Insurance stocks rally after prolonged sideways movements

Insurance stocks have experienced rallies in the past month after prolonged sideways movements, buoyed by positive business performances in the first quarter of 2024.

Military Insurance Corporation, listed on the Ho Chi Minh Stock Exchange (HoSE) as MIG, has gained 19.4% to VND20,700 ($0.8) apiece in the last six trading sessions after sitting at VND17,000 ($0.67).

Similarly, BIDV Insurance Corporation (HoSE: BIC) has reached VND32,900 ($1.29) in the past month after fluctuating around VND28,000-VND29,000 ($1.1-1.14).

Bao Viet Holdings (HoSE: BVH) has jumped 15.5% over the past month, with the price surging to VND44,600 ($1.75) on Friday.

PVI Holdings (HoSE: PVI), Bao Minh Insurance Corporation (HoSE: BMI), and Vietnam National Reinsurance Corporation (HoSE: VNR) have also climbed 11-16% over the last month.

The upward trend in insurance stocks has been fueled by positive Q1 business results.

BIC’s net profit went up 34.6% year-on-year to VND105 billion ($4.12 million) in the first three months. Its insurance and financial segments posted 62% and 51% increases in consolidated profits, respectively.

PVI achieved record quarterly profit of VND360 billion ($14.13 million) in the period, up 41% year-over-year. The performance was driven by the firm’s insurance segment, which saw 16% and 45% increases in revenue and consolidated profit, respectively. Its financial activities generated VND313 billion ($12.29 million) in revenue, up 41%.

BVH and MIG also experienced 10-11% hikes in Q1 net profit from the same period last year.

The majority of listed insurers focus on non-life insurance, except for Bao Viet, with both life and non-life insurance.

Mirae Asset Securities Vietnam (MAVN) remarked that 2023 was the most difficult year for the insurance industry, with its revenue posting negative growth for the first time in 10 years due to life insurance feuds at Saigon Commercial Bank (SCB) and insurer Manulife.

Meanwhile, the non-life segment rose 5% year-over-year, but it was the slowest growth in 10 years. Health and motor vehicle insurance stalled, but property damage liability and cargo insurance still saw double-digit growth.

As of Q1/2024, the non-life insurance business had recorded a 9.8% hike in revenue year-on-year, and it is expected to grow 10-12% this year, forecast Mirae Asset.

Besides, the insurance industry’s investment portfolio has had a major change in asset structure. The portion of government bonds in the portfolio has sharply declined, while assets with higher rates of return, such as deposits at credit institutions, corporate bonds, stocks, fund certificates, and capital contributions to other units, have witnessed greater capital flow from insurers. In particular, deposits at credit institutions still account for the highest slice, at 50-90%.

The low interest rate environment in 2024 may cause insurers’ profits from deposits to decrease. If deposit interest rates increase, profits from their financial segment may improve, Maybank Investment Bank noted.

The Vietnamese government set goals that life insurance would cover 15% of the population by 2025, compared to 12% in 2023, and the insurance industry would account for 3.5% of GDP by 2025, compared to 2.31% in 2023.