Lower mortality supports BIHL’s core earnings growth

• Core earnings up by 138% to P481m
• Life insurance claims decline
• Policy lapses and surrenders a concern

For the year ended December 2022, BIHL – whose subsidiaries include Botswana Life Insurance Limited (BLIL) – recorded core earnings amounting to P481 million, more than double the previous period’s amount of P137 million.

“A bit part of this is the benefit of a lower mortality,” said the CEO of BIHL, Catherine Lesetedi at the presentation of Group financials in Gaborone recently. “In 2021, we paid significantly higher claims.” BIHL claims have indeed fallen compared to the prior year, from over P2.4 billion in the prior year to a little over P2 billion in the current period. “It is important to also note that this P2 billion is more elevated than the pre-COVID claims trend,” said Lesetedi.

Prior to the outbreak of COVID-19, Lesetedi noted, the Group was paying around P1.6 billion. “So this P2 billion is still high in our view,” she said. Lesetedi said the Group is also proud to have kept and maintained its dividend policy. “Our dividend policy considers capital requirements, any project that we may want to undertake, any investments we want to undertake and then we declare a dividend,” she explained.

She said the Group’s view is not to have excess cash or capital that is not utilised because it may become a drag on BIHL returns. “We are particularly pleased that with this set of results, we are also able to put back to our shareholders a much more enhanced dividend,” Lesetedi said. Besides normalised claims under life insurance, BIHL’s asset management business also yielded positive results.

“Our asset management company, BIFM, really performed well,” she noted. “Our Assets Under Management (AUM) grew by 4 percent.” In addition, Lesetedi said BIHL is proud of the results of Nico Holdings, a diversified financial services group based in Malawi with a focus on insurance and banking in which BIHL holds 25.1 percent. Notwithstanding the good performance of the Group in 2022, Lesetedi said there are challenges that remain but which management is committed to resolving.

“Some of them are not going to necessarily be resolved in 2023, but it is the commitment of management to ensure that we really begin to lay a foundation for better performance,” she said. “Botswana Life’s top line was really muted. Our net premium income remains flat.” Leseted disclosed that Botswana Life continues to experience significant lapses and surrenders. “There are reasons for that,” she said. “It is very easy to say it is because of high inflation and the high cost of living.”

She noted that BIHL does recognise these factors as a part of the problem. However, she added, the Group intends to invest a lot in consumer education. “Top-line growth is very fundamental for our business,” she said. “Whenever we present, we take pride in this top line because this is where our future profits come from.” The Group is also facing challenges with its unit trusts as clients came to get back their funding because of the pressures that both businesses and individuals faced in 2022.

This led to clients tapping into their unit trusts savings. Lesetedi spoke of a Group strategy being in place to ensure that BIHL lays a solid foundation that will ensure a good performance of unit trusts. She expressed concern about performance at Letshego where BIHL holds a 28 percent shareholding. “Letshego’s earnings also declined,” she said. She noted that the micro-lender’s performance was affected by reference rates in most of the markets it operates in, resulting in rising costs of funding that were not passed to clients.

“In Ghana, there was a big challenge and the government bond programme had to be reconfigured, and with that came a lot of impacts which were negative in Letshego,” she said. “There is recognition within Letshego that it is now time to draw the line and ensure that non-performers either perform or if they fail; they will definitely be some exits.” Lesetedi recognised that Letshego is a big investment for the Group, saying it is therefore important that the micro-lender is positioned for growth leading to profits filtering into BIHL.