Preliminary Report -
Abridged Financial Results
For The Period Ended 30 June 2023
SHORT-FORM FINANCIAL RESULTS
This short form financial announcement is the responsibility of the Directors which has been issued in terms of the Zimbabwe Stock Exchange (ZSE) Practice note 13.
This announcement is only a summary of the information contained in the full preliminary report of the abridged consolidated financial statements for the six months ended 30 June 2023. Any investment decision by investors and/or shareholders should be based on consideration of the preliminary report of the abridged consolidated financial results for the six months ended 30 June 2023. The abridged consolidated financial statements have been released on the ZSE Data Portal: WWW.ZSE.CO.ZWand the Company's website: https://firstmutualholdingsinvestor.com/. The full preliminary report is available for inspection, at no charge, at the registered offices of First Mutual Holdings Limited at the office of the Company Secretary on working days between 8:00am and 4:30pm.
Comprehensive Income and Cashflow highlights
Inflation adjusted | Historical cost | |||||
30-Jun-2330-Jun-22 | Growth | 30-Jun-23 | 30-Jun-22 | Growth | ||
ZWL million | ZWL million | % ZWL million | ZWL million | % | ||
Insurance contract revenue | 199,510 | 97,329 | 105% | 106,414 | 12,519 | 750% |
Insurance service result | 29,975 | 32,491 | -8% | (18,334) | 2,997 | -712% |
Net fair value gains - investment property | 510,343 | 141,016 | 262% | 746,663 | 55,997 | 1,233% |
Net Investment return | 109,276 | 6,046 | 1,707% | 159,347 | 8,810 | 1,709% |
Profit/ (loss) after tax | 386,377 | (2,001) | 19,409% | 486,668 | 34,040 | 1,330% |
Basic earnings per share (ZWL) | 305 | (14) | 2,279% | 358 | 26 | 1,277% |
Headline earnings per share (ZWL) | 305 | (14) | 2,279% | 358 | 26 | 1,277% |
Financial Position highlights | ||||||
Inflation adjusted | Historical cost | |||||
30-Jun-2331-Dec-22 | Growth | 30-Jun-23 | 31-Dec-22 | Growth | ||
ZWL million | ZWL million | % ZWL million | ZWL million | % | ||
Total assets | 1,490,838 | 697,165 | 114% | 1,454,711 | 220,005 | 561% |
Shareholder equity | 337,872 | 140,770 | 140% | 298,662 | 71,230 | 319% |
Total equity | 585,942 | 237,668 | 147% | 543,165 | 100,197 | 442% |
Total Liabilities | 904,896 | 459,497 | 97% | 911,546 | 119,807 | 661% |
DIVIDEND ANNOUNCEMENT
On 13 September 2023 the Board resolved that an interim dividend of 0.068 US cents per share amounting to USD500,000 be declared from the profits of the Company for the half year ended 30 June 2023. Further details on the payment of the dividend will be communicated in a separate dividend announcement.
AUDITOR'S STATEMENT
The audit review of the Group is incomplete pending the finalisation of the Insurance and Pension Commission forensic investigation currently underway at one of the Group's significant subsidiaries, First Mutual Life Assurance Company.
Amos Manzai
Chairman
13 September 2023
SUPPLEMENTARY INFORMATION - UNITED STATES DOLLARS | |||
Comprehensive Income and Cashflow highlights | |||
30-Jun-2330-Jun-22 | Growth | ||
USD000 | USD000 | % | |
Insurance contract revenue | 62,036 | 53,884 | 15% |
Insurance service result | 10,184 | 10,120 | 1% |
Net fair value gains - investment property | 5,563 | 38 | 14541% |
Net Investment return | 4,963 | (8,601) | 158% |
Profit/ (loss) after tax | 9,211 | (1,510) | 710% |
Financial Position highlights | |||
30-Jun-2331-Dec-22 | Growth | ||
USD000 | USD000 | % | |
Total assets | 219,493 | 197,706 | 11% |
Shareholder equity | 60,173 | 54,120 | 12% |
Total equity | 92,459 | 84,859 | 9% |
Total liabilities | 127,034 | 112,847 | 13% |
Directors: A R T Manzai (Chairman), D Hoto* (Group Chief Executive Officer), W M Marere* (Group Finance Director) G Baines,
F Mabena, M Mangoma, A Masiiwa, E Mkondo, E K Moyo, M Mukondomi, I P Z Ndlovu, S V Rushwaya (* Executive Director)
FIRST MUTUAL HOLDINGS LIMITED, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P O Box BW 178, Borrowdale, Harare
Tel: +263 (242) 886 000 - 17 | E-mail: info@firstmutualholdings.co.zw | Website: www.firstmutual.co.zw
ADRENALIN
Preliminary Report - Abridged Financial Results
For The Period Ended 30 June 2023
CHAIRMAN'SSTATEMENT
ECONOMICOVERVIEW
During the first half of the year macroeconomic developments continued to be negatively impacted by price and exchange rate volatility, particularly in Q2 2023. Significant policy interventions were implemented by Government towards the end of the period aimed at stabilising the Zimbabwe dollar and reducing inflationary pressures. However, the impact of these measures is likely to be fully felt post June 2023. Blended annual inflation had increased to 175.8% as at June 2023 compared to 101.5% in January 2023 and the ZWL also lost its value as the official exchange rate advanced from USD1:ZWL669 to USD1:ZWL5,739 by the end of the period. The Government revised its GDP growth estimates for 2023 from 3.8% to 5.3% on the back of better than anticipated agricultural output from tobacco. Moreover, the Reserve Bank of Zimbabwe expected the blended annual inflation to close the year at between 60%-70% from an initial estimate of between 10%-30%. The ratio of USD to ZWL bank deposits rose to 80%:20% in the first half of 2023 compared to a ratio of 64%:36% last year.
As the local economy increasingly dollarised, FMHL continued to expand its USD based product portfolio to maintain product relevance. In addition, the Group maintained its stance of diversifying its pool of investment assets with a skew towards real assets to minimise the impact of the volatility i in the macro-economic environment. Save for the VFEX listed equities, there was a positive real return on the remaining components of the investment portfolio, including ZSE listed shares, investment property and alternative investments.
FIRSTMUTUALLIFEFORENSICINVESTIGATION
During 2022, the Insurance and Pensions Commission (IPEC) instituted a forensic investigation on First Mutual Life Assurance Company (FML), a subsidiary of FMHL. The forensic investigation related to the separation of assets between the policyholders and shareholder during the period 1 February 2009 and 31 December 2021. The investigation formally commenced on 26 August 2022 following the appointment of BDO Zimbabwe to conduct the exercise. On 10 May 2023, FML received a copy of the forensic investigation report from IPEC. At the direction of IPEC, FML submitted its response to the forensic investigation report to the Ministry of Finance on 8 June 2023.
As at the date of issuing these results, the half year audit review of the Group interim financial statements is incomplete pending the finalisation of the forensic investigation and, consequently, the Group will not be in a position to publish audit reviewed financial statements in line with the Zimbabwe Stock Exchange listings requirements and approved timelines. In the interim, the board of directors, in consultation with the ZSE, has decided to publish the financial information in the form of a preliminary report.
IFRS17REPORTING
The International Financial Reporting Standard IFRS17 - Insurance Contracts (IFRS 17) was issued by the International Reporting Standards Board in May 2017. This standard replaced IFRS 4 on accounting for insurance contracts effective 1 January 2023. IFRS 17 requires a company to measure insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to insurance contracts. This requirement will provide more transparent reporting on the financial position and risk of insurance entities. The Group financial highlights and performance have been analysed in line with the requirements of this new standard.
