THE National Social Security Authority (Nssa) could shore up its shareholding in Afre Corporation after it emerged this week that the social safety net fund will underwrite the insurance group’s US$10 million rights issue.
Report by Chris Muronzi
Nssa general manager James Matiza told businessdigest this week that the fund would underwrite a rights issue at Afre to fund working capital requirements for its subsidiaries.
“We are going to follow our rights and underwrite the rights issue,” Matiza said. He said the funds would be used to capitalise the group’s various subsidiaries except First Mutual Life, which was self sufficient. Nssa’s shareholding in Afre would therefore increase post the rights issue.
Nssa acquired Econet Wireless Zimbabwe’s 19,7% stake in Afre in February at a premium of 514%.The pension fund already held more than 32% through Renaissance Merchant Bank (RMB).
Nssa, Renaissance Financial Holdings (RFHL), RMB, now Capital Bank, and Econet signed an agreement late December that saw the pension fund emerging with an 84% stake in the merchant bank.
RMB, a merchant bank formerly-owned by Patterson Timba, Dunmore Kundishora and Clementine Sibve, owned a stake in Afre believed to be around 20% of the company’s total issued share capital.
First Mutual Ltd (FML) led a 52% increase in Afre Corporation’s half-year profit to June 30 2012 as the group continued to recover lost ground.
The strong performance was achieved on the back of gross premium income of US$44,9 million earned from a 5% increase on the prior year’s comparative of US$42,9 million. Of this, the life assurance and medical savings business contributed US$27,8 million, while the short-term insurance and reinsurance businesses accounted for US$17,1 million of gross premiums.
First Mutual Life, a division of FML, contributed 61% of the group’s total written premium. The life business achieved a gross premium income of US$10,2 million.
This was a result of the downward movement in the group’s life business, which suffered as more clients opted for segregated pension arrangements.
Whilst this was a 17% decrease from US$12,3 million achieved during the first half of last year, the company said the life assurance business would focus on acquiring new high-value schemes while at the same time retaining and achieving organic growth from existing clients.
Employee benefits premium income of US$5,4 million was 34% lower than the prior year’s figure of US$8,2 million, whilst individual life premium for the period, at US$4,8 million, was 20% firmer than US$4,1 million achieved last year on the back of an increased uptake of individual life and funeral cover products.
First Mutual Medical Savings Fund member contributions were 20% stronger at US$17,6 million, up from the June 2011 amount of US$14,1 million. As a result of lower life premiums, First Mutual Life posted a lower technical profit of US$5,9 million, from US$6,7 million in June 2011.
Short-term insurer Tristar Insurance achieved a gross premium income of US$5,1 million, up from US$4,6 million in the comparative period. Management has adopted strategies to grow the balance sheet by increasing the contribution of small to medium-risk clients, which can be retained to net, whilst maintaining the large corporate clients for commission income on the reinsurance ceded.
FMRE Property & Casualty (Zimbabwe) contributed gross premium income of US$10,4 million, a growth of 7% compared to the half year ended June 2011.
On the insurance costs side, Afre Reinsurance ratio, at 19% represented US$8,6 million of the gross written premium, achieving a net premium of US$35,4 million, marginally higher than the June 2011 figure of US$34,6 million.
The fly in the ointment was investment income from quoted equities and returns from short term investments which amounted to US$1,6 million, compared to investment gains of US$4,5 million for the first half of 2011. The decline in investment income was largely attributed to the general fall in ZSE share prices.
The group achieved a total profit after tax of US$7,1 million, up from US$4,7 million in June 2011. The comprehensive profit attributable to shareholders after transfers to non-controlling interests and policyholders amounted to US$3,2 million, compared to a loss of US$2,4 million last year.
Consequently, shareholder profit of US$3,2 million for the period represented a whopping 233% jump from prior year.
Policyholder funds increased by 5% to US$70,07 million, whilst the total asset base increased by 3% to US$169,3 million.
The claims ratio at 49% represented a 7% decline and the group’s cost-to-income ratio (CIR) also declined by 3% to 82%.
Pearl Properties earned US$4,2 million, up from US$3,9 million in June 2011.
The property business achieved a decent rental yield of 8,2%, with rentals per square metre of US$7,40, a slight improvement from US$7,30 achieved during the same period last year. Whilst this was slightly below the 2012 target of US$7,50 per square metre, the company managed to lower the vacancy rate for the period to 15,4% from 22,5% as it acquired new tenants during the first half of the year.
Occupancy levels for commercial offices located in the central business district remained under pressure, with tenants continuing to consolidate their operations as a means of reducing total space held and related operational overheads.
Rental income grew by 10% from US$3,1 million as at June 2011 to US$3,4 million during the current reporting period, whilst management says the company will seek to further enhance effective cost management and debt recovery on tenant receivables.