Inside a branch of Bao Viet Holdings (BVH) in Ha Noi. Bao Viet Holdings had the highest liquidity of all the Vietnamese insurance stocks in 2021. — Photo courtesy of Bao Viet Holdings
State capital divestment planning and the removal of limitations on foreign ownership are expected to drive insurance stocks to flourish in 2022.
There are currently nine insurance stocks listed on the market, five of which are listed on the Ho Chi Minh Stock Exchange (HoSE); Bao Viet Holdings (BVH), Bao Minh Insurance Corporation (BMI), Military Insurance Company (MIG), Petrolimex Insurance Corporation (PGI) and BIDV Insurance Corporation (BIC). The other four are listed on the Ha Noi Stock Exchange (HNX); Post - Telecommunication Joint - Stock Insurance Corporation (PTI), PVI Holdings (PVI), Vietnam National Reinsurance Corporation (VNR) and PVI Reinsurance Joint-stock Corporation (PRE).
In terms of market price, in 2021, these nine stocks had an average growth of 56.5 per cent, relatively high figures compared to the average growth rate of the VN-Index of 36 per cent.
Non-life insurance companies also made good growth, such as Post - Telecommunication Joint - Stock Insurance Corporation (PTI) increasing by 165 per cent to VND59,000 per share, Vietnam National Reinsurance Corporation (VNR) rising by 82 per cent to VND31,500 per share, Bao Minh Insurance Corporation (BMI) gaining by 74 per cent to VND43,600 per share, Military Insurance Company (MIG) rising by 64 per cent to VND23,850 per share, PVI Holdings (PVI) rising by 60.5 per cent to VND48,900 per share.
In the first nine months of 2021, the total assets of insurance businesses were estimated at VND650.2 trillion (US$28.6 billion), up nearly 21 per cent over the same period in 2020. Total insurance premium revenue reached VND152 trillion, an increase of more than 15 per cent over the same period in 2020 and reaching the highest level ever.
According to BIDV Securities Co (BSC), the financial statements for the first nine months of 2021 of eight non-life insurance companies on the stock exchange showed that the average profit growth was 29.7 per cent over the same period last year.
Petrolimex Insurance Corporation (PGI)’s profit after tax increased by 91.1 per cent, reaching VND260.5 billion; Military Insurance Company (MIG) rose by 51.6 per cent, reaching VND148.57 billion; PVI Holdings (PVI) increased by 28.7 per cent, reaching VND805 billion; Vietnam National Reinsurance Corporation (VNR) gained 17 per cent to nearly VND267 billion; Bao Minh Insurance Corporation (BMI) achieved VND188 billion, up 19 per cent; Post-Telecommunication Joint - Stock Insurance Corporation (PTI) reported VND196 billion, up 13.5 per cent over the same period of 2020.
The process of State capital divestment and expanding foreign ownership to 100 per cent in the insurance sector has also had a positive impact on the prices of stocks on the market.
On August 31, 2021, the Ministry of Planning and Investment officially updated the "market access conditions" in 59 industries with conditional market access for foreign investors, including the insurance sector. For the insurance sector, the percentage of foreign investors' ownership has been opened up to 100 per cent.
The Board of Directors of Post-Telecommunication Joint - Stock Insurance Corporation (PTI) said that lifting ownership limitations for foreign investors was necessary, helping the company expand its business and grow profits. In addition, the liquidity and value of shares on the stock market also improved.
In mid-December, VNPost completed the auction of 18.2 million PTI shares to three domestic individual investors, with an average successful auction price of VND77,341 per share, 63 per cent higher than the starting price.
According to the capital divestment plan of the Corporate Finance Department under the Ministry of Finance, in the first quarter of 2022, the State Capital Investment Corporation (SCIC) will divest from Bao Minh Insurance Corporation (BMI) and Vietnam National Reinsurance Corporation (VNR).
Growth not proportional with "potential"
Although there is much potential, insurance stocks haven’t made strong gains when compared to the growth of other financial stocks in the banking and securities groups. Except for Bao Viet Holdings (BVH), other stocks only have low liquidity of a few thousand shares per session.
Currently, the capitalisation of nine insurance companies on the stock market remains trivial at about VND80 trillion, equivalent to more than 1 per cent of the total market capitalisation. Excluding Bao Viet Holdings (BVH), the remaining eight enterprises have a market capitalisation of VND1.5 trillion to VND11 trillion, which is quite low.
The small amount of market capitalisation in the context of good and steady business in recent years shows that the insurance group has good growth potential in the near future. Viet Nam is currently one of the countries with the highest growth rate of premium revenue in the world, with an average annual growth rate of over 9.3 per cent.
According to Bao Viet Securities Co (BVSC), when the COVID-19 pandemic ends, the non-life insurance industry will quickly return to the average growth rate of 15 per cent, like in the previous period, while life insurance will still maintain a high growth rate of 25 per cent to 30 per cent per year. — VNS