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BIHL five-year strategy delivers growth

Publishing Date : 10 September, 2018

Author : REARABILWE RAMAPHANE

Botswana Insurance Holding Limited (BIHL), an investment group with interests in leading insurance and finance business across Africa continues to increases its market share and retain profitability amid increasing competition from new entrants and evolving regulatory and trading environments.


When delivering a review on the lapsing 5 year strategy which commenced in 2013 BIHL Group Chief Executive Officer (CEO), Catherine Lesetedi-Letegele noted that the strategy delivered sustainability and continued profitability for the group with increasing market share.
Letegele shared these at the BIHL 2018 interim results announcement in Gaborone this Tuesday.


The BIHL chief explained that since the commencement of the “The Tomagano” five-year strategy the company has been able to protect its leading status and position in all its businesses, penetrated new markets as well as introduced new segments. “When growing our businesses we did so closely monitoring profitability and risks in new investments, we did not just aim at increasing our market share without protecting profitability and sustainability,” she said.


She highlighted that in the past five years the Botswana Stock Exchange (BSE) listed BIHL acquired 25 percent stake in Nico Holdings based in Malawi, 50 percent stake in Botswana Insurance Company as well as increased share stake in Pan African outfits Letshego Holdings and Funeral Services Group. She also noted that BIHL disposed some assets that were no longer serving the interests of BIHL‘s strategic expansion targets.


Stakeholders were informed that BIHL increased efficiencies in group operations through establishment of a program office, group business development office, HR and IT administration and monitoring bases. “These business suits have delivered and continue to deliver efficiencies within the group, we also introduced new technologies across the group to harness synergies in ensuring that we run a well managed business and create a pull of individuals that are not just specialists but also generalists,” she said


Letegele also echoed that BIHL has within the five year strategy entered into collaborations with strategic corporate entities in the interest of the company and its workforce.  “We have signed agreements with the likes of Baisago University, sent our people to Gordon Institutes of Business Science, collaborated with Sanlam   and Stellenbosch University amongst others, all of this has been done under clear management processes. We recognized that BIHL does not exist in a vacuum as a corporate citizen, we believe we have executed well on the strategy,” explained Letegele.


She revealed that a new strategy will be launched in March next year. Since 2008 Botswana Insurance Holdings Limited has realized a growth in embedded , raking in  5 billion in profits before tax since  to date , paid 2.7 billion pula  dividends and paid just under 800 million pula  tax to Botswana government. Speaking to the half year results for the six month period ended June 2018, BIHL CEO explained that the Group continues to lead profitable operations amid trading challenges.


 “In our view as management we believe we gathered resilient set of results supported by growth in revenue, growth in value of new businesses, growth in operating profits, growth in group embedded value amongst others,” she said. Letegele explained that overall expenses have been well maintained to output flat growth.  “This is our dedication to ensure that we are managing cost by spending money on areas that we believe are investment geared rather than on consumption operations,” she stated.


 Letegele contend that BIHL raked in an impressive 54 percent increase in premium income, because of new products, strategic partnerships, and schemes adding that the group administration system implemented during the half year under review also contributed to Group’s impressive overall performance. Letegele explained that return on group embedded value grew from 8.3 percent to 17.6 percent attributable to increased value of new business which expanded by 14 percent as well as the fact that the company didn’t incur any impairment.


On segment and subsidiary performance, Letegele  revealed  that  the Life insurance business which is headlined by BIHL largest subsidiary, Botswana Life gathered and increase in Net Premium Income for the first half of 2018  with increase from P1.1 billion in six month  ended June 2017  to P1.15 billion during period  under review. Still under Life Insurance Business total New Business written grew by 7 percent underpinned by strong single premium income performance.


Recurring premium income grew by an impressive 9 percent from P605 million in June 2017 to P659 million in June 2018.  “This line represents a sustainable source of profits in the long term at group level,” she said. The value of new business, which represents the present value of future profits from new business premiums written during the period, increased by 14 percent from prior year on the back of impressive new business volumes from the group lines and term assurance policies.


 Operating profit grew 15 percent on prior year mainly because of good new business volumes from the group line, low new business strain and cost savings from the streamlining exercise carried out second half of last year. Operating profit increased from P142 million in June 2017 to P164 million in June 2018.


Under the Botswana Insurance Fund Management (BFIM) Letegele shared that despite the challenges of mixed economic performance reflecting both international economic uncertainty as well as domestic challenges BIHL’s asset management outfit managed to retain mandates and existing clients. However BIFM group’s overall operating profit in the 2018 first half showed a decline of 8 percent year on year.


BIHL explained that this is due to direct result of Zambia operations not performing as expected because of unrealized activities that were anticipated to take place in the year 2018. “Despite the current difficult trading conditions, where we have witnessed several new entrants into the market and pension funds adopting new strategies of splitting mandates, BIFM has continued to show resilience and continued to gain market confidence and maintain its position as a leading Asset Management Company,” explained Letegele.


Total Assets under management including Zambia’s P4.7 billion stands at P26 billion. Regarding the Short term insurance business, Letegele explained that the segment continued to face pressure on the top line resulting in an 8 percent decline in income compared to prior year.
Despite the top line pressures, Legal Guard has achieved an operating profit of P1.8 million to June 2018 up from a P0.9 million loss for the same period last year.


“With the introduction of a new core operating system last year, the business has been able to provide an enhanced platform for claims administration which has resulted in turn in a decline in claims costs,” she said. Botswana Insurance Holding Limited Board Chairperson, Dambe Groth said BIHL Group remains well positioned in terms of capital management and solvency.


She explained that the board has confidence in the Group’s ability to maintain dividends at this level while ensuring that its capital position remains solid and aligned with future capital requirements across the Group, at sustained levels of Return on Group Equity Value.
The Group’s embedded value increased to P4.37 billion as compared to the P4.31 billion in the half year ended June 2017. The embedded value allows for P288 million dividends paid during the period

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