ZIMRE Holdings Ltd’s (ZHL) subsidiaries reported mixed fortunes during the interim period ending June 30 with Fidelity Life and Zimre Property Investments (ZPI) posting profits while NicozDiamond recorded a loss.
The three subsidiaries’ MDs, Grace Muradzikwa (NicozDiamond), Edson Muvingi (ZPI) and Fidelity Life’s Simon Chapereka said rising costs, liquidity constraints and stiff competition were placing pressure on profit margins for the three companies.
Muradzikwa, whose company recorded losses during the interim period to June 30, provided an overall view of the operating environment.
Nicoz Diamond recorded a pre-tax loss of US$1,1 million compared to US$1,2 achieved during the same period last year.
Gross premium written was US$8,3 million compared to US$5,9 million, while earned premiums was US$4,8 million against US$1,8 million.
When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. Insurance companies often purchase reinsurance to protect themselves against the risk of a loss above a certain threshold; the cost of reinsurance (reinsurance premiums) is deducted from gross premiums written to arrive at net premiums written.
The company’s balance sheet grew to US$16, 2 million from US$11, 5 million last year.
“Depressed financial market performance had a big impact on all our businesses,” Muradzikwa said.
“This is where we were all focusing before, but we have now had to look at the money market, where the returns have also been thinning. There are also risks associated with some of the instruments, which is an issue when dealing with policyholders’ funds,” she said.
Chapereka said Fidelity, which recorded the steadiest results of the three, was “reasonably satisfied” with the outcome given the challenges over the past year as many companies were still not remitting pensions.
The subsidiary’s underwriting surplus rose to US$786 267 from US$208 309. Pre-tax profit at $904 693 was up 46% from US$620 031.
The company’s balance sheet grew by US$3 million to US$19,6 million from US$15,6 million.
ZPI MD Muvingi said rental collections averaged 74% in the period, compared with 65% last year.
The average yield had risen to 6% from 3,5%, with rent continuing to average at $5/sqm. He said the group would be shifting its focus from renal collection to projects as liquidity remained an issue and there was resistance to further increases. Rental income had risen only 7% in the period.
“We cannot continue to increase rentals because the ability to pay is not there. We will focus on development. The entry level is about stands, high and medium density,” he said.
ZPI’s revenue rose $1,2 million from US$1,1 million, while operating profit increased to US$738 767 from US$709 176.
Pre-tax profit rose to US$401 993 from a loss of US$385 228.