomes the opportunity to charge premiums in foreign currency, and is ready to explore alternative investment opportunities that may arise as the financial markets become more liberalised.

Appreciation

I would like to commend my fellow directors, management and staff for the efforts made during the past year. Clients and other stakeholders’ support is greatly appreciated.

S. Tembo

Chairman