FINANCIALHIGHLIGHTS
In October 2019 the Public Accountants and Auditors Board concluded that the conditions for applying International Accounting Standard IAS 29 - Financial Reporting in Hyperinflation Economies had been met in Zimbabwe. The historical cost financial results have been restated to consider changes in the purchasing power of the local currency during the year. Effective February 2023, the Zimbabwe National Statistics Agency ( ZimStat) ceased the publication of the ZWL Consumer Price Indices (CPIs) and replaced them with the weighted average consumer price index also known as blended indices in line with the Statutory Instrument 27 of 2023 which requires the inflation rate to be calculated as the weighted average of the ZWL and USD rates. This created challenges for financial reporting purposes as the weighted average consumer price index does not comply with the International Accounting Standard (IAS) 29 which requires the use of a General Price Index (GPI) of the hyperinflationary currency (ZWL) as a basis of restatement. FMHL has continued to apply IAS 29 for the half-year ended 30 June 2023 with the CPI estimated using the Total Consumption Poverty Line (TCPL) movement. The inflation adjusted financial results therefore represent the main financial statements with historical cost financials provided as supplementary information:
Comprehensiveincomehighlights | ||||
Inflation adjusted | Historical cost | |||
30-Jun-2330-Jun-22 | 30-Jun-2330-Jun-22 | |||
ZWL000 | ZWL000 | ZWL000 | ZWL000 | |
Insurance contract revenue | 199,509,637 | 97,329,185 | 106,413,926 | 12,519,290 |
Insurance service result | 11,294,327 | 31,909,264 | (37,014,490) | 2,878,488 |
Rental income | 7,993,506 | 3,689,916 | 3,715,096 | 489,923 |
Net Investment return | 109,275,636 | 6,046,006 | 159,347,140 | 8,809,483 |
Profit/(loss) after tax | 386,377,001 | (2,000,981) | 486,668,413 | 34,039,943 |
Financial position and Cashflow highlights | ||||
Inflation adjusted | Historical cost | |||
30-Jun-2331-Dec-22 | 30-Jun-2331-Dec-22 | |||
ZWL000 | ZWL000 | ZWL000 | ZWL000 | |
Total assets | 1,367,311,128 | 606,413,469 1,341,292,649 193,725,861 | ||
Total equity | 585,942,075 | 237,668,168 | 543,165,432 | 100,197,445 |
Investment contract liabilities | ||||
without DPF | 23,163,505 | 10,110,043 | 23,163,505 | 3,240,398 |
Share performance | ||||
Inflation adjusted | Historical cost | |||
30-Jun-2330-Jun-22 | 30-Jun-2330-Jun-22 | |||
Market price per share (ZWL) | 141 | 24 | 141 | 24 |
Basic earnings per share (ZWL) | 305 | (14) | 358 | 26 |
Headline earnings per share (ZWL) | 305 | (14) | 358 | 26 |
FINANCIALPERFORMANCE
STATEMENTOFCOMPREHENSIVEINCOME
Insurance contract revenue
During the period under review, Insurance Contract Revenue (ICR) at $199.5 billion, grew by 105% compared to prior year (a growth of 750% to $106.4 billion compared to the prior year in historical cost terms). The growth in comparison to the same period last year was largely driven by the continued revaluation of ZWL insurance policy values to ensure adequate cover for clients as well as a migration of more policies to the USD for value restoration in case of the occurrence of an insured event. The proportion of the USD business being written by the Group constituted 74% of the total ICR at USD 45.8 million.
Insurance service result
The Insurance service result declined by 65% to $11.2 billion compared to the prior year (1,379% to a negative insurance service result of $37.1 billion compared to prior year negative result of $2.9 billion in historical cost terms). The deterioration was as a result of increases in direct insurance expenses despite the growth in ICR as well as significant foreign denominated business written mostly in Q1 2023 and translated to ZWL at a lower exchange rate against the claims expenses that were settled at a higher exchange rate during the course of the period as the ZWL rapidly depreciated. The underlying pure USD business was profitable.
Rental income and Investment return
During the period under review, rental income grew by 117% to $7.9 billion compared to the prior year (658% growth to $3.7 billion compared to the prior year in historical cost terms). The growth arose from a combination of factors which included a migration to the USD denominated leases as well as inflation driven adjustments on ZWL rentals. The occupancy levels stood at 88.10% compared to prior year of 89.99% and the average rental/square metre was $4.02/ square metre compared to prior year of $3.3/ square metre. The overall Group net investment returns amounted to $109.3 billion ($159.3 billion in historical cost terms) that was 1,701% above prior year. The positive investment outturn was mainly due to fair value gains on the ZSE and the ZWL depreciating at a faster rate than the USD fair value losses on the VFEX.
Profit for the period
The Group achieved a profit for the period of $386.4 billion which represented a 19,409% increase relative to the prior year (a growth of 1,330% to $486.7 billion compared to the prior year in historical cost terms). The increase is attributable to the increases rental income, net fair value gains in investment properties and listed equities.
STATEMENTOFFINANCIALPOSITION
The Group's total assets grew by 125% to $1.4 trillion in inflation adjusted terms and 591% to $1.3 trillion in historical cost terms compared to 31 December 2022. The growth in both inflation adjusted and historical cost terms was mainly driven by positive fair value adjustments on investment properties and the impact of the depreciation of the ZWL on USD denominated current assets including balances with banks, insurance contract assets.
In recent periods, the investment properties have witnessed significant growth in Zimbabwe dollar values and this was the case for the period under review. The ZWL continued to decline in comparison to the USD for the period under review, which had an impact in the forward- looking information utilised in the valuations by property experts, hence the net fair value gains of $510.3 billion in inflation adjusted terms and $746.6 billion in historical cost terms. The total investment property value grew by 147% compared to last year in inflation adjusted terms and 670% in historical cost terms.
SUSTAINABILITY
The Group has prioritised the sustainability agenda not only from a risk management perspective but also considering the various aspects in Group operations that include value creation and maximisation, potential growth and compliance with reporting requirements as well as fulfilling the good corporate citizenry mandate as a governance tool. The Group's objective to create sustainable economic value is a pillar of our corporate strategy and core values.
In order to achieve the above, the Group makes an allowance for environmental, social and governance ("ESG") aspects in its strategy. FMHL has also laid out processes to ensure that the impact of sustainability is not only limited to core operations but also stretches to other areas of the business.
FIRSTMUTUALINTHECOMMUNITY
First Mutual continues to actively support the communities in which we operate including the ongoing provision of educational support through the First Mutual Foundation to deserving students from disadvantaged backgrounds. This includes tuition fees, stationery, laptops, uniforms and other ancillary support as necessary. The recipients are spread across primary and secondary schools as well local universities.
As part of expanding the tertiary bursary programme, FMHL partnered with Africa University and established the First Mutual Scholarship Fund, which supports an additional 6 students under this initiative which is cognisant of the Group's diversity policy and incorporates students with vulnerabilities.
Additional community support was implemented through donations to charitable causes as well sponsorship of industry bodies as the Group believes that this is an integral part of thought leadership and capacitating industry to ensure a vibrant and sustainable business environment.
OUTLOOK
The strategic assumptions for the outturn of the economic environment have remained largely unchanged however policy fluidity may lead to temporary negative outcomes during the realignment period. With that background, the various business units within the Group will deploy their strategies accordingly and adjust as appropriate to new policy measures but maintaining the aim to achieve sustainable real growth into the future. FMHL will continue to pursue value enhancing initiatives such as investments in real assets to preserve and grow the net assets of the Group.
DIRECTORATE
There were no changes to the directorate during the period under review.
DIVIDEND
On 13 September 2023 the Board resolved that an interim dividend of 0.068 US cents per share amounting to USD500,000 be declared from the profits of the Company for the half year ended 30 June 2023. Further details on the payment of the dividend will be communicated in a separate dividend announcement.
APPRECIATION
On behalf of the FMHL Board, I would like to thank our clients and stakeholders for their continued support. I also extend my appreciation and gratitude to FMHL employees and management for their commitment to serve our clients and ensuring that the Group continues to adapt to operate sustainably in a challenging environment. I would also like to extend my gratitude to my fellow board members for their continued support, including their valuable contributions, insight and guidance to management as we pursue the realisation of the Group's strategy.
Amos Manzai
Chairman
13 September 2023
GROUPCHIEFEXECUTIVEOFFICER'SREVIEWOFOPERATIONS
The operating environment continued to be volatile with high inflation and a depreciating local currency during the review period. The country experienced significant Zimbabwe dollar exchange rate depreciation between May and June 2023 driven by both demand and supply factors. The demand factors mainly reflected elevated demand for foreign currency for purposes of value preservation. The effect of the high demand for foreign currency on the economy was coupled with the sudden decline in the demand for local currency. The measures instituted by the Reserve Bank of Zimbabwe (RBZ), which included further liberalisation of the exchange rate, tighter monetary policy and the introduction of gold-backed digital tokens bore fruit as evidenced by the recovery of the ZWL and relatively stable exchange rate. As at 30 June 2023, the exchange rate stood at USD1:ZWL5,739 compared to USD1:ZWL4,516 at 31 July 2023. The blended month-on-month inflation moved in sympathy with exchange rate with a steep increase from 15.7% in May 2023 to 74.5% in June 2023 followed by a significant reversal in July 2023 to minus 15.3%. Similarly, the blended annual inflation, which had risen from 86.5% in May 2023 to 175.8% in June 2023, fell to 101.3% in July 2023.
