Zimre in $4.4 billion profit

The sharp rise in inflation and price controls were the biggest challenge to the insurance industry because they eroded profitability, Zimre Holdings says in its report for the year ending December.

The price controls were wide and varied and covered almost all products resulting in most disappearing from supermarket shelves and resurfacing on the parallel market where they were selling for three or more times the controlled price.

The government has since relaxed the price controls. Another major drawback was the low interest regime which saw rates average 30 percent throughout 2002.

This was a major setback to the insurance industry which was required to maintain prescribed assets at 45 percent.

The group was therefore forced to resort to the equity market which saw the key industrial index rise by 124.9 percent, slightly lower than the average rate of inflation of 134.5 percent.

According to the group's results, gross premium increased almost five-fold from $5.4 billion to $24.8 billion while investment income rose from $2.4 billion to $10.2 billion and other income from $106.9 million to $934.5 million.

Profit before tax stood at $9.2 billion, up from $2 billion with net profit at $4.4 billion, up from $890.3 million.

Zimre offloaded its short-term insurance arm the National Insurance Company of Zimbabwe (NICOZ) which has since merged with Diamond and is now listed on the exchange.

It is also planning to demerge Fidelity Life Assurance which is seeking a listing as well. It says in both cases the aim is to enhance shareholders' value by creating bigger and better balance sheets that can withstand perennial challenges in the insurance industry.

The report is, however silent on the groups' regional operations. It only says that it has separated external operations from domestic operations because of the volatility of the Zimbabwe dollar.

It says the separation will enable the group to manage its foreign currency earnings more efficiently and effectively. The regional diversification will provide the necessary hedge as it seeks to create value for shareholders.

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