Fidelity Life Assurance Company MD Simon Chapereka says the financial services group will not shut down its funeral assurance business.
Chapereka last week told businessdigest on the sidelines of Fidelity’s annual general meeting that following a rationalisation programme, the funeral unit was now out of the hole.
“We did a rationalisation exercise in March which entailed among other things lowering the unit’s cost structures. Essentially, after rationalisation the business started breaking even. So we have since become profitable,” he said.
“Business is very much alive.”
Management took a decision in March to cut salaries of employees in the funeral business. The unit was operating at a loss.
Fidelity Funeral had a cumulative loss of US$148 639 as at December 2013.
After Chapereka read the riot act to staff at the funeral business, the unit has reportedly shaped up. He said all business units in the group should be self sufficient and profitable.
“All we said is if you are a society medical aid, you have to be profitable. Each unit has to be profitable on its own,” he said.
His comments come after suggestions recommending the conversion of Fidelity Funeral Services into a division of Individual Life and not a standalone entity.
A meeting chaired by Chapereka a few months ago resolved to review salaries and benefits of all staff.
All employees opted for a salary with no benefits.
In February, Chapereka forecasted a loss of around US$396 000 this year for the funeral business.
It emerged last week that staff at Fidelity Funeral Services is headed for a bruising labour battle amid concerns the salary cut was for a period of not more than six months.
Management is said to have cut salaries by over 50% and removed benefits, a charge Chapereka denied.
“We have not cut salaries by 50%. We wrote a letter seeking permission to the National Employment Council (NEC) for the salary review,” he said.
Sources at the company said management had been mum on how the business was faring, prompting staff to approach the NEC 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.