Insurance stocks see good prospect

22-Sep-2021 Intellasia | Nha Dau tu | 7:07 AM Print This Post

Compared to other financial industries such as banking, securities, insurance stocks have not yet experienced significant increase despite positive business results and market growth potential.

The Law on Insurance Business project (amended) is being implemented with the spirit to boost the insurance market, apply international experiences, promote the development of the Vietnamese market which has great potential but low development rate compared to the common level of the region and the world. The Law on Insurance Business (amended) is expected to take effect from 2023.

Meanwhile, the insurance market in the first eight months of 2021 still recorded positive growth despite the epidemic. Specifically, by the end of August, the total assets in the insurance market were estimated at 643.588 trillion dong, up by 22.1 percent over the same period of last year. the total insurance premium revenue in this period also increased by nearly 17 percent to 133.040 trillion dong.

Contrary to other industries that are affected by the Covid-19 pandemic, the profit growth rate of the insurance sector was fairly good in the first half (H1) of 2021.

The statistics of nine listed insurance companies by showed that five out of nine companies achieved a profit growth from 40 to 55 percent in H1/2021 year-on-year. Meanwhile, Bao Minh Insurance Corporation (BMI) took the lead with the highest profit growth of 55.4%, followed by the Vietnam National Reinsurance Corporation (VNR) with 54.6%, Petrolimex Insurance Corporation (PGI) with 49.9%, Military Insurance Corporation (MIG) with 44.3%, and Bao Viet Holdings with 41.2%.

Some insurance companies with impressive profit growth in the period of 2019 2020 were Post and Telecommunication Joint Stock Insurance Corporation (PTI) with respective profit growth rates of 475 percent and 113%. BIDV Insurance Corporation (BIC) also recorded profit growth rates of 25 percent and 39%, respectively in 2019 and 2020. These numbers were 30 percent and 37 percent for MIG.

The stock prices of listed insurance companies also grew fairly well in the first nine months of 2021. Compared to the beginning of the year, the market prices of five out of nine insurance companies increased by 40 145%. The stock codes with good development in prices include VNR (145%), MIG (66%), PTI (57%), etc.

Notably, all the insurance stock codes saw good growth in the past two months while some stock codes have just started to increase from September, such as PRE, VNR, PTI, etc. Some stocks experienced price increase earlier from the end of June and early July such as MIG, BMI, PVI, PGI, or from early August like BIC. Even when BVH is the only stock code that witnessed price decline compared to the beginning of the year, it has recovered from the bottom since mid-July.

However, basically, the profit growth rate of insurance stocks is still far behind other financial industries such as banking or securities. While the stock price increase from the beginning of the year until now of insurance stocks is no more than 145%, many stocks of the banking and securities sectors have increased by times, even four to five times.

In general, the total capitalisation of the insurance industry has only inched up by 2.8 percent from the beginning of the year (largely due to the nearly 20 percent decline in BVH’s stock price).

The current capitalisation of insurance industry in the stock market is currently very modest at just over one percent of the total market capitalisation. This shows the large growth room of insurance stocks compared to the market and the potential of the industry in the near future.

Financial indicators of insurance stocks point out that there is still a lot of room for growth when more than half of the group has Price to Earnings (P/E) of less than 15x and average Price to Book (P/B) of 1.5 1.7x. Meanwhile, FiinGroup forecasted that the P/E and P/B of the entire market in 2021 will be respectively 17.8x and 2.1x.

For the insurance industry alone, FiinGroup said that the industry attained good profit growth in 2020 (25%) despite the influence of the Covid-19, while the stock prices did not record commensurate increase. The P/B of the insurance sector is currently lower than the three-year average (2.2x).

In fact, the negative and complicated developments of the Covid-19 epidemic are creating short-term risks for insurance companies as they have to face with decrease in customer income, the risk of inflation and the increase in compensations.

However, Bao Viet Securities Company (BVSC) mentioned that in the short term, insurance stock prices still be motivated from the plan of state capital divestment. In 2021, some businesses have plan to divest part of their capital such as BMI, PTI, BVH and MIG.

In addition, Vietnam is always in the top of countries with the highest growth rate of insurance premium revenue, with an average annual growth rate of over 9.3%. despite continuously recording high growth, the insurance penetration rate in Vietnam is still very low, reaching only 2.7 percent as of 2019 (0.8 percent for non-life insurance and 1.9 percent for life insurance), much lower than other countries in the region (average at 3.3%). Accordingly, BVSC believed that when the Covid-19 pandemic is under control, the non-life insurance segment will soon return to the average growth rate of 15 percent in the previous period, while the life insurance segment will maintain a high growth rate of 25 30 percent per annum.

Hoang Viet Phuong, director of the centre for Analysis and Investment Advisory of Saigon Securities Incorporation (SSI), said that the growth rates of original premium revenue will be higher in 2021 for life insurance and non-life insurance segments, reaching respectively 22 percent and 10 12 percent over the same period. This is the group of stocks for investors to consider because the demand for life insurance products is at a fairly good level and insurance companies can reach a larger group of potential customers thanks to the exclusive bancassurance deals recently signed between banks and insurance companies. When the Covid-19 pandemic is under control and social distancing order is removed, sales activities (meetings, customer conferences, etc.) will be able to recover to the pre-Covid levels, stronger boosting the sales.


Category: Finance, Vietnam

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