Botswana Insurance Holdings Limited (BIHL) has admitted to the need to diversify its client base following near catastrophic events last year, when the insurance giant lost major offshore portfolios and experienced a crippling shrinkage of assets under management (AUM).
According to the group’s 2014 annual report, its asset management unit, Botswana Insurance Fund Management (Bifm) will going forward seek to diversify its client base as much as possible. ??”The risk associated with our continued reliance on a few major clients remains a concern. Bifm therefore devoted considerable attention to developing and implementing diversification strategies. In reality, we are no different from the Government of Botswana which has placed diversification as a means to reduce the country’s reliance on mining, as a strategic imperative,” said the Botswana Stock Exchange (BSE) listed company. ??The group admitted that while Bifm has made progress with diversification into activities that are not directly related to its core asset management function, the hard truth is that they would not compensate for the loss of a major client, should this occur.
However, the fund manager said it will not neglect existing clients and a key component of its strategy is to strengthen relationships with clients while delivering outstanding service. ?However, Bifm said despite a drop in asset revenue from a single client, it has retained all major clients in 2014. Bifm also reassured clients that concerns expressed by Government with regard to fees have been addressed and resolved to both parties’ mutual satisfaction. The group admitted that after losing the lucrative Botswana Public Officers Pension Fund (BPOPF) contract, it will have to restructure its business to adjust to the drastic reduction of its assets under management.
The group said in its full year results for the period ended 31 December, 2014 that subsequent to year end, assets under management reduced by 30 percent as a result of a mandate withdrawal. ??“Following the significant reduction in the assets under management, the business will have to restructure in response to this. We will focus on diversifying the profit sources through acquisitions in financial services.”??The pension fund is reported to have terminated its P 9billion worth management contract, effectively shrinking Bifm’s funds under management from a whooping P11 billion to just under P 2billion. This led to Bifm firing its Chief Executive Officer, Tiny Kgatlwane.
BIHL said its subsidiary; Bifm achieved very satisfactory results for the year 2014 as a result of continued growth of assets under management, well supported by positive net client contributions. During the period, assets under management increased by 7 percent to P28.9 billion. It said year on year operating profit and profit before tax and minorities increased by 12 percent respectively, with Bifm incurring an adverse fair value adjustment of P15.9 million as a result of the sale of its controlling interest in a Zambian property investment company; this once off event is not expected to reoccur in similar transactions in 2015.