First Mutual Holdings Limited (FMHL.zw) HY2021 Presentation
Economic Overview – Zimbabwe
- Relatively more stable inflation, higher disposable incomes and improved aggregate demand.Y-o-Y inflation was 106.6% as at 30 June 2021 mainly driven by exchange rate depreciation and the re-alignment of prices to the exchange rate. Y-O-Y inflation has since slowed to 50.2% as at August 2021 however exchange rate volatility still threatens declining inflation trend.
- The average returns on plain money market investments in the first half of the year improved slightly to 17.6% compared to 13% at year the beginning of the year.
- Reserve Money Supply Growth at the close of HY 2021 at ZW$24.45bn reflected a 30.3% YTD growth. YTD up to September 2021, Reserve Money Supply growth has been 47.2% to ZW$27.2bn.
- The RBZ foreign exchange rate as at 30 June 2021 was USD1:ZW$85.4234 representing a 4.4% movement of the ZW$:US$ exchange rate since the beginning of the year.
- ZSE All Share Index returned 135% in the first half of the year versus YTD inflation of 20.7%. The above inflationary return was attributed to
- Investors hedging against currency weakness.
- Equity market price correction from perceived undervaluation.
- Improved cash liquidity on the local bourse.
Economic Overview – Botswana
- The International Monetary Fund estimates Botswana’s GDP growth at 7.5% in 2021 (2020: -8.3%).
- Real GDP in 2021 is projected to expand by 7.5% in 2021 due to a recovery in Tourism and resurgent demand for diamonds.
- Year-on-Year Inflation was 8.2% as at June 2021 (FY 2020: 2.2%).
- The aggressive growth in inflation reflects the base effects associated with the reduction in domestic fuel prices in June 2020 and the increase in water tariffs in June 2021.
Economic Overview – Impact on FMHL Operations
- Consolidated GPW growth of 411% ahead of average year-on-year inflation for period of 231% due to:
- Increased business in property & casualty sector – NicozDiamond, FMRE Zimbabwe and FMRE Botswana
- FML Employee Benefits – real increase in pension contributions and Group Life Assurance premiums as employers continued to adjust salaries to address erosion of earnings after transition to ZWL in 2019
- FML Individual Life – Recovery as customers adjusted funeral policy covers to match actual funeral costs
- Premium adjustments at First Mutual Health in an effort to meet rapidly increasing health service costs
- Increased USD revenue (H1 2021 – USD24m vs H2 2020 – USD15m) as more clients elected to fully protect their assets through USD insurance value covers
- Higher retrocession ratio following the writing of more USD business as the Group builds up its USD asset base
- Higher claims ratio at First Mutual Health due to medical services inflation exceeding general inflation
- Above inflation increase in administration and property expenses as ZWL costs grew in real terms after a steep drop in USD terms in 2019 and 2020 due to hyperinflation.
- Above inflation growth in investment income on listed equities in line with ZSE Industrial Index movement
- Increased share based compensation costs in line with share price movement
- Lower exchange gains in line with the more stable ZWL during the first half of 2021
