Most insurance stocks have underperformed despite a positive outlook for the Vietnamese insurance sector.

Inside the office of Post and Telecommunications Insurance Corp (HNX: PTI).
(Photo: VNA)

Ten insurance companies are trading on the Vietnamese stock market but only Bao Viet (HoSE: BVH) has seen its share price approach 80,000 VND, as its shares ended August 5 at 78,600 VND per share.

Meanwhile, another nine stocks closed August 5 at maximum 36,500 VND per share – almost half of Bao Viet’s share price.

It is obvious insurance stocks are undervalued on the market despite their gains in earnings, local media reported.

In the first six months of 2019, Bao Viet recorded its combined revenue was up slightly from the previous year to 20.9 trillion VND.

With a six-month post-tax profit of 670 billion VND, the company also fulfilled 54.6 percent of its post-tax profit for the year.

Other insurance businesses such as Post and Telecommunications Insurance JSC (HNX: PTI), BIDV Insurance Corp (HoSE: BIC), Agribank Insurance (UPCoM: ABI) and Military Insurance Corp (UCPoM: MIG) also performed well in the first six months but their shares are not too expensive at the moment.

Another leading insurer – Bao Minh Insurance Corp (HoSE: BMI) – on June 21 paid a 12 percent dividend in cash to investors for 2018’s results. The company has not revealed its results in the first six months, but early forecasts point out the company will release good figures.

According to the Insurance Association of Vietnam (IAV), the domestic insurance market was strong in the first six months of the year.

Total revenue of insurance fees in six months increased 16 percent year on year to 69.4 trillion VND. Of the figure, revenue of life insurance was up 17 percent year on year to 44.2 trillion VND and non-life insurance rose 14 percent to 25.2 trillion VND.

IAV figures mean insurance companies saw good earnings in the first six months. Therefore, there is plenty of room for insurance firms to improve earnings in the future, especially as Vietnamese people are paying more attention to insurance deals in order to prepare for risks.

However, insurance stocks may not be attractive to individual investors because of their modest dividend payout rates.

In recent years, insurance firms have been paying dividend payout rates of 10-15 percent each year.

Bao Viet plans to pay a 10 percent dividend to investors between July and September for last year’s results. The amount of the dividend payout is estimated at 700 billion VND.

Its dividend payout rate has remained the same over the last few years.

However, the firm’s share trading liquidity is only 220,000 shares in each session, which is modest compared to other large-cap stocks.

A similar trading situation also happened to other insurance stocks as their liquidity is quite low.

But to institutional investors, insurance stocks do have value.

The buying in insurance stocks of institutional investors, especially foreign companies, will help local firms access international practices and standards to make impressive growth rates in the local market.

Recent deals are between the Canada-based FairFax and BIDV Insurance Corp, between Post and Telecommunications Insurance Corp and DB Insurance.