Real unveils turn around strategy

Real Insurance Company of Malawi Limited chief executive officer (CEO) Grant Mwenechanya has unveiled a five-point plan to turn around the company’s fortunes to start making profits.

The Malawi Stock Exchange (MSE)—listed insurance firm has been making losses for the past three years or so; hence, not declaring dividends, an issue that has not amused shareholders.

In the year ended December 2012, the company reported a pre-tax loss of K157 million (about $392 500) due to two key factors; the cancellation of policies at year-end in compliance with the Reserve Bank of Malawi (RBM) directive on premium payments and the increase in reported claims.

At year-end, cancelled policies that had been outstanding for more than 90 days totalled K118 million (about $295 000).

But speaking at the company’s fifth annual general meeting (AGM) in Blantyre on Thursday, Mwenechanya said: “When the results of 2012 came out, I immediately put myself in the shareholders shoes. I do understand the shareholders frustrations. My understanding, of investment is that the investor should get a return. When I saw a loss, I said to myself, not again.”

To turn around the fortunes, he said he has developed a five-point plan, namely business growth, aggressive debtors’ management, expenses cost management, claims cost management and human resources development to assist the company in its transformation drive.

Mwenechanya said he wants the company, which has been growing at between 12 percent and 14 percent, to turn the corner and post profits. In the first quarter [January to March], the firm grew by 64 percent, adding by April growth had peaked at over 90 percent.

On debtors management, he said for the past two years, the company had “to cancel some policies that did not pay the premiums, thereby reducing the revenues”, stressing that this year, cover will be strictly on cash basis.

The CEO said expenses will be closely monitored and, because of the measures, in the Q1, expenses were 13 percent below the budget.

“On claims cost management, our business is to pay claims, but genuine claims only and not exaggerated or fraudulent claims. We have embarked in strict claims management,” he said, adding that their aim is to build a strong and stable human resource.

“If we grow our business, manage our debtors, manage our expenses, manage our claims the result is profit and subsequently dividend,” said Mwenechanya, stressing that the five-point plan is driven by a strict individual performance management appraisal system which is done.

One shareholder, Sunduzwayo Madise, was pleased, saying this was the first AGM where the CEO has spoken some sense.

“I don’t know what we were doing. This company has been making losses for three years. We have diluted our earnings. We need to back and start making profits,” he said.

Real Insurance Company of Malawi Limited, whose share price traded at K1.20 with 250 million shares on issue, is 65 percent owned by Real Kenya, 30 percent by the public and four percent is under employees share ownership scheme.