The National Social Security Authority (NSSA) is proceeding with plans to buy out minorities in Zimbabwe’s largest short term insurer, NicozDiamond, in which it last year increased its shareholding to 44.9 percent, the Financial Gazette’s Companies & Markets (C&M) can report.
NSSA raised its shareholding in NicozDiamond in November after buying 56,6 million shares, which translated to just over 10 percent of the company’s issued share capital.
The shares were owned by foreign investors, Noel Hayes, who had 4,3 percent and Bruce Campbell, who had a 6,7 percent stake.
The shares were bought at 2,75 cents per share.
A spokesperson for NicozDiamond declined to give details when contacted for comment, only saying: “Kindly take note that we are currently under cautionary and all the questions asked will be contained in the circular to shareholders in due course. We therefore cannot answer any of the questions until such a time that the circular is released.”
NSSA chairman, Robin Vela, said the transaction was in progress but declined to give details, saying NicozDiamond was currently preparing to announce its annual financial results and therefore proscribed from making statements related to its operations.
“The transaction is going on, but at present NicozDiamond is in a closed period so I cannot say much as we are following the Zimbabwe Stock Exchange (ZSE) rules,” Vela said.
Analysts who spoke to C&M said for the mandatory offer to sail through, all shareholders should agree to the proposal. If they agree, NSSA which has 70 percent of its investments in the equities market, and interests in 53 of the 60 companies listed on the ZSE, would buy out the minority shareholders at the market value.
“NSSA could offer a sweetener to other NicozDiamond shareholders to compel them to offload the shares so that they close the deal faster and probably restructure the company in a direction that they are convinced would create value for them,” said one analyst.
NicozDiamond’s other major shareholders are Zimre Holdings Limited with 28,78 percent and Campbell with a five percent stake.
Zimre is 40 percent controlled by brothers Simon and Humish Rudland, whose other interests are in Unifreight and CFI Holdings. There were suggestions the Rudlands were not interested in exiting NicozDiamond.
According to ZSE listing rules, an investor who acquires a shareholding exceeding 35 percent in a company should make a mandatory offer to minority shareholders.
“Section 9 (Note 1A) of the ZSE listing rules triggers certain obligations by any acquirer who reaches a threshold of 35 percent. Accordingly the company has begun instituting measures to ensure compliance with the ZSE listing rules,” NicozDiamond said in a statement soon after NSSA’s acquisition of more shares.
If NSSA succeeds, NicozDiamond would have to delist from the ZSE.
NicozDiamond’s net profit for the half year to June 30, 2016 dropped eight percent to US$1,2 million compared to US$1,3 million during the previous comparative period after contributions by associates weakened.
During the period, gross premiums written grew three percent to US$22,9 million compared to US$22,4 million in 2015 previously.
Operating profit grew 52 percent to US$1,87 million from US$1,23 million.
The Zimbabwean unit’s underwriting profit increased 83 percent compared to prior year while the Malawian operation reported an underwriting loss in the period due to the impact of the Malawian Kwacha devaluation.
The Zimbabwean business recorded a growth of 10,4 percent and remained the largest contributor to revenue. Claims rose 4,8 percent as the company processed heavy fidelity guarantee claims and growing claims in other classes during the period.
Profits from insurance underwriting amounted to US$1,35 million.
The company’s full year results for the year to December 31 2016 are expected next month.
NicozDiamond was created from the merger of National Insurance Company of Zimbabwe (NICOZ) and Diamond Insurance Company in 2002 and subsequently listed on the Zimbabwe Stock Exchange in the same year. NICOZ was formerly known as NEM and Diamond Insurance Company was formerly named Pearl General Insurance Company (Private) Limited, which was incorporated in 1979, when Pearl Assurance Plc of the United Kingdom sold its business interests in Zimbabwe.
NicozDiamond’s brand is consistently one of the most recognised insurance brands in Zimbabwe with six branches in the country and regional operations in Uganda, Malawi, Zambia and Mozambique and Bancassurance arrangements with four banks.