BIHL profits drop on low consumer spending
Isaac Pinielo | Thursday September 7, 2017 12:53
The Botswana Stock Exchange (BSE) quoted financial services group recorded an eight percent loss in profit before tax (PBT) from P314.4 million last year to P289.7 million in the six months to June 30, 2017.
According to the group’s unaudited financial results for the six months ended June 30, 2017, net premium income also decreased by four precent year-on-year to P1.1 billion compared to P1.2 billion achieved in prior year due to suppressed annuity business income.
However, the group’s recurring premium income grew by 12% from P530 million in June 2016 to P592 million during the first six months of 2017.
Group chief executive officer, Catherine Lesetedi-Letegele said the value of new business written has also decreased by 22% to P58 million from prior year owing to low new business volumes and reduced margins.
Operating profit decreased from P192 million in June 2016 to P147 million in June 2017. Lesetedi-Letegele blamed the decrease on the low volumes for single premium business, which was acquired at lower margins.
In addition, she said operating profit for the life business reported is 26% lower than the same period in 2016 due to the subdued operational earnings from most key business lines especially the annuity business.
Investment income, which comprises dividend income and interest income, reduced significantly compared to prior year due to a once off income item received last year.
“Investment losses were incurred on shareholders’ assets and that can primarily be ascribed to underperformance in global equity markets. This area remains susceptible to market volatility,” Lesetedi-Letegele said.
The group’s embedded value decreased marginally to P4.31 billion as compared to December 2016 year end level of P4.34 billion. The embedded value allows for P188.3 million dividends paid during the period.
“Given the challenges on the profitability of the business, the company has embarked on a streamlining exercise to improve efficiency.”
However, she said the asset management business performed very well at 41% above prior year due to an increase in assets under management, while general insurance business was positively impacted by lower claims and operational costs. Share of profit of associates and joint ventures increased by eight percent due to good performance from Letshego Holdings Limited, Funeral Service Group and Botswana Insurance Company Limited.
Lesetedi-Letegele said during the period, the company launched Sharia compliant investment products that are expected to contribute to new business growth going forward.
She said the business also introduced a new life cover product, Poelo Whole of Life, aimed at benefiting members with a lifetime cover, inclusive of a 120% premium payback after 15 years.
“The launch of these products shows our commitment to introducing innovative products that meet market needs, and the products are expected to have a positive impact on revenue and value of new business targets,” Lesetedi-Letegele said. She further noted that the outlook for the domestic economy remains fragile, noting that despite the challenges, management is focussed on delivering sustainable growth and value to its stakeholders through various innovations.