During the first half of the year 2023 the Zimbabwe Stock Exchange (ZSE) registered nominal gains which tended to track money supply dynamics rather than fundamental corporate performance. The ZSE registered a return of 779.3% which was behind both official and alternative market exchange rate movements for H1 2023. The Victoria Falls Stock Exchange (VFEX) All Share Index was characterized by bearish sentiments during the period and declined by 23.1% in the first 6 months of the year.
This was despite its market capitalization rising due to new listings on the bourse.
The Botswana economy continues to be stable despite the BWP weakening against the USD. In Mozambique, the economy has maintained signs of growth as evidenced by a stable exchange rate and declining inflation.
OPERATIONSREVIEW
The commentary below relates to the unconsolidated performance of each business unit in both inflation adjusted and historical cost terms for the period ended 30 June 2023. All the figures are in ZWL except where another currency is indicated.
LIFEANDHEALTHCLUSTER
First Mutual Life Assurance Company (Private) Limited
Insurance contract revenue ("ICR") for the period amounted to $15.7 billion in inflation adjusted terms which was 343% above the prior year $0.7 billion in historical terms representing a growth of 1,457% against the prior year). The year-on-year growth in the ICR was driven by the regular revisions in sums assured with the objective of retaining the value of policyholder benefits. Growth in premiums from the retail segment was largely due to significant growth in USD denominated premiums on the Eternal Life Plan and E-FML Gold Funeral products. In the corporate segment, growth in premiums was attributable to growth in the Group Life Assurance portfolio arising from new business and organic growth. The organic growth stemmed from the effect of employee salary increases, as employers sought to attain the target financial security benefits of this product.
The business achieved a profit for the period of $103.8 billion in inflation adjusted terms that reflected a growth of 202% compared to the prior year and a 1,257% growth in historical cost terms to $132.8 billion. The profit after tax growth was driven by increases in premiums as noted above and net investment returns (investment property and quoted and unquoted equities).
First Mutual Health Company (Private) Limited
For the period ended 30 June 2023, the business achieved an ICR of $82.1 billion which represented a growth of 117% compared to prior year in inflation adjusted terms (in historical cost terms the ICR grew by 714% to $40.3 billion). The growth in both inflation adjusted and historical cost terms was largely driven by the regular exchange rate linked reviews to premiums in response to increased medical benefit costs in order to cushion members from the negative impact of shortfalls driven by price increases effected by medical service providers. There were also modest adjustments of USD premiums on account of rises in USD costs of medical benefits by service providers. There was a gradual growth in pure USD medical policies as members are migrating to a more stable product.
The unit generated a profit for the period ended 30 June 2023 amounting to $33.1 billion in inflation adjusted terms representing a growth of 1,410% against prior year. In historical cost terms, the profit for the period amounted to $41.8 billion, 2,319% higher than the prior year. The positive outturn arose from significant fair value gains on the equity portfolio and a positive operating result.
The business continues to roll-out medical services facilities (clinics, pharmacies, dental and optometry services) as a long-term strategic priority. Our objective in this space is to complement government efforts to provide greater access to Zimbabweans to quality healthcare at affordable prices.
GENERALINSURANCECLUSTER
NicozDiamond Insurance Limited
The ICR grew by 35% to $44.1 billion in inflation adjusted terms and 465% to $23.2 billion in historical cost terms. The revenue increase was primarily a function of increased migrations to USD denominated policies, organic growth as well as the continued review of statutory covers in line with exchange rate linked reviews.
The business recorded a profit for the period ended 30 June 2023 in inflation adjusted terms of $49.6 billion which represented a growth of 78% against the prior year. The historical cost terms profit for the period amounted to $23.9 billion a 3,003% rise above the prior year. The improved performance was mainly driven by a notable growth in the ICR as well as growth in net fair value gains in equities and investment properties.
Diamond Seguros - Mozambique
Diamond Seguros recorded an ICR of $4.2 billion which was 133% above the prior year in inflation adjusted terms (55% growth to $0.6 billion in historical cost terms). The growth was mainly driven by continued improvements in broker business reflecting increasing market confidence. In Mozambican Metical (MZN) terms, an ICR growth of 57% to MZN99.9 million was recorded compared to prior year.
REINSURANCECLUSTER
FMRE Property and Casualty (Proprietary) Limited - Botswana
The ICR for the period went up by 169% to $40.4 billion in inflation adjusted terms and 977% to $22.6 billion in historical cost terms. In Botswana Pula (BWP), the year-on-year growth was 16% at BWP134.4 million compared to BWP116.3 million in the prior year. The double-digit growth was partly attributable to improved local and international treaty participation and growth of specialist lines of business under the casualty segment. The BWP stood at USD1:BWP12.9 to the USD at the beginning of the year, closing at USD1: BWP13.5 as at 30 June 2023, shedding almost 5% of its total value against the USD. However, this movement in the exchange rate was lower than the growth in the ICR in both BWP and ZWL terms.
First Mutual Reinsurance Company Limited - Zimbabwe
The business recorded an increase of 447% to $20.4 billion in the ICR in inflation adjusted terms and 1,936% to $11.1 billion in historical cost terms for the period ended 30 June 2023. The increase in ICR was attributed to the significant increases in demand for USD policies by clients, which consequently led to more business for reinsurers as there was limited USD underwriting capacity at local direct insurers.
The business achieved an inflation adjusted profit for the period of $28.2 million, 727% above the profit for the same period in prior year and $34.5 million which represented a growth of 6,225% in historical cost terms. The growth in profit was driven by increases in ICR and exchange gains.
INVESTMENTSCLUSTER
First Mutual Properties Limited
Rental income for the period ended 30 June 2023 grew by 121% to $7.9 billion in inflation adjusted terms and 668% to $3.6 billion in historical cost terms. The growth compared to prior year is largely attributed to the migration to USD foreign denominated leases with those maintained in the local currency being adjusted for inflation linked reviews. This growth in revenues occurred despite a decrease in the occupancy rate to 88.10% in 2023 compared to 89.61% in 2022. Independent investment property valuations as at 30 June 2023 resulted in net fair value gains of $744.4 billion.
First Mutual Microfinance (Private) Limited
The interest income grew by 304% to $4.2 billion for the period ended 30 June 2023 in inflation adjusted terms and 1,697% to $2.4 billion in historical cost terms. The growth was principally due to increases in the USD loan book which was 92% of the total loan book as at 30 June 2023. The corresponding interest costs amounted to $1.3 million in inflation adjusted terms, 214% above prior year and $0.7 billion in historical costs terms which represented an increase of 1,157%. The business turned a corner and attained critical mass leading to a profit for the period ended 30 June 2023 of $1.9 billion 1,161% above the prior year in inflation adjusted terms and 7,069% growth to $2.4 billion in historical cost terms.
DIRECTORS: A R T Manzai (Chairman), D Hoto* (Group Chief Executive Officer), W M Marere* (Group Finance Director) G Baines, F Mabena, M Mangoma, A Masiiwa, E Mkondo, E K Moyo, M Mukondomi, I P Z Ndlovu, S V Rushwaya (* EXECUTIVE DIRECTOR) | 1 |
FIRST MUTUAL HOLDINGS LIMITED, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P O Box BW 178, Borrowdale, Harare | Tel: +263 (242) 886 000 - 17 | E-mail: info@firstmutualholdings.co.zw | Website: www.firstmutual.co.zw |
ADRENALIN
Preliminary Report - Abridged Financial Results
For The Period Ended 30 June 2023
First Mutual Wealth Management (Private) Limited
The business recorded investment management fees of $982.6 million, 170% above the prior period in inflation adjusted terms and 221% growth to $526.6 million in historical cost terms. This growth was mainly driven by higher funds under management. Funds under management for the period ended 30 June 2023 grew by 888% to ZWL368 billion partly as a result of increased support from third party contributions, growth
STATEMENTOFFINANCIALPOSITION
AS AT 30 JUNE 2023
on the ZSE and fair value gains on investment property.
HUMANCAPITAL
Since our Group is involved in the provision of financial and investment services, we consider employees to be a key success factor in navigating a volatile and complex operating environment. Amidst these challenges, our employees have demonstrated commitment and resilience to serve our clients and other stakeholders, including the implementation of our consensus driven strategy. We will ensure that investment in human capital retention and development programs is prioritised on a Group-wide scale to improve the skills of our staff to align towards future requirements.
