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Insurers earned big money from investments in 2008
In 2008, most insurance companies saw turnover and profit increase over the previous year. In particular, profit from investment activities of insurers witnessed the highest ever growth rate, according to the Vietnam Insurance Association.
The noteworthy thing is that no insurance company dared increase their portfolios in securities investments; therefore, they did not suffer heavy impacts from the falling stock market.
According to Phung Dac Loc, Secretary General of the Vietnam Insurance Association, the majority of the profit insurers got in 2008 came from financial investments with their stockholder equity and capital surplus (the price margin got from share issuances).
Insurers benefited from the State Bank of Vietnam’s policy on tightening monetary policies, which once pushed bank interest rates up to very high levels at over 18% per annum, while the average interest rate was 10-12% last year.
As for non-life insurance companies, profit from investment activities proved to be a miracle for them, which brought money in the context of insurance premiums being not high enough to cover compensations, expenses and provisioning in accordance with the Ministry of Finance’s regulations.
In 2008, the total non-life insurance premiums of the market reached nearly VND10,900bil, an increase of 30% over 2007. The premiums were 21% higher than the target set in the insurance development strategy for 2010 (the targeted level was VND9tril).
The top five insurers which had high premiums in 2008 were Bao Viet (VND3,305bil), PVI (VND2,016bil), Bao Minh (VND1,981bil), PJICO (VND1,061bil) and PTI (VND429bil).
The unsatisfactory results in insurance operations will force insurers to rethink their actions of slashing insurance premiums to scramble for clients.
Life insurance companies reportedly got the turnover of VND10,334bil in 2008. The five life insurers which had the highest turnovers were Prudential VND4,270bil, Bao Viet VND3,425bil,, Manulife VND1,072bil, AIG VND634bil, Dai-ichi VND585bil.
Economists have warned that in 2009, the global economic recession will have continuous impacts on Vietnam’s economy. In the first months of the year, the VN Index and bank interest rates continued decreasing, and the falls will certainly influence the profit from investment activities of insurers.
The Vietnam Insurance Association has suggested that life insurers think of measures to help clients overcome the current difficulties. Clients may see their incomes decrease due to the economic recession, and they need help to be able to pay premiums annually and not stop contracts before maturation.
VietNamNet/TBKTVN
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