|
Insurers running out of time to raise capital
As the stock market has recovered in the past two months, insurers have resumed the process of raising chartered capital. They must meet required levels before March 2010.
Rushing to raise capital
Decree No 46 dated March 27, 2008 stipulates that two years after the decree becomes valid, non-life insurance companies have to have the chartered capital of 300 billion dong, while life insurance companies need to have 600 billion dong. This means that by the end of March 2010, insurers will have to have the requited chartered capital or they will have to close.
Two life insurance companies, Bao Long and Bao Tin, still have not raised the necessary capital. In early August 2009, Bao Long collected shareholders’ opinions on a plan to increase capital from 172 billion dong to 340 billion dong.
In fact, the capital increase was discussed at the shareholders’ meeting in 2008, but the plan was cancelled due to the stock price falls. Bao Long plans to issue 17.28 million shares: 16.72 millions shares to existing shareholders at face value, 560,000 shares to the company’s staff. If shareholders do not buy up all the shares, the company will sell shares to strategic partners and the company’s workers.
Viendong Assurance Corporation (VASS) plans to issue shares to increase capital in the fourth quarter of 2009. In fact, VASS previously decided to raise capital by selling shares to strategic partners. However, as the national economy met difficulties in late 2008, VASS could not find suitable buyers.
In order to improve its financial capability to provide satellite insurance services and expand its operation network, Post and Telecommunications Joint-stock Insurance Company (PTI) plans to increase its chartered capital by 150 billion dong. The company’s shareholders’ meeting decided in April 2009 that PTI would issue shares to existing shareholders at face value.
Bao Tin insurance is going to issue shares to strategic partners to raise its chartered capital from 80 billion dong to 500 billion dong.
Analysts say that insurers are rushing to raise chartered capital now, not so much because they are concerned about the legal regulations, but because they feel it is a must. As many insurers have low capital levels, the insurers have to reinsure a high percentage of insurance premiums. The ratio of reinsurance to original premiums is now 30 percent. In some cases, the ratio is 95 percent, for example in construction and installation policies.
Meanwhile, insurers with low chartered capital levels cannot offer insurance policies with high value because they cannot meet the requirements for financial capability, especially for policies they have to obtain through bidding. Moreover, a low financial capability hinders the development of a transaction network.
It’s not an easy job at all
Trinh Thanh Hoan, Head of the Insurance Supervision Department under the Ministry of Finance, said that in principle, insurers can call for capital from foreign strategic investors to improve corporate governance and develop insurance technology. However, Hoan said that it is not so easy to get foreign partners at this moment, while the globe has not recovered from the crisis yet. Moreover, the insurance companies which have to raise capital as required by the law are not well-known ones, and thus do not attract foreign investors.
Hoan said that it is more feasible to go after capital in the domestic market.
The capital increase plans of many insurers are considered feasible, with most insurers planning to issue shares to existing shareholders at face value. However, Hoan said that insurers need to set up clear plans and make public their plans on listing on the bourse.
vietnamnet, dtck
|
