admininvestment no longer drives value for policyholders.
RTG had an exposure of US$5,143 million to ReNaissance Merchant Bank after it acted as a guarantor and local gannet for an international loan of US$7,5 million.
Group chief executive Mrs Sibusisiwe Ndhlovu told an analyst briefing during the presentation of the group’s financials for the six months to June 2011 that the group was restructuring its investment in RTG.
“We do not see the investment driving the imperative and we are structuring the investment with the view of exiting but it has to be done with the right pricing to benefit the policy holders,” said Mrs Ndhlovu.
More than 80 percent of the group’s investment in RTG is owned by policyholders and about 15 percent is owned by shareholders.
The group has also announced its US$15 million rights issue to capitalise under performing insurance subsidiaries to underwrite meaningful business and retire expensive debt. Mrs Ndhlovu said the group had used internal resources to retire the expensive external debt and proceeds of the rights offer will also be used to cover the internal resources.
Some of the subsidiaries to benefit from the proceeds of the rights offer include Tristar Insurance, FMRE Property & Casualty, Botswana First Mutual Life and FMRE Life & Health. Mrs Ndhlovu said shareholders would be meeting for an Extraordinary General Meeting before the end of next month to give directors the green light to raise the funding.
She said Afre had already secured an underwriter for the rights issue although she refused to reveal the financial institution.
However, market sources say TN Bank would be the underwriter. Analysts attending the briefing questioned the ability of shareholders to raise the required funding in the current illiquid market. They also thought that the idea of the rights issue was to dilute the current shareholders of the company to the benefit of the underwriter.
Mrs Ndhlovu said the directors were working for the interest of the shareholders and they would not do anything that undermines the shareholders of the company.
Group non-executive chairperson Mr Tawanda Nyambirai said a rights issue would not take away the value of the company as perceived but would increase the value of the underlying asset because it would be well priced.
A rights issue is a way in which a company can sell new shares in order to raise capital.
Shares are offered to existing shareholders in proportion to their current shareholding, respecting their pre-emptive rights.
If shareholders fail to follow their rights, the underwrite takes up the shares. During the first six months of the year the group made a loss of US$2,4 million compared to a loss of US$1,6 million in June 2010.
The group achieved gross premium income of US$42,9 million representing a 62 percent increase compared to the same period last year.
Afre reinsured US$8,3 million of the gross premium written, achieving a net premium of US43, 6 million.
Total expenditure for the group during the period under review amounted to US$36,9 million to show a growth of 52 percent to the comparable year, which recorded US$24,2 million.
Included in this loss is the US$4,9 million relating to the provision for losses on scrip which was improperly disposed through related party transactions by the former executive chairman, Mr Patterson Timba.
The group has already taken legal action to recover the funds.
Online Reporter