Botswana Insurance Holdings Limited (BIHL) said it missed its portfolio return target on weak regional markets marred by hyperinflation and the devaluation of Malawian currency.
In 2023, the BIHL group’s equity value dipped to P5.4 billion from P5.8 billion in 2022, representing a 7 percent decline. Nevertheless, despite this decrease, the prominent insurance giant managed to declare dividends.
However, the Group announced that it fell short of achieving its Return on Group Equity Value (RoGEV) hurdle rate of 14.5 percent during the 2023 financial year.
Chief Executive Officer Catherine Lesetedi stated that her company achieved a portfolio return of 8.3 percent, which fell short of the 14.5 percent benchmark.
In the previous corresponding period, BIHL achieved a RoGEV of 16.9 percent.
โThat is largely because of the significant underperformance of Letshego,โ explained Lesetedi.
โWe also had low returns coming from NICO Holdings because of the devaluation of the Malawian Kwacha which impacted fair value return.โ
Despite the 44 percent devaluation of the Kwacha against the Botswana Pula, resulting in a foreign currency exchange loss of P82 million, the NICO Holdings Group is reported to have posted a strong set of results for the year.
Meanwhile, Letshego has reported that its financial performance was impacted by one-off accounting provisions and hyperinflationary markets.
During the period under review, BIHL paid dividends totaling P754 million, compared to P402 million in the previous corresponding period.
This amount comprises an interim dividend of P218 million, a final dividend of P218 million, and a special dividend of P251 million.
Lesetedi reported that after expressing previous concerns about lapses trending upward, she noted that ongoing mindset action has led to a slowdown in the rate of lapses.ย
โThat is because of actions like consumer education and we are happy that it has paid dividends,โ said Lesetedi.
Lesetedi noted that due to changes in pension fund rules, the group has observed a higher number of individuals encashing their lump sums, a trend which she expressed concern about.ย
โThere is a lot of liquidity that is flowing from the pension funds now into individual pockets,โ she said.
โWe know that in this country we lack financial education and we remain concerned that it may lead to people becoming poor.โ
According to Lesetedi, claims at BIHL have now returned to pre-pandemic levels, which has had a positive impact on the group’s performance.
However, she stated that BIHL struggled with new business throughout the year, resulting in a muted top line.
During the period under review, BIHL’s value of new business decreased by 12 percent to P140 million compared to the prior year, primarily due to lower new business volumes.
Profit before tax from insurance operations increased by 136 percent compared to the prior year.
According to BIHL, the primary factor driving the increase in profitability is a 326 percent rise in investment returns earned during the year. This growth is attributed to positive fair value gains across assets backing insurance contracts and IFRS 9 Investment Contracts.
In the asset management segment, Bifm’s operating profit for the year increased by 1 percent compared to the prior year.
BIHL stated that the Zambian business operation was the main detractor, as it closed the year with significantly lower operating performance. This decline was attributed to a once-off positive accounting adjustment recorded in the prior year.
Operating profit, excluding the Zambian operations, experienced a year-on-year growth of 20 percent.
The growth in profit was primarily fueled by operating income, which closed 13 percent higher than the previous year, driven by a significant increase in Assets Under Management (AUM).
Bifm’s contribution to the group performance is reported to be on an upward trajectory, positively impacting results and recording a 15 percent improvement in operating profit compared to the prior year.
Total Bifm Assets Under Management (AUM) increased by 16 percent, reaching P44.5 billion at the close of the year (compared to P38.5 billion in 2022), including Zambia’s P5.9 billion and Bifm Unit Trusts at P2.6 billion.
Lesetedi said BIHL would be looking at ways to grow its AUM.
โBifm team has quite a task to come up with new products that can attract funds as they are repatriated home,โ she said.
โWhat is important for the pensioners is for us to develop products that give good returns. This is not a small challenge considering the small economy that we are.โ
As part of the SanlamAllianz group, Lesetedi noted that this affiliation enables BIHL to develop solutions and products tailored to meet the needs of the new assets.
