Botswana Insurance Holding Limited ( BIHL), the country’s trail-blazing asset management and insurance heavy-weight, is in the process of acquiring Legal GuardÔÇöa legal short term insurance division of Letshego Holdings Limited.
The move is expected to propel the long term ambitions of BIHL of rolling-out new products to the market that are expected to distinguish it from its peers as it aggressively looks into the regional markets.
The company is currently established in BotswanaÔÇöwith assets under its management valued at P 14 billionÔÇöand having a successful flagship in Zambia that controls the 60 percent of the pension industry market and a greater stake in property development. Further, the company, through its Botswana Insurance Fund Management (Bifm) is also looking at developing the yet to be approved regional property development company to be accredited to IFSC.
According to a statement that was issued this week BIHL, through its subsidiary Botswana Life, is to acquire Letshego Guard and Letshego Guard Insurance Company Limited which are the short term legal insurance agency and a dormant short term insurance company for a P 57 million cash consideration. BIHL is also a shareholder in Letshego.
The issue is still before the regulatory authorities that includes Non Bank Financial Institution Regulatory Authority (NBFIRA) and the Botswana Stock Exchange for approval.
However, observers said Friday that the move tallies well with the long term vision of BIHL aimed at increasing shareholders’ value.
“This will give the Letshego a chance to focus on micro-lending, an area which they know quite well while BIHLÔÇöwhich is a shareholder in LetshegoÔÇöwill focus on insurance and legal guard,” a source close to the deal said Friday, adding that “it appears the company will be looking synergies from its partners across the region to roll-out the products in the African continent”.
The deal will give BIHL a comfortable start of 55,000 strong members for the legal guard that has contributed P 14.8 million to profit before tax towards the Letshego Holdings performance.
The move is a part of a raft of sweeping measures being introduced by Botswana Life in a bid to increase its contribution to the parent company. Some of the measures include the launch of MotshegetsiÔÇöa bancassurance product which is working closely on it with Barclays Bank.
Further, under the deal, Letshego and BIHL are expected to work closely in terms of short loan disbursement with latter having an edge on policy loan matters.
The latest developments come right after the company blamed the global economic down turn for its sluggish performance during its first six months of the year when it appears on stage for profit parade three weeks ago, but, added that it was going to concentrate on new product roll-out.
“The global economic environment in the first half of the year of 2009 continued to be characterized by uncertainty and volatility in global capital markets,” market commentators were told, but reports of some recovery in the second half of the year were mentioned in line with the performance some developed market.
Botswana’s case was made worse by the fact that it is heavily dependent on commodity markets that collapsed at the wake of the crisis. The local diamond mining industry was hit by the collapse in the diamond exports and experienced a technical recession due to the closure of mines and the resulting fall in diamond production.
BIHL’s biggest investment arm, Bifm, has been working on an Afro-centric investment strategy since last year when the global recession started to spread across the world in the last quarter of the year.
The move prompted the grey-hair fund manager to look into countries like Kenya , Namibia and Zambia in a bid to grow shareholders’ value.
On the other hand, the life assurance division, Botswana Life, resisted the shocks of the global economic crunch as premium income from new businesses jumped up by 51 percent to P 147.3 million while net insurance income increased by 32 percent to P 622. 4 million.
“As a result of our client centric approach, in particular listening to our clients needs, we have added benefits to our popular product, Mmoloki, as well as enhanced other products with additional benefits,” the company has said.