Constantia Risk and Insurance Holdings (Pty) Ltd, a wholly owned subsidiary of Conduit Capital, has entered into an agreement to sell the entire issued share capital of Constantia Life and Health Assurance Company Limited (CLAH) to Affinity Financial Services (Pty) Ltd for R20 million.
The sale of CLAH has been necessitated by the liquidation of Constantia Insurance Company Limited (CICL) in September. CICL contributed more than 95% of Conduit Capital’s revenue.
Read: Constantia Insurance goes into final liquidation
“Without the CICL business, on which the business assets within the group were highly dependent for scale and transactional volumes, cash flow within the group is being eroded and causing financial strain,” JSE-listed Conduit Capital said in a SENS announcement in December.
The directors were of the view that, unless CLAH is sold, Conduit will not have sufficient working capital to remain a going concern. They expect the sale to reduce operating costs and enable Conduit to meet its financial needs for the next 12 months.
The transaction is expected to be completed by the end of March 2023, subject to the fulfilment of all suspensive conditions by the end of January.
The disposal would normally require shareholder approval in terms of the JSE’s Listings Requirements. However, because of current circumstances of Conduit as a result of CICL’s liquidation, the directors applied for this requirement to be waived, which the JSE granted.
Affinity Financial Services is wholly owned by Affinity Enterprises Holdings (Pty) Ltd. It provides financial, healthcare and insurance-related services to low-income consumers.
The SENS announcement said CICL’s liquidation has prevented Conduit Capital’s auditors from completing the audit for the year to 30 June 2022.
It said the unaudited value of CLAH’s net assets on 30 June 2022 was R6.1m. The unaudited loss after tax for the year to 30 June 2022 was R33.7m, and the overall loss for the first quarter of the 2023 financial year was R3.3m.
According to Conduit’s interim results presentation in April 2022, CICL, CLAH and Constantia Life Limited comprised 95% of the group’s assets. With the demise of CICL, the (pending) sale of CLAH and Constantia Life not having written any new business since 2019, the Constantia Insurance Group is effectively no more.
Status of the remaining assets
Conduit provided an update of the status of the assets it will continue to hold after the disposal of CLAH.
Constantia Life, the wholly owned subsidiary has been in run-off since 2019. Conduit said it intends to complete the run-off of this business in the next few months.
Conduit Ventures (Pty) Ltd, a portfolio of insurance-related businesses in which Conduit holds a minority interest. Subsidiaries include:
- Leymic Holdings (Pty) Ltd, which owns interests in several motor and non-motor insurance claims solutions and technologies;
- Fixico (Pty) Ltd, a platform that enables insurers, fleet-owners and car owners to manage damage claims; and
- Rikatec (Pty) Ltd, an insuretech company specialising in information management systems and digital solutions.
Conduit said these entities have been “severely impacted” by the liquidation of CICL, as they relied on business from the general insurer.
Oraclemed Health (Pty) Ltd, an underwriting manager that specialises in medical evacuation insurance in Africa, in which Conduit has a 30% stake. Although Oraclemed was affected by the liquidation of CICL, it was able to find a replacement insurance carrier and “prospects remain good”.
Deal Design Commercial Property and Business Broking (Pty) Ltd, the South African master franchisor of international real estate brokerage Century21. Conduit owns 51% of the business, which has been unaffected by the liquidation of CICL.
Conduit is a 25% participant in Africa Special Opportunities Capital’s Fund 1, which invests in distressed South African assets. The fund is monetising its investments and distributing the proceeds to investors. This is expected to be concluded by June 2023.
Conduit said that following the sale of CLAH, the group will no longer qualify to be listed on the JSE. Once the 2022 annual report has been released, Conduit will consider the available options to enable it to reinstate its listing.
Trading in Conduit’s shares was suspended in September at the request of the directors.
