Non-life insurers have cut back cash dividend rates for 2020 by maximum five percentage points as they prepare for a global economic downturn.
According to business insiders, dividend is paid after the company completes tax duties and settles all financial obligations. Therefore, non-life insurance firms must have many issues reviewed before deciding to pay cash bonuses.
As economies are being ravaged by the COVID-19 pandemic, local companies are trying to secure cash to prepare for a rough period ahead. Thus, insurers’ cash dividend policy is considered a positive thing for the market.
But compared to last year, 2020 cash dividend rates are getting lower.
Leading insurance-finance group Bao Minh (HoSE: BMI) at the annual shareholder meeting in late April announced total revenue in 2019 was up 7.5 per cent on-year to nearly VND4.6 trillion (US$197.5 million) and pre-tax profit gained 9.9 per cent on-year to VND220.6 billion. The cash dividend rate for 2019 performance was set at 15 per cent.
But the company forecast total revenue and pre-tax profit in 2020 will fall 15 per cent on-year to nearly VND3.9 trillion and VND188 billion, respectively. Lower earnings projection made Bao Minh cut its expected cash dividend rate for 2020 by five percentage points to 10 per cent.
According to CEO Le Van Thanh and chair Le Song Lai, COVID-19 will hit the firm’s earnings as customers’ spending is limited by the economic downturn and more people will go to healthcare centres and hospitals for check-ups and treatment.
Petrolimex Insurance (PJICO, HoSE: PGI) reported total revenue rose a tenth on-year to nearly VND3.66 trillion in 2019 and pre-tax profit was up 12 per cent on-year to VND200 billion. The cash dividend rate for 2019 was 13 per cent.
But this year, the company’s earnings are expected to contract to VND3.47 trillion in total revenue and VND180.8 billion in pre-tax profit. The cash dividend rate is also slashed to 12 per cent.
At Military Insurance Corporation (UPCoM: MIG), the cash dividend rate is promised at 8-10 per cent for 2020 instead of fixed 10 per cent for 2019.
Aside from less-worse earnings projections and cash-dividend policies, interest in insurance firms has increased as investors are betting the companies are allowed to raise the foreign capital limit. The presence of foreign investors is widely expected to boost their performances.
According to KIS Vietnam Securities Co, local insurers will soon sell shares to strategic investors and launch IPOs for their divisions to lure foreign capital.
The Post and Telecommunication Insurance Corporation (HNX: PTI) will propose shareholders eliminate the foreign ownership cap, raising the rate from 49 per cent to 100 per cent.
According to the company, heightening the foreign ownership is needed to raise the firm’s future credit rating and increase its charter capital. If approved, the proposal will also help improve the liquidity and attractiveness of the company’s shares on the market.
Military Insurance is planning to move shares from the Unlisted Public Company Market (UPCoM) to the Ho Chi Minh Stock Exchange (HoSE) this year. Meanwhile, PJICO and shareholders have agreed to lift off the bar to draw more foreign investment.
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