FINANCIAL services firm, First Mutual Holdings Limited (FHML) posted a massive US$27,11 million loss in its financial year ended December 31, 2024, owing to distortions on its investment property.
In the prior year, FHML recorded a profit after tax of US$58,68 million.
In a statement attached to its financial year results for the period ended December 31, 2024, FHML chairperson Amos Manzai said the group had maintained its strategic investment stance towards real assets.
This, he added, was to not only hedge against potential value loss arising from exchange rate and inflation shocks, but also stabilise the volatility of its investments and pass such benefits to clients.
“The group incurred a loss after tax of US$27,1 million from a profit of US$58,7 million in the prior period. The contrasting performance for the two periods is due to major distortions on investment property emanating from compliance with functional currency transitional guidelines as required by IAS 21,” Manzai said.
“In 2023, investment property was valued in ZWL by independent property valuers who did not necessarily make use of the official exchange rates in their valuation due to its limited use in property transactions.
“Translation of the ZWL investment property values to USD on January 1, 2024 resulted in the opening balance of US$182 million, which was more than the USD valuation of US$134 million for the same property as at December 31, 2024.”
He said this phenomenon resulted in the group incurring a fair value loss on investment property of US$54 million, reduced by current year additions to US$50,5 million.
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Consequently, the firm’s profitability was affected.
During the period under review, FHML recorded a decrease in insurance contract revenue to US$156,21 million from a prior year comparative of US$183,44 million.
From the total insurance contract revenue, life assurance contributed US$12,31 million (2023:US$11,9 million) health insurance US$61,51 million (2023:US$55,1 million), and property and casualty US$82,39 million (2023:US$116,43 million).
Insurance service expenses from insurance contracts issued, however, lessened to US$112,44 million from a prior year comparative of US$158,86 million.
Despite this, the group recorded a steady increase in the use of foreign currency across its business units over the past 24 months in line with the general macroeconomic trends in the country.
“The focal point of the group continues to be the provision and enhancement of products that adequately address customer requirements in risk management, wealth creation and wealth management,” FHML chief executive officer Douglas Hoto said.
“During the year under review, the proportion of Group revenue in foreign currency increased from 74% to 84%, indicating client preference for insurance covers and other products in foreign currency.”
The value of total assets fell nearly 11% during the period under review to US$256,8 million from the prior year owing to fewer gains on investment property.
“Continuous engagement with customers remains key in maintaining product relevance in a dynamic environment,” Hoto said.
“The group’s solid financial position, diversified revenue streams as well as the focus on growing the contribution of regional assets is expected to contribute towards sustainable growth and value creation for our stakeholders.”
He said product innovation combined with investment in technology remained the cornerstone of the drive to improve service delivery channels as part of the firm’s strategy to meet dynamic market requirements.
The group revealed plans to “assist” policymakers and the government in addressing national challenges through win-win partnerships for the benefit of not only shareholder and policyholder funds but for the nation at large.
