Insurance stocks get boost thanks to State divestment
Insurance stocks get boost thanks to State divestment
Revenue of the whole non-life insurance market recorded modest growth this year, but most insurance stocks on the stock market rose sharply.
In the past two months, most insurance stocks have rebounded, with some stocks like Military Insurance Company (MIG), Bao Minh Insurance Corporation (BMI) and Post - Telecommunication Joint Stock Insurance Corporation (PTI) up about 60 per cent compared to the beginning of the year. Vietnam National Reinsurance Corporation (VNR) even jumped 145 per cent.
This stands in contrast to the sideways trend that occurred a few years ago.
On the stock exchange, there are currently seven insurance stocks, including VNR, PTI, MIG, BMI, Petrolimex Insurance Corporation (PGI), PVIRe (PRE) and BIDV Insurance Corporation (BIC).
These companies are operating in the field of non-life insurance. In Viet Nam, there is no life insurance company listed or registered for trading on the stock exchange.
Two other stocks, including Bao Viet Holdings (BVH) and PVI Holdings (PVI), have long been considered by many investors as insurance stocks, but are actually financial investment stocks in the financial - insurance sector. BVH is holding 100 per cent of capital in Bao Viet Insurance Corporation, while PVI holds 100 per cent of capital in PVI Insurance Corporation and 73 per cent of capital in PRE.
PVI shares, which were trading at VND48,100 per share on Thursday morning, rose about 50 per cent this year. Meanwhile, BVH shares fell slightly, despite its profit climbing 41.2 per cent year-on-year in the first half of 2021.
The negative and complicated developments of the COVID-19 pandemic are creating short-term risks for insurance companies due to a decrease in customer income, the risk of inflation and an increase in premiums, but insurance stocks are expected to inch higher.
The bullish trend of insurance stocks is believed to be driven by the divestment of state capital and extraordinary business results of some enterprises.
According to the plan to divest state capital of the Department of Corporate Finance, the Ministry of Finance, BMI and VNR are two insurance companies managed by the State Capital and Investment Corporation (SCIC) expecting to divest in the first quarter of 2022. The value of State capital at par value at BMI is VND463.1 billion (US$20.3 million), while at VNR is VND529 billion.
However, VNR has not received any documents from the authorities on the divestment of State capital, Nguyen Thi Minh Chau, who is in charge of information disclosure of VNR, told tinnhanhchungkhoan.vn.
Finance-insurance expert Tran Nguyen Dan said that it is understandable that investors’ cash flow is poured into insurance stocks, especially those on the list of State divestment. But investors need to assess the business performance and growth potential.
Accordingly, if an enterprise subject to divestment has an almost exclusive segment, it is an investment opportunity, while if that field has been opened and liberalised, it is not attractive.
“For example, previously, a month after the successful State divestment, Sabeco (SAB) share price declined from VND340,000 per share to VND230,000/share. The shares’ fluctuation, then, created a lot of emotions in the market, but SAB shares currently are just traded over VND160,000 per share,” Dan added.
Preliminary data from the Insurance Association of Viet Nam showed that in the first eight months of 2021, the revenue of the non-life insurance market is estimated at nearly VND37.3 trillion, up 3.61 per cent over last year, the lowest growth rate in the last decade.
The slowdown was due to declines in both major retail businesses, with negative growth in vehicle insurance, while health insurance's growth was lower.
Of which, vehicle insurance's revenue reached nearly VND10.3 trillion, down 7.7 per cent, while revenue of health insurance rose 3.39 per cent year-on-year to more than VND11 trillion.
