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Analyst recommends insurance shares
Shares of insurance companies are giving positive signals, says Saigon Securities Inc analyst Tran The Phong.
Phong expected earnings and profits of listed insurance companies to flourish in the second half, with major insurers like Bao Viet Holdings (BVH), PetroVietnam Insurance (PVI) and Bao Minh (BMI) all likely to exceed their targets for the year.
Meanwhile, mid-sized insurers such as Post & Telecommunication Insurance (PTI) and BIDV Insurance (BIC) – the latter is preparing to list shares on the HCM City Stock Exchange this month – will see solid earnings even as profits are squeezed by higher compensation costs.
"The increase in compensation rates and accounts receivable threaten the profits of insurers in the last months of the year," Phong said.
Director of the Ministry of Finance's Insurance Supervisory Authority, Trinh Thanh Hoan, has written to the Association of Vietnamese Insurers, ordering its member companies to closely review portfolios and risk provision plans. Since the begining of this year, shares of insurance companies have plunged at a steeper rate than the VN-Index, with shares of BVH in particular seeing a steep decline over the past three months due to rising costs faced by the company and a heavy sell-off by foreign investors.
"Bao Viet, Bao Minh and PTI all posted losses in their insurance operations in the first six months, although insurance operations since July have improved," Phong said.
PVI and BMI have shown signs of rallying, while BIC had a high return on investment ratio of 5.72 per cent as it increased short-term deposits and investments in bonds.
In the first seven months of this year, insurance premiums for the entire sector reached nearly VND20.2 trillion (US$980.6 million), up 18.8 per cent compared to the same period last year. PVI ranked first in energy, hull and indemnity insurance, while BVH led in healthcare, accident insurance and automobile insurance.
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