Insurance and investment giant, Botswana Insurance Holdings Limited (BIHL) more than doubled first-half profit, shrugging off a decline in the value of new business as stronger life insurance earnings and associate companies lifted results.
Profit attributable to shareholders rose 121 percent to P335 million in the six months to June, from P152 million a year earlier. Core earnings, a measure of profit from its main operations, increased 102 percent to P287 million.
Despite the increase, the value of new business dropped by 21 percent to P66 million from P84 million, which Chief Financial Officer Frank Dalo said was being held back by weakness in credit-life insurance, which is closely linked to bank lending.
Presenting the group results last week, Dalo told analysts and the media that the weaker bank lending had reduced the volume of credit-life business flowing to Botswana Life, as credit-life insurance is typically attached to loans, meaning slower lending directly reduces the number of new policies being written.
“We have seen that the banks are not lending as much as they used to, significantly so,” Dalo said. “So we are not getting almost half of the income that we used to get last year.”
The decline comes against a broader slowdown in borrowing in the country, with BIHL saying lending rates remained high during the first half of the year, while demand for credit stayed subdued as weak economic activity and limited growth in household disposable income weighed on both consumers and businesses.
Dalo said that without the weakness in credit life, the group’s other new business lines would have shown stronger growth.
Stronger associate earnings provided another lift. BIHL’s equity-accounted earnings rose 65 percent to P246 million, largely supported by NICO Group in Malawi.
However, the company cautioned that high inflation and foreign exchange shortages in Malawi could reduce the economic value of those earnings when converted or repatriated.
The group also recognised a P99 million impairment on Letshego Africa Holdings following a decline in the microlender’s listed share price, compared with P85 million a year earlier.
Despite pressure on new business, BIHL paid P160 million in dividends during the first half and has since declared a further P122 million interim dividend, equal to 43 thebe per share.
However, Dalo said foreign exchange shortages in Malawi had limited the amount BIHL could bring back from its investments there for distribution to shareholders.
“One of the key challenges in terms of these dividends is mainly the dividends that are stuck in Malawi,” Dalo said. “We do have money sitting there in Malawi that we are trying to move over.”
He said the funds were available for distribution but could not yet be repatriated because of shortages of foreign currency in Malawi, constraining BIHL’s interim payout. Dalo nevertheless described the dividend declared for the period as healthy.
