In spite of not being as loud as in previous years, some non-life insurers are continuing to make capital increase plans in order to expand the system and welcome business opportunities.
The 2018 annual general meeting (AGM) of Bao Long Insurance Corporation in mid-April approved the policy on chartered capital increase with the minimum ratio of 20 percent by separate issuance, with priority given to foreign investors.
Currently, Bao Long has 600 billion dong chartered capital. As of June 30, 2017, Bao Long has two major shareholders including Saigon Joint Stock Commercial Bank (with 81.1 percent stake) and Vietnam Export Import Joint Stock Commercial Bank (with 6.51 percent stake).
As planned by Bao Long, by 2019, the company’s chartered capital will increase to one trillion dong; the number of member units swelled by three companies (from 47 to 50). Accordingly, premium revenue will grow 18 percent (reaching 1.280 trillion dong) while the Return on Equity (ROE) will be five percent.
This year, Bao Long sets premium revenue target at 1.088 trillion dong (up 14 percent).
At the annual general meeting organised on May 15, the management board of PVI Reinsurance Joint Stock Corporation (PVI Re) plans to submit to shareholders the capital increase plan to 983 billion dong in Q3 this year, after completing the capital increase for the first time to 728 billion dong in Q1/2018. Along with that, PVI Re will list the stock on the bourse.
Another life insurer also said it really wants to raise the chartered capital in 2018 via the issuance to strategic shareholders. Currently, the company is seeking for partners and has not had clear signal, so it has not included in this year’s AGM agenda.
The major reason for the capital increase of life insurers is to expand product distribution network, in order to increase sales and market share.
Nguyen Thanh Long, Chair of the Board of Bao Long Insurance said the newly mobilised capital of the chartered capital increase from 500 billion dong to 600 billion dong in 2017 (increased chartered capital for 88 billion newly issued shares and 12 billion dong issued from the retained profit to make dividend payment to shareholders) helped Bao Long develop five more member units last year, expanding traditional retail network.
With the current capital, Bao Long is ranking 14th out of 29 non-life insurers in the market. Bao Long’s network includes 47 member companies, among Top 6 companies having the largest network in the system, helping the company rank 11th in market share.
Not having capital increase plan in this year after it has just completed the chartered capital increase from 700 billion dong to one trillion dong in Q3/2017, leader of Saigon-Hanoi Insurance Joint Stock Corporation (BSH) said the recently increased capital, apart from helping the company raise financial potential, also helps enhancing the competitiveness in the bidding for big projects, supplementing capital for investments, supporting original premium business activity.
Similar to Bao Long, after increasing capital, BSH newly established 10 member companies and business centres, raising the total network to 39 member companies and business centres.
At the end of 2017, the business that ranked the first position in original premium revenue i.e. Bao Viet Insurance raised chartered capital to 2.3 trillion dong.
The capital increase in non-life insurance businesses is often associated with the target of setting up more member companies to enlarge market share. However, the operation of member companies does not always follow the expectation of insurance businesses.
The restructuring activities of member companies in non-life insurance companies in the past such as Bao Minh, PJICo, Bao Viet, or MIC, BSH, Aviation Insurance, etc. proved that.
The aforementioned businesses’ member units that are subject to restructuring did not have effective operations and did not bring about much revenue. Leaders of these member units lack competence and responsibility, making the costs to rise suddenly, apart from suffering in management, compensation. Even, a leader at a member company in a Northern Province held a big sum of premiums and escaped, causing the insurance company headquartered in Hanoi to fall into difficult situation.
