According to statistics of NDH newspaper, 10 companies listed on the stock market are operating in insurance sector. In the first quarter (Q1) of 2019, their total insurance premium was 15.753 trillion dong, 15 percent higher than the same period of last year, lower than the industry average of 17 percent. The pre-tax profit of these 10 companies reached 1.347 trillion dong, up by 17 percent; while their after-tax profit was over 1.091 trillion dong, 15 percent higher than Q1 2018.
Bao Viet Insurance Company (stock code on HCM City Stock Exchange (HoSE): BVH) made the largest contribution with 455 billion dong of after-tax profit, accounting for 42 percent. However, it ranked the last in growth, if excluding Bao Minh Insurance Company (HoSE: BMI).
Taking the lead in growth rate is Bao Long Insurance Company (stock code on the Unlisted Public Company Market (UPCoM): BLI) with 49.6 billion dong of after-tax profit, up by 1.5 times; followed by Military Insurance Company (UPCoM: MIG) with 29.6 billion dong, up by 147 percent compared to Q1 2018. Other companies such as PetroVietnam Insurance Company (stock code on Hanoi Stock Exchange (HXN): PVI), Posts and Telecommunications Insurance Company (HNX: PTI) both recorded a double-digit growth.
Bao Minh Insurance was the only listed companies posting a decline of more than 31 percent in after-tax profit, reaching 46.8 billion dong in Q1 2019. The reason, according to BMI’s explanation, was due to the reduction (by half) in the company’s financial and securities trading activities which affected the overall profit.
This is one of the contents pointed out by Saigon Securities Incorporation (SSI)’s Securities Analysis team in the general report for insurance industry. Accordingly, the financial profit of 10 listed insurers fell by nearly 40 percent in Q1 2019.
However, the more efficient insurance business has helped improve the overall profit of the industry. The compensation rate was 66 percent and the cost ratio was 38.7 percent, down compared to the same period of 2018 (which were respectively 78 percent and 39.5 percent), helping the combined costs decline from 117.6 percent to 104.7 percent. Except for Vietnam National Reinsurance Corporation (HNX: VNR) and Bao Minh Insurance which saw higher compensation rate, other insurers recorded decline in this rate, in which Bao Viet Insurance took the lead with compensation rate falling from 99.4 percent to 80.5 percent, due to the company’s tightening in management, and the increase in fees of some typical insurance operations which are suffering losses such as motor vehicle insurance.
Foreign insurers compete on the life insurance market
Among the listed companies, Bao Viet Insurance is the only unit which involves in life insurance field. However, the growth rate of Bao Viet has shown sign of slowing down while the general market is still expanding.
In Q1 2019, Bao Viet collected a life insurance premium revenue of 5.532 trillion dong, up by 19 percent while the industry’s average growth was 23 percent. This indicator of Bao Viet in 2018 also increased at a modest level of 23 percent, while it was 31 percent for the whole industry (four consecutive years with growth of above 30 percent).
Despite being the largest insurer in the market, the market share of Bao Viet has gradually been decreasing due to the stronger participation of foreign rivals such as Prudential, Manulife, AIA, Dai-ichi, etc. The competition level is increasing when foreign insurers associate with banks in the distribution of insurance products (bancassurance).
Typically, Manulife Vietnam is cooperating with Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) and Tien Phong Commercial Joint Stock Bank (TPBank); AIA is cooperating with Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Asia Commercial Joint Stock Bank (ACB), Dong A Commercial Joint Stock Bank (DongABank). Hanwha Life Vietnam is also partnering with Woori Bank and Shinhan Bank. These moves show the expansion of life insurance distribution of life insurance companies through different channels in addition to traditional agents.
Non-life insurance is the main area of Vietnamese listed insurers. Their Q1 revenue reached 9.316 trillion dong, up by 13 percent, higher than the industry’s average level of nine percent. This revenue accounted for 70 percent of the total market revenue.
According to SSI Retail Research, PTI took the lead in non-life insurance field with a growth rate of 41 percent. The largest contribution to this was the sales of insurance products to capital borrowers at consumer finance companies and motor vehicle insurance. In addition, Agribank Insurance, Bao Long Insurance and BIDV Insurance recorded growth in original premium revenue of respectively 27.7 percent, 15.7 percent and 14.1 percent.
The potential of Vietnam’s insurance industry is still large.
According to Bui Gia Anh, general Secretary of Vietnam Insurance Association, the insurance market currently accounts for 2.9 percent of Gross Domestic Product (GDP), while this rate is over six percent in other countries. For life insurance field, the proportion of people buying insurance products is less than 10 percent, while this rate is 70-80 percent in developed countries and 90 percent in the US. This shows the potential of Vietnam’s insurance sector.
Talking with the press, Chair cum general director of AIA Ng Keng Hooi once said that Vietnam is a potential life insurance market with the ability to exploit products worth 700 billion US dollars.
Concerning non-life insurance segment, the State is encouraging the development of non-life insurance businesses such as agricultural insurance, technical insurance and public asset insurance, etc. Therefore, if insurers take advantage of the opportunities, they can develop very well in the near future. Motor vehicle insurance, cargo insurance, asset insurance and fire insurance products will continue to be exploited.
In 2019, the Vietnam Insurance Association aims to expand the revenue of the entire insurance market by 25 percent, in which the revenue growth of life insurance segment is targeted at 35 percent and of non-life insurance segment is expected 10 percent.
BIDV Securities Company (BSC) mentioned that the business results of insurance companies will continue to be improved for three reasons. Firstly, the interest rate increase will help improve financial profit. Secondly, health and property insurance will continue to go up. Lastly, the application of Extended Reporting Period (ERP) technology will help companies save sales costs and management costs, thereby improving insurance performance.
Nevertheless, BSC also noted that the growth rate of the industry will not see major changes and the prospect of insurance companies will only significantly enhance when divestment and room loosening deals take place. As expected, in 2019, the State will make divestments in leading insurance companies such as PVI and Bao Minh Insurance. With these two insurers affirming their position in the industry, BSC expects the divestment of these two insurance corporations will attract the attention of investors.
