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Asset management business slows down BIHL 2019 H1

Publishing Date : 10 September, 2019

Author : AUBREY LUTE

Botswana Insurance Holdings Limited (BIHL), the country‘s largest insurance and investment conglomerate has not had it easy in the first half of 2019. According to BIHL financial statement for the half year period ended 30 June 2019 released this week, operating profit for the Group improved marginally by 1% over the 6 months when gauged against the same period in 2018.


Zooming into business operations per segment, BIHL reports that operating profit for the life business increased by 2% over the same period despite difficult economic conditions and intensified competition, while the general insurance business was positively impacted by lower claims registering 18 % growth in operating profit.


On a major highlight, posting negative movement the Group‘s asset management business under its market outfit Botswana Insurance Fund Management (BIFM Holdings) went the opposite direction ending  the six months period with  a decline of 42 percent  in operating profit due to pressure on the fees earned as well as once off provisions that were booked during the period.


“The first half of the year has been a challenging one for BIFM Holdings; operating profit is showing a continued decrease of 20%  when compared to the same period last year,” explained BIHL Executives. The Group says this low performance is mainly attributable to competitive landscape BIFM operate in locally which is depicted by pressure experienced in the investment management fees and once off costs that contributed negatively to the operating profit movement.


On a slight positive wave under asset management segment was the Zambia business upswing with a 24 percent increase in operating profit from the previous half year period. However due to its size the Zambia asset management business could not fully offset the decrease in BIFM’s performance. Total Assets under Management including Zambia’s P4.4 billion stands at P28.3 Billion , closing the 2019 half year at a slight increase of 2% on prior year.


Another negative performance was experienced by BHIL associates and joint ventures, closing the six month period at 38 percent decrease on share of profits contributed to the group. The main driver of this decline was a drop in fair value of Letshego Holdings Limited.
The other associates, Funeral Services Group, Botswana Insurance Company Limited and NICO however reported satisfactory results compared to last year. Investment income which comprises dividend income and interest income increased by 104% compared to prior year as a result of dividends from the Offshore Private Equity fund.


On a close look on BIHL in house subsidiaries the life insurance business  which operates under Botswana Life experienced significant positives in the period under review , closing the half year at slight operating profit increase from P164 million in June 2018 to P166 million in June 2019. This slight growth is mainly as a result of good new business volumes from the group lines and low new business strain for Botswana Life retail products.


Net premium income for the first half of 2019 grew by 11% from P1.15 billion in 2018 to P1.28 billion, with all income lines posting good growth from prior year, while total new business written grew  by 6% underpinned by strong single premium income performance. Recurring premium income grew by 12% from P634 million in June 2018 to P712 million in June 2019. “This line represents a sustainable source of profits in the long term” observed BIHL.


The value of new business, which represents the present value of future profits from new business premiums written during the year, was flat compared to prior year despite the challenging operating environment. Operating expenses increased above inflation as a result of the investment made on the 5-year strategy that was rolled out at the beginning of the year.


In the short term insurance space, Legal Guard, the group’s segment market outfit continued to experience top line pressures which saw revenue declining by 3% compared to the first 6 months of 2018. However operating profit achieved for the first 6 months of 2019 amounted to P1.6 million, a slight increase of P0.2 million higher than for the same period last year.


The business has also managed to contain operating expenses which are 1% lower than the same period last year. “As the results for the half year reflect, top line performance is and must remain the preeminent focus area. The business will continue to implement its comprehensive sales strategy in order to turn around the top line performance,” shared BIHL Executives.


On the overall, BIHL Group’s embedded value increased to P4.38 billion from the P4.37 billion reported as at 30 June 2018. The embedded value allows for P234 million in dividends paid during the first half of the year. The value of new life business is flat at P66 million compared to prior year. Value of new business was subdued for the risk and term assurance products due to lower new business volumes for the period.


BIHL Group Chief Executive Officer Catherin Letegele says prospects for the economy remain mixed reflecting both international economic uncertainty as well as domestic challenges. “Despite these challenges we are focused on delivering sustainable growth and value to our stakeholders,” she said.

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