Soaring compensation costs cast shadow on insurer business
Soaring compensation costs cast shadow on insurer business
Despite a spike in premiums, many insurers suffered in terms of performance in 2022 on the back of soaring compensation costs.
Figures by the General Statistics Office show that insurers saw a strong rebound in their premium income last year, particularly those in the non-life segment.
Total premium income of the entire insurance market rose 16.2 per cent on-year in 2022, in which the share of the life segment surged 15.8 per cent, and that of the non-life segment hiked 17.3 per cent on-year.
In 2022, besides higher compensation cost, many insurers counted losses in their financial investments due to unfavourable market conditions. Profits have been dampened even amid a strong rebound in revenues.
The total profit figure of 12 listed insurers shed 29.5 per cent on-year in 2022.
Post and Telecommunication Insurance Corporation (PTI) became the single insurer catching negative growth in 2022 when the company counted $15.3 million losses in post-tax profits.
In 2022, the asset scale of 12 listed insurers swelled by an additional $1.64 billion.
This was attributed to a 35 per cent jump on-year in its compensation cost, equal to $32.4 million PTI had incurred in 2022 compared to 2021’s low base level.
PTI bet on one specific insurance product which helped insure buyers against COVID-19 infection. Purchasers could receive an insurance amount reaching several hundred dollars if they became COVID-19 patients.
With a soaring number of pandemic patients last year, this programme alone cost PTI as much as $15.3 million extra, according to the company's chief accountant.
With most other insurers, the profit picture was also less optimistic. Top state-owned group Bao Viet Holdings saw its profit trimmed by one-third compared to 2021, despite having resumed double-digit revenue growth.
Petrolimex Insurance posted profits at a 42 per cent dip due to a spike in compensation costs and financial expenses.
Vu The Quan, an analyst at VNDirect Securities, assumes that compensation costs could further swell in the forthcoming months.
Elsewhere, Military Insurance (MIC) and Bao Minh Insurance both saw a 20 per cent jump in their premium incomes, yet their compensation costs rose more than 30 per cent on-year in 2022.
Despite these factors, the two insurers still saw positive growth last year. MIC counted profit equal to 15 per cent of last year’s figure, while Bao Minh reported a 14 per cent jump on-year in profits.
In 2022, the asset scale of 12 listed insurers swelled by an additional $1.64 billion, but equity is moving sideways.
By the end of 2021, their equity capital accounted for 19 per cent of their total capital sources, yet one year later this figure was pulled down to just 16.4 per cent.
