Positive outlook for insurance stocks as 2022 arrives
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 Hanoi 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 percent, relatively high figures compared to the average growth rate of the VN-Index of 36 percent.
Non-life insurance companies also made good growth, such as Post - Telecommunication Joint - Stock Insurance Corporation (PTI) increasing by 165 percent to 59,000 VND per share, Vietnam National Reinsurance Corporation (VNR) rising by 82 percent to 31,500 VND per share, Bao Minh Insurance Corporation (BMI) gaining by 74 percent to 43,600 VND per share, Military Insurance Company (MIG) rising by 64 percent to 23,850 VND per share, PVI Holdings (PVI) rising by 60.5 percent to 48,900 VND per share.
In the first nine months of 2021, the total assets of insurance businesses were estimated at 650.2 trillion VND (28.6 billion USD), up nearly 21 percent over the same period in 2020. Total insurance premium revenue reached 152 trillion VND, an increase of more than 15 percent 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 percent over the same period last year.
Petrolimex Insurance Corporation (PGI)’s profit after tax increased by 91.1 percent, reaching 260.5 billion VND; Military Insurance Company (MIG) rose by 51.6 percent, reaching 148.57 billion VND; PVI Holdings (PVI) increased by 28.7 percent, reaching 805 billion VND; Vietnam National Reinsurance Corporation (VNR) gained 17 percent to nearly 267 billion VND; Bao Minh Insurance Corporation (BMI) achieved 188 billion VND, up 19 percent; Post-Telecommunication Joint - Stock Insurance Corporation (PTI) reported 196 billion VND, up 13.5 percent over the same period of 2020.
The process of State capital divestment and expanding foreign ownership to 100 percent 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 percent.
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 77,341 VND per share, 63 percent 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 80 trillion VND, equivalent to more than 1 percent of the total market capitalisation. Excluding Bao Viet Holdings (BVH), the remaining eight enterprises have a market capitalisation of 1.5 trillion VND to 11 trillion VND, 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. Vietnam 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 percent.
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 percent, like in the previous period, while life insurance will still maintain a high growth rate of 25 percent to 30 percent per year.
International insurance groups have reaffirmed their appetite in Vietnam’s landscape, citing favourable demographics, an improved regulatory corridor, and a foreign ownership ratio lift contributing to the market’s appeal.