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The life insurance business of diversified group Botswana Insurance Holdings Limited (BIHL) is feeling the pinch of challenging economic conditions such as the constrained household income and high unemployment rates. The segment, which is under Botswana Life, is key to BIHL earnings with Botswana Life holding over 80 percent of the market share.
However, for the half year period which ended 30 June 2017, net premium income decreased by four percent year-on-year to P1.104 billion compared to P1.145 billion recorded in the previous year and this is said to be the result of suppressed annuity business income. The group, which is led by Catherine Lesetedi-Letegele, as a result saw profit attributable to equity holders decrease by five percent to P251 million as the value of the new business written under Botswana Life decreased by 22 percent from the previous period owing to new business volumes and reduced margins. Given the challenges on the profitability of the business, BIHL says it has embarked on a streaming exercise to improve efficiency. The group has launched a number of products into the market including Sharia compliant products which are expected to bring new business to the life segment of the group. In order to keep existing clients, Poelo Whole of Life was introduced to benefit members with lifetime cover which will see them getting a 120 percent premium payback after 15 years. The other segment, which has struggled during the period, is the short-term insurance business with revenue from this division being 1.4 percent lower than the same period last year.
Business is said to have been impacted by a rise in policy cancellations the reason behind being due to many clients experiencing financial constraints which made it difficult for them to continue holding their policies. There was also a significant decline in new businesses in addition to cancellations while the legal guard business recorded an operating loss of P0.9 million which is said to have been due to a once off P2.1 million costs incurred as part of the restructuring exercise which was completed on June 2017. The group said it embarked on restructuring exercise so s to align the business’ cost base to levels more appropriate to a business size and nature of Legal Guard and thereby improve the company’s ability to achieve sustainable profitability.
The segment which seems to be doing well for the group is the asset management business management under Botswana Insurance Fund Management (BIFM). The business is growing following a turbulent period when it lost mandate from BPOPF, the largest pension fund in Botswana. BIFM’s first half of the year performed much better than the previous period in terms of operating profit which is up by 41 percent. The good performance is said to be due to strong assets under management position which increased by new mandates won in the latter part of 2016. As it stands BIFM’s total assets under management, including Zambia’s of P4 billion, stands at P25 billion.