BIHL profit jumps on economic recovery
Brian Benza | Thursday March 6, 2014 09:02
On the back of improved life insurance new business, BIHL’s profitability rose 25% to P494 million in the year to December 2013, a sharp recovery from the 16% decline registered in the prior year.
In a statement accompanying the results, BIHL says business recovered last year, in line with the domestic and global economy. Its life insurance business, its flagship, showed a robust 26% growth in new individual life premium income.
The economy registered a year on year GDP growth rate of 5.9 percent up to September 2013, comparing favourably against the 2012 full year growth rate of 4.2 percent.
In 2012, the life insurance business, which usually contributes over 80% to the group’s operating profit, was affected by the erosion of household’s disposable incomes leading to a three percent decrease in operating profit.
“The year 2013 saw an improvement in the local and global economy, our results are consistent with this recovery. The life business operating profit increased by 15% from P239.5 million in the prior year to P275.7 million.
“The value of new life business grew by 10% to P109.7 million off the back of significant growth in individual life volumes and changes in mortality assumptions,” says the company.
For the period, the groups operating profit increased by 19% to P277.3 million with all business lines contributing positively to this result.
In 2012, the group, which has interest in life and short term insurance and asset management, saw its operating profit weakening by 15% to P232 million.
While the life insurance new business increased on economic recovery, the annuity business underperformed due to fewer than expected retirees leading to a 3 percent drop in net premium income to P1.88 billion.
In 2012, BIHL retrieved assets worth P890 million from former subsidiary, Bifm Capital and transferred the funds to Botswana Life annuity fund.
In 2013, the asset management business unit profit before tax and minorities grew by 27% and assets under management grew by 25% to P27.1 billion, including assets of P3.8 billion, managed by Bifm ‘s sister company in Zambia.
“The Bifm group has generated an excellent set of results for the full year 2013. This is as a result of growth in Assets under Management which is linked to the investment team’s enhanced focus on delivering investment performance for our clients, the recurrent inflows from existing clients, as well as the acquisition of new mandates,” says BIHL.
In 2012 Bifm registered a 21% drop in profit, mainly due to the falling of the P33 million incomes realised from the disposal of a stake in a Zambian subsidiary in 2011.
The group’s short term insurance arm, BIHL Sure made a loss as the market remains very softly priced which mitigate rapid growth.
“Penetration into the commercial lines market remains slower than expected resulting in a loss for the year. Measures to address this situation are being put in place and we are confident that it will come to fruition in due course. “Our legal guard division, which has been key to the business was affected by technical difficulties occasioned primarily by a system change in 2013,” added the statement.
However, BIHL enjoyed decent returns from investments in associate firms and joint ventures with the group’s share of profit standing at P189 million, although it was a 4 percent decline from the previous year’s share.
BIHL holds significant stakes in fellow listed entities Letshego and funeral services company, FSG.