Afre shareholders meet next month

to deliberate on the company’s proposed rights issue.
The group is targeting to raise about US$15 million to inject into its ailing subsidiaries to write meaningful business.

The meeting will indeed be extraordinary as shareholders have to agree on the exercise that is likely to see existing shareholders being heavily diluted.
In most of the rights issues carried out on the Zimbabwe Stock Exchange the majority of the shareholders failed to follow their rights resulting in underwriters gaining significant control in these companies.

One of the well subscribed rights issues was that of OK Zimbabwe where just about 70 percent of the rights issue shares were taken up by existing shareholders, with the remainder taken up by underwriters.

Afre chief executive, Mrs Sibusisiwe Ndhlovu was not at liberty to disclose the underwriter of the US$15 million rights issue but indications are that Econet, already with a 19 percent shareholding in Afre, will underwrite the rights offer.
TN Bank owned by Mr Tawanda Nyambirai, the current non-executive chairman for Afre, is also linked as a joint underwriter.

Definitely, not all the shareholders would be able to follow their rights and that means Econet or TN, depending on who will underwrite the initiative, will increase their shareholding or gain shareholding in the insurance giant.

Analysts are convinced that the rights issue will not receive majority support and it was a strategy of Econet to underwrite and increase its shareholding in Afre.
The (analysts) said the idea of the rights issue was to dilute current Afre shareholders and the underwriter increasing influence in the company.

Chairman Mr Nyambirai was quick to dismiss that the rights issue was intended to dilute the current shareholders of the company to the benefit of the underwriter. He also said a rights issue would not take away the value of the company as perceived but increases the value of the underlying asset because it would be well priced.

RIBC an investment arm and Renaissance Financial are some of the major shareholders in Afre controlling 10,3 percent and 9,77 percent respectively.
The market is waiting with great interest to see the outcome of the EGM and ultimately the results of the rights offer.

Normally, the blue chip counter whenever it sets its eyes on what it wants it gets it, maybe simply because it has the money. They have now become the big guys on the market. In the case that they underwrite this rights offer it means they have taken over Afre.

According to Mrs Ndhlovu, subsidiaries to benefit from the proceeds of the rights offer include Tristar Insurance, FMRE Property & Casualty Botswana First Mutual Life and FMRE Life & Health.
Besides the rights issue, Afre also made an interesting announcement to offload its shareholding in tourism group, RTG.

Mrs Ndhlovu said Afre had resolved to sell its 23 percent shareholding in the tourism group, saying the investment 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. More than 80 percent of the group’s investment in RTG is owned by policyholders and about 15 percent is owned by shareholders.

During the first six months of the year 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 pre-miums written, achieving a net premium of US$43, 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 former executive chairman Mr Patterson Timba.