OVERVIEW

The Society continued on its consolidation and growth strategy.  The year saw a steady recovery in the economy and some growth in GDP from the previous year.  This came on the back of tighter fiscal discipline by Government as well as increased output of the staple food, maize.  Despite the improved performance, the Society continued to face tighter times due to escalation of medical inflation occasioned primarily by the depreciation of the Kwacha against the US Dollar.

We have extended our service provider network to all districts in the country.  In the urban areas the providers are predominantly private while the rural areas are serviced mainly by Mission and Government hospitals.  We have service agreements with all providers which assist in tariff setting.  The major problem noted during the year has been the drastic rise in charges being levied in Mission hospitals.  This inevitably forced the Society to introduce shortfalls, in line with private hospitals, in some of the established mission institutions.  Sadly also, due to un-reconciled queries, Mtengo Wa Nthenga (Francisco Palau) Hospital had and continues to suspend service to our members for a greater part of the year. We are hopeful that a solution will be found soon to avoid further inconveniences experienced as a result of this mishap.

RESULTS

Membership

Membership has continued to grow, a factor that is very important in ensuring sustainability and financial strength.  During the year under review, the Society’s membership grew by 32% from 61,187 on January 2006 to 81,185 as at December 31, 2006.  The breakdown of this is as follows:-

As reported at the last AGM, the growth area is on the low and medium income group.  This is confirmed by the statistics above.  Management has been advised to focus even more towards this.  We have been assured that the strategies are in place to enhance this captive market.  The Board has taken cognizance of the fact that the arrival of a new firm offering similar products to ours will usher in competition, albeit at a higher level.  In general, competition is welcomed because it offers clients an opportunity to compare and see the difference. 

At Masm, we believe that there is room for improvements in services currently being offered and that the competition will ensure that we go an extra mile to provide value services to our members.  Management has been tasked to 2put in place appropriate strategies to ensure that existing membership is retained, but also that overall membership grows.

At the last AGM, we announced the advent of premier schemes of SUPER VIP and PLATINUM VIP.  These have seen a slow growth rate than envisaged.  The anticipated growth has not been attained mainly due to the heavy cash flows involved.  It has been realized that most potential member firms would not sustain the contribution at the current levels on a “one off” settlement.  As a result of this, The Board has now approved an instalment plan that would allow firms to optionally pay on a monthly, quarterly or semi-annual basis.  It is hoped that this alternative will provide an affordable option.

As at 31st December 2006, the total number of members subscribed to these schemes stood at 129. 

CONTRIBUTIONS

Contributions received during the year increased by 43.6% from K610.5 million in the previous year to K876.8 million. 

The proportion of contribution income derived from the schemes was as follows:-

The above reflects the membership growth as well as the increase in contribution rates introduced early on in the year.

CLAIMS

Expenditure on claims continues to rise as intimated to earlier.  The total spent amounted to K740.1 million in the current year compared to K549.1 million in the last year.  This represented a 34.8% increase on 2005 claims. 

The scheme proportions of that spent were as follows:-

Claims have escalated due to increase in membership and the consequent increase in usage.  As an example, a total 390,208 claims were processed in 2006 compared to 310,329 in 2005.  Coupled to this, tariffs charged by all hospitals increased on average by 40% in the year.  Major increases were seen in Mission hospitals where, incidentally, Masm pays in full for its members.  Due to that pressure and in quest for sustainability, certain hospitals were re-classified to ‘private’ and hence allow for co-payments in line with other private hospitals.  Management has however continued to engage these institutions in discussion to find a way towards affordable tariffs.

IMPLICATIONS

Experience from operations during the last four months of the year called for a review of contribution rates for the 2007 financial year if sustenance was to be maintained.  A 20% contribution rate increase was announced effective 1st January 2007.  The increase is in line with the medical inflation figures obtaining in the market.  The projected increases in tariffs in all institutions we use are on average at 30%.  These institutions tend to review their tariffs at least twice in a year.  Unless there are drastic changes in the economic factors, contributions rates are unlikely to change again in the current year.

