Life assurers’ prescribed asset uptake improves, still below threshold

Life assurers’ prescribed asset uptake improves, still below threshold

By Bernard Mpofu, HARARE, April 21 (The Source) – Zimbabwe’s life assurance industry committed $41 million (three percent) of its total assets to prescribed paper in the final quarter of 2014, up from 1 percent in the corresponding period of 2013 – still below the stipulated threshold – the Insurance and Pension Commission has said.

The life industry is required to hold 7.5 percent of its assets in prescribed paper.

“Out of a minimum level of 7.5 percent, the industry’s uptake of prescribed paper was one percent. Players are however required to subscribe more to statutory paper to avoid penalties,” said IPEC.

The life sub-sector, which ended last year with 11 life firms following the licencing of Econet Life, registered a 2 percent jump in total assets to $1,57 billion, the IPEC fourth quarter report for 2014 shows.

As at 31 December 2014, the life industry’s asset allocations were in properties, 34 percent or $527million (December 2013:35 percent or $533 million}, equities $482million or 31 percent (December 2013:38 percent or$594 million), money market, $241million or 15 percent (December 2013:11 percent or $177million), cash assets-$17million or 1 percent (December 2013:1 percent or $23million), other assets,$263million or 17 percent (December 2013:13 percent or $198million) and $41million or 3 percent on prescribed assets(December 2013:1 percent or $20million).

Last year saw paper exceeding $300 million – mostly bonds – being according prescribed asset status. The report shows that nine bonds were issued between February and November 2014.
State-owned Infrastructure Development Bank accounted for more than a third after it issued paper worth $130 million to finance energy and housing development projects.

The bond was awarded Prescribed Asset Status by the Ministry of Finance and Liquid Asset Status by the Reserve Bank of Zimbabwe. CBZ Bank secured $105 million for the purchase 2013/14 grain by GMB. Bindura Nickel Mine also raised $20 million during the same period to finance the restart of its smelter.

Short-term insurance companies are required to reserve five percent of their funds for prescribed assets while life assurance companies and pension funds are required to put up 7,5 percent and 10 percent, respectively.

The life industry, including the two reinsurers in the market, reported $304 million in net premiums written, a 15 percent growth from the prior year. Total costs were $234 million and slightly out-grew premium inflows. The life sector realized $70 million in technical profit down from $72 million in the comparative period last year.

The life industry is capitalised adequately except Altfin Life Assurance Company which remains suspended, IPEC said in the report.

Old Mutual, with assets exceeding $1,12 billion at the end of 2014, remains the dominant player by assets, followed by FML ($191 million), Fidelity ($70 million) Nyaradzo ($55 million), Zimnat ($52 million) and ZB Life ($47 million).