By Thomas Chidamba
Insurance firm, FBC Insurance Company Limited, recorded an inflation adjusted after tax loss of ZWL$23.6 million as hyperinflationary environment continues to have a toll on business.
Before tax, FBC Insurance had recorded an inflation adjusted loss of ZWL$26.9 million.
Presenting the company’s Abridged Audited Financial results for the year ended 31 December 2019, FBC Insurance Chairman Mr John Mushayavanhu said the loss was attributed to dynamics prevailing in the local economy that resulted in weak demand for both short-term and life insurance products.
“The hyperinflationary environment continues to negatively impact on disposable incomes making it increasingly difficult for our clients to buy insurance products.
“The continued devaluation of the local currency also resulted in claims costs increasing as most business and individuals prefer to index pricing of goods and services to the United States Dollars,” he said.
Mr Mushayavanhu pointed out that the volatility in the foreign exchange market continued to weigh down on the capacity of the industry to meet contractual obligations.
“The insurance industry has not been spared from the dynamics prevailing in the local economy and this has been compounded by the ever changing regulatory environment.
“This has resulted in weak demand for both short-term and life insurance products.
“Volatility in the foreign exchange market continued to weigh down on the capacity of the industry to meet contractual obligations as well as meet reasonable policy holder and fund member expectations thereby undermining confidence in the sector,” he said.
Mr Mushayavanhu said, despite the FBC Insurance being hard hit by claims and operating expenses inflation, the company’s investment strategies yielded positive results.
“The business was hard hit by claims and operating expenses inflation and total revenues of ZWL$78.1million were inadequate to cover, inter-allia, insurance claims of ZWL$32.2 million, operating expenses of ZWL$45.9 million and a monetary loss of ZWL$22.6million.
“during the course of the year, the Government introduced statutory instrument 142 which ushered the official return of our local currency. This meant that all foreign currency denominated insurance policies could no longer be underwritten hence negatively affecting the industry as a whole.
“the full impact of inflationary pressures on the traditional business was reduced by the company’s investment strategies. As inflationary pressures continued to negatively affect premium revenues, attention shifted to hedging via a robust investment strategy,” he said.
Mr Mushayavanhu said, FBC Insurance was not lagging behind in embracing technology in easing the way of doing business.
“there has been development in the information and technology space as a result of the need to reduce cost of doing business. This has been evidenced by offer of insurance products on electronic platforms by some of the payers in the industry. As a result, FBC Insurance embarked on developing its own electronically based delivery channels and that have since been deployed,” he said.
Mr Mushayavanh added that the company will continue to adopt various business models to the environment in order to further consolidate its position on the market.