APPRECIATION
On behalf of First Mutual, I would like to thank all our stakeholders for their continued trust in the Group. We will continue to be reliable partner and remain focused on our customers as we strive to exceed your expectations.
Douglas Hoto
Group Chief Executive Officer
13 September 2023
CONSOLIDATEDSTATEMENTOFCOMPREHENSIVEINCOME
FOR THE PERIOD ENDED 30 JUNE 2023 | |||||
INFLATIONADJUSTED | HISTORICALCOST | ||||
UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | ||
30-Jun-23 | 30-Jun-22 | 30-Jun-23 | 30-Jun-22 | ||
Note | ZWL000 | ZWL000 | ZWL000 | ZWL000 | |
INCOME | |||||
Insurance contract revenue | 21 | 199 509 637 | 97 329 185 | 106 413 926 | 12 519 290 |
Insurance service expenses from insurance contracts issued | 23 | ( 309 784 346) | ( 98 895 987) | ( 230 124 355) | ( 14 386 530) |
Insurance service result before reinsurance | ( 110 274 709) | ( 1 566 802) ( 123 710 429) | ( 1 867 240) | ||
Net expenses from reinsurance contracts held | 140 249 416 | 34 058 154 | 105 376 319 | 4 864 279 | |
Movement in premium credit adjustment | ( 18 680 380) | ( 582 088) | ( 18 680 380) | ( 118 551) | |
Insurance service result | 11 294 327 | 31 909 264 | ( 37 014 490) | 2 878 488 | |
Insurance finance result | ( 269 945 114) | ( 153 052 253) | ( 366 580 208) | ( 23 387 147) | |
Net insurance & reinsurance performance | ( 258 650 787) ( 121 142 989) ( 403 594 698) | ( 20 508 659) | |||
Net investment return | 22 | 109 275 636 | 6 046 006 | 159 347 140 | 8 809 483 |
Net gains/losses from fair value adjustments to investment properties | 510 342 668 | 141 016 240 | 746 662 662 | 55 996 725 | |
Net change in investment contract liabilities | ( 13 761 036) | 7 533 795 | ( 20 205 742) | ( 1 627 540) | |
Movement in shareholder risk reserve | ( 1 970 821) | 668 896 | ( 2 616 901) | ( 110 519) | |
Net insurance & reinsurance performance after investment return | 345 235 660 | 34 121 948 | 479 592 461 | 42 559 490 | |
Rental income | 7 993 506 | 3 689 916 | 3 715 096 | 489 923 | |
Property expenses | ( 5 857 957) | ( 2 289 158) | ( 3 170 256) | ( 345 871) | |
Other income | 15 908 033 | 8 818 262 | 7 799 396 | 1 643 654 | |
Foreign currency exchange gains | 67 786 322 | 7 856 172 | 77 093 952 | 1 513 340 | |
Other administration expenses | ( 47 529 875) | (24 079 469) | (23 579 890) | ( 2 785 495) | |
Movement in allowance for credit losses | ( 1 752 382) | ( 264 229) | ( 1 752 382) | ( 53 814) | |
Inflation adjustment monetary gain | 25 921 895 | 1 224 706 | - | - | |
Profit before share of (loss)/profit of associate | 407 705 202 | 29 078 149 | 539 698 377 | 43 021 226 |
ASSETS
Property, plant and equipment
Investment property Right of use of assets
-
IFRS 16 Goodwill
Other intangible assets
Investment in subsidiaries
Investment in associates- other companies
Financial assets:
- Equity securities at fair value through profit or loss
- Debt securities at amortised cost
Investment in gold coins
Deferred tax asset
Non current assets held for sale
Income tax asset Inventory
Reinsurance contract assets
Rental receivables Other receivables
Cash and cash equivalents
TOTALASSETS
EQUITYAND
LIABILITIES
Equity attributable to equity holders of the parent
Share capital Share premium
Non-distributable reserves
IFRS 17 adoption reserve
Retained profits
Total equity
INFLATIONADJUSTED | HISTORICALCOST | INFLATIONADJUSTED | HISTORICALCOST | |||||
Note | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED |
GROUP | GROUP | GROUP | GROUP | COMPANY | COMPANY | COMPANY | COMPANY | |
30-Jun-23 | 31-Dec-22 | 30-Jun-23 | 31-Dec-22 | 30-Jun-23 | 31-Dec-22 | 30-Jun-23 | 31-Dec-22 | |
ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | |
5 | 10816229 | 7325745 | 2405654 | 708321 | 77830 | 66756 | 18558 | 2861 |
6 | 858141901 | 347676985 | 858141901 | 111434931 | 5810000 | 3684096 | 5810000 | 1180800 |
7 | 374503 | 149100 | 374503 | 47789 | 923711 | 1085460 | 87183 | 102449 |
1542098 | 472248 | 1542098 | 151362 | - | - | - | - | |
97867 | 136907 | 6353 | 6757 | - | - | - | - | |
- | - | - | - | 329957358 | 106243229 | 253643725 | 31824110 | |
9532269 | 5033767 | 6527110 | 1061625 | 73598 | 73598 | 7207 | 7207 | |
- | - | - | - | - | - | - | - | |
9 | 181629249 | 55139158 | 181629249 | 17672807 | 5258959 | 1666500 | 5258959 | 534135 |
10 | 37752294 | 7844821 | 37752294 | 2514366 | 583439 | 168237 | 583439 | 53922 |
3216744 | 863029 | 3216744 | 276612 | - | - | - | - | |
19 | 11985818 | 2298080 | 7766829 | 702885 | - | - | - | - |
280000 | 119808 | 280000 | 38400 | - | - | - | - | |
153909 | 36347 | 153909 | 11650 | - | - | - | - | |
1666600 | 1043823 | 508435 | 170615 | 56033 | 38618 | 10995 | 1970 | |
11 | 117723671 | 112527507 | 110355956 | 37967311 | - | - | - | - |
12 | 3765510 | 1540785 | 3765510 | 493841 | 10107 | - | 10107 | - |
12 | 16990014 | 12186695 | 15223650 | 3793940 | 1323589 | 767822 | 1323589 | 246097 |
13 | 111642452 | 52018664 | 111642452 | 16672649 | 1968774 | 393187 | 1968774 | 126022 |
1367311128 | 606413469 | 1 341 292647 | 193725861 | 346043398 | 114187503 | 268722536 | 34079573 |
1292762 | 1292762 | 54878 | 54878 | 1292762 | 1292762 | 54878 | 54878 |
25925742 | 25925742 | 39417 | 39417 | 25925742 | 25925742 | 39417 | 39417 |
(25829878) | (2099191) | (29821193) | 2589976 | 460426 | 460426 | 345 | 345 |
26000516 | 26000516 | 34271787 | 34271787 | - | - | - | - |
310482580 | 89650558 | 294117496 | 34273565 | 314676992 | 84690244 | 264940420 | 33402136 |
Share of profit/(loss) of associate
Profit before income tax
Income tax expense
Profit/(loss) for the period
2 439 827 | ( 40 095) | 2 530 784 | 152 658 |
410 145 029 | 29 038 054 | 542 229 161 | 43173884 |
( 23 768 028) | ( 31 039 035) | ( 55 560 747) | ( 9 133 941) |
386377001 | ( 2 000 981) | 486668414 | 34 039 943 |
attributable to equity holders of the parent
Non-controlling interests
Total equity
337871722 | 140770387 | 298662385 | 71229623 | 342355922 | 112369174 | 265035060 | 33496776 |
248070353 | 96897781 | 244503047 | 28967822 | - | - | - | - |
585942075 | 237668168 | 543165432 | 100197445 | 342355922 | 112369174 | 265035060 | 33496776 |
Other comprehensive income/(loss)
Other comprehensive income/(loss) to be reclassified to statement of comprehensive income in subsequent period
Exchange (loss)/gain on translating foreign operations Share of other comprehensive profit
Other comprehensive (loss)/income to be reclassified to statement of comprehensive income in subsequent periods
( 2 902 526) | 1 851 985 | ( 15 614 687) | 3 547 586 |
459 679 | 170 397 | 807 963 | 34 704 |
( 2 442 847) | 2 022 382 | ( 14 806 724) | 3 582 290 |
Liabilities | - | - | |||||||
Investment contract | |||||||||
liabilities without DPF | 14 | 23163505 | 10110043 | 23163505 | 3240398 | - | - | - | - |
Shareholder risk | |||||||||
reserves | 15 | 2921655 | 950834 | 2921655 | 304754 | - | - | - | - |
Member assistance | |||||||||
fund | 9041 | 28207 | 9041 | 9041 | - | - | - | - | |
Lease liabilities | 7 | 1216262 | 388078 | 1216262 | 124384 | 2246829 | 796605 | 2246829 | 255322 |
Borrowings- from third | |||||||||
parties | 20918657 | 5243231 | 20918657 | 1680523 | - | - | - | - |
Total comprehensive profit for the period | 383 934 154 | 21 401 | 471 861 690 | 37 622 233 |
Profit/(loss) attributable to: | ||||
Non-controlling interest | 164 683 937 | 8 085 845 | 226 639 786 | 15 230 635 |
Equity holders of the parent | 221 693 064 | ( 10 086 826) | 260 028 628 | 18 809 308 |
Profit/(loss) for the period | 386377001 | ( 2 000 981) | 486668414 | 34 039 943 |
Total Comprehensive income attributable to: | ||||
Non-controlling interest | 165 877 015 | 7 947 364 | 226 521 600 | 15 092 154 |
Equity holders of the parent | 218 057 139 | ( 7 925 963) | 245 340 090 | 22 530 079 |
Total comprehensive income for the period | 383 934 154 | 21 401 | 471 861 690 | 37 622 233 |
Basic earnings per share (cents) | 30 523 | ( 1 389) | 35 801 | 2 590 |
Diluted earnings per share (cents) | 30 523 | ( 1 389) | 35 801 | 2 590 |
The Group has adopted IFRS 17- Insurance contracts, a new accounting standard that became effective on 1 January 2023. The adoption of the new standard has resulted in new financial statement lines as presented in the primary financial statements. Prior year numbers have been restated in accordance with the new standard & provisions of IAS 8 from 1 January 2022.
