Botswana Insurance Holdings Limited (BIHL) is looking to diversify profit sources through new acquisitions in the financial services sector, following a 30 percent slash in assets under management at its subsidiary, Bifm.
According to market reports, Botswana Public Officers Pensions Fund (BPOPF) recently withdrew Bifm’s P9 billion mandate to manage funds, a decision that would result in substantial fee income losses for the subsidiary in 2015 going forward.
In a statement accompanying the diversified financial house’s results for the year ended December 2014, CEO Gaffer Hassam said Bifm, the group’s second biggest subsidiary, had commenced a realignment processes that would ensure that it was optimally structured for the decreased volume of operational activities.
“Subsequent to year end, assets under management reduced by 30 percent as a result of a mandate withdrawal. Group embedded value calculations at 31 December 2014 have taken this decrease into consideration.
“Following the significant reduction in the assets under management, the business will have to restructure in response to this. We will focus on diversifying the profit sources through acquisitions in financial services,” said Hassam.
Sitting on pension funds in excess of P45 billion, the BPOPF was the largest cash cow for most local fund managers, but the Fund’s decision to restrategise had left some fund managers bruised after they lost lucrative mandates. Bifm normally contributes an average 30 percent of BIHL’s profit after tax. The loss of the BPOPF will show in the group’s 2015 half-year results to be announced around August this year.
In the full year to December 2014, Bifm contributed P91
The group’s operating profit stood at P287 million while investments in associate firms raked in P211 million in profits. BIHL holds significant stakes in other listed entities such as Letshego and FSG.
In the period, BIHL’s largest subsidiary Botswana Life Insurance Limited (BLlL) registered a 15 percent growth in operating profit to P 317.5 million from P275.7 million. Premium income grew by six percent over prior year from P1.84 billion to P1.95 billion with all lines contributing to the positive movement.
The group’s smallest subsidiary, BIHL Sure, however, continued to record losses as it registered an operating loss of P27 million in 2014.
The BIHL Sure business comprised of two distinct business lines, which include the general lines that provided conventional short term insurance solutions and legal aid cover, Legal Guard.
“As reported at half year, although the company had high hopes for this business since starting in 2012, continued market challenges including strong price competition and slower than anticipated penetration of the commercial lines market resulted in the business deciding to discontinue offering short term insurance by mid-2014.
The short term book was sold to Botswana Insurance Company effective 31 August 2014,” said the company. Following the decision to withdraw from the general insurance market, Hassam said the business had refocused on the Legal Guard division.