FINANCIAL PERFOMANCE REVIEW (Historical Cost)
Group Financial Highlights
Net Premium Income up 1,047%
Investment Income up 11,943%
Total Income up 9,532%
Underwriting Surplus up 1,899%
Profit After Taxation up 11,153%
Basic Earnings per share up 14,844%
GROUP CONSOLIDATED RESULTS
Group financial performance during the period under review was commendable, given the hostile operating environment. Profit before tax for the twelve months to 31 December 2006 was $76.45 billion, an 11 077% above prior year figure amounting to $683.97 million. Profit after tax for the Group was a commendable $75.85 billion.
Total income, at $77.60 billion for the year ended 31 December 2006 was 9 529% up on $805.72 million for the prior year. During the same period, premium income from core operations was $1 486 million, representing a 1 047% growth on prior year figure of $129,57 million. Investment income contribution to total income improved from 82% in 2005 to 98% during the period under review. This was largely a result of appreciation in values of both property and equity investments, in view of the hyperinflationary environment.
Administration expenses went up 896% to $892.7 million while commission paid was only 293% up. This was reflective of cost containment strategies employed by the Company during the period. Claims expense growth, at 1 299%, was in line with year on year inflation which stood at 1281% as at 31 December 2006.
The Company will always ensure that strategies that maximize shareholders and policyholders returns are maintained, while at the same time enforcing tight cost management strategies.
FIDELITY LIFE ASSURANCE OF ZIMBABWE
Total premium income, at $1 325 million was 1 119% above prior year which stood at $108.33 million while during the same period, claims amounted to $786.04 million, a 765% growth on prior year. Realised investments income went up 547% on prior year. This was deliberate given that the environment favoured holding assets that mitigate against the ravages of inflation and this entailed low crystallized listed equity positions. Equities revaluation was a massive 5 227% up, at $9.43 billion. Prior year equity revaluation stood at $180. 59 million. We are hopeful that our strategy on investments will pay off going forward. Administration costs were contained at $540.53 million, an 835% increase from prior year figure of $57.80 million. This was due to a more focused cost control strategy adopted particularly in the second half of the year under review. The Company recorded a profit before tax for the year of $76.12 billion, representing a growth of 11 366% on prior year figure of $633.87 million.
Individual Life Division
This division underwent a major rationalization during the period under review, leading to closure of a number of branches nationwide. The restructuring exercise arose from the need to maintain economically viable divisions in this hostile operating environment, where demand for mainline products has been dwindling over the years as a result of the erosion of disposable incomes. Premium income, at $277.47 million was 847% up on prior year. This is reflective of the harsh economic environment in which companies are operating. Product innovation will remain a priority area going into the future.
Employee Benefits Division
Employee Benefits Division has continued to do well as a result of both new business acquisition as well as recurring business. Premium income for the period ended 31 December 2006 was $1 047.63 million, an increase of 1 219% on prior year while claims went up 1440% to $168.97 million.
Going forward, the Company will be aggressive on acquiring new business while at the same time ensuring that existing business is retained.
Premium Finance Division
The Division continues to contribute positively to the Company. We are currently exploring synergies within the Group. Performance during the period has continued to improve.
The Company’s balance sheet continues to strengthen due to organic growth as well as new business acquisitions, particularly in Employee Benefits Division. We will strive to ensure that the Company remains solid so that it can withstand the pressures inherent in an economy, which is hostile to business.
FIDELITY LIFE ASSET MANAGEMENT (PRIVATE) LIMITED (FLAM)
Since the restructuring exercise, which was undertaken in 2005, the Company has continued to make positive progress. Profit before tax for the period ended 31 December 2006 was $212.38 million, up from $3.8 million in 2005. Prospects for this Company are bright.
VANGUARD LIFE ASSURANCE LIMITED
The Malawi based subsidiary turned a profit before tax of $30.19 million. The Company was successfully turned around and is poised for continued positive growth.
ZIMBABWE ACTUARIAL CONSULTANTS (ZAC)
Profit before tax for the year ended 31 December 2006 amounted to $10.75 million, up from prior year figure of $491,700. The subsidiary continues to fight for business with other players in the industry, both locally and regionally.
The subsidiary posted a profit before tax amounting to $11.9 million. There is a need, however, to consider increasing the Company’s critical mass in order for it to meet the ever increasing demand for micro-financing. KU Finance has the potential of becoming one of the leading providers of micro finance in the Country.
FIDELITY LIFE MEDICAL SERVICES COMPANY (PRIVATE) LIMITED
There has been an improvement in terms of visibility of the Company in the market. Profit before tax for the period under review amounted to $24.44 million. We expect the Company to increase its presence in the market in 2007 and compete effectively with other players in the sector. Contribution to Group performance is expected to improve going forward.
At their meeting in December 2006, your directors decided to merge the Premium Finance Division, KU Finance and Fidelity Life Medical Services Company into Fidelity Financial Services effective 1 January 2007. There are synergies between the units with significant scope to optimize business growth whilst eliminating duplication of costs.
Your Board has resolved to award a final dividend of 25 cents per share. The dividend declared takes into account the need by the Group to exploit new investment opportunities, which have arisen as well as recapitalization of subsidiaries in the financial services industry in line with the regulatory requirements. The dividend was paid on 30 April 2007 to shareholders registered in the books of the Company at the close of business on 20 March 2007.
General economic decline is expected across the country and this is not likely to help the business community. Shortages of foreign currency, products supply shortages, inflationary pressures and a decline in the standards of living of the general populace will remain major challenges. We will, however, continue to pursue strategies that will ensure policyholders’, shareholders’ and other stakeholders’ interests are preserved.
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.