PVIRe taking the initiative on the reinsurance market

PVIRe elected its new board of directors at its recent shareholders meeting

Robust growth

Figures released by the Ministry of Finance’s Insurance Supervisory Authority showed that last year, Vietnam’s non-life insurance market’s size reached $2 billion and insurance premium value jumped by 12 per cent on-year to reach VND43.6 trillion ($1.94 billion).

Non-life insurers retained 68 per cent of insurance premium value, whereas the remaining 32 per cent was ceded to reinsurers to transfer risks, helping to shape a secondary market barely known to the Vietnamese public, the reinsurance market.

Worldwide, this market is the playing field of long-standing financial institutions with a value reaching several hundred billion dollars, such as Swiss Re, Munich Re or legendary billionaire Warren Buffett’s Berkshire Hathaway Group, which boasts the second-largest revenue in the US.

In Vietnam, the reinsurance market’s size reached VND13.07 trillion ($596.8 million) last year, up 9.1 per cent on-year, but 72 per cent of the market share was in the hands of foreign reinsurers, while the remainder was shared by Vietnam National Reinsurance Corporation (Vinare) and PVIRe.

Vinare is the more well known brand of the two, as the company made its debut on the Vietnamese stock market in 2006. The stock’s trading liquidity remains low however, as the state shareholder State Capital Investment Corporation (SCCI), foreign shareholder Swiss Re, and other corporate shareholders hold nearly 96 per cent of the company’s circulating stock volume.

Meanwhile, comparatively juvenile PVIRe, which is also smaller in capital size, has been developing vigorously, leveraging the brand value and advantages of parent company PVI Holdings. After three years of operations, PVIRe reached premium revenue from reinsurance services surpassing VND1.6 trillion ($71 million) in 2014, almost equal to that of Vinare.

In the past three years, PVIRe has adjusted company’s underwriting guidelines from top to bottom lines. Therefore, despite a slight fall in reinsurance premium revenue to about VND1.3 trillion ($57.7 million) a year, its efficiency has been stable.

Of particular interest is PVIRe’s combined ratio, which averaged 80-82 per cent, the best level in Vietnam’s insurance market and much lower than the world’s average combined ratio of 95 per cent.

Building a firm foundation for sustainable development

After seven years, PVIRe has built a solid foundation for development. Its corporate governance complies with the new model outlined in the new Law on Enterprises, with one independent member of board of directors.

The company boasts strong human resources, consisting of experienced managers and staff members. Its strong information technology system provides the key to ensure efficient operations in a sector where success often leverages statistical database.

PVIRe’s recent annual general shareholder meeting (AGM) approved a rise in the company’s 2017 dividend payout ratio from 14 per cent, a target set early in the year, to 16 per cent in cash. This is also the third consecutive year PVIRe paid shareholders more than 14 per cent, the top level in the insurance industry.

The AGM also passed 2018 business plans with the target for reinsurance premiums set at VND1.21 trillion ($53.7 million) and the goal for the payout ratio set at 14 per cent in cash.

The AGM also elected the board of directors for the period 2018-2023, boasting well-known faces of the Vietnamese insurance market - including Nguyen Anh Tuan, chairman of PVI Holdings; board chairman Pham Khac Dung, former board chairman of life insurer PVI Sunlife (now Sunlife); and Duong Thanh Danh Francois, Asia Australia director of HDI Global.

As the company’s return-on-equity (ROE) ratio hovered around 14-16 per cent over the past three years, the new board of directors has committed to keep the ROE ratio at no less than 14 per cent a year in the new tenure.

To keep abreast of burgeoning development requirements, PVIRe is set to raise its charter capital, find strategic partners, and make its debut on the stock market.

The new board of directors expects the new plan to help PVIRe boost its capacity on the domestic market, expand its share in regional markets, and make avail of PVI’s system strength, laying the initial stepping stones to grow PVIRe into a leading reinsurer on the Vietnamese market and a prestigious player on the regional market.