FIDELITY Life Assurance of Zimbabwe Ltd (Fidelity) has withdrawn its earlier decision to pay out dividends due to shareholders citing pressing financial commitments.
Chief executive officer Simon Chapereka said the company had retained the money to raise its prescribed assets ratio which currently stands at 36%.
Insurance company asset ratios have to be 45%.
This means that Fidelity is 9% short of the required prescribed asset ratio.
Reserve Bank of Zimbabwe governor Gideon Gono has already warned insurance firms that the central bank would be moving in on the sector because there were major discrepancies in it.
Chapereka said the Fidelity board had agreed on the decision not to pay a dividend to shareholders.
“This decision was taken by the 20 major shareholders of the company who in total hold 95% of its total shares,” said Chapereka.
He said the $1 billion raised from the rights issue had become inadequate for the company’s information technology project.
According to Chapereka, the project is hard currency-driven and thus the recent devaluation of the Zimbabwe dollar has provided a challenge to the company.
“We have found ourselves $500 million short, this being the cause of the recent devaluation of the Zimbabwe dollar against the US dollar,” said Chapereka.
The project was meant to enhance service delivery for the company.
In its financial results ending December 31, Fidelity declared a dividend payment of 40 cents a share.
This amount was supposed to have been paid to the shareholders by May 4. Fidelity said the withdrawal of the payment had been necessitated by the new requirement set by the Registrar of Insurance Companies.
It also cited the economic environment persisting in the country as the other reason for withdrawing payouts.
“This decision was reached after taking into account the prevailing macroeconomic and regulatory requirements,” said Martin Makaya, the company secretary.
He said the decision was within the company’s rights and meant to safeguard shareholder interest.
“We are a public company and have to stand in for the shareholders,” said Makaya.
He said the decision was made public and there was nothing sinister in the company’s actions.
Zimbabwe Stock Exchange chief executive officer Emmanuel Munyukwi said the bourse had approved the withdrawal by the insurance concern because the decision was within the company’s rights.
“We approved their notice after looking at Fidelity’s reasons and found that it was justified,” Munyukwi said. He said this was not new to the ZSE but the last time such a case occured was two years ago.
Fidelity, which has failed to perform up to expectations since listing, recorded earnings per share of $8,33, far below the projected $11.
Colcom Holdings Ltd is also understood to have cancelled its dividend payout.