CM: Kennedy Lemani indicated Afre was considering taking a legal route to recover funds –US$1,3 million — the company lost through a scrip lending deal done by PattersonTimba when he was executive chairman?
DH: Yes, in fact our lawyers are handling that. The matter is in court as we speak. I am not inclined to say much about it as this will be subjudice.
CM: Has Timba resigned from the board? I ask because an AGM notice says he is still on the board in line with an AGM held recently.
DH:The AGM that was done on 30 March was for the year 2010. During that year he was a board member. What the AGM sought to do was to have members ratify what was already a fate accompli. That is why when you read the resolutions more closely they only talk about ratifying issues rather than approving them. Indeed the Chairman emphasised this at the meeting. In essence that meeting was primarily to comply with the Companies Act.
CM: You left five years ago and came back to find the business model had not changed. Are you looking at changing the model? What do you have in mind?
DH: Yes I think the model needs to be adjusted to take into account the dollarisation of the economy and new economic environment. The changes will capture the fact that we have a strong currency, the average incomes are low. So the pricing and distribution of our products must take cognizance of that. Also the margins tend to be lower although more they are sustainable. This requires us to explore new distribution channels that rely more on technology than physical bodies. It also puts demand for more efficiency and tight cost control given the low margins alluded to above.
CM: You have set aside US$6,9 million as capex. Where is the money going?
DH: The capex is mainly going into Pearl properties for new property developments and refurbishment in line with our strategy to improve the quality of space and diversify the portfolio. Additionally, capital will also be allocated to purchase core business application systems for the insurance subsidiaries and the medical savings fund. The balance of the capital will be applied to renew the motor vehicle fleet.
CM: You said you would be looking to raise capital? Have shareholders backed a rights issue? And how much are u looking to raise and when do you hope to do this?
DH: The major shareholders have indicated their support for the capital raising. We are looking at raising around US$10 million. The capital will be used to support the insurance subsidiaries to underwrite more business. We would want capital support that is proportional to the business underwritten as we move towards a risk based capital approach to our underwriting. We are also preparing the business to Solvency II capital measurement protocols in line with global trends.
CM: How do you intend to contain costs? Does this mean laying off staff?
DH: We will use all tools necessary to reduce costs. This may include right sizing the number of staff. At the moment I have not yet got to that point. When we get there, we will communicate. We will also cut the cost of distributing our products by using technology for distribution as well as franchising. I will limit my response to those few steps for now.
CM: You have gone full circle at Afre after you left a few years ago. How does it feel to be back?
DH: It feels good to be back. I believe I can make a better contribution to both my career and the country at the second largest non banking financial institution in the country.
CM: How is business? Could you give us a trade update for the quarter to March for all the divisions?
DH: Business looks fine. We need to gain the trust of more stakeholders. The total group income for the quarter was US$22,7m. The surplus was US$5,8m. The figures are above the budget by about 10%.
CM: A look at your share price shows its trading at a discount to your competitors such as Fidelity. Do you think your share price is undervalued?
DH: Yes. The share price is grossly undervalued. This largely reflects the negative sentiments surrounding the poor corporate governance that was obtaining in the group.
CM: If so where do you think the price should be? Do you think that price is ever going to be achieved given perception issues around Afre?
DH:I would not want to guess where the price would be for now but I believe it should trade at a minimum of its net asset value. This would mean that we should not have a price less than about 21 cents.
CM: How was your experience at Altfin?
DH: My experience at Altfin was very enriching and fulfilling. I was able with support of the shareholder to introduce two new business unit namely Altfin Life Assurance Company and Altfin Health Insurance company.
CM: Who is Douglas Hoto? What makes you tick?
DH: I am kept going by strong belief in people. I am an Actuary who converted into a business leader over time. My ethos is make sure that things are done properly and that the unsuspecting public who are our clients are treated fairly.