First Mutual release a mixed set of numbers

Published: 10 September 2013

First Mutual Holdings Limited (FMHL) released a mixed set of numbers indicating a 16% jump in gross premium written to $52m from $45m in the prior period.

The biggest contribution to revenue came from Health insurance at 37% ($19.4), followed by 29% from Reinsurance ($15.1m) and then 26% from Life Insurance ($13.5m). However, short-term direct insurance at 8% contribution to group revenue was down to $4.3m and rental income was up 13% to $3.9m.

On the technical profit line the biggest contribution was from First Mutual Life which grew 114% to $5.1m followed by FMRE Property and Casualty Zimbabwe which rose 36% to $0.7m. FML Health Care's contribution to bottom line was severely impacted by a surge in claims which resulted in a 95% decline in technical profit to $0.2m.

The group's technical profit amounted to $6.4m, largely the same as in the comparable period. The claims ratio for the healthcare division spiked from 67% in the prior period to 81% mainly as a result of a new wave of clients being able to access medical benefits for the first time after their mandatory waiting period.
Management attributes this to a marketing drive which resulted in new membership increasing from 72,000 to 89,945. Overall the insurance company managed to maintain profitability due to high business retention post recapitalisation as the company was in a position to underwrite more risk than before in spite of the increase in claims in the major division.

Growth of 8% in total assets was driven by a surge in trade receivables as well as cash and cash equivalents. Trade receivables grew by 45% to $16.5m from $11.3m while cash and cash equivalents grew by 8% to $26.1m from $24.2m in the prior period.

Current liabilities however grew at a much slower rate of 6% to $27.6m. This indicates that FMHL's cash flow management is an area where improvements can be made given that the company is paying is creditors at a faster rate than it is receiving money from debtors leaving the company with a funding gap.

While maintaining a positive position, group operating cash flow of $4.1m receded from $7.7m recorded in H1 2012. From net holding of cash resources the group reported net interest income of $0.2m. The group invested $2.8 compared to $3.1m last year with the bulk of those funds ploughed into the purchase of new vehicles and equipment as well as additions to investment properties.

Imara Edwards analyst Tonderai Maneswa thinks FMHL remains a work-in-progress with significant investment being deployed to optimise the various individual operations and enhance the benefits of synergy.
- businessdaily

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