Fidelity Life to invest prudently to safeguard cash reserves

FIDELITY Life Assurance of Zimbabwe (FLA) says it aims to safeguard its cash reserves by engaging in prudent spending and making strategic investments in products that ensure long-term viability.

This comes as the international landscape is expected to continue to be affected by the ongoing Russia-Ukraine conflict and the Israel-Palestine war.

The World Bank has previously warned that the conflict between Israel and Gaza could trigger global economic shocks, including oil prices soaring up to US$150 a barrel and millions going hungry due to higher food prices.

“These current epicentres of geopolitical tensions have the potential to cause far-reaching adverse effects in terms of food shortages, supply chain disruptions, and rise in global petroleum product prices, which in turn can cause an increase in production costs and cause volatility in international markets globally,” said Fidelity Life Assurance of Zimbabwe company chairman Mr Livingstone Gwata in the 2023 annual report.

In addition to that, he said the Zimbabwean economy is still facing challenges due to liquidity constraints as the new local currency, Zimbabwe Gold (ZiG), continues to trickle into the economy.

Fidelity Life Assurance, however, indicated that it was banking on Government initiatives as it undertakes various projects, which include infrastructure road construction, dam rehabilitation and irrigation projects.

According to the 2023 annual report, the Government is dedicated to achieving the objectives outlined in the Vision 2030 plan as outlined in the National Development Strategy 1 and 2 (NDS1 and NDS2).

Operationally, Fidelity recorded strong revenue growth of 242 percent to ZWL$116,6 billion in inflation-adjusted terms compared to the prior year, on the back of the group’s innovative product development and increased uptake of its products offering on the market.

Significant growth in premium inflows was witnessed through the Vaka Yako product contributing 83 percent of the individual life premiums.

The Zimbabwe operation contributed 62 percent of the premium inflows while 38 percent was attributable to the Malawi operation.

Insurance service results increased by 280 percent on an inflation-adjusted basis underpinned by real growth in insurance contract revenue.

“This is despite an increase in insurance service expenses propelled by the increase in claims and directly attributable costs due to the inflationary environment prevailing in Zimbabwe and the regional business operation,” he said.

Net investment income grew by 91 percent to $70,8 billion on an inflation-adjusted basis attributable to fair value gains from investment property, equities and interest income from money market investments.

The group profit for the period increased by 9,945 percent on an inflation-adjusted basis to $101,1 billion.

The positive profit growth was driven by the increase in insurance contract revenue and investment income.

The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s Russia’s war with Ukraine.

“Policymakers will need to be vigilant. If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades not just from the war in Ukraine but also from the Middle East,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics.-herald