Real Insurance Company (Malawi) Limited has posted a K23.2 million (about $78 000) loss in the half year ended June 30 2012 from a profit of K8.5 million, blaming it on increased claims costs and insurance receivables.
In the half year, the Malawi Stock Exchange (MSE)-listed insurance firm saw its claims and related costs growing by 26 percent to K254 million (about $846 000) from K207 million (about $690 000) the year before.
The company said the increases in claims and insurance receivables pulled down the company’s investment income by 41.5 percent to K3.7 million (about $13 000) from last year’s K6.5 million (about $22 000); hence, the loss.
The results are a reflection that Real Insurance business and operational environment in the half year continued to be unfavourable.
Going forward, the company’s chairperson Thomas Kanyuka and director Dr Rex Harawa are upbeat that the board will continue with its strategies to mitigate the harsh operating environment.
“The innovative efforts and various partnerships entered with certain segments of the economy are beginning to yield positive returns through growth in our business. It is anticipated that should these positive trends continue, the company will return to profitability in the second half of the year,†reads the statement accompanying the financial results.
Meanwhile, Real Insurance says following advice from the Reserve Bank of Malawi (RBM) to recapitalise due to insolvency problems caused by outstanding debtors, the company will create a second category of shares in the form of preferential shares to be issued privately.
Preference shares are capital stock which provides a specific dividend that is paid before any dividends are paid to common stockholders and which takes precedence over common stock in the event of liquidation.
The company announced at its last annual general meeting (AGM) in Blantyre that the firm’s shareholders agreed to inject an additional K358 million (about $1.2 million).
In 2011, the firm posted K96 million (about $320 000) loss due to, among other things, a 43 percent jump in claims which came as a result of increases in spare parts prices, high litigation costs and accidents and fraud.
On the MSE, the company with 250 million shares on issue has had its share price stuck at K1.20 for quite some time.
