Insurance companies are cautious in building profit plans.

Many non-life insurance companies continue to pursue strong revenue growth. However, the low interest rate environment has caused many companies to be cautious in building profit plans.

BIC only targets 4.5% profit growth in 2024, compared to nearly 20% growth in 2023. Photo: Duc Thanh

The bright spots of the locomotives

The recently held annual general meeting of shareholders of PVI Joint Stock Company approved an ambitious total revenue plan of nearly VND 17,400 billion, an increase of 8.17% compared to 2023. This is also an unprecedented level in PVI's history of operations.

More importantly, if the target is achieved, PVI will have its fourth consecutive year of revenue growth and will be more firmly in the leading position in terms of scale among non-life insurance companies.

2023 is a year of many fluctuations for the activities of the Vietnamese insurance market. Although still "brighter" than the life insurance sector, the revenue of the non-life insurance market for the whole year only increased by 3%, estimated at 71,064 billion VND.

In terms of business segments, according to calculations by the Vietnam Insurance Association, some product segments have shrunk in revenue such as aviation insurance (-10.8%); cargo insurance (-10.8%); motor vehicle insurance (-1.9%) in both compulsory and voluntary products. However, there are also some segments with strong growth such as voluntary fire and explosion insurance, property damage insurance, credit insurance and financial risk insurance... all exceeding 10%.

Similarly, revenue growth of each insurance company is also a diverse picture, especially strongly differentiated among the leading companies.

Revenue of two insurance companies, Post and Telecommunication Insurance (PTI) and Military Insurance (MIG), decreased by more than 4% compared to 2022. Both of these companies were in the Top 5 non-life insurance market share last year.

On the other hand, some other businesses have surged with double-digit growth. Leading the way is BIDV Insurance (BIC), with a 31.1% increase in insurance premium revenue. Hanoi Reinsurance (Hanoi Re) - a subsidiary of which PVI owns more than 81% of capital - achieved a growth rate of more than 17%. Last year, PVI recorded a growth rate nearly 5 times higher than the overall growth of the market, earning 14,466 billion VND in insurance revenue alone - the main factor contributing to the total revenue of 16,083 billion VND.

According to statistics of more than 10 insurance companies on the stock exchange (Bao Viet Group only counts the non-life segment), revenue from insurance premiums in 2023 increased by approximately 6%, higher than the overall growth rate of the entire non-life insurance industry.

Setting targets for 2024, PVI is not the only unit with high expectations for revenue growth. Although it only completed 77% of the revenue plan and ended a growth streak lasting more than 10 years, Military Insurance continues to set a target of entering the Top 4 market share in 2024, with premium revenue increasing by 33%.

Meanwhile, according to the business plan submitted to shareholders in preparation for the upcoming general meeting of shareholders, BIDV Insurance leaders said that the target insurance premium revenue in 2024 is VND 4,774 billion, an increase of 14.2% over the previous year.

Challenges from a falling interest rate environment

Unlike many non-life insurance companies that have announced their business plans at the present time, PJICO has set a rather cautious revenue target, with original insurance revenue only “not lower than the results achieved in 2023”. The task set for this year is to follow the direction of safe - sustainable - effective business development, along with digital transformation activities, improving customer experience.

According to statistics from more than 10 insurance companies on the stock exchange, revenue from insurance premiums in 2023 increased by approximately 6%, higher than the overall growth rate of the entire non-life insurance industry.

A common point that is quite easy to see in this year's business plan is the caution in building a profit plan. Deposit interest rate - a factor that greatly affects financial revenue because the insurance group allocates a large proportion of its portfolio to deposits.

According to Ms. Nguyen Thi Huong Giang, General Director of PJICO, the sharp decrease in bank interest rates, about 35% compared to the average deposit interest rate in 2023, will lead to a significant decrease in deposit revenue. The solution proposed by PJICO leaders is to seek cooperation with banks with preferential loan interest rates to optimize investment cash flow, regularly review the financial investment portfolio, choose the time to divest capital, sell shares, etc.

Assessing that bank deposit interest rates are low and are not likely to increase in 2024, Hanoi Reinsurance also assessed that this is the top challenge, directly affecting financial investment activities.

PJICO targets flat profits. BIDV Insurance, despite planning to increase revenue by over 14%, only targets a 4.5% increase in profits. This insurance company recorded a profit growth of nearly 20% in 2023, thanks to a 58% increase in deposit revenue compared to 2022.

Meanwhile, PVI was more cautious, setting a profit plan that would go backwards, down more than 13%, even though the target revenue increased positively.

Military Insurance is a rare case that continues to expect high growth in profits (+25%) and revenue (+33%). The company believes that low interest rates in 2024 are also one of the driving forces for the stock market to grow, in addition to the recovery of profits of businesses on the stock exchange compared to a low comparison base.

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