Equities bolster FMHL earnings

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First Mutual Holdings Ltd (FMHL) investment income grew 2 799% to US$12,9 million thanks to a surge in equities in the six months to June.

By Chris Muronzi

Chief Executive Douglas Hoto told analysts and journalists in the capital on Wednesday, equity investments had contributed US$11 million to total profits.

Hoto said his company was looking at restructuring its balance sheet to reflect more real assets and look at shorter-term fixed interest securities amid inflation fears.

“We are looking at restructuring some of our investments. Ideally, we want to hold on to monetary assets of a short-term nature,” he said.

The group’s operating profit, a measure of the group’s performance before factoring in the investment performance, went down 61% from US$4,2 million to US$1,6 million, owing to higher claims in the agriculture business in the reinsurance business and the health insurance unit.

But Hoto said the loss at the reinsurance business would be reversed in the next few years. FMHL’s gross premium written went up 1% in the same period helped by growth in the health, life, and property and casualty insurance businesses.

Rental income at its property business, First Mutual Property, declined by 8% from US$3,5 million in 2016 to US$3,2 million in 2017 owing to downward pressure review from tenants. Gross premium written for the health insurance business grew 8% to US$28,1 million H117 from US$26,1 million H116. First Mutual Health membership increased from 111 314 to 116 166.

Its life business, First Mutual Life Assurance Company, reported gross premium written of US$16,7 million for both life assurance and pension and savings, down 9%.

Tristar, the group’s short-term insurer, Tristar Insurance, gross premium written jumped 24% after the business retained the majority of its existing book and acquired new business.

Hot said a deal that will see his company acquire Nicoz Diamond was a plus for the company and would enable it to take a leading position in the short-term business.

“Like with any business, there is obviously risk attached to it. We are optimistic that the profit from the deal far outweigh the risk. This deal will ensure that we achieve our goal of becoming a force to reckon with in the short-term insurance business,” Hoto said.

“It would have taken us a number of years to grow the business organically. But in a few days, we will achieve our object for Tristar.”

Hoto says the current valuation of the company bears testament to the value management has been unlocking over the years.

“With the acquisition of Nicoz Diamond, your value is going to grow by leaps and bounds. So yes, there is definitely a lot of upside for the counter,” he said.

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