Non-life insurance companies are facing difficulties not only in the core business segment but also in optimising investment efficiency in the current context.
Baominh Insurance Corporation’s Board of directors intends to submit to the Annual general Meeting of Shareholders for approving the business plan with total revenue (excluding revenue from exchange rate differences) of 3.218 trillion dong and total profit before tax of 175 billion dong, equivalent to 70.24 percent and 79.32 percent of the level implemented in 2019.
Another insurance company, PJICO, in the report to the general Meeting of Shareholders in 2020, targets a pre-tax profit not lower than that implemented in 2019 while the total gross premium is planned to be 3.293 trillion dong (excluding fishing vessel insurance under Decree 67/ CP), an increase of eight percent compared to 2019.
In 2019, the total original insurance revenue (excluding fishing vessel insurance under Decree 67/ CP) of this insurance company reached 3.048 trillion dong, an increase of ten percent compared to 2018 while profit before tax was 200.7 billion dong, up 12 percent compared to 2018.
Other insurance companies are also considering to discuss the 2020 profit plan adjustment at the annual general Meeting of Shareholders (most of them have been reschedule to organise before June 30, 2020).
The Covid-19 epidemic is forecasted to adversely affect the new insurance revenue targets of insurance companies.
By 2020, the non-life insurance market is estimated to grow only about 10 percent over the previous year; in which, motor vehicle, human, health, bank-linked insurance and liability insurance products are expected to increase by 25%.
Along with insurance services, investment is the main income source for insurance companies. This activity is also seriously affected when the financial and securities markets dropped sharply.
To ensure capital safety, normally, investment capital of insurance enterprises is allocated with the proportion of investment of more than 70 percent in bank deposits, 10 percent in securities, 5 percent in real estate and 15 percent in others.
In the context of a complicated and unpredictable pandemic, the whole economy is facing difficulties, production and business activities are delayed. The influence has been evident in the sluggish stock market, frozen real estate and interest rate fall according to lending rates.
According to PTI representative, investment activities of insurance enterprises in general and PTI in particular will be directly affected after a poor fiscal year. Specifically, gross profit from financial investment activities last year was only 222 billion dong, fulfilling 88.9 percent of the year plan.
The main reason is losses from securities investment activities. In 2019, the stock market continued to decline sharply, leading to an increase in the provision for devaluation of securities.
For Bao Minh, the total revenue from financial activities in 2019 reached 217 billion dong, equivalent to 94.5 percent of the plan and only 89.4 percent compared to 2018. Profit from financial investment activities was 132 billion dong, equivalent to 82.8 percent of the plan and 105.7 percent as compared to 2018.
The main reason is due to unpredictable fluctuations in the stock market, resulting in a sharp decline in stock business profits. Although dividends and deposit interests increased, it could not cover the losses.
In fact, for most insurers, although they are not directly affected by interest rate fluctuations as they do not utilise loans, the fair value or future cash flow of financial instruments will indirectly fluctuate due to changes of market interest rates.
Therefore, the problem for insurers in 2020 is not only to find solutions to promote the insurance market with new product lines or services, but also to choose an effective portfolio.
“We will continue to revise our financial portfolio to suggest ways to divest, sell ineffective stocks or stocks that we have achieved expected profits,” an insurer said.
