Tripartite agreement fuels PJICO’s hopes

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Strength through unity

PJICO is expected to