Fidelity life assurance of Zimbabwe (Fidelity) after tax-profit slumped 56% in the full year to December 2016 to US$2,3 million owing to declining revenues from housing stand sales and higher finance costs.
Fidelity’s latest financial results show total revenues went down by about US$19 million compared to the same period in 2016 mainly driven by a decline in revenues from the sale of residential stands amounting to about US$18,5 million on prior period.
Stands sales contributed a mere US$4,4 million in FY16 from US$20 million in FY15 to total revenues.
Finance costs rose from US$400 000 in FY15 to US$2 million in FY16.
Fees and commission income also went down significantly from US$1,4 million to US$907 000 while investment income fell from US$1,7 million to US$366 000.
“With the Southview Park project now at its final stages, income from sale of stands was lower than 2015,” group chairman Fungayi Ruwende said in a statement accompanying the unaudited abridged consolidated financial statements.
The group recorded net insurance premiums of US$14,8 million, down from US$16,6 million in FY15 as the difficult operating environment impacted on the group’s premium income generation and collection ability.
“The insurance sector continues to be affected by high claims, low uptake of products, cancellations, policy surrenders and failure by employers to remit contributions deducted from employers,” Ruwende said.
Basic earnings per share attributable to the ordinary equity holders of the parent fell from US4,74 cents to US1,64 cents.
Giving an update of the forensic audit outcome, Ruwende said the report by KPMG Chartered Accountants at the instigation of the insurance regulator Ipec made unfavourable findings on corporate governance deficiencies, compliance with prescribed asset thresholds, merging of funeral and life businesses, recognition of income from sale of stands, [profit allocation between policy holders and shareholders as well as systems of internal control on the administration of the Fidelity Southview Park residential stands project.
Fidelity South View Park consists of about 6 000 stands averaging 240 square metres and is expected to generate at least US$60 million in revenues.
“In consultation with Ipec and the new auditors, the board has taken action to correct the issues which were raised and significant strides have been made to strengthen the group’s policies, systems of internal control, various operating procedures, and taken appropriate provisions,” said Ruwende.
“The board has also made changes to management and is in the process of recruiting a substantive CEO and financial director,” added Ruwende.