BIHL, Letshego wrap up P57million deal

MBONGENI MGUNI
Staff Writer | Friday April 9, 2010 00:00

 

This week, sources close to the deal said NBFIRA had provided BIHL with confirmation of the approval of change of ownership of Letshego Guard Insurance Company, which had also been communicated to Letshego Holdings. The multi-million pula transaction involves the sale of Letshego Guard and Letshego Guard Insurance Company by Letshego Holdings to BIHL.

The latest developments mean BIHL is now required to pay the P57 million to Letshego Holdings, a move that was due to be finalised this week. The sale price for both subsidiaries was pegged at P43 million, with an additional P14 million required of BIHL for settlement of loan accounts.

'BIHL has confirmed to Letshego Holdings that it has received the approval of change of ownership from NBFIRA, meaning that the deal will be wrapped up this week,' the sources said on Wednesday.

Senior BIHL and Letshego Holdings officials were unavailable for comment, while NBFIRA officials would neither confirm nor deny the deal.

With the greenlight from NBFIRA, BIHL has consolidated its dominance of the insurance and asset management market, adding the two subsidiaries to existing blue chip assets of Botswana Life and Botswana Insurance Fund Management (Bifm). Botswana Life ranks among the leading life assurers on the market with a net premium income for 2009 of P1.3 billion, while Bifm is among the top five asset managers with P16.5 billion worth of assets under management.

In addition, BIHL owns 13.7 percent equity in Letshego Holdings, meaning that through the deal, the insurance and services titan not only diversifies its strong portfolio but also leverages on the runaway success of Letshego's micro-finance business.From its establishment in March 2004, Letshego Guard contributed positively to Letshego Holdings' bottom line, growing from 12, 946 clients in the first year to an estimated 55, 000 prior to the sale to BIHL.

For the year ended 31 January 2009, the subsidiary posted a profit before tax of P14.8 million. By 31 January 2009, Letshego Guard, previously known as Legal Guard, had approximately P8.4 million in net assets. Letshego Guard Insurance Company is a dormant entity.  Letshego Guard and Letshego Guard Insurance Company went up for sale last year when parent company, Letshego Holdings Limited, decided to focus on its core business of micro-lending.

Through the sale, Letshego Holdings, through its flagship, Letshego, will now focus on its core business that has seen the company grow its loan book beyond one billion pula, while the group has other fast growing subsidiaries in six other southern African countries.

'The sale of these subsidiaries will also help boost profitability as Letshego will obtain better utilisation of assets through higher profit margins in lending than insurance,' said Stockbrokers Botswana analysts in a recent research note.

'The average yield on loans is 30 to 40 percent, second only to hire purchase (approximately 90 percent). Even though the legal insurance division was doing well, it has lately complained of the high instances of family matters which affected profit margins,' the note went on.

Proceeds from the sale will contribute capital to Letshego Holdings' capital raising initiatives needed to satisfy appetite for micro-lending domestically and abroad. Recently, the micro-lender sealed a P249 million convertible loan agreement aimed primarily at bolstering its working capital.