Put option liability | 20 | 31240253 | 10051246 | 31240253 | 3221553 | - | - | - | - |
Insurance contract | |||||||||
liabilities | 16 | 513518043 | 253171082 | 530994374 | 56411984 | - | - | - | - |
Investment contract | |||||||||
liabilities with DPF | 17 | 61819262 | 23997163 | 61819262 | 7682170 | - | - | - | - |
Share based payment | |||||||||
liabilities | 1242908 | 677678 | 1242908 | 217205 | 383637 | 219081 | 383637 | 70218 | |
Other payables | 18 | 44500716 | 16776164 | 43608078 | 5262258 | 1057010 | 802643 | 1057010 | 257257 |
Deferred tax liability | 19 | 73414165 | 46093933 | 73588634 | 14971056 | - | - | - | - |
Current income tax | |||||||||
liabilities | 7404586 | 1257642 | 7404586 | 403090 | - | - | - | - | |
Total liabilities | 781369053 | 368745301 | 798127215 | 93528416 | 3687476 | 1818329 | 3687476 | 582797 | |
TOTALEQUITYAND | |||||||||
367311128 | 606413469 | 1341292647 | 193725861 | 346043398 | 114187503 | 268722536 | 34079573 | ||
LIABILITIES |
The Group has adopted IFRS 17- Insurance contracts, a new accounting standard that became effective on 1 January 2023. The adoption of the new standard has resulted in new financial statement lines as presented in the primary financial statements. Prior year numbers have been restated in accordance with the new standard & provisions of IAS 8 from 1 January 2022.
DIRECTORS: A R T Manzai (Chairman), D Hoto* (Group Chief Executive Officer), W M Marere* (Group Finance Director) G Baines, F Mabena, M Mangoma, A Masiiwa, E Mkondo, E K Moyo, M Mukondomi, I P Z Ndlovu, S V Rushwaya (* EXECUTIVE DIRECTOR) | 2 |
FIRST MUTUAL HOLDINGS LIMITED, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P O Box BW 178, Borrowdale, Harare | Tel: +263 (242) 886 000 - 17 | E-mail: info@firstmutualholdings.co.zw | Website: www.firstmutual.co.zw | |
ADRENALIN
Preliminary Report - Abridged Financial Results
For The Period Ended 30 June 2023
STATEMENTOFCHANGESINEQUITY
FORTHEENDED30JUNE2023
INFLATIONADJUSTED | Share | Non- | IFRS17 | Total | Non- | |||
Sharecapital | premium | distributable | Adoption | Retained | equity | controlling | Total | |
reserves | reserves | reserve | earnings | forparent | interest | equity | ||
ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | |
Asat1January2022 | 1292762 | 25925742 | 8026103 | - | 46490374 | 81734981 | 64289137 | 146024119 |
ImpactofadoptingIFRS17 | - | - | - | 26000516 | - | - | - | - |
Restatedasat1January | ||||||||
2022 | 1292762 | 25925742 | 8026103 | 26000516 | 46490374 | 81734981 | 64289137 | 146024119 |
Profitfortheyear | - | - | - | - | (10086826) | (10086826) | 8085845 | (2000981) |
Othercomprehensive(loss)/ | ||||||||
income | - | - | 2160863 | - | - | 2160863 | ( 138481) | 2022382 |
Totalcomprehensive | ||||||||
(loss)/income | - | - | 2160863 | - | (10086826) | (7925963) | 7947364 | 21401 |
Transactionswith | ||||||||
shareholdersintheir | ||||||||
capacityasowners | ||||||||
FMPredemptionofshares | - | - | - | - | - | - | 2543 | 2543 |
CONSOLIDATEDSTATEMENTOFCASHFLOWS
FOR THE PERIOD ENDED 30 JUNE 2023
Profit before income tax
Total non- cash and separately disclosed items
Operating cash flows before working capital changes
Working capital changes
Cash (utilised in)/generated from operations
Finance costs on lease liability
Interest received
Tax paid
Net cash flows(utilised in)/ generated from operating activities Net cash flow generated from/(used in) investing activities Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents Effects of inflation on cash and cash equivalents
Cash and cash equivalents at the end of the period
INFLATIONADJUSTED | HISTORICALCOST | ||
UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED |
30-Jun-23 | 30-Jun-22 | 30-Jun-23 | 30-Jun-22 |
ZWL000 | ZWL000 | ZWL000 | ZWL000 |
410 145 029 | 29 038 054 | 542 229 161 | 43173884 |
62 550 064 | ( 133 320 533) | ( 888 028 375) | ( 63 482 384) |
472 695 093 ( 104 282 479) ( 345 799 214) | ( 20 308 500) | ||
( 425 993 258) | 114 387 445 | 425 500 367 | 25 886 398 |
46 701 835 | 10 104 966 | 79 701 153 | 5 577 898 |
( 187 451) | ( 34 889) | ( 150 230) | ( 4 867) |
9 133 319 | 1 361 633 | 3 412 967 | 247 571 |
( 1 136 634) | 7 900 209 | ( 446 615) | ( 661 230) |
54 511 069 | 19 331 919 | 82 517 275 | 5 159 372 |
( 82 192 754) | ( 11 289 351) | ( 44 522 333) | ( 1 410 306) |
6 752 833 | ( 530 518) | 3 719 987 | ( 90 138) |
( 20 928 852) | 7 512 050 | 41 714 929 | 3 658 928 |
52 018 664 | 32 837 615 | 16 672 649 | 3 053 838 |
139 908 163 | 11 161 595 | 53 254 874 | 2 273 237 |
( 59 355 522) | ( 7 389 985) | - | - |
111 642 452 | 44 121 275 | 111 642 452 | 8 986 003 |
FMPtreasurysharesbuyback | - | - | 2735 | - | 2909589 | 2912324 | (2912324) | - |
ReclassificationofNCItoput | ||||||||
optionliability | - | - | - | - | - | - | ( 665584) | ( 665584) |
RemeasurementofPut | ||||||||
optionliability | - | - | 1820023 | - | - | 1820023 | - | 1820023 |
Dividenddeclaredandpaid | - | - | - | - | ( 739708) | ( 739708) | - | ( 739708) |
Asat30June2022 | 1292762 | 25925742 12009724 | 26000516 | 38573429 77801657 | 68661136 146462794 | |||
Asat1January2023 | 1292762 | 25925742 | (2099191) | 26000516 | 89650558 140770387 | 96897781 237668168 | ||
Profitfortheyear | - | - | - | - | 221693064 | 221693064 | 164683937 | 386377001 |
Othercomprehensive | ||||||||
income | - | - | (3635925) | - | - | (3635925) | 1193078 | (2442847) |
Totalcomprehensive | (3635925) | 221693064 | 218057139 | 165877015 | 383934154 | |||
income | - | - | - | |||||
Transactionswith | ||||||||
shareholdersintheir | ||||||||
capacityasowners | ||||||||
FMPredemptionofshares | - | - | - | - | - | - | 11419 | 11419 |
FMPtreasurysharesbuyback | - | - | ( 242) | - | ( 2468) | ( 2710) | 2710 | - |
RemeasurementofPut | ||||||||
optionliability | - | - | (20094520) | - | - | (20094520) | - | (20094520) |
Reclassificationtoputoption | ||||||||
liability | - | - | - | - | - | - | (13264826) (13264826) | |
Dividenddeclaredandpaid | - | - | - | - | ( 858575) | ( 858575) | (1453746) (2312321) | |
Asat30June2023 | 1292762 | 25925742 (25829878) | 26000516 310482580 337871722 248070353 585942075 | |||||
HISTORICALCOST | Share | Non- | IFRS17 | Total | Non- | |||
Sharecapital | premium | distributable | Adoption | Retained | equity | controlling | Total | |
reserves | reserves | reserve | profits | forparent | interest | equity | ||
ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | |
Asat1January2022 | 414347 | 8309533 | 2572469 | - | 14900761 | 26197110 | 20605493 | 46802603 |
ImpactofadoptingIFRS17 | - | - | - | 34271787 | - | 34271787 | - | 34271787 |
Restatedasat1January | ||||||||
2022 | 414347 | 8309533 | 2572469 | 34271787 | 14900761 | 60468897 | 20605493 | 81074390 |
Profitfortheyear | - | - | - | - | 18809308 | 18809308 | 15230635 | 34039943 |
Othercomprehensive(loss)/ | ||||||||
income | - | - | 3720771 | - | - | 3720771 | ( 138481) | 3582290 |
Totalcomprehensive | ||||||||
(loss)/income | - | - | 3720771 | - | 18809308 | 22530079 | 15092154 | 37622233 |
Transactionswith | ||||||||
shareholdersintheir | ||||||||
capacityasowners | ||||||||
FMPredemptionofshares | - | - | - | - | - | - | 518 | 518 |
