Leading Vietnamese insurer Bao Minh lowers profit, dividend targets due to typhoon

Vietnam’s Bao Minh Insurance Corporation has revised its profit and dividend targets for 2024 following the increased compensation costs stemming from super typhoon Yagi, which severely impacted the northern region.

In its documents for the 2024 Extraordinary General Meeting (EGM), the company’s board of directors proposed maintaining the revenue target at VND6.8 trillion ($268 million).

However, it seeks to reduce the pre-tax profit target by 29% to VND268 billion ($10.6 million). The after-tax profit to equity ratio has been revised down from 10% to 7%, and the minimum dividend payout ratio lowered from 10% to 7%.

According to the leadership, the typhoon, which occurred in early September, caused widespread damage across northern Vietnam, with many of Bao Minh's customers suffering significant losses of property and vehicles.

This led to a sharp increase in compensation claims, resulting in a higher-than-expected provision for claims. As a consequence, Bao Minh's after-tax profit for Q3/2024 fell to VND51.1 billion ($2 million), marking a 52% year-on-year decrease. For the first nine months of 2024, its net profit dropped 23% to VND194 billion ($7.6 million).

Bao Minh expects an even higher volume of claims in the remaining months of the year due to the ongoing impact of typhoon Yagi. This will put additional strain on the company’s cash flow and its ability to balance investment activities while meeting compensation obligations to policyholders.

In addition to the typhoon's impact, the company is facing challenges in its health insurance segment, which represents a key part of its business. Rising medical costs and increasing instances of insurance fraud are hindering claims management.

The board of directors has proposed several measures to address these issues, including raising premiums, limiting benefits, and discontinuing coverage for high-revenue clients who have shown signs of abusing the system. However, these actions have yet to yield desired results.

The board stated that it will continue to explore additional strategies to improve its health insurance operations and overall business performance.

Bao Minh is listed on the Ho Chi Minh Stock Exchange as BMI, which closed at VND21,250 ($0.84) per share on Friday.

Vietnam’s total insurance premium revenue in the first 10 months of the year is estimated at VND184.23 trillion ($7.3 billion), a slight decline of 0.3% compared to the same period last year.

Typhoon Yagi and the subsequent flooding resulted in 344 people dead and missing, 1,976 injuries, and an initial estimated economic damage of over VND81.5 trillion ($3.2 billion) as of September 27, 2024, according to the Ministry of Agriculture and Rural Development.