Malawi Stock Exchange (MSE)-listed financial services group, Nico Holdings plc (MSE:NICO) has disposed of its stake in Tanzanian firm Sanlam General Insurance Limited.
Speaking in an interview on the sidelines of a virtual annual general meeting for the financial year ended December 31 2020, the group’s board chairperson Gaffer Hassam said the decision followed the loss-making record of the business.
He said: “When the group expanded outside Malawi, the objective was to diversify its revenue sources, but also in the process make a good return for its shareholders and the group has been in Tanzania for about 10 years.
“However, due to the significant losses that we have been experiencing in that market, we had to pull out.”
Hassam said the business required significant capital investment to re-capitalise it and considering that the shareholding in Tanzania was going to be reduced, the company decided not to follow the rights for a capital call it made.
“When we looked at opportunities we have across the horizon, we felt that the capital is better deployed elsewhere than trying to re-capitalise business that has been making losses.”
He said the company is looking at increasing its shareholding in Sanlam General Insurance Limited (Uganda) to between 15 percent and 20 percent.
Hassam said Nico Holdings believes business prospects in Uganda are bright, but was quick to mention transactions in both companies are subject to approval by the regulatory authorities in the countries they operate in.
On his part, Nico Holdings Limited plc group managing director VizengeKumwenda said as at last year, the business needed more capital as their capital base had shrunk to under $100 million (about K81.4 billion).
In 2014, Sanlam Emerging Markets (Proprietary) Limited, a South African-based life insurer which has interests in the Nico Group, completed the acquisition of a 32.66 percent stake in Nico Holdings plc’s general insurance subsidiary, Niko Insurance Tanzania, now Sanlam General Insurance Limited.
The deal, completed on June 20 2014, resulted in local shareholders in Tanzania buying 33.34 percent with 34 percent being held by Nico Holdings plc.
In the year-ended December 31, 2020, the group registered a profit after-tax of K18.56 billion, a 26 percent increase from the prior year’s K14.73 billion.
According to Hassam, the good performance is on account of the resilience portrayed by the group’s diversified structure despite a challenging global and local operating environment in view of the Covid-19 pandemic.
