Thursday, November 30, 2023

Contraction in disposable income hurts BIHL

Under a challenging environment last year, Botswana Insurance Holdings Limited Group maintained strong market positions in the face of stiff competition and an increasingly complex operating environment.

This is according to the financial services group’s 2017 annual report.

BIHL group operated in an environment characterised by subdued economic growth, retrenchments, rising unemployment, stagnated incomes, intense competition and loss of key personnel. Despite a 27 percent slump in profit, the group management’s decisive actions, remarkable turnaround of key businesses, and avoidance of short term gains enabled the group to weather the storm, coming out of it fortified and resilient.

“One of the major challenges experienced by our Group of companies is the contraction of disposable income for Batswana who therefore seek to reduce their monthly financial commitments,” said Batsho Dambe-Groth, BIHL group chairman. “Unfortunately, there is a widespread misconception that reducing or cancelling insurance cover ÔÇô both long-term and short-term ÔÇô is an easy way to ease pressure on household budgets.”

Dambe-Groth said they are doing everything possible to educate consumers about the importance of insurance and “how the short-term benefit of a slightly higher cash flow could be eliminated in minutes should something untoward occur while they are un- or under-insured”. She noted that on the life insurance side, consumers also fail to take into consideration the higher costs of reinstating policies or obtaining cover later when their cash flow improves.

Despite the tough trading conditions, strategic decisions taken by management ensured that the financial services behemoth remained ahead of the curve, even seeing room for growth and expansion. Dambe-Groth says the BIHL group’s long term view on situations arrested what could have been a precarious situation for one of the country’s oldest financial institutions. The group had to exercise patience and restraint in the face of pricing wars, loss of skilled key personnel and hiccups in the fortunes of some of the group’s associate investment companies.

“The BIHL Group did not become one of the oldest and most successful corporates in Botswana by indulging in knee jerk reactions to events over which we do not have control,” she said and added that “Such short-term thinking is contrary to our ethos and we will not be panicked into taking actions that do not gel with our long-term strategy and perspective.”

Dambe-Groth, a human resources consultant and founder of Resources Logic, said by adopting a long-term view, they have been able to develop a strategy that allows them to deal effectively with the challenges they are currently experiencing. “As a result, we have been investing heavily in the resources, skills and technology that will ensure we take our rightful place at the forefront of a changing market.”

BIHL group’s chief executive officer, Catherine Lesetedi, said the financial services behemoth ended the previous year with a satisfactory set of results given the complexities and difficulties experienced during 2017. She says the macro-economic factors that were apparent and created tough operating conditions in the previous year continued unabated.

“Household incomes remained constrained, and that resulted in policy lapses at both Botswana Life and Legal Guard. Bifm, however, saw its Assets Under Management (AUM) and profitability significantly improved as previous volatility in global markets steadied,” she said.

Lesetedi explained that increasing competition, especially aggressive pricing on employee benefit insurance covers and annuities, posed a challenge to attracting new business. “However, the Group remains very focused in upholding its prudent underwriting principles and will continue to balance risk, return and profitability, as these are key to the sustainable growth of the business,” she added.

The group’s performance was also helped by resurgence of key subsidiaries like Botswana Life and Legal Guard, which had undergone restructuring in 2017, resulting in a markedly improved performance in the latter half of the year.

Lesetedi, who also doubles up as the acting CEO of Botswana Life, the group’s largest subsidiary, says they have established a Business Development Office within the group, and this has already made a positive impact on the way BIHL is positioning itself in the market. Through the office, they intend to create an inclusive one-stop financial services centre.

“We now present a consolidated, integrated business proposition to customers ÔÇô that of a financial services company that offers asset management services, life, funeral and investment solutions, legal insurance, short-term insurance, high-end investment options and other specialised structured solutions through Bifm, our Asset Management company,” she said before adding, “this has already had a positive effect on our sales, and is enabling us to build a strong pipeline into the future.”


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