HomeBusiness DigestFidelity seeks capital for subsidiaries

Fidelity seeks capital for subsidiaries

Ndamu Sandu

FIDELITY Life Assurance of Zimbabwe will undertake a rights issue to raise capital for its external operations in Malawi and Kenya.

sans-serif”>Businessdigest heard this week that the money would be used to recapitalise its Malawian subsidiary, Vanguard Malawi, and to buy a stake in Kenyan National Assurance Corporation (KNAC) in the event of privatisation. Fidelity has a management contract with KNAC which expires at the end of May.

Fidelity managing director, Simon Chapereka, said the company had given shareholders an option to either withhold the dividend or to follow their rights when capital is needed.

Fidelity’s shareholders agreed to take up their dividend and were prepared for a rights offer when the need arose, Chapereka said.

He said Fidelity would benefit from the proceeds of the Zimre Holdings Ltd (ZHL) rights offer that raised $60 billion.

“Once ZHL inject capital, other shareholders will follow their rights,” Chapereka said.

ZHL has a 52% shareholding in Fidelity.

Vanguard needs an injection of US$150 000 to strengthen the balance sheet and for a branch network roll out.

Vanguard is 90% owned by Fidelity and operates in Blantyre and Lilongwe. It has been operational for the past three-and-a-half years. In the financial year to December 31 2004, the entity made a $35 million deficit to the Fidelity group.

The deficit was attributed to lower business written and poor investment returns than anticipated.

The recapitalisation of the entity is envisaged to stave off competition from other players in the Malawian market such as Old Mutual and National Insurance Company of Malawi (Nico) Ltd.

Fidelity moved into Vanguard in 2003 after acquiring the shareholding of Zimre Holdings Ltd.

In Kenya, Fidelity is waiting on the sidelines to snap up KNAC in the event of privatisation of the entity.

Managers of KNAC since 2002, Fidelity made proposals to the Kenyan government on modalities to turn around the fortunes of the assurance concern. Chief among them was the injection of new capital into the company “to enable it to run new business”.

A wholly-owned entity of the Kenyan government, KNAC was tottering on the brink of collapse until Fidelity was given a two-year management contract in 2002 to turn around the waning fortunes of the company.

The contract ended in November last year but has been extended twice to May 31.

Fidelity was listed on the Zimbabwe Stock Exchange (ZSE) in 2003 and owns Zimbabwe Actuarial Consultants and has a controlling shareholding in Fidelity Life Asset Management.

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