Fidelity's results did not disappoint

Fidelity's results did not disappoint as the group registered a strong performance, driven by its core life assurance business whose premium income grew by 58% to $7.1 million, with $6.1 million coming from employee benefits whilst $1 million was attributed to Individual Life. Total premium income at $11.8 million was thus 53% above the prior year.

Net benefits and claims remained in check with $773,421 of the claims arising from death claims whilst the total claims amounted to $1.2 million indicating a low CI/NPW of 10% from 11% for FY 2010. Consequently the underwriting surplus amounted to $4.9 million improving by 88% from the prior period, showing that the company has a good insurance model. Other operating costs of $1.5 million were sufficiently covered by the other income of $3.3 million generated from the non finance units, FLAM, Flimesco and Fidelity Life Financial Services ($2.5 million interest income).

Group expenses are at optimum level, although management reported that cost management strategies need to be developed for the subsidiaries for example Vanguard expenses dollarised before its income whilst the funeral unit expenses are out of the norm because on the ongoing growth exercise.  The investment income came in at $3.9 million with $1.2 million (FY 2010: $399.000) coming in from interest earned, $1.5 million fair value adjustment of equities and $1.2 million from fair value adjustment property portfolio. Finance costs for the period went up by 47% to $1.2 million. Consequently, the PBT for the period went up 209% to $9.4 million with $6.1 million coming from the life business, $1.6m from Vanguard, $410,000 from the financial services unit and $654,000 from funeral assurance. FY 2010 contributions were $1.9 million life business, $928,000 Vanguard, $150,000 financial services and $32,000 from funeral assurance. The attributable profit was $2 million after $6.9 million was allocated to policy holders. The company declared a dividend of US0.3213cents a share.

Group's life fund amounted to $18.1 million. Shareholders funds at $7.8 million show an attractive ROE of 26%, up from 20%. Loans and advances relating to the micro lending business amounted to $5.3 million. The 93% growth in current assets was driven by a 118% growth in current liabilities as $5.7 million in borrowings was acquired to finance the microlending business. The average interest rate on the loans stands at 16% p.a. and the funds were used for on-lending in the financial services unit (a wholly owned subsidiary) and also to fund investment projects. Net cashflow from operating activities amounted to $4.5 million indicating a strong cash position.

On the outlook, the group has had a good start to 2012, with January posting results well in line with the budget. Management is targeting doubling the bottomline with all units expected to register strong growth, a 67% contribution is expected from the parent company. Of the 200 stands put up for sale from the Manresa project, 129 have been sold to date with 71 to be sold in due course. Plans are to embark on the second stage of the development before year end. The group is also at an advanced stage in negotiations to purchase 300 ha of land through which they will embark on another housing development project. A capital raising project for Vanguard Malawi is ongoing.
 
Expectations are to raise MWK 350.0m to fund the solvency gap in Vanguard Life. The private placement will reduce Fidelity's stake from 67% to 51%.