Botswana Insurance Holdings Limited (BIHL) profit has improved after being largely assisted by its non-core businesses as the insurance giant faces stiff competition from a shrinking market. The financial services group released its full year financials for the year that ended December 2019, which detailed muted growth within the company.
The insurance and investment giant wholly owns the country’s biggest life insurer Botswana Life Insurance Limited (BLIL), top asset manager Botswana Insurance Fund Management (BIFM), and recently disposed its struggling general insurance business, which was run through an indirect 50 percent stake in Botswana Insurance Company (BIC).
Further, BIHL has an impressive array of associate companies, which are businesses it holds large shareholding but does not directly control. These associates include a 28.1 percent stake in Botswana’s largest microlender Letshego Holdings, a 37 percent shareholding in the country’s leading funeral service provider, Funeral Service Group (FSG), and a 25.1 percent stake in Nico Holdings, a top financial services provider in Malawi.
As usual, BIHL’s performance was anchored by its crown jewel BLIL, which continues to dominate the life insurance market, estimated at over 70 percent, though the company says the operating environment has become challenging, made worse by intensifying competition. The subsidiary contributes to most of BIHL’s top and bottom line, but over the years it has come under pressure.
Total revenue for the year that ended December 2019 was up 17.7 percent to P3.7 billion, mostly generated through insurance premium revenue after the value of new business under BLIH grew by 8 percent. The revenue was also propped up by 34.6 percent increase in investment income, mostly from dividends earned through BIHL’s huge investment portfolio.
According to the financials, the insurance giant’s revenue was gnawed by a 22.2 percent spike in net insurance and investment contract benefits and claims, recorded at P2.6 billion, and largely made up of the P1.6 billion in gross insurance benefits and claims, and a P1 billion change in liabilities in insurance and investment contracts. In addition, BIHL’s sales and administration expenses surged by 16 percent to P719 million.
This meant the company’s profit before including income from associate companies was P394.9 million, down by 3.5 percent from the corresponding figure in 2018. However, thanks to a strong performance from the associate companies, BIHL’s share of profits from Letshego, FSG and Nico went up by a staggering 169 percent to P142 million, bringing BIHL’s total profit before tax to P537 million – a 15 percent increase from 2018’s pre-tax profit. The profit for the year after taxes was recorded at P440.4 million, up by 18.9 percent.
The Botswana Stock Exchange insurance behemoth has declared a final dividend of 59 thebe, which means they will fork out P369 million, a little lower from P457 million paid to shareholders last year. BIHL is one of the listed companies that pay higher dividends, thanks to its huge retained earnings, which at the end of last year stood at P2.5 billion.
The health dividends will keep shareholders happy after the company’s stock price finished flat last year. The company’s top shareholders include South Africa’s financial behemoth Sanlam, which owns 41.22 percent of BIHL, while Botswana Public Officers Pension Fund (BPOPF) holds 19.92 percent and African Life Assurance Company has 17.21 percent.