Savings rates were on the decline, but the portfolio of insurance companies had not changed much.
The general Meeting of Shareholders (AGM) 2020 of the Post Telecommunication Joint Stock Insurance Corporation (PTI) last week approved an increase in the ownership ratio for foreign investors from 49 percent to 100 percent and the plan to set up a fund management company or investment company. According to the representative of PTI, this was one of the crucial steps for the company to professionalise its investment and insurance business activities.
In the business strategy for the period from 2020 to 2025, along with the thorough handling of outstanding ineffective financial investments, PTI would focus at 80 percent of the investment capital source on deposit activities and other investments having a fixed interest rate, while the proportion of investment in securities and real estate maintained at around five percent to 15%.
Accordingly, the rate of return on investment was expected to be at least six percent per year. It was known that in 2019, the gross profit from financial investment activities and other activities of PTI reached more than 74 billion dong, just completed over 50 percent of the year plan. The main reason for this fact was the loss of securities investment activities.
At Petrolixmex Insurance Corporation (PJICO), this insurer was reviewing and evaluating the effectiveness of securities investments, capital contributions to create an appropriate divestment plan. In 2019, PJICO’s financial revenue reached 230 billion dong, increased by two percent compared to 2018.
According to a representative of PJICO, in the 2020 plan, the company would continue to diversify its portfolio to improve investment activities, focusing on long-term investments, potential industries and fields with high growth. Also, the company would regularly review the financial portfolio to divest for inefficient investments or achieve expected profits.
With BIDV Insurance Corporation (BIC), bonds and deposits often made up a large proportion of the financial portfolio, at about 90%. At the recent annual shareholder meeting of 2020, the BIC representative said that term deposits accounted for the most substantial proportion in the portfolio.
According to this position, although it was a safe investment form, the interest rate in the current downward trend, the general profit of BIC was difficult to avoid being affected.
In fact, based on the evaluation of business results in the first four months and the economic situation in 2020, BIC’s Board of directors had adjusted this year’s business plan, in which the profit target reduced by more than 10 percent compared to 2019 due to restrictions on securities investment activities when the stock market fluctuated. Deposit interest rates had dropped sharply from the beginning of the year until then (from 7.5 percent per year at the beginning of the year to around six percent per year currently) due to disease impacts.
It was known that in 2019, BIC’s financial investment profit reached more than 254 billion dong, rose by 10 percent compared to 2018, mainly from deposit and bond investment activities, while stock investment activities were limited. Last year, the value of BIC’s portfolio had increased, but the portfolio structure still focused mainly on bank deposits and bonds, with a proportion of more than 92%.
At Bao Minh Insurance Corporation (BMI), bank deposits also accounted for the highest proportion in the financial portfolio in 2020, reaching about 80%. According to BMI leaders, bank interest rates were currently not high, but this was a safe investment form, especially in the current challenging context.
Securities investment brought high profits, but the risks were equally great, so it often required an abundant provision. To minimise risks and ensure investment efficiency, BMI would focus on high-yield bonds and reduce the proportion of stock investment, said BMI leaders.
In 2019, the profit of financial investment activities of BMI had not completed the set plan (reached 132 billion dong, completed 82.8 percent of the drawing), the main reason was due to the stock market fluctuations, leading to stock trading profits dropped sharply. Although interest from dividends and deposit interest increased, it was not enough to compensate.
