Published by the government of Zimbabwe
Golden Sibanda
16 November 2009
Harare — LISTED short-term insurer, NicozDiamond shareholders last week approved the group's proposed US$4 million rights offer meant to recapitalise operations.
The resolution was passed during an extraordinary general meeting last Friday, which also passed other resolutions to redenominate shares and increase the insurance firm's authorised share capital.
NicozDiamond directors had earlier warned that if the insurance firm failed to undertake the rights offer as proposed, it would not be able to compete in the market due to a weak balance sheet.
They also cautioned the group would not be able to recapitalise its Zimbabwean and Ugandan operations that have shown potential to do well.
Following the approval that was granted by shareholders, NicozDiamond will issue 160 million shares of nominal value at a price of US$0.025.
The rights offer will gross US$4 million.
The approval also gives directors authority to increase the firm's share capital from the current 500 million to 800 million ordinary shares.
After the rights offer, a total of 559 450 370 ordinary shares will be in issue while 240 549 630 authorised but unissued ordinary shares will be placed under the control of the company's directors.
In addition, the group's total equity after the rights offer will increase to US$16.6 million from the current level of US$12.7 million.
Managing director Grace Muradzikwa said the advent of the multi-currency system meant the group could now write US dollar business, but that needed to be supported by a US dollar balance sheet.
"The erosion of the balance sheet has been particularly difficult for us as the short term insurers because the amount of business underwritten and retained is a direct function of your risk appetite and the balance sheet size," said Mrs Muradzikwa at the EGM.
She added saying "as a result of the weak balance sheet we took a cautious approach to the amount of business retained" by the company.
Mrs Muradzikwa said the company could not retain more than 50 percent of the business it has been writing since the advent of the multi-currency.
"It is for this reason that we are seeking for a recapitalisation of the business. We believe that with an additional capital of US$4 million, we can increase our retention to about 70 percent, which would be in line with regional benchmarks," said Mrs Muradzikwa.
NicozDiamond has responded well to the macro-economic environment although the pace at which customers insured their valuables was still slow, as firms were yet to operate at optimum levels.
The ZSE-listed firm had written US$9 million worth of business by October this year, posting a US$700 underwriting profit in the process.
Investment income was perched at US$716 000 taking group after tax profits for the 10 months to October to a modest US$1.4 million.
The leading short-term insurer believes that additional capital would enable it to negotiate favourable treaty structures to facilitate higher retentions during the forthcoming financial period.
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