Insurance group, First Mutual Holdings Limited is set for a US$20 million capital raise, in a transaction that should help capacitate its Botswana reinsurance business. This comes after the board agreed to relocate its reinsurance head office business to Botswana for a wider international market, access foreign capital as well as cushion the business against currency risks and volatility currently obtaining in Zimbabwe.
The business will be headquartered in Gaborone.
Group chief executive Douglas Hoto indicated the transaction was underway although the firm was yet to issue a cautionary statement as per the Zimbabwe Stock Exchange requirements.
"There is a transaction underway, it hasn't got to the stage we can issue a cautionary yet but significant progress has been made.
"The capital raise we are doing is to capacitate that business (Botswana reinsurance) so that it will have total capital of around US$20 million.
"We are in the phase of raising between US$6 million to US$7 from disposal of a stake of nearly 30 percent in the Botswana and Zimbabwe businesses.
"We will have partners who will end up with about 30 percent equity. This will give us about US$7 million more on the balance sheet and we believe this will give us a bigger impetus in the underwriting risks business in the region particularly in SADC which Mozambique, Tanzania, Namibia, Malawi, Zimbabwe," he said.
During the year to December 31, 2018, the insurance giant's consolidated gross premium written (GPW) for grew 45 percent to US$180,6 million on the back of the consolidation of NicozDiamond for the whole year compared to only one month in 2017 when it was acquired.
At US$11 million, operating profit was 37 percent above prior year while profit for the year rose 45 percent to US$17,6 million.
Flagship, First Mutual Life total GPW rose 23 percent to US$43,4 million while operating profit remained flat at US$4,9 million despite an increase in operating costs driven by inflationary pressures. Claims ratio improved to 27 percent from 28 percent in the prior year.
For the reinsurance business, GPW for the period remained flat at US$19,3 million. The business suffered reduced regional business due to concerns about Zimbabwe's capacity to discharge foreign obligations.
The decline was offset by growth in local business, mainly coming from life and health which had a growth of 32 percent at US$2,8 million. Claims ratio also improved to 59 percent from 63 percent as a result of lower agricultural losses.
Across borders, FMRE P&C Botswana recorded a 48 percent growth in GPW on strong performance in regional business.
Operating profit went up 127 percent on a combination of lower claims ratio and higher net premium earned.
Regional business lost in Zimbabwe due to challenges in discharging foreign obligations was retained through Botswana which has created further scope for relocating the reinsurance business to the neighbouring country.
Locally, the group incorporated microfinance business towards the end of last year and it is still operating internally.
The micro-finance business, Mr Hoto said, would be a pillar to the group's financial inclusion strategy.
The consolidation of TristarInsurance into NicozDiamond is still ongoing and is expected to be complete by year end.
Mr Hoto said despite the obtaining challenging economic, the group would work on growth and survival strategies.
"There is no environment where there is no good business as people say, it is your attitude," he said.
FMLH declared a dividend of RTGS0,29 cents a share.