INVESTMENTS

We have continued to maintain our strategic investments in Mwaiwathu Private Hospital and Michiru Pharmacies.  As reported at the last AGM, the shareholding was increased in Mwaiwathu to 17%.  Both these investments are being held for strategic reasons as they are allied to the operations we undertake.

Following an invitation to participate and upon review of available information, a decision was taken to invest K10 million in African Lotteries Ltd (AFLOT).  This organization had won the tender to run the lottery in Malawi following assessment by the National Lotteries Board.  As part of the licensing agreement, AFLOT was required to offer shares to Malawian empowerment groups to which Masm belonged.  It was evident from the projections that this investment will come to maturity from the third year of its operation where upon dividends would start accruing.  Board considers this as a viable project but accept that for accounting purposes it be treated as per regulatory requirements.

FINANCIAL PERFORMANCE

Overall performance has been encouraging, resulting in a surplus of K14.3 million for the year as compared to a deficit of K6.8 million in the previous year.  Assets increased from K458.3 million to K737.2 million as at December 31, 2006.  Overheads have continued to grow partly due to inflationary pressure as well as to increased business activity arising from membership growth.  Management have however been asked to keep a closer tab on the controllable costs.

MOZAMBIQUE OPERATIONS

As reported at the last AGM, we have now set up operations in Mozambique.  We initially started with one member firm being serviced from the Head Office.  We will open a full time office manned by a Branch Manager from 1st May 2007.  Our survey of the potential market is promising.   We are pleased to have with us here today the Branch Manager, Mr. Pondamale.  You are welcomed.

THE BOARD

The Board comprised of the following during the period:-

Representing member firms:-

1. Mr P. Gundumulani      -        Chairman
2. Mr H. Masi                    -        Member
3. Mr M. Sawerengera       -        Member

Mr Sawerengera resigned from the Board during the fourth quarter of the year and the position held vacant due to time limitations.  This position is open for election at this AGM.

Representing individuals:-

1. Mrs A. Kalidonis            -        Member
2. Mr G. Sadyalunda                   -        Member
3. Mr W. Chirwa               -        Vice Chairman

Mr Sadyalunda retires by rotation at this meeting but being eligible has offered himself for re-election.

For an effective Board, it is imperative that the composition be of the right mix in order to have appropriate skills and experiences to add value to the organizations.  I therefore urge members to take this into consideration when voting in Directors for the various positions.

PROSPECTS

The year 2007 offers more challenges especially with the coming in of a new and more established organization as competitors.  It is challenging because our traditional products will be put to more scrutiny when compared to products offered by the competition.  This will only add more fires to calls for DEMUTUALISATION as seen/heard in the past two to three years.  It is perhaps therefore an appropriate juncture at which the issues of DEMUTUALISATION were to be re-visited.  We will therefore be sanctioning a study during the year with view to establishing the way forward.

On another note, members may be pleased too hear of the introduction of the Masm Emergency Medical Services (EMS).  In our quest to add value to our members and in line with our investment strategy, we will roll out ambulance services in both Blantyre and Lilongwe.  These will be available to members at no additional cost.  None members will also have access to this service on a ‘fee-for-service’ basis.  The service will be provided with cooperation of the City Centre Clinic in Lilongwe and Mwaiwathu Hospital in Blantyre and is targeted for launching in the first week of May 2007.

APPRECIATION

I thank management and staff for handling the affairs of the Society competently and with full effort and dedication.  Working with them we were able to turn around a deficit situation in the past period to a surplus for the year ended.  I challenge you to continue applying yourselves to the maximum of your abilities so that our Society may continue to prosper.  To my colleagues on the Board, I thank you for your support and wise counseling which has made it possible for us to achieve what we have during the year.

Particular appreciation is extended to our various Service Providers spread throughout the country.  Without you (them) we would be nothing as Masm.  We thank you for your continued excellent service to our members and understanding on tariff issues.

Last, but most importantly, I thank all our member firms and individual members for your support, stable and continued patronage of the Society.  We would like to assure you of our continued efforts in servicing and taking care of your interests.

I thank you for your attention.