Insufficient safe investment channels, decreasing interest rates hit insurance companies

Jul 30th at 22:57

30-07-2012 22:57:07+07:00

Insufficient safe investment channels together with decreasing interest rates have affected the insurance companies.

General director of Vietnam National Reinsurance Corporation (VNR) Pham Cong Tu said that insurance firms normally spend some 60pct-70pct of their investment volume in bonds. Therefore, most of them enjoyed excessive profits one year ago thanks to high interest rates, however it has now been hit by interest rate easing.

Their share prices have witnessed erratic fluctuations over the recent times.

Bao Viet Insurance Corporation (BVH) saw the share price plummeting to VND 42,700/share as of the end of trading session on 25 July from VND 70,000/share since early 2012. Over the first half of the year, its financial revenue fell 5pct to 644 billion dong. Yet, this firm still enjoyed gross profit of 774 billion dong-a 57 percent year-on-year increase thanks to the reimbursement of provisions for investment devaluation.

Also, it is rumoured that BVH’s foreign strategic partner HSBC may sell their 18pct of to Sumitomo Life-one of the four Japanese largest insurance firm. However, no official announcements have yet been made so far.

In the meantime, the VNR share price has edged up from VND 12,000/share to VND 12,500/share last month after falling earlier in the year. Recently, Chair of VNR Management Board Trinh Quang Tuyen unveiled intention to hire an international credit rating firm for internal assessment.

Another insurance firm whose share has attracted much investors’ interest is PVI, the price of which has been hovering around VND 17,000/share for the past three months.

Recently, this firm has sold stake to a Germany strategic partner-Talanx group. Currently, much attention has been given to the potential establishment of PVI Sun Life Insurance Company Limited. In all likelihood, this firm would be granted license at the end of August and insurance products and financial services would then easily approach domestic customers, said Kevin Strain, general director of Sun Life Financial Asia.

Bao Dau Tu