HARARE- FMHL shareholders have approved the proposed acquisition of NicozDiamond Insurance and a subsequent rights offer pursuant to the acquisition.

The shareholders further voted in favour of a merger of the group’s existing short term operations Tristar Insurance together with that of NicozDiamond which is also into short term insurance, at  a slated EGM in Harare on Wednesday.

FMHL, listed on the ZSE, is one of Zimbabwe’s largest and leading financial services group predominantly undertaking insurance business. Its various interests span from Short term reinsurance, Life Assurance, Short term insurance, health insurance long term reinsurance, property investments as well as wealth management.

NicozDiamond is likewise a peer listed concern on the ZSE involved in the short term insurance sector in Zimbabwe and across the region.

The proposed transactions will see NSSA, a government commissioned corporate body tasked with providing social security, further increase its direct shareholding in FMHL from 50.95% to 60.71% post the acquisition. The increase will be a result of NSSA’s existing controlling shareholding in Nicoz Diamond.

Other shareholders besides NSSA will take a knock in book holdings but realize incremental value through increased absolute equity. Indirectly NSSA will hold more in the range of 70% of the consolidated group through its shareholding in defunct and second top shareholder Capital Bank.

As the underwriter to the approved rights issue NSSA may accrue even more shares in FMHL as other shareholders may fail to exercise their rights.

NSSA is likely to strategically influence a non participation by Capital Bank which shares automatically accrues to its shareholding as the 90% underwriter.

In a cutthroat insurance market where premiums are plummeting and highly concentrating in trusted strong brands on the back a depleting macro environment characterised with low aggregate demand, pulling of resources to enhance competitiveness has become a common thing.

In recent months Sanlam an insurance giant in South Africa grabbed a significant shareholding in Zimnat which has a strong presence in short term insurance among other insurance businesses.

Old Mutual which experienced a marginal knock in its overall gross written premium in the first half of the year has used scale and resources to  its advantage over the years maintaining a grip as market leader.

Nicoz Diamond has in recent periods experienced high claims while premiums growth has been very sluggish although maintaining operational profitability. On the other hand Tristar has been struggling realizing a sharp dearth in premiums as well as a decline in operating income. The move by FMHL will therefore be a resuscitation bet pulling on NDI’s strength and viability.

In a value proposition to shareholders FML said the acquisition will enhance economies of scale within its short term business through a large capital base, technology and a wide delivery channel. It went further stating that there will be increased market share, revenue and earnings boost as well as balance sheet growth.

Both stocks NDI and FML were stable in trading on Wednesday as the industrial index touched a new all-time high of 235.03.