Ndamu Sandu
30 August 2008
Fidelity Life Assurance has paid ZMK 700 million (US$200 000) in bride price for Cavmont Life and Asset Management in Zambia as the listed concern bolsters its regional drive to fund local operations choked by the economic meltdown.
Initially Fidelity was given a five-year management contract over the Zambian firm in 2005 which was due to expire in 2010. The contract had a clause on equity participation on its expiry but Cavmont's shareholders offered Fidelity the opportunity to buy the company before the end of the contract, Standardbusiness was told last week.
Simon Chapereka, Fidelity MD said the acquisition of Cavmont, together with other regional sojourns being planned by the group will raise the necessary capital to fund local initiatives.
"It (regional operations) is an avenue to buttress our performance. The computerisation exercise and the replacement of motor vehicle fleet have been funded by regional operations," he said.
Before 2006, Cavmont was a composite insurance company transacting both short term and life business but changed to conform to new Zambian regulations that dictate the separation of short term and life business. Nicoz Diamond remain managers of the short-term business.
Chapereka said Fidelity had poached Yorum Chulu from Zambia State Insurance Corporation to be the GM of Cavmont. Chulu will be complemented by former Fidelity Employee Benefits manager George Munaki and investment analyst Patrick Serere. Munaki and Serere moved into Zambia in 2006.
Cavmont will have to stave off stiff competition from established companies in Zambia but Fidelity is confident that the staffers have the experience to steer the company to success.
Chapereka said unlike the Kenyan project, "Where they said thank you after four years, we are getting better and better as we go along with it". In 2002, Fidelity was given a management contract to manage the affairs of Kenyan National Assurance Company. It moved out in 2006 after the expiry of the contract.
Cavmont has US$6.5 million funds under management.
In the region, Fidelity has a 65% shareholding in Vanguard Malawi; a management contract in Angola and Chapereka said the group is looking for other opportunities in the region whose identities remained under wraps as it was still negotiating for contracts.
Standard business is reliably informed that Fidelity is looking for contracts that have opportunities for equity participation.
In the half year ended 30 June 2008 results, Vanguard registered premium income of $3.6 quadrillion, a 55% growth from the same period last year. Investment income dropped to $245 trillion from $1.1 quadrillion in the year comparable. German Mushoma, Fidelity financial director told an analysts' briefing that the growth in premium income "looked small but significant in a normal environment". He said investment income was affected when the Treasury Bill rate moved from 23% to 8% in line with the Malawi inflation figures.
Analysts say Fidelity's forays into the region will generate capital to fund local operations on the back of a worsening environment characterised by high inflation. At 11.2 million percent as at June, Zimbabwe's annual inflation has made business planning an unattainable feat. The insurance industry, relying heavily on consumers' disposable income has not been spared either and struggles to grow business volumes under the hyper-inflationary environment.
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