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Vietnam Financial News

Vietnam Business » Vietnam Financial News » Where do insurers incomes originate?

Where do insurers incomes originate?

In an investors meeting held before making IPO (initial public offering), representatives of BIDV Insurance Company (BIC) noted that profits brought by financial investments accounted for 74.5 percent of the total. The company had pretax profits of 36.298 billion dong in the first half of the year, of which financial investments brought 27.046 billion dong.

Many insurance companies announced their business results for the second quarter and the first half of 2010. They show that insurers do not earn their living from services - their main operation field - but from financial investments. The total revenue of BIC in the first half of 2010 reached 346.146 billion dong, increasing by 62 percent over the same period of 2009. The premium income reached 238.512 billion dong, an increase of 69 percent. BICs income from financial investments mainly came from deposits as well as bond and stock investments (the company purchased securities and made capital contribution to establish companies). With the motto of making financial investments in accordance with the 4-3-3 model (40 percent for deposits, 30 percent for bonds and 30 percent for stocks), BIC aims for effective financial investments, while it still tries to ensure high liquidity to compensate in case of crisis. Nguyen Quang Tung, Director of BIC, believes that financial investments will bring higher profits this year, because some capital contribution deals began showing revenue, including BICs capital establishing the finance company Vietel-Vinacones and Vietnam-Laos insurance joint-venture. In the first six months of 2010, the Vietnam Reinsurance Corporation (Vinare) received reinsurance premiums of 633.6 billion dong, increasing by 78 billion dong (14 percent) over 2009, fulfilling 56.6 percent of its yearly business plan. The net revenue from insurance service was 282.3 billion dong, an increase of 13.8 percent over the same period of 2009. Profit from insurance services dropped from 8.3 billion to 2.7 billion dong. Financial investment revenue was 134 billion dong, and profit from financial investments was 126.8 billion dong. Other insurance companies also announced impressive increases in income from financial investments. PetroVietnam Insurance has increased profits from financial investments by 27.7 percent over 2009 (270 billion dong). Bao Minh obtained 150 billion dong in profit from financial investments, up 11.8 percent. The good news for Bao Minh was that compensation rates were low: in the first six months, the corporation had to spend 397 billion dong for compensation, or 34.5 percent of its revenue, while the figure stood higher at 49.3 percent in the same period of 2009. Financial analysts have pointed out that financial investments, not services, are the main source of income for insurance companies. To pursue financial investments, insurance companies must increase premium revenues. In many cases, this means lowering premiums, expanding conditions for insuring and accepting high-risk insurance deals.

Vietnam Business And Financial News Network. Source [english.vietnamnet.vn]

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