Mozambican operations steer Zimre profitabilty

Melody Chikono

ZIMRE Holdings’ profitability in FY 2019 was driven mainly by the growth in the reinsurance business, which was more pronounced in its Mozambican operations, as well as significant property revaluations following the change in functional currency.

The strong top line performance was achieved in the Mozambique reinsurance business, where the operation has a foothold in the country’s market by virtue of its physical presence and is making inroads into other Portuguese-speaking countries on the African continent.

In the company’s annual report, group CE Stanley Kudenga said strong revenue performance of the regional operations resulted in the narrowing of losses when compared to the prior year.

The Botswana reinsurance operation also recorded modest growth and could have achieved better results had it not been for its low capital base, while the performance of the Zambian-based reinsurance operation was subdued, mainly due to market-wide structural issues, including the harsh economic environment, externalisation of risks, internal competition, collection challenges and the closure of some direct insurance companies in that market.

“The domestic reinsurance and reassurance operations sustained an upward business growth trajectory despite operating in an extremely difficult business environment, thus testifying to the relatively strong financial position and positive impact of mono-rebranding,” Kudenga said.

Although Emeritus Re Mozambique’s performance for the first five months of 2020 was trailing behind its budget due to the existence of a soft insurance market and Covid-19 induced travel restrictions which impeded marketing activities, the operation is optimistic that business growth in 2020 will surpass the 2019 level.

A reasonable profit is also envisioned on account of the increasing contribution of the business from the external market (54% in Q2) particularly the niche markets developed by the company in Francophone and Portuguese speaking countries and cost savings emanating from reduced marketing activities.

“Though at a slower pace, the implementation of the gas projects in Mozambique is going ahead and is giving impetus to the growth of downstream infrastructure projects and industries resulting in overall economic growth and demand for insurance cover,” he said in a trading update.

“Emeritus Re Malawi recorded gross premium of K1,85 billion (approximately US$2,4 million) as at May 31, 2020, which was above prior year performance against the backdrop of increased new business acquisitions in fire and motor portfolios. Modest profitability is expected in 2020 despite the downside risks emanating from the Covid-19 pandemic outbreak on account of the control of expenses, sound underwriting and an anticipated favourable claims experience.”

At K24,1 million (US$13 million) for the five months ended May 31, 2020, gross premium written by Emeritus Re Zambia was in line with the budget and 55% above the business written in the same period in 2019, mainly due to the depreciation of the Zambian Kwacha.

Cash collections improved significantly following the adoption of premium warranties on business written adopted in the market.

Emeritus Re Botswana’s performance was generally in line with budget in most key result areas and profitable on account of a favourable claims experience and implementation of cost containment measures.

Going into the future, the impact of the Covid-19 pandemic on the group’s performance is expected to be mild, given the different responses to contain the disease and stimulate economic recovery in each country where the group has operations.