CHAIRMAN’S STATEMENT

ECONOMIC OVERVIEW

The COVID-19 pandemic has continued to impact the global economy negatively and as indicated by the World Health Organisation, the world is likely to be dealing with the pandemic for an extended period of time. However, advanced economies have made strides towards returning to normal economic activity following the vaccination of a significant portion of their populations. The International Monetary Fund is projecting a 5.1% growth in Gross Domestic Product (GDP) for 2021 in advanced economies and 6% for the global economy. Developing and certain emerging market economies, however, have continued to incur greater economic losses due to limited access to vaccines and the resultant need to maintain lockdowns. During the first half of the year, Zimbabwe experienced a third wave of the pandemic following an outbreak of the more infectious Delta variant resulting in a spike in infections and deaths. The country understandably responded with a series of lockdowns that negatively impacted on the economy and social interaction. The Group has not been spared from the effects of these lockdowns and has implemented a suite of technological solutions to ensure that we continue to serve our clients while also participating in private sector led initiatives to improve access to COVID-19 vaccines.

The nation’s GDP, initially projected by the Ministry of Finance and Economic Development to grow by 7.4% in 2021, is now estimated to grow by 7.8%. The projected improved performance largely stems from the higher growth in the agricultural sector which is now expected to register growth of 34%, combined with growth in the construction, mining, distribution and health sectors. Manufacturing industry capacity utilisation is expected to recover to 56% in the second half of 2021 compared to 47% in 2020. According to the Zimbabwe National Statistics Agency, in the five months to May 2021, the country recorded imports of US$2.4 billion, 29.8% more than in the comparative period last year. On the export side, US$2.0 billion worth of exports were recorded, 31.4% higher than in the comparative period last year. It is encouraging to note that imports shifted more towards industrial raw materials, machinery and medicines compared to the more consumptive nature of imports recorded in the same period last year. Despite the negative trade balance, diaspora and grant aided institution inflows saw Zimbabwe maintaining a capital account surplus in the first half of 2021. The inflation rate significantly declined in the first half of the year from a year-on-year high of 362.6% in January 2021 to 106.6% in June 2021. The slow-down in inflation has been supported by a more stable local currency which has seen limited forward pricing by stakeholders in industry and commerce. However, the potential volatility of the Zimbabwe dollar remains a key risk as the Reserve Bank of Zimbabwe Dutch Foreign Currency Auction system has witnessed settlement delays and the resultant consequence of a widening of the premium between the official and alternative market exchange rates. This may result in increased rent seeking behavior that has the potential to derail the economic progress achieved thus far.

The Zimbabwe Stock Exchange (ZSE) All Share Index gained 135% during the first half of 2021, outpacing both inflation and exchange rate movements, resulting in real value gains for listed equity asset class holders. The Group has maintained its position that, in times of turbulence, quoted equities and other real assets remain a viable long-term asset class especially in light of exchange rate movements, resulting in currency volatility risk. The Group will continue to diversify its real assets portfolio with investments in areas such as private equity, property and foreign currency denominated equities.

REGIONAL DEVELOPMENTS

The Group, through NicozDiamond, followed its rights in the recapitalisation of Diamond Companhia de Seguros (“Diamond Seguros”) with capital injection of US$900,000, after 30 June 2021. The capitalisation will result in the company exceeding the revised minimum regulatory capital to operate in Mozambique.

FINANCIAL HIGHLIGHTS

In October 2019 the Public Accountants and Auditors Board concluded that conditions for applying International Accounting Standard (IAS) 29 – Financial Reporting in Hyperinflation Economies had been met in Zimbabwe. The historical cost financial results have been restated to take account of changes in the purchasing power of the local currency during the year. Inflation adjusted financial results therefore represent the main financial statements with historical cost financials provided as supplementary information.

FINANCIAL PERFORMANCE

Statement of comprehensive income
Gross Premium Written (“GPW”), 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 a marginal growth in United States of America Dollar (“USD”) values determined as at 30 June 2021 and converted to Zimbabwe Dollar (“ZWL”) at the prevailing auction rate. However, the ZWL depreciated by 6% against inflation movement of 21%, hence the fair value loss of $1.6 billion to 30 June 2021.

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.

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.

Statement of financial position
The Group’s total assets appreciated in value by 2% from 31 December 2020 to 30 June 2021. The growth is mainly attributable to the fair value adjustment on listed equities.

SUSTAINABILITY

We remain committed to providing sustainable financial services which are responsive to emerging trends and risks faced by our clients. During the six months ended 30 June 2021, the Group made significant progress towards commissioning of the First Mutual Park solar power project. The Group remains optimistic of opportunities for business growth in the foreseeable future.

FIRST MUTUAL IN THE COMMUNITY

First Mutual continues to actively contribute to the community in which we operate. We contributed to the national effort to mitigate the impact of COVID-19 through the First Mutual Health vaccination program which provided assistance in resourcing local government clinics.

In addition, we continue to provide educational assistance to selected children in need from primary school to tertiary level through the First Mutual Foundation and the First Mutual Reformed Church University Scholarship based on humanitarian needs and academic merit. The Group is also playing a key role in equipping university students with financial literacy education through its Future First programme and providing support to cancer awareness programs.

OUTLOOK

The Ministry of Finance and Economic Development is projecting that the economy will recover, with growth projections of 7.8% in 2021 led by recovery of the agriculture sector supported by monetary and fiscal stability. The International Monetary Fund’s recent allocation of Special Drawing Rights to mitigate against the impact of COVID-19 will enhance recovery prospects.

The vaccination drive by the Government of Zimbabwe is expected to further alleviate the impact of COVID-19 and result in the opening up of the economy. The Group will continue to leverage on its diverse business portfolio, strategic partnerships, as well as its regional footprint to sustain a positive growth trajectory in the future.

DIRECTORATE

There were no changes to the directorate during the period under review.

DIVIDEND

On 10 September 2021 the Board resolved that an interim dividend of $35 million, being 4.82 Zimbabwe cents per share, be declared from the profits of the Company for the six months ended 30 June 2021. The dividend will be payable on or about 15th October 2021 to all shareholders of the Company registered on the close of business on 8th October 2021. The shares of the company will be traded cum-dividend on the ZSE up to 5th October 2021 and ex-dividend as from 6th October 2021.

APPRECIATION

On behalf of the Board, I would like to extend my gratitude to our customers, regulators and other stakeholders for their support during the extraordinarily challenging period under review mainly due to COVID-19. We especially appreciate the commendable efforts by employees for their seamless adjustment in executing their duties in a challenging environment. Keep it up. Finally, I wish to thank my fellow board members for their open and honest contributions in our board deliberations, their guidance and support for management and above all, their wisdom. I thank you.

Amos Manzai
Chairman
10 September 2021

Directors: A RT Manzai (Chairman), D Hoto* (Group Chief Executive Officer), WM Marere” (Group Finance Director) G Baines, F Mabena, M Mangoma, A Masiiwa, E Mkondo, EK Moyo, M Mukondomi, S V Rushwaya (* Executive Director)

FIRST MUTUAL HOLDINGS LIMITED, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P 0 Box BW 178, Borrowdale, Harare Tel: +263 (242) 886 000 – 17 | E-mail: [email protected] | Website: www.firstmutual.co.zw

Abridged Financial Results for the Six Months Ended 30 June 2021.pdf