HomeBusiness DigestFidelity mulls shutting down funeral business

Fidelity mulls shutting down funeral business

Fidelity Life Assurance of Zimbabwe is mulling shutting down its funeral assurance business amid indications it has lost over 10 schemes and is seen sinking deeper into loss, businessdigest has established.

Chris Muronzi

At a meeting with staff to review product levels of the funeral business, chaired by Fidelity MD Simon Chapereka a few months ago, the unit was said to be operating at a loss.

“The required levels of productivity have not been achieved and fidelity funeral has a cumulative loss amounting to US$148,639 as at December 2013,” read documents seen by businessdigest.

“The purpose of the meeting was to also discuss the current level of performance and to come up with possible solutions to the problems that are currently affecting the level of productivity.”

Chapereka said the current level of income generated could no longer support the operations of the business.

He asked for a ideas from staff of the funeral assurance business on how to get the business out of the hole.

According to the document, a member of staff proposed to increase the assurance book, while another proposed to lower cost drivers — salaries, rental and depreciation.

“The employee recommended that strategic positions such as finance, marketing including all support staff, be placed under head office (Individual Life) as such employees work for both units,” the document reads.

But Chapereka shot down the proposal to move personnel to headquarters, arguing the life business was also facing operational challenges and could not take up extra financial commitment.

The Fidelity boss told management and staff to start producing results in order to break even.

Another member of staff recommended converting Fidelity Funeral Services into a division of Individual Life and not a standalone entity.

Chapereka acknowledged the recommendation and promised to review the suggestion.

He also shot down a suggestion for a sales team outreach, arguing the company’s financial performance did not allow such programmes.

At another meeting with staff also chaired by Chapereka to manage costs, the top executive proposed to review salary and benefits of all staff and closing the funeral services business if business did not improve.

All employees present at the meeting are said to have opted for a salary cut.

“The first option was go, review the salaries and benefits offered to all staff. A salary survey that was conducted within the funeral industry showed that the company was the highest paying company in the industry, followed by Nyaradzo. The chairman highlighted that salaries would be reduced to the level of those being offered by other competitors such as Moonlight Funeral Company. This therefore resulting in a reduction of salary for an initial period of 6 months,” read the document.

“The medical aid contribution was to be reviewed downwards, from the employer paying 75% of the medical aid contribution to 50%.”
Chapereka said Fidelity was willing to subsidise the company for a period of six months.

“Thereafter the second option (closure of Fidelity Funeral Services) may be exercised,” the document said.

All employees opted for a salary with no benefits.

In February, Chapereka said the business would report a loss of around US$396 000 this year.

It emerged this week that staff at Fidelity Funeral Services are headed for a bruising labour battle after management unilaterally cut salaries by over 50% and removed benefits.

Sources at the company said management had been mum on how the business was faring, prompting staff to approach the National Employment Council to intervene.

Total comprehensive income for the year to December 2013 stood at US$4,8 million up from US$4,1 million in the prior year.

The performance was after adding US$2,3 million classified as other comprehensive income, consisting of a revaluation of owner occupied properties and foreign exchange differences.

Premiums went up by only 3% to US$14,5 million because of liquidity challenges that have seen employers failing to pay premiums and individuals cancelling their policies.

Individual Life business reduced by 12% to US$2,8 million as a result. Group business and funeral assurance income contributed US$9,1 million and US$2,5 million to put total income at US$ 18,9 million, 7% down from US$20,3 million reported last year.

Total expenses for the period went down 14% to US$12,6 million, leaving an underwriting surplus of US$6,2 million. In 2012 the underwriting surplus stood at US$5,6 million.

Investment income however slid 16% compared to 2012 at US$5,7 million.

Total assets jumped to US$58,9 million, up from US$48 million in the prior year after a significant growth in current assets to US$27 million from US$22,8 million.

Investment properties were at US$21,2 million up from US$15,7 million in 2012.

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