GUARDRISK, a South African insurance company and 10% equity holder in Cell Insurance Company (Pvt) Ltd, says it will exercise its rights to re-capitalise the fledgling Zimbabw
ean firm when shareholders move to fully comply with the new $7,5 billion insurance firm-reserve fund requirement.
Cell, launched on a $1 billion capital base, is majority-owned by the Zimbabwe Electricity Supply Authority (Zesa) group and its pension funds as well as industrial giant Delta Corporation, paper company Art Corporation and rebranded ZHL Holdings Ltd.
Herman Schoeman, the SA specialist insurance company’s managing director, told businessdigest that they fully supported the state-prescribed solvency ratio expansions and given the market conditions obtaining in Zimbabwe, it was essential to have sufficient capacity to underwrite new business.
“As Guardrisk, we will definitely follow our rights (to capitalise the company). The shareholders are certainly supportive of the government’s new statutory requirements,” he said in Harare recently.
Global finance company Alexander Forbes Group (AFG) wholly owns Guardrisk, proprietors of the globally patented and innovative cell captive concept. Under the arrangement, some 200 exclusive cells ensure equity participation by those who utilise or subscribe to Cell.
AFG is already active in the local insurance market where it is involved in broking, but Schoeman said the Cell venture and current AFG exploits remain unrelated in terms of management issues.
The cell initiative, developed in 1993, has seen Guardrisk grow to the second largest global player of its kind and its backers have been particularly impressed by the opportunity of transferring intellectual property.
While there are concrete board discussions to whittle down Zesa’s 60% stranglehold on Cell, in line with government demands that institutional investors can only own 40% of insurance companies, it is firmly believed that the company will carry the money-raising issue through issuance of more shares.
Businessdigest can also reveal that about four potential investors — to snap up the power utility’s 20% stake on offer — have been identified and these include two building societies, a motoring concern and an as yet unknown institutional funder.
Asked about the rationale of going into insurance, let alone the Zimbabwean financial sector at a time the critical sub-sector has been decimated by continual failures of banking institutions, Schoeman said his company was confident of the growth prospects of its local associate and self-insurance market hence they needed to have a foothold.
Guardrisk, turning in some two billion rand in revenues annually, nonetheless bears no short to medium-term plans to increase its shareholding in Cell Insurance.
Its investment approaches elsewhere in the region and notably Mauritius and Namibia are 100% ownership because of necessary business capacity and stability in the fellow Southern African Development Community (Sadc) countries.
Headed by former CGU Insurance boss John Sibanda and underwriting premiums worth $37 billion as at its early November launch date, Cell anticipates to do business in the region of $400 billion next year and churn out $12 billion in projected promoter cell profit in 2005.
Meanwhile, Zesa says its investment in Cell was “highly necessary” in that its $1,7 trillion assets had outgrown most insurers’ capacity.
At any rate, Zesa’s executive chairman Sydney Gata said, they have always been involved in self-insurance because the power business was highly risky.
He said government was so “worried about under-insurance” that it affirmatively approved the Cell project as well as expeditiously processing the operating licence.
On shareholding thresholds, Gata confirmed on-going programmes to regularise the issue.