The largest diversified financial services group in the country, Botswana Insurance Holdings Limited (BIHL), expects a tough operating environment in the short term following a year of high interest rates that squeezed consumer disposable incomes.
In the latest annual report released on Friday, Mahube Mpugwa, the BIHL acting board chairman, said persistently higher inflation and tighter monetary policy dominated local investor concerns in 2022, together with economic risks emanating from the threat of a global recession and tighter monetary policies.
“Recovery from the pandemic effects and improved corporate earnings, however, left investor sentiments positive. The new Retirement Act changes, requiring that a minimum of 50 percent of pension fund assets be invested in local assets, became a source of concern as its immediate implementation could result in excess liquidity and asset price bubbles,” he said.
“Overall, investors took comfort when the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) proposed that the changes to the Pension Fund Investment Rules (PFR2) be implemented gradually. Given the challenging macroeconomic environment, BIHL delivered solid results,” he said.
BIHL’s total revenue grew from P3.38 billion to P3.9 billion, while net insurance and investment contract benefits and claims came at P2.4 billion. Expenses ticked slightly to P1 billion, resulting in P522 million before adding other income from companies BIHL has shares in. With addition of profits from the other companies, BIHL’s profit before tax jumped to P759 million, and profit after tax surged by 56 percent to P614.5 million.
BIHL owns Botswana Life Insurance Limited (BLIL), which has nearly 70 percent of the life insurance market share, and Botswana Insurance Fund Management (BIFM), one of the country’s top asset management company. Botswana Life’s profit nearly quadrupled in 2022, jumping from 2021’s P103.1 million to P393 million. BIFM’s profit climbed to P130 million, up from the prior year’s P55.6 million.
The group also holds significant shareholding in other companies. In the general insurance segment which provides short term insurance, legal insurance and reinsurance, BIHL is present through a 50 percent interest in Teledimo which wholly owns Botswana Insurance Company Limited (BIC) and BIHL Insurance Company Limited. Teledimo also holds 66 percent in Grand RE Tanzania.
BIHL is also a major shareholder in the country’s biggest microlender Letshego, holding 27.91 percent of the company through Botswana Life. Outside Botswana, BIHL has a 25.1 percent interest in NICO Holdings which is a diversified financial service group based in Malawi with interest in banking and insurance.
Last year, BIHL sold its entire stake in Funeral Services Group (FSG), which has a considerable market share in the funerals market. The 37.62 percent shareholding in FSG was disposed for P250 million to local private equity firm Africa Lighthouse Capital (ALC).
With 2022’s strong financial performance, BIHL paid P405 million in dividends to shareholders, an increase from the P195 million paid in 2021. The group’s top shareholders include South Africa’s financial behemoth Sanlam, which owns 58.43 percent of BIHL, while Botswana Public Officers Pension Fund (BPOPF) holds 19.92 percent.
“BIHL faced strong challenges in the past year from high inflation and we do not expect the environment to return to normalcy in the short term. Management therefore expects the pressure on costs and household income to underpin key decisions going into the future,” said Catherine Lesetedi, BIHL’s group Chief executive officer. She said the priorities for 2023 will be continued growth through increasing profitable revenue, focusing on new channels and products to improve client centricity, and ensuring that systems are efficient and compliant in serving both customers and the business, while cultivating a growth-conducive culture among BIHL staff.
