Source: Fidelity capitalises on land bank | The Financial Gazette June 15, 2017
THE Insurance and Pensions Commission (IPEC) last year ordered a forensic audit into Fidelity Life Assurance’s operations after alleged infractions by management, which resulted in the sacking of the now-deceased former managing director, Simon Chapereka. In an e-mail interview with the Financial Gazette’s Online Editor Paul Nyakazeya (PN), Fidelity’s acting managing director, Nyaradzo Matindike (NM), talks about the company’s land bank and what it is doing to comply with regulatory directives.
PN: Finance costs arising from debts assumed in 2015 weighed down Fidelity Life’s profitability to US$2,3 million for the year to December 31, 2016 from US$5,1 million on the prior year. How does the group intend to address these costs so that they do not eat into your profit?
NM: The decline in profitability was a result of prudent provisioning for bad and doubtful debts, which is in keeping with the current economic environment. Should we manage to recover amounts owed, this income will be ploughed back into our earnings at that time.
PN: Fidelity says it would develop 11 500 high density residential stands at Langford Estate farm in Waterfalls with an estimated market value of US$350 million, inclusive of housing and other developments. Are you still working with these figures?
NM: We do plan to continue with our plans to develop Langford Estates. However, it is too early to comment on costs and profits associated with this project. Currently, our board investments committee is assessing proposals by various engineers following a tender to appoint a resident consulting engineer. Only then will we begin the process of determining the full extent of the cost of works that need to be done at Langford and the profits the group may earn from the project.
PN: How much profit are you projecting from the South View Park housing project?
NM: We have sold all our stands at Southview Park. However, it must be noted that the majority of the stands have been sold on ten year payment plans therefore income will be realised at a later stage. The project is envisaged to make the group US$50million in profit.
PN: How much has the South View Park housing project developed to date and when do you expect to finish this project?
NM: We have developed over 92 percent of the project. We have faced some major delays due to the heavy rains that were experienced in the country, which affected onsite work. However, work is back on track and our engineers are working on a revised programme which will see completion of onsite work by October 2017.
PN: We understand there are calls for a further audit into the Southview Park project, amid concerns of weak internal controls which could have prejudiced the company and policyholders. What is your comment and progress in this regard?
NM: IPEC requested the group to conduct an audit into our operations at Southview Park. This audit was conducted and the report was submitted to IPEC.
PN: How far have you gone in addressing corporate governance deficiencies, compliance with prescribed asset thresholds, merging of funeral and life businesses following an audit by KPMG?
NM: Monthly reports are provided to IPEC on the progress we are making. We believe that we have made significant strides in meeting the requirements and corrective action that has been called for and ensuring our compliance with policies and regulations as set by IPEC.
PN: How would you describe the group’s policies and systems of internal controls after a forensic audit unearthed corporate governance deficiencies, some dating back to 2007?
NM: The board at Fidelity Life has been working to implement the proposals and corrective actions recommended by IPEC. We have since implemented the majority of those corrections. The board, together with our new auditors, have taken action to address all issues raised and significant strides have been made to strengthen our policies, systems and internal controls.
PN: What about reconciling income from sale of stands and profit allocation between policyholders and shareholders?
NM: The reserving policy that is in place at Fidelity Life Assurance is compliant with all regulations.
PN: When can the market expect a substantive managing director and finance director at Fidelity?
NM: The recruitment process has begun and the board will announce the substantive managing and finance director in due course.