FMPtreasuryshares | - | - | ( 870) | - | 593738 | 592868 | ( 592868) | - |
ReclassificationofNCItoput | ||||||||
optionliability | - | - | - | - | - | - | ( 404269) | ( 404269) |
RemeasurementofPut | ||||||||
optionliability | - | - | ( 778002) | - | - | ( 778002) | - | ( 778002) |
Dividenddeclaredandpaid | - | - | - | - | ( 115003) | ( 115003) | - | ( 115003) |
Asat30June2022 | 414347 | 8309533 | 5514368 | 34271787 | 34188804 48427052 | 34701028 83128080 | ||
Asat1January2023 | 54878 | 39417 | 2589976 | 34271787 | 34273565 71229623 | 28967822 100197445 | ||
Profitfortheyear | - | - | - | - | 260028628 | 260028628 | 226639786 | 486668414 |
Othercomprehensive | ||||||||
income | - | - | (14688538) | - | - | (14688538) | ( 118186) | (14806724) |
Totalcomprehensive | - (14688538) | 260028628 | 245340090 | 226521600 | 471861690 | |||
income | - | - | ||||||
Transactionswith | ||||||||
shareholdersintheir | ||||||||
capacityasowners | ||||||||
FMPredemptionofshares | - | - | - | - | - | - | 5347 | 5347 |
FMPtreasurysharesbuyback | - | - | 12410 | - | 126382 | 138792 | ( 138792) | - |
ReclassificationofNCItoput | ||||||||
optionliability | - | - | - | - | - | - | (10283660) | (10283660) |
RemeasurementofPut | ||||||||
optionliability | - | - | (17735040) | - | - | (17735040) | - | (17735040) |
Dividenddeclaredandpaid | - | - | - | - | ( 311078) | ( 311078) | ( 569272) | ( 880350) |
ASAT30JUNE2023 | 54878 | 39417 (29821193) | 34271787 | 294117496 | 298662385 | 244503047 | 543165432 |
The Group has adopted IFRS 17- Insurance contracts, a new accounting standard that became effective on 1 January 2023. The adoption of the new standard has resulted in new financial statement lines as presented in the primary financial statements. Prior year numbers have been restated in accordance with the new standard & provisions of IAS 8 from 1 January 2022.
The Group has adopted IFRS 17- Insurance contracts, a new accounting standard that became effective on 1 January 2023. The adoption of the new standard has resulted in new financial statement lines as presented in the primary financial statements. Prior year numbers have been restated in accordance with the new standard & provisions of IAS 8 from 1 January 2022.
NOTESTOTHEFINANCIALSTATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2023
1. Corporate information
The main business of First Mutual Holdings Limited ("the Company") and its subsidiaries (together the "Group") is that of provision of life and funeral assurance, health insurance, short term insurance, reinsurance, property management and development, wealth management, micro lending, funeral services and health services. First Mutual Holdings Limited is a public company, incorporated and domiciled in Zimbabwe whose shares are publicly traded on the Zimbabwe Stock Exchange. As at 13 September 2023, the Company's major shareholders were the National Social Security Authority ("NSSA") which owns 34.25% (2021: 65.53%) directly and an additional 5.33% (2021: 7.10%) indirectly through Capital Bank Limited (NSSA owns 84% (2021: 84%) of Capital Bank Limited) and CBZ Holdings Limited ("CBZHL") after acquiring 31.22% shares from NSSA in a transaction that was concluded on 6 September 2023. The registered office is located at Second Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe. The consolidated historical and inflation adjusted financial statements of the Company and the Group for the period ended 30 June 2023 were authorised for issue in accordance with a resolution of the Directors at a meeting held on 13 September 2023.
-
Statement of compliance
The Group's Abridged financial statements are an extract of the complete set of financial statements that have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting", as issued by the International Accounting Standards Board ("IASB"), International Financial Reporting Committee Interpretations ("IFRIC") as issued by the International Financial Reporting Interpretations Committee ("IFRS IC") and in a manner required by the Zimbabwe Companies and Other Business Entities Act (Chapter 24:31). The financial statements are based on statutory records that are maintained under the historical cost convention except for investment properties, equity securities at fair value through profit or loss and insurance and investment contract liabilities that have been measured on a fair value basis. For the purpose of fair presentation in accordance with IAS 29 "Financial Reporting in Hyperinflationary Economies", this historical cost information has been restated for changes in the general purchasing power of the Zimbabwe Dollar and appropriate adjustments and reclassifications have been made. Accordingly, the inflation adjusted financial statements represent the primary financial statements of the Group and Company and historical information is supplementary. - Accounting policies
The accounting policies applied in the reviewed abridged financial results are consistent with the accounting policies in the prior year financial statements except for the adoption of IFRS 17 - Insurance contracts which are detailed below:
- IFRS 17 - Insurance contracts and transitional provisions
On 1 January 2023 the Group adopted International Financial Reporting Standard (IFRS) 17 - Insurance Contracts. IFRS 17 requires the Group to measure its insurance contracts using updated estimates and assumptions that reflect the timing of cash flows and any uncertainty relating to those insurance contracts. These requirements are intended to provide uniformity across the industry as well as provide more transparent reporting on the financial position and risk of insurance businesses.
The Group is provided with various options of transition from IFRS 4 - Insurance contracts in reporting. Considering the various circumstances from both an operational and financial reporting perspective, the Group opted for the full retrospective transitional approach for all its insurance & reinsurance contracts with the exception of growth annuities to which the fair value approach has been applied. The date of such transition is 1 January 2022 for practical purposes. The fair value transitional approach has been applied to growth annuities carried under the Variable Fee Approach (VFA) due to impracticability in determining the Contractual Service Margin (CSM) IFRS 17 at the date of transition as required by IFRS 17 for the full retrospective approach. - Measurement models
-
Premium Allocation Approach (PAA)
The majority of contracts issued by the Group are accounted for under the PAA measurement model, the eligibility criteria which has been met by the Group contracts for all of its short-term insurance contracts. The Group reasonably expects that such simplification (that is adoption of the PAA) will produce a measurement of the liability for remaining coverage (LRC) for the Group that would not differ materially from the one that would be produced by applying the requirements under other measurement models. - Variable Fee Approach (VFA)
The Group accounts for annuity contracts issued by its Life business contracts under the VFA measurement model.
