- Even as profit is expected to be subdued
BIHL, the most diversified insurance outfit in Botswana, announced this week that the Group’s results (profit before tax) for the year ended 31 December 2021 will be lower than those reported for the year ended 30 December 2020 by between 20 percent and 30 percent. According to the insurer’s cautionary, this translates into a reduction of between P133 million and P200 million in the Profit Before Tax (PBT). PBT for the year ended 31 December 2020 was P666.2 million.
The Listings Requirements of the Botswana Stock Exchange (BSE) require companies to announce, through the bourse and the press, any circumstances or events that have or are likely to have a material effect on the financial results of the company for the period to be reported upon next. The BSE stipulates that communication should be shared with the market in the event that results will differ by at least 10 percent from the prior reporting period.
BIHL’s board explained that it recorded a significant increase in claims paid of 41 percent during the year ended 31 December 2021 due to excess mortality levels adversely impacting the life insurance business, Botswana Life. The board said the increased mortality was driven by the COVID-19 pandemic experienced during most of 2021. In the first half of 2021 alone, over P354 million was paid out in excess mortality. While P119 million claims were COVID-related at Botswana Life, P235 million claims were due to other causes which arguably were not properly attended to perhaps as a result of health facilities prioritising COVID-related risks.
The P354 million reported as at 30 June 2021 accounted for the growth in the claims versus the first six months of the prior year, which stood at P763 million. As at 30 June 2021, the group stood at P1.117 billion claims paid.
“In the prior year (2020) the number of claims were lower than expected, assisted by the lockdowns which resulted in lower infection rates and mortality,” the board told shareholders this week. While that is the case, “the Group recorded a strong top-line performance during the year as a result of impressive volumes of new business underwritten,” the board said.
The value of new business as at June 2021 increased by 47 percent to P91 million compared to the prior year. New business volumes for individual life retail and group funeral portfolios were higher compared to the prior year. As opposed to just individuals contributing to this growth, the group had revealed that they won a few significant schemes through business development efforts that have contributed to the group funeral growth. BIHL says in 2021, non-life businesses have also performed well despite the challenging economic environment.
The board says capitalisation levels of the Group continue to be significantly above the stipulated regulatory requirements and the internal risk appetite levels. As at 30 June 2021, capital levels increased from 6.0x to 7.8x cover, according to Group Chief Financial Officer, Kudakwashe Mukushi. “The Group continues to have ample liquidity to continue to pay claims going forward,” the board said this week.
BIHL announced last year that is was enhancing its risk management which will result in the insurer reviewing pricing of products to reflect the current mortality spurred on by the scourge of COVID-19. CEO Catherine Lesetedi said this was an important undertaking to ensure that the business remains financially strong and prices products “appropriately for the risks that we are taking on”. BIHL pricing principles did not look at an epidemic happening; its processes, pricing and modelling was not taking into account a pandemic like COVID.
The Group’s results for the year ended 31 December 2021 are expected to be published in the first week of March 2022. Accordingly, the shareholders of BIHL and potential investors were advised to exercise caution when trading in the company’s securities until a detailed announcement is made.
