- Plans to leverage AfCFTA to expand into North Africa, enhancing its underwriting capacity, competitive capital, and revenue streams
- Insurance contract surged 63% to $31.6 million, resulting in $6.8 million PAT
- Possible challenges
Harare- Zimre Holdings Limited (ZHL Group) is planning to expand its footprint in North Africa, tapping into the vast opportunities presented by the African Continental Free Trade Area (AfCFTA).
The group reviewed this in its HY financials for the period to 30 June 2024.
This strategic move aims to enhance the Group's underwriting capacity, competitive capital, and revenue streams by leveraging AfCFTA's policy frameworks and enabling protocols.
In its half-year financials for the period ended June 30, 2024, ZHL stated, “Plans are underway to use the regional units to further expand into the Northern African market, exploiting the policy frameworks and enabling protocols of the African Continental Free Trade Area (AfCFTA) whilst also taking the opportunity to restructure the balance sheets of the regional operations to augment their underwriting capacity and competitive capital.”
The AfCFTA aims to create a single continental market for goods and services, promoting intra-African trade and economic integration. Key policies include the elimination of tariffs on 90% of goods, the establishment of a framework for trade in services, and the removal of barriers to investment.
By fostering trade facilitation and harmonizing regulations, the AfCFTA creates a more conducive environment for businesses, encouraging cross-border investments and enhancing competitiveness. For ZHL Group, this means increased opportunities for diversified revenue streams and improved regional performance.
The benefits of the AfCFTA for insurance companies like ZHL include increased market access as it allows ZHL to reach a broader customer base across member states, while the elimination of tariffs can reduce operational costs, making insurance products more competitively priced.
ZHL Group's existing operations in Southern Africa, Botswana, South Africa, Malawi, Zambia and in the country have demonstrated strong performance, providing a solid foundation for expansion.
The Group's expertise in these markets positions it well to replicate successful business models, leveraging regional synergies to capitalize on the benefits afforded by the AfCFTA.
However, the expansion into Northern Africa may not be without challenges. ZHL Group could face regulatory hurdles, market competition, and operational risks.
Navigating diverse regulatory frameworks across countries, managing competition from established local players and international insurers, and adapting to varying cultural and economic contexts will require strategic planning and expertise. This may also strain the firm’s resources, highlighting the need for a proactive approach that balances both growth and profitability.
Financial performance
The Group's financial performance has been impressive, with insurance contract revenue surging 63% from USD 19.3 million in June 2023 to USD 31.6 million in June 2024 fueled by significant expansion in regional reinsurance units and the Life and Pension segment.
Reinsurance operations accounted for 75% of revenue, with Zimbabwe and Mozambique being key contributors at 26% and 14%, respectively while the Life and Pension segment continued to perform well, contributing 22% to revenue, while the short-term business unit showed signs of recovery at 3%.
Overall, the regional expansion strategy is yielding positive results, with reinsurance operations in the region contributing 49% to total revenue.
In addition to the growth in insurance contract revenue, ZHL Group achieved a 16% increase in total income, reaching USD 15.0 million, primarily driven by impressive growth in insurance contract revenue and substantial fair value gains from investment properties and equities.
The Group posted a profit after tax of USD 6.8 million, representing a 52% growth from USD 4.5 million in 2023, driven by robust revenue growth and effective cost containment across all subsidiary operations.
Total assets reached USD 204.1 million, reflecting a 20% increase. Notably, the Group maintained a strong cash position, generating USD 10.6 million from operations, a 79% increase from USD 5.9 million in the prior period.
The cash-to-profit ratio ended the period at 1.55 times, surpassing the benchmark of 1.2 times.
In addition to its expansion plans, ZHL Group is set to commission phase 1 of Mazowe Mall in Q4 2024, demonstrating its commitment to environmentally friendly and socially responsible projects.
This landmark development reflects the company’s contribution to Zimbabwe's economic growth and development, further solidifying its reputation as a responsible corporate citizen.
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