Botswana Insurance Holdings (BIHL), the titanic BSE listed insurance giant, admitted the first quarter of the year was challenging, but navigated the recession storm as it reported a record rise in premium income.
The group results, for the six months ended June 30, 2012 saw the 37-year-old company’s net premium income hitting P1 billion mark for the first time while fee income decreased by 32 percent to P43 million.
The value of new business went down 35 percent to P39 million largely blamed on low sales volumes on the individual life and credit life business. However, the group’s embedded value increased 3 percent to P2.47 billion.
“It has been quite a challenging period to operate in,” BIHL Chief Executive Officer, Gaffar Hassam, said.
“Despite the challenges we had, we reported a profit,” he added.
The economic environment was tough with Europe broadly in recession due to the fiscal austerity. On the domestic front, the Botswana economic growth declined to 4.3 percent over the 12 months to March from 5.7 percent in the year to December 2011.
“The growth moderation was driven by the contraction in the mining sector over the period,” BIHL stated.
“The mining sector will likely be adversely affected by the global economic slowdown in the second half of 2012”.
The non-mining sector grew by 7.2 percent over the 1 year period to March driven mainly by manufacturing and construction of major mining and power projects.
Interest rates have remained unchanged over the period and inflation still remains high although it stood at 7.3 percent in June down from 9.2 percent in December.
“What we have realised is that there is an increased pressure on individuals, which has led to increased arrears rate,” added Hassam.
The group, which is the parent company to Botswana Life, Bifm and BIHL Sure, saw its operating profits plummet 36 percent, but was able to retain key clients.
Assets under management increased by 1 percent to P18 billion, but Hassam said the group ‘aspires to grow that’ and increase market share in the retail side.
The group was able to pay a dividend of P115 million to shareholders in the past 6 months and managed to increase solvency, which now stands at 7 times more than the required limit.
The results comes at the back of Bifm ceding shareholding in African Life Financial Service of Zambia (ALFSZ) to meet new laws passed in Lusaka barring foreign-owned fund management companies to own more than 49 percent in local companies.
Bifm, Botswana’s largest asset manager, which held 70 percent of ALFSZ, was forced to sell 21 percent stake to make it compliant with statutory instruments aimed at citizen economic empowerment in that country.
“Operating profit before tax reduced by 41 percent when compared to first half 2011,” BIHL, said in a statement accompanying the results.
“This was mainly due to the effect of the Zambian transaction on reported figures as well as internal repositioning.”
BIHL pocketed P33 million from the transaction and it increased shareholding in Letshego, a consumer lender which this week released a cautionary saying it was expecting results to be higher.
ALFSZ is now accounted as results from Zambia not as results from associates.
The operating costs were also negatively affected by the new levies from Non Bank Financial Institutions Regulatory Authority (NBFIRA.
In a bid to grow and find new businesses, Hassam said through its partner, Sanlam, they will be seeking new opportunities in the region.
“…..we have not forgotten that. We want to invest in a company that gives returns,” Hassam said. However, the partnership is unpopular with local critics who think Sanlam, which holds 54 percent in BIHL, will stifle growth of a local company.
