The financial statement in the first quarter (Q1) of 2020 of many non-life insurance companies showed positive results. However, many forecasts pointed out that difficulties are emerging.
In the context of economic difficulties due to the impact of the Covid-19 pandemic, many non-life insurance companies achieved positive business results in Q1 2020. Typically, BIC insurance company of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) has released the financial statement for Q1 2020 with total premium revenue of the parent company alone reaching 537.7 billion dong, up by 11 percent over the same period of 2019, in which the original insurance premium revenue was 502.4 billion dong, up by 13%.
Regarding profit, the consolidated pre-tax and after-tax profits of BIC were respectively 84.4 billion dong and 63 billion dong, up by respectively 25 percent and 19 percent over the same period of 2019. The main reason is the high profit growth of 34 percent of the company’s insurance business in Q1.
The Q1 business results of Petrolimex Joint Stock Insurance Company (PJICO) also showed the growth of the company’s insurance business and after-tax profit compared to the same period of last year. Specifically, the net revenue in Q1 of PJICO was 669.3 billion dong, and pre-tax profit was over 42 billion dong, up by respectively 13 percent and 7.6%.
At Military Insurance Joint Stock Corporation (MIC), the net revenue of insurance business in Q1 2020 was 498.8 billion dong, up by 26.3 percent over the same period of 2019, but the after-tax profit was 28.2 billion dong, slightly down compared to the 29.6 billion dong recorded in the same period of 2019.
Despite the positive results in the first quarter, many businesses were cautious when talking about the market situation in Q2.
Representative of Post and Telecommunications Joint Stock Insurance (PTI) said that by the end of April 2020, PTI estimated to achieve about two trillion dong of total insurance revenue, up by about 10 percent over the same period of last year.
The two highest growth activities were technical property insurance and human insurance (focusing on health care products).
According to PTI’s representative, in Q2 2020, the market will face more difficulties due to the negative impact of the Covid-19 pandemic.
“The rate of motor vehicle compensation is expected to increase rapidly because many owners will increase the demand for repairs after a long period of limited travel due to the social distancing, while the revenue of technical property business do not have many opportunities to soar. Regarding health care insurance, the growth will continue but not be high, focusing mainly on corporate customers who buy insurance for employees, etc.,” said PTI’s representative.
For Bao Minh Insurance Joint Stock Company (MBI), although the net revenue of insurance business activities in Q1 2020 reached more than 944.5 billion dong, up by 30 percent over the same period of 2019, the company’s after-tax profit started to fluctuate.
In the written explanation sent to the State Securities Commission (SSI) and the HCM City Stock Exchange (HoSE) on the fluctuations of business results in Q1 2020, BMI said that its Q1 after-tax profit was more than 40.9 billion dong, down by 12 percent over the same period of 2019 due to the negative volatility of the stock market which caused the stock prices in BMI’s portfolio to plummet, resulting in a sharp increase in the provisions for devaluation of securities prices, affecting profits.
Assessing the operation situation in Q2 2020, representative of an insurance company said that the Q1 results have not reflected the whole situation, and changes will be seen through the figures in Q2. The reason is that in Q1, there was still a number of deposit contracts from the previous year with high interest rates which contributed positively to the overall results, but the next quarters will be more difficult without this support.
Not only the difficulties in exploiting new fees in Q2 2020, investment activities are also said to begin to see impacts of the pandemic.
According to the market analysis report of BIDV Securities Company (BSC), the deposit interest rates of banks will continue to decline by 0.25 0.3 percent per annum in 2020, following the 0.5 percent per annum reduction in deposit rates for terms of less than six months.
This will affect the financial income of non-life insurance companies when the short-term deposits (of less than one year) are accounting for larger proportion in the investment asset structure.
Accordingly, BSC lowered the forecasts on non-life insurance segment from positive in 2019 to neutral in 2020 with the view that the downtrend of deposit interest rates will reduce financial profit.
In addition, although the growth of non-life insurance segment is still high at 11 12%, the competition is also getting fiercer, causing core profits to be affected. However, BSC also said that the prospect of divestment and the cheap valuation are the positive points for non-life businesses this year.