2.2.3 Future cashflows and estimates
-
Best estimates of future cash flows
Best estimates of future cashflows refer to amounts expected to be collected from premiums and payouts for claims, benefits and expenses, and are projected using a range of scenarios and assumptions based on the Group's demographic and operating experience along with external mortality data where the Group's own experience data is not sufficiently large in size to be credible. The estimates of future cash flows are adjusted to reflect the effects of the time value of money and the financial risks to derive an expected present value. - Discount Rates
The discount rate is defined as the financial adjustment that is made to the future cashflows in order to determine their present value. Under IFRS 17, the discount rate is primarily used to adjust the estimates of future cash flows to reflect the time value of money and to accrete interest on the CSM. A bottom-up approach is used to determine the discount rate to be applied to a given set of expected future cash flows. For the period ended 30 June 2023, the Group has determined the risk-free rate by making reference to corporate bonds with an estimated range of between 10% to 12% and they are based on observable market data in addition to their other characteristics such as:
- Covering a longer duration period compared to other instruments in the market.
- Traded regularly in the market.
-
Risk adjustment for non-financial risk
The risk adjustment reflects the compensation required by the Group for bearing the uncertainty about the amount and timing of future cash flows (understated premiums and overstated claims) that arises from non-financial risk. The Group estimates these factors by reference to the business units' claims experiences. The Group does not disaggregate changes in the risk adjustment between insurance service result and insurance finance income or expenses as all adjustments are included in insurance service result through the election to present net finance costs/ income relating insurance and reinsurance contracts in the profit and loss.
DIRECTORS: A R T Manzai (Chairman), D Hoto* (Group Chief Executive Officer), W M Marere* (Group Finance Director) G Baines, F Mabena, M Mangoma, A Masiiwa, E Mkondo, E K Moyo, M Mukondomi, I P Z Ndlovu, S V Rushwaya (* EXECUTIVE DIRECTOR) | 3 |
FIRST MUTUAL HOLDINGS LIMITED, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P O Box BW 178, Borrowdale, Harare | Tel: +263 (242) 886 000 - 17 | E-mail: info@firstmutualholdings.co.zw | Website: www.firstmutual.co.zw |
ADRENALIN
Preliminary Report - Abridged Financial Results
For The Period Ended 30 June 2023
NOTESTOTHEFINANCIALSTATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2023
For the period ended 30 June 2023, the following risk adjustments factors were adopted:
Business Unit | Direct Business/Reinsurance issued | Reinsurance/Retrocession held |
NicozDiamond Insurance Limited | 8% | 11% |
First Mutual Health | 0.30% | n/a |
FMRE P & C Botswana | 11% | 11% |
First Mutual Reinsurance Zimbabwe | 11% | 11% |
First Mutual Life | 10% | 11% |
- Contractual Service Margin (CSM)
The CSM represents the future profit that the Group expects to earn from the portfolio of annuity contracts and is deferred to the Statement of Financial Position, effectively not resulting in income or expense at initial recognition. The CSM is remeasured and adjusted at each subsequent reporting period for changes in fulfilment cash flows relating to future service. The CSM is systematically recognized in insurance contract revenue to reflect the insurance contract services provided, based on the coverage units of the group of contracts. - Onerous Contracts
An insurance contract is onerous at the date of initial recognition if the fulfilment cash flows allocated to the contract, any previously recognised insurance acquisition cash flows and any cash flows arising from the contract at the date of initial recognition in total are a net outflow and shall be immediately recognized on initial recognition in the Income Statement on day one. - Acquisition cashflows
Acquisition cashflows represent commissions on insurance & reinsurance business from intermediaries, these are deferred over a period in which the related premiums are earned. Management has however made an accounting policy choice as per IFRS 17 to expense upfront such costs (instead of reduction in liability for remaining coverage) when the coverage period is one year or less.
2.3 Inflation adjusted
IAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of a measuring unit current at the statement of financial position date, and that corresponding figures for previous periods be stated in the same terms to the latest statement of financial position date. To comply with IAS 29 requirements the Group estimated the inflation rate for February 2023 to June 2023 by adjusting the last published consumer price index (January 2023) based on the monthly movement using the Total Consumption Poverty Line (TCPL). The resultant CPIs and their corresponding conversion factors are as follows:
Period | CPI | Conversion factor |
30 June 2023 | 8,707 | 4.91 |
31 December 2022 | 13,673 | 3.20 |
30 June 2022 | 42,711 | 1.00 |
All items in the income statements are restated by applying the relevant monthly conversion factors.
2.3.1 CPI Estimation
Total Consumption Poverty Line (TCPL) data from ZIMSTAT has been considered to be appropriate for the purposes of estimating the movement in inflation for the period from February 2023 to June 2023 due to the following reasons:
- There is correlation rate of 99% between TCPL and the previously published Consumer Price Indices (CPIs) based on a research carried out by the Institute of Chartered Accountants of Zimbabwe
- Using The TCPL data as estimation of movement in inflation allows for comparability of the Group's financial results with the rest of the market.
-
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The financial statements are presented in the ZWL which is the Company and the Group's functional and presentation currency. - Audit review
The audit review of the Group is incomplete pending the finalisation of the Insurance and Pension Commission forensic investigation currently underway at one of the Group's significant subsidiaries, First Mutual Life Assurance Company.
INFLATIONADJUSTED | HISTORICALCOST | INFLATIONADJUSTED | HISTORICALCOST | |||||||
UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | UNAUDITED | |||
GROUP | GROUP | GROUP | GROUP | COMPANY | COMPANY | COMPANY | COMPANY | |||
30-Jun-23 | 31-Dec-22 | 30-Jun-23 | 31-Dec-22 | 30-Jun-23 | 31-Dec-22 | 30-Jun-23 | 31-Dec-22 | |||
ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | |||
5 | Property, vehicles and | |||||||||
equipment | ||||||||||
At 1 January | 7 325 745 | 5 146 212 | 708 321 | 140 853 | 66 756 | 72 737 | 2 861 | 2 210 | ||
Additions | 4 631 667 | 3 459 562 | 1 819 908 | 610 928 | 46 330 | 3 460 | 17 839 | 747 | ||
Disposals | ( 19 808) | ( 19 478) | ( 3 042) | ( 887) | - | - | - | - | ||
Depreciation charge | ||||||||||
and disposal | ( 1 121 376) | ( 1 260 551) | ( 119 533) | ( 42 573) | ( 35 256) | ( 9 441) | ( 2 142) | ( 96) | ||
Closing balance | 10 816 229 | 7 325 745 | 2 405 654 | 708 321 | 77830 | 66 756 | 18 558 | 2 861 | ||
6 | Investment property | |||||||||
At 1 January | 347 676 985 | 241 562 593 | 111 434 931 | 22 506 950 | 3 684 096 | - | 1 180 800 | - | ||
Additions | 122 248 | 468 821 | 44 308 | 82 790 | - | 5 261 558 | - | 1 074 138 | ||
Disposal or transfer to | ||||||||||
Subsidiaries | - | ( 679 255) | - | ( 160 028) | ( 2 717 155) | ( 916 531) | ( 1 305 500) | ( 272 000) | ||
Transfer to Non-current | ||||||||||
