High mortality rate dents BIHL profits

Botswana Insurance Holdings Limited ( BIHL) expects its profits for the half year ended 30 June to decline by close to P85 million due to high mortality rate experienced during the period. The company stated its financial performance will be between 22 percent and 26 percent lower, translating to a reduction of between P72 million and P85 million. In its half year ended June last year, the company recorded profit of P321.8 million which was an increase from P221 million recorded in 2019. BIHL stated that it recorded 44 percent increase in claims during the six- month period to June 2021 due to excess mortality adversely impacting the life insurance business. The increase in mortality was driven by the COVID- 19 pandemic as the country continues to battle with high infection rates experienced in the third wave which has overwhelmed medical facilities. “In the comparative period, the number of claims was lower than expectation, largely assisted by the lockdowns and lower infection rates. The Group recorded a strong top- line performance during the period resulting from impressive volumes of new business underwritten. Capitalization levels continue to be significantly more than regulatory requirements and internally stipulated risk appetite,” states the company. In a statement published on Botswana Stock Exchange, BIHL highlighted that it is actively monitoring the risks brought about by excess mortality and has put measures in place to manage the impact. However, the trading environment remains volatile, and COVID- 19 is expected to continue to pose challenges into the 2nd half of the year. Presenting the interim results for 2020, BIHL Chief Executive Officer, Catherine Lesetedi pointed out that premium income for the period declined by five percent from P1.28 billion in 2019 to P1.21 billion. The decline was due to low new business volumes on single premium income lines while recurring premium income grew by 10 percent from P712 million in June 2019 to P781 million in June 2020, underpinned by growth in group lines. “Recurring Premium income line represents a sustainable source of profits in the long term. The effects of the COVID- 19 pandemic have been felt on new business as a result of travel restrictions and lockdown.” However, the group indicated that as a result of COVID- 19 impact, the business accelerated its digitisation projects which will enable digital and remote selling by agents and brokers, enhanced customer experience by giving customers online capability to access policy information, as well as several options including payment of premiums. The Group also highlighted that economic performance is expected to decline significantly this year due to the COVID- 19 pandemic. “Strict social distancing measures and travel restrictions are expected to negatively impact private consumption, and this is likely to continue to be felt in our operations and new business performance.”