Regional Expansion: Mixed Fortunes for Insurers

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Nicoz Diamond

Insurance companies have had mixed fortunes in their efforts to invest in the regional market.

Prior to dollarisation and the multi-currency regime Zimbabwean companies were pushed to invest into the regional market in order to spread risk and hedge their investment for pensioners and policyholders. This enabled them to continue to meet payouts for pension benefits and policies in an environment where money was losing value at a shocking rate.

Fidelity Life Assurance (FLA) was one company which was forced to expand its business regionally as it entered the Zambian market in 2008 through a five-year management contract with Cavmont Life.
The deal gave FLA the option to buy the business outright, which the company invoked in 2008 when it purchased the business for US$200 000 and Fidelity Life Assurance Zambia was born.
Barely a year into the venture, FLA began questioning the way the business was being run.
An attempt to staff the operation with Zimbabweans backfired when FLA clashed with the Pension and nsurance Authority of Zambia, and FLAZ’s operating licence was cancelled in December 2009, though reinstated two months later.
Fidelity opted to pass on the concession and on September 2, 2010 it voted to exit Zambia.
Earlier, FLA had ventured into Malawi, market where it bought Vanguard Life Assurance, which incidentally used to be a wholly-owned subsidiary of Zimre Holdings Limited.
Although, it continues to hold onto that investment, the unit continues to face strong headwinds from a depreciating currency.
In the year ended December 31, 2015, the Malawian kwacha fell by 28,4 percent against the US dollar.
Not surprisingly, Vanguard’s underwriting surplus fell 20 percent to US$1,2 million from US$1,5 million in the
period.
The jury is still out on FLA’s decision to venture into South Sudan where it has a 49 percent stake in New South Insurance Company, a medical insurance venture.
The new nation of South Sudan, which gained independence from Sudan in 2011, is locked in a bitter conflict pitting President Salva Kiir and opposition leader Riek Machar.

But it has not always been doom and gloom.
Short-term insurer NicozDiamond has units in Malawi (UGI) and Uganda (FICO). It also has associate investments like Diamond Seguros (Mozambique) and Diamond General (Zambia).
In the half-year to June 30, 2016, the Malawian operation recorded a loss of US$50 300, while a profit of  US$586 000 was realised in Uganda.
The results from Uganda compare favourably with a profit of US$681 000 recorded by the local unit.

“Premium growth prospects (for Uganda) are still expected to be healthy on the back of infrastructure projects for highways, hydroelectric power and crude oil refinery,” said NicozDiamond chairman Mr James Karidza in a statement accompanying the company’s interim financials.
The East African country’s economy has proved resilient.
The Uganda Bureau of Statistics on June 8, 2016 forecast growth to 4,6 percent for the 2015/ 2016 financial year from five percent in 2014/2015.
And then there is the not insignificant discovery of oil reserves in 2006.
Chinese state-controlled oil company Cnooc Ltd, French-based Total SA and London-headquartered Tullow Oil are projected to spend more than US$8 billion before they start producing oil by 2020.

This is an extract from an article written by DARLINGTON MUSARURWA in the Sunday Mail – 01 September 2016

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