OVER the past five years most people have been shunning insuring themselves owing to the fall in disposable incomes because of high inflation, which made it difficult to keep pace with changing values of the insured assets.
In their interim financial results ending June 30 2008, Zimnat said: â€œGoing forward the company will continue with its hunting strategies and focusing on profitable revenue growth and delivery of superior quality services to all its clients.â€
The strategies were however affected by rising inflation. They only showed signs of improving when the economy was dollarised during the last quarter of last year.
Zimnat traces its history back to 1974 when it was formed as a tobacco insurer. It then grew to the Farmers Union Insurance Company, and in 2001 it was listed on the stock exchange. It seems Zimnat â€œLionâ€ has never ceased hunting for lucrative opportunities.
After merging with AIG in 2005 and expanding its wings in Uganda, the insurance company has made it an â€œopen secretâ€ that it would continue â€œhuntingâ€ to maintain its market share as insurance companies scramble for a slice of the constantly dwindling cake.
Financial reporting compliance requires that inflation-adjusted results be published in Zimbabwe dollars. For the financial year ending December 31 2008, Zimnat was not able to produce Zimbabwe dollars inflation-adjusted results because inflation figures were last released by the Central Statistical Office (CSO) in July last year.
The insurance company only produced historical cost accounts which were audited by external auditors.
â€œIn order to provide stakeholders with some meaningful and reasonable information, the company produced supplementary financial statements in US dollars.
The supplementary statements were based on audited historical cost figures and were translated to US dollars on the basis of the convenience translation method as permitted by International Accounting Standard No 21 (IAS21) paragraph BC14,â€ said Zimnat in a statement accompanying its financial results.
The period under review saw a marked change for the non-life insurance business sector in the country. Consequently Zimnat had to adjust its business model in order to survive.
â€œThe realignment of the business model resulted in the company realising an operating profit if US$22 094 for the year under review,â€ Zimnat said.
The US dollar values were arrived at by converting the quoted Zimbabwe dollar using the Old Mutual Implied Rate (OMIR) as at November 17 2008 which was $646 quadrillion to US$1.
The Reserve Bank has recommended that financial institutions use a rate of $35 billion to US$1.
â€œBalances and transactions in the local currency were converted to the US dollar using a translation rate of $627 trillion to US$1,â€ Zimnat said.
The values of the investment properties were not adjusted for any impairment and were maintained at the US dollar values as at December 2007.
â€œEquity investment decreased significantly by 87% to US370 711 mainly due to the slump in value of listed equities impacted by the deteriorating local economic environment,â€ the company said.
There was no impairment suffered by the properties. As a result the values of the investment properties were maintained at prior year level.
The change reflected in the accounts is due to a reclassification of a property into fixed assets.
â€œThe shareholdersâ€™ equity was negatively affected by the decrease in value of the listed equities portfolio. Consequently, it fell by 55% from US$3,5 million in 2007 to US$1,6 million last year,â€ said Zimnat.
The company said the impairment of the balance sheet was likely to be reversed when the economic environment improves resulting in repricing of listed equities to reflect true underlying value of the investment.
â€œDuring the year under review, the company utilised net cash of US$5 257 in business operations. This was mainly due to the fact that the rate of conversion of the revenue stream into hard currency was slower than that at which the operating expenses were dollarised,â€ Zimnat said.
The groupâ€™s bank and cash balance at the end of the year was US$354 922 of which US$280 000 was in foreign currency accounts.
The sharp drop of investment income resulted in profit attributable to shareholders decreasing by 62% to US$781 644. Consequently the headline earnings per share fell to 0,4 cents in 2007.
BY PAUL NYAKAZEYA