Botswana Life’s BIHL control shrinks
But the CEO of BIHL is quick to note that it is not so much because Botswana has become less significant as it is a reflection of other businesses showing healthy growth
Botswana Life’s contribution to Botswana Insurance Holdings Limited’s total earnings has shrunk from 80 percent a decade ago to 45 percent, highlighting that the group’s diversification strategy is paying off, Chief Executive Catherine Lesetedi revealed this week.But she was quick to explain that the reduction was not because Botswana Life’s significance has waned but rather that other businesses were showing significant growth. As the core business of the group, Botswana Life remains the cash cow of BIHL.
In the 12 months ending December 2019, operating profit for the life business increased by 3 percent over the year despite difficult economic conditions and intensified competition. According to the CEO, the growth is mainly a result of good new business volumes from the group lines and low new business strain for retail products.
Net Premium Income grew by 11 percent from P2.35 billion in 2018 to P2.60 billion in 2019. Total new business written grew by an impressive 18 percent underpinned by strong performance on group lines. Recurring premium income recorded a growth of 12 percent from P1.30 billion in December 2018 to P1.46 billion in 2019.
The CEO said this line represents a sustainable source of profits in the long-term. “The value of new business, which represents the present value of future profits from new business premiums written during the year, increased by 8 percent t from the previous year on the back of impressive new business volumes from the group lines,” she noted.
BIFM Group’s operating profit for 2019 was flat compared to the 2018 performance. Lesetedi said the main driver of the 2019 performance was continued pressure on investment management fees, hence lower margins. “The margin squeeze calls for more stringent cost management and containment strategies,” she said, adding that the Zambia business, on the other hand, remained resilient despite challenging economic conditions, particularly in the second half of the year, and posted an overall 5 percent year-on-year growth in operating profit.
Total Assets Under Management for the year were P27.3billion, a 5 percent growth from the 2018 AUM. Included in this number is Zambia’s P4.2 billion while the remaining P23.1 billion represents assets directly managed by BIFM. During the year, said Lesetedi, management rolled out a new five-year strategy that saw some new funds being introduced to the market. “This strategy is already bearing fruit with fresh mandates received for some of the new funds,” she observed. “Management is cognisant of the highly competitive environment and will continue to focus on managing expenses and delivering value to clients.”
Further, Lesetedi revealed that general insurance business was positively impacted by lower claims, leading to decent growth over last year. However, this business was sold during the year as the group streamlined its activities.Share of profits of associates and joint ventures increased by 169 percent due to lower impairment charges compared to prior year. The group says the associate companies also delivered better results this year compared to last year due to varying factors. Investment income, which comprises mainly dividend income, increased by 324 percent compared to the prior year as a result of dividends from both local equity and offshore equity funds.
The group says it is satisfied with the growth they are seeing at Nico Holdings. “It wasn’t easy to come to this meeting. After initial investment in Nico, we took an immediate impairment,” Lesetedi said.Nico grew 49 percent year on year.