Fidelity in US$500 000 loss

ZSE-LISTED Fidelity Life Assurance (FLA) made a US$500 000 unrealised loss in the first five months of the year on the back of subdued trading conditions worsened by uncertainty surrounding empowerment regulations and tight liquidity.

The unrealised loss resulted from the fall of the FLA share price.
FLA MD Simon Chapereka on Monday told businessdigest that the company made the unrealised loss between January and May after its share price tumbled owing to lacklustre trade on the market.

In February the company incurred a US$73 000 loss in investment income after citing low trade that resulted from controversy surrounding indigenisation regulations gazetted in January.

Investment income is capital derived from premiums which insurance companies invest on equities before paying out matured policies.

“We made an unrealised loss of about US$500 000 on the ZSE between January and May because of a fall in share prices,” said Chapereka on the sidelines of the company’s annual general meeting on Monday.
FLA shareholders approved a reduction in authorised share capital from the initial target after management cited “prohibitive” administration costs.

This decision means that an initial move to increase share capital from 100 million ordinary shares of a nominal value of US$0, 01 each to 500 million shares was dropped for a new plan that would double the authorised share capital for a reduced nominal value of US$0,001 per share.

The businessdigest understands that management sought shareholders’ approval after the registrar of companies charged US$327 000 in administration costs. But the revised authorised share capital would see the company being charged US$10 000.

“At the last Extra Ordinary General Meeting of the company, members approved an increase in the authorised share capital of the company from 100 million ordinary shares of a nominal value of US$0, 01 each to 500 million ordinary shares of a nominal value of US$0, 01 each. The cost of administering the shares has become prohibitive and as such the company will require shareholders’ resolve, with or without amendment,” said company secretary Nyaradzo Matindike before the annual general meeting.

“The balance of the authorised but unissued ordinary shares of the company, after the proposal, be placed under the control of the directors for an indefinite period, to be issued in compliance with the terms of the company’s Memorandum and Articles of association and the regulations of the Zimbabwe Stock Exchange, provided that no issue will be made which would effectively transfer the control of the company without prior approval of the shareholders in a general meeting.”

This development comes after FLA went on the market to raise US$1,7 million through a private placement to boost its underwriting capacity. The insurance industry is on a confidence building drive after years of hyperinflation eroded insurance policies. Initially, the company was seeking US$2,5 million but had to review the figure downwards due to liquidity challenges prevailing on the market.

Despite losses made on the ZSE, Chapereka said the company’s micro finance arm performed beyond expectations after it made US$1,7 million advances against a US$1 million target. He said lending was expected to hit the US$2 million mark by weekend. ­— Staff Writer.

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