Botswana Insurance Holdings Limited (BIHL) has attributed its unsatisfactory financials to the Brexit vote on June 23, 2016 to leave the European Union (EU) which has driven global equity markets downward to result in decreased yields in the quarter ending in June 2016.
The BIHL Group’s unaudited financials for the six months ended June 30, 2016 shows that Net insurance premium income went down by 11 percent to P1.17 billion while Operating profit saw a decrease of 6 percent to P177 million. The Embedded value also decreased by 2 percent to P4.2 billion while in December 2015 it was P4.3 billion. The Group’s value of new business remained at P78.9 million. The Group’s embedded value decreased to P4.19 billion as compared to the December 2015 year-end level of P4.30 billion, allowing for P202.4 million of dividends paid during the period.
Led By Catherine Lesetedi-Letegele, the operating profit for the life business increased by a moderate 2 percent due to subdued operational earnings from most key business lines under challenging operational conditions.
The company stated that the asset management business was adversely affected by underperforming global equity markets while legal insurance business was adversely affected by additional claims provisioning and increased operational costs.
“Investment income which comprises dividend income and interest income increased significantly compared to prior year. Investment losses were incurred on shareholders assets that can primarily be ascribed to underperformance in global equity markets. This area remains susceptible to market volatility,” reads the financial statement.
Life insurance business
Net premium income decreased 11 percent year on year at P1.145 billion compared to P1.292 billion for the comparative six months. The company said the decrease was mainly due to a number of material single premium transactions relating to retirement schemes that were concluded in the first six months of 2015 and were not repeated in 2016. The statement further noted that recurring premium income grew by an impressive 8 percent from P486 million in June 2015 to P530 million during the first 6 months of 2016. Also, operating profit grew from P188 million to P192 million over the comparative six months mainly on the back of the good performance on recurring premium business which is a more sustainable source of profits in the longer term.
“Despite the challenging economic environment the value of new business written was maintained at the same level compared to prior year,” reads the statement.
Asset management business
BIFM Holdings group posted strong half year results in a challenging business environment and heightened market volatility. Its operating profit for the period decreased from P25 million to P22 million year on year owing mainly to the significant decrease in AUM experienced in 2015 as well as the volatility in global investment markets. Total assets under management (AUM) ended at P21.1 billion, (BIFM P17.6 billion and Zambia P3.5 billion), a modest growth of 2 percent year on year, on the back of inflows to the Unit Trust business.
Short term insurance business
BIHL stated that the first half of 2016 was devoted to carrying forward the positive changes from 2015 whilst at the same time reflecting on the challenges of retaining a market leadership position in the legal insurance space. Financial performance for the first half has been subdued with an operating loss of P0.7 million compared to P1.3 million operating profit recorded for the first half of 2015.
“This lower result has come about from increased operating costs and increased open claims provisions to reflect an accurate estimate of all potential claims as a prudential measure,” BIHL stated.
An interim dividend of 55 Thebe per share (gross of tax) was realised for the period ending June 30, 2016.