IPEC issues US$53m corrective order on FML

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FIRST MUTUAL
FIRST MUTUAL LIFE

HARARE – The Insurance and Pensions Commission slapped First Mutual Holdings’ Life Assurance subsidiary with a US$53 million restitution order to policyholders after an audit uncovered massive non-compliance with rules and several corporate governance breaches.

The restitution, according to sources, also includes an order to pay restitution in local currency for an amount, which is just above $200 million.

The audit, which arose after IPEC called for asset separation for policy holders and shareholders, was conducted by BDO Chartered Accountants. After a long-drawn out audit, which sources say involved negotiations with political offices, particularly with blacklisting of executives, IPEC issued a corrective order on First Mutual after several deficiencies were unearthed at FML Life more specifically through various opaque schemes.

Sources said that the audit unearthed abuse of policy shareholder funds by shareholders, improperly constituted boards, handpicked by the FML executive, abuse of funds for foreign subsidiaries and losses from an investment in Tristar while overall there was no inflation protection for the shareholders.

The audit also showed that there were several  payments that were not supported by computations or monthly reconciliations as required by the company procedure manual as proof that these were earned-funds by the shareholder.

The audit report, which was gleaned by FinX, showed employment benefit policyholders were exposed to a potential financial prejudice of US$31 million due to potential overdrawing of the policyholder bank account.

Policyholders are said to have been prejudiced over at Tristar, which was noted to have a confusing shareholding. FML policyholders did not follow their rights in all subsequent rights offers and this resulted in policyholder interest in Tristar being diluted to 1.06% from 35% over six years.

As mentioned above, the audit also found out that the boards of some of the subsidiaries were compromised, which heightened the dominance risk.

 

 

 

 

 

 

 

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