We have extracted below the Chairman’s Statement from the 2018 annual report of Prima Reinsurance Plc (PRIMA.zm), listed on the Lusaka Securities Exchange:
On behalf of the Board of Directors, I am pleased to present the 2018 results of Prima Reinsurance Plc.
The country’s economic performance in 2018 remained generally resilient in the face of global economic challenges as well as domestic fiscal challenges. The depreciation of the Kwacha in the second half of the year triggered inflationary pressures which impacted on the overall performance of the economy.
The central bank reduced the monetary policy rate early in the year, which saw some slight improvement in liquidity in the economy, however liquidity constraints continued in the year. Agriculture output contracted in early 2018, arising from poor rainfall, although copper production continued to increase by a moderate margin. Construction also contributed to growth through public infrastructure projects and investment in commercial buildings and residential housing. The annual growth is estimated at 4.0 percent.
“I firmly believe that we have the right strategy and people in place to enable us achieve our goals and grow in the future as we have consistently done in the past.”
2018 continued to be a challenging year in the insurance sector. The new Insurance Bill which we anticipated to be passed in 2018, was not tabled before Parliament.
This was a disappointment for the whole industry. The Bill is expected to improve and strengthen the legal framework for the insurance industry, resulting in growth and stability of the sector. The new capital requirements came into effect on 1st November 2017 and there were some companies who failed to meet these requirements who, therefore, could not renew their licenses for 2018, which was business lost to the Company.
The Insurance Levy on reinsurance premiums was removed with effect from 1st January 2018 which was a very welcome move made by Government, as it reduced the cost of local reinsurance and made it more competitive on the international platform. The National Health Insurance Act 2018 was enacted in the course of the year. The Act provides for sound financing for the national health system so as to provide for a universal access to quality insured health care services.
During the year, Prima Re focused on bottom line results rather than organic growth through the selection of quality and credit worthy business. This is against the backdrop of a large debt build up in the domestic market in the absence of legislation for “cash and carry” business.
In 2018, we continued to make good progress with respect to our strategic priorities and although we had expected a challenging year due to the continued debtors’ problem in the industry, we met those challenges head on and managed to come through it. The Company posted a loss for the year of K 1.556 million as compared to a profit in the previous year of K2.602 million. This was mainly due to the large increase in the impairment of bad debts as the Company complied with the IFRS 9 standard.
As a result, the earnings per share fell from 0.10 to (0.05) at the end of the period. Subsequently, the Company’s financial position declined, with total assets decreasing from K 65.659 million the previous year to K 57.701 million. The Directors and Management are committed in ensuring that this loss is reversed in the short term so as to arrest any erosion in shareholder value. The Company’s solvency margin remained robust at 272% compared to 170% for the same period last year.
Prima Re continued to contribute to the government treasury through the payment of various taxes and remains compliant with all tax laws and compliant within the regulatory framework. We remain on track with the operationalization of our Enterprise Risk Management framework, having formulated our risk tolerance levels, and we continue to minimize the effect of risk on the Company’s capital and earnings.
Over the years, we have consistently held true to our commitment to reward our shareholders with positive yields. To date, dividends totaling K 6.270 million have been paid out to shareholders. However, the Directors do not recommend that a dividend be paid for the year ending 31 December 2018.
The year ahead brings challenges in the form of expenses headwinds, as the insurance sector struggles with the reduced liquidity in the economy. As we strategize to mitigate against these headwinds, I firmly believe that we have the right strategy and people in place to enable us achieve our goals and grow in the future as we have consistently done in the past.
To this end, I would like to thank you, the shareholders, for your continued support in 2018. I would also like to thank my fellow Board members for providing counsel and oversight and the Management team and all staff for their commitment and passion in driving the business forward. On behalf of the Board of Directors and Management, I wish to thank all our business partners for their support and loyalty during the year.