asset held for sale | - | ( 119 808) | - | ( 38 400) | - | - | - | - | ||
Fair value adjustments | 510 342 668 | 106 444 634 | 746 662 662 | 89 043 619 | 4 843 059 | ( 660 931) | 5 934 700 | 378 662 | ||
Closing balance | 858 141 901 | 347 676 985 858 141 901 111 434 931 | 5 810 000 | 3 684 096 | 5 810 000 | 1180800 | ||||
The Group's fair values of its investment properties are based on valuations performed by Knight Frank Zimbabwe an accredited independent valuer. | ||||||||||
Knight Frank is a specialist in valuing these types of investment properties and has recent experience in the location and category of the investment | ||||||||||
properties being valued. The valuations are based upon assumptions on future rental income, anticipated maintenance costs, future development | ||||||||||
costs and the appropriate discount rate. Where the market information is available, the valuers make use of market information from transactions of | ||||||||||
similar properties . Significant judgements were applied as at 30 June 2023 as a result of the uncertainties resulting from the hyperinflationary economic | ||||||||||
environment, currency shifts, excessive market volatility and lack of recent transactions conducted in ZWL. | ||||||||||
7 | Leases | |||||||||
Right of use of assets | ||||||||||
As at 1 January | 149 100 | 149 903 | 47 789 | 13 967 | 1 085 460 | 625 614 | 102 449 | 23 124 | ||
Additions | - | 220 609 | - | 38 957 | - | |||||
Modification | - | - | - | - | - | 705 276 | - | 102 489 | ||
Depreciation charge for | ||||||||||
the year | ( 441 749) | ( 96 365) | ( 173 575) | ( 17 017) | ( 161 749) | ( 245 430) | ( 15 266) | ( 23 164) | ||
Exchange rate effects | 667 151 | ( 125 047) | 500 290 | 11 882 | - | - | - | - | ||
Closing balance | 374 503 | 149 100 | 374 503 | 47 789 | 923 711 | 1 085 460 | 87183 | 102 449 | ||
Lease liability | ||||||||||
Current | 194 565 | 5 343 | 194 565 | 1 713 | 456 789 | 13 399 | 456 789 | 4 295 | ||
Non-current | 1 021 697 | 382 735 | 1 021 697 | 122 671 | 1 790 040 | 783 206 | 1 790 040 | 251 027 | ||
Closing balance | 1 216 262 | 388078 | 1 216 262 | 124 384 | 2 246 829 | 796 605 | 2 246 829 | 255 322 |
NOTESTOTHEFINANCIALSTATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2023
INFLATIONADJUSTED | HISTORICALCOST | INFLATIONADJUSTED | HISTORICALCOST | |||||
UNAUDITED | UNAUDITED | UNAUDITED UNAUDITED UNAUDITED UNAUDITED UNAUDITED UNAUDITED | ||||||
GROUP | GROUP | GROUP | GROUP | COMPANY | COMPANY | COMPANY | COMPANY | |
30-Jun-2331-Dec-22 | 30-Jun-2331-Dec-22 | 30-Jun-2331-Dec-22 | 30-Jun-2331-Dec-22 | |||||
ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | ZWL000 | |
8 Investmentin | ||||||||
subsidiaries | ||||||||
First Mutual | ||||||||
Microfinance (Private) | ||||||||
Limited | - | - | - | - | 2 689 100 | 492 520 | 2 609 524 | 104 603 |
First Mutual Life | ||||||||
Assurance Company | ||||||||
(Private) Limited | - | - | - | - | 164 162 490 | 59 383 603 | 151 988 363 | 18 206 148 |
First Mutual Health | ||||||||
Company (Private) | ||||||||
Limited | - | - | - | - | 48 590 074 | 15 701 100 | 37 922 776 | 4 427 245 |
First Mutual Reinsurance | ||||||||
Company (Private) | ||||||||
Limited | - | - | - | - | 22 685 673 | 2 709 324 | 25 393 860 | 927 000 |
FMRE Property & | ||||||||
Casualty (Proprietary) | ||||||||
Limited | - | - | - | - | 20 120 680 | 6 066 709 | 3 179 443 | 1 944 458 |
First Mutual Wealth | ||||||||
Management (Private) | ||||||||
Limited | - | - | - | - | 3 235 901 | 722 308 | 3 173 941 | 213 764 |
NicozDiamond | ||||||||
Insurance Limited | - | - | - | - | 68 473 439 | 21 167 665 | 29 375 818 | 6 000 892 |
Total | - | - | - | - | 329 957 358 | 106 243 229 | 253 643 725 | 31 824 110 |
9 Financial assets at fair value through profit orloss
At 1 January | 55 139 158 | 65 830 730 | 17 672 807 | 6 133 603 | 1 666 500 | 3 335 448 | 534 135 | 310 771 |
Purchases | 25 655 809 | 13 264 459 | 9 765 669 | 2 342 385 | 39 236 | 6 109 | 15 156 | 1 349 |
Disposals | ( 3 858 729) | ( 899 065) | ( 1 516 200) | ( 158 767) | ( 6 104) | ( 148 353) | ( 4 934) | ( 23 605) |
Fair value gain on | ||||||||
unquoted investments | 15 434 517 | 953 821 | 25 236 106 | 2 066 947 | - | - | - | - |
Fair value gain on | ||||||||
quoted equities | 89 258 495 | ( 24 010 786) | 130 470 866 | 7 288 639 | 3 559 327 | ( 1 526 704) | 4 714 602 | 245 620 |
Closing balance | 181 629 249 | 55 139 158 | 181 629 249 | 17 672 807 | 5 258 959 | 1 666 500 | 5 258 959 | 534 135 |
10 Debt securities at | ||||||||
amortised cost | ||||||||
At 1 January | 7 844 821 | 2 003 341 | 2 514 366 | 186 656 | 168 237 | 253 672 | 53 922 | 23 635 |
Purchases | 57 852 958 | 13 735 689 | 35 276 194 | 2 425 600 | 1 141 232 | 130 010 | 566 837 | 37 540 |
Maturities | ( 97 385) | ( 554 334) | ( 38 265) | ( 97 891) | ( 94 979) | ( 42 750) | ( 37 320) | ( 7 253) |
Monetary gain/ loss | ||||||||
adjustment | ( 27 848 099) | ( 7 339 875) | ( 631 050) | ( 172 695) | - | - | ||
Closing balance | 37 752 294 | 7 844 821 | 37 752 294 | 2 514 366 | 583 439 | 168 237 | 583 439 | 53 922 |
11 | Net Reinsurance | ||||||||
contract assets | |||||||||
Reinsurance contract | |||||||||
assests | 154 493 207 | 147 530 890 | 154 493 207 | 46 062 987 | - | - | - | - | |
Reinsurance contract | |||||||||
Liabilities | ( 36 769 536) | ( 35 003 383) | ( 44 137 251) | ( 8 095 676) | - | - | - | - | |
Net reinsurance | |||||||||
contract assets | 117 723 671 | 112 527 507 | 110 355 956 | 37 967 311 | - | - | - | - | |
12 | Tenant and other | ||||||||
receivables | |||||||||
Tenant receivables | 3 765 510 | 1 540 785 | 3 765 510 | 493 841 | 10 107 | - | 10 107 | - | |
Amounts due from | |||||||||
Group companies | - | - | - | - | 213 860 | 368 941 | 213 860 | 118 250 | |
Other receivables | 16 990 014 | 12 186 695 | 15 223 650 | 3 793 940 | 1 109 729 | 398 881 | 1 109 729 | 127 847 | |
Total | 20 755 524 | 13 727 480 | 18 989 160 | 4 287 781 | 1 333 696 | 767 822 | 1 333 696 | 246 097 | |
13 | Cash and balances | ||||||||
with banks | |||||||||
Money market | |||||||||
investments with | |||||||||
original maturities less | |||||||||
than 90 days | 25 449 000 | 27 248 545 | 25 449 000 | 8 733 508 | 1 025 832 | 121 582 | 1 025 832 | 38 969 | |
Cash at bank and on | |||||||||
hand | 86 193 452 | 24 770 119 | 86 193 452 | 7 939 141 | 942 942 | 271 605 | 942 942 | 87 053 | |
Cash and balances | |||||||||
with banks | 111 642 452 | 52 018 664 | 111 642 452 | 16 672 649 | 1 968 774 | 393 187 | 1 968 774 | 126 022 |
14 Investment contract liabilities without DPF
At 1 January | 10 110 043 | 18 024 541 | 3 240 398 | 1 679 388 | - | - | - | - |
Movement for the | ||||||||
period | 13 053 462 | ( 7 914 498) | 19 923 107 | 1 561 010 | - | - | - | - |
Closing balance | 23 163 505 | 10110043 | 23 163 505 | 3 240 398 | - | - | - | - |
15 Shareholder risk reserve
At 1 January | 950 834 | - | 304 754 | - | - | - | - | - |
Movement | 1 970 821 | 950 834 | 2 616 901 | 304 754 | - | - | - | - |
Closing balance | 2 921 655 | 950 834 | 2 921 655 | 304 754 | - | - | - | - |
DIRECTORS: A R T Manzai (Chairman), D Hoto* (Group Chief Executive Officer), W M Marere* (Group Finance Director) G Baines, F Mabena, M Mangoma, A Masiiwa, E Mkondo, E K Moyo, M Mukondomi, I P Z Ndlovu, S V Rushwaya (* EXECUTIVE DIRECTOR) | 4 |
FIRST MUTUAL HOLDINGS LIMITED, First Mutual Park, 100 Borrowdale Road, Borrowdale, Harare, Zimbabwe | P O Box BW 178, Borrowdale, Harare | Tel: +263 (242) 886 000 - 17 | E-mail: info@firstmutualholdings.co.zw | Website: www.firstmutual.co.zw |
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First Mutual Holdings Ltd. published this content on 25 September 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 September 2023 06:50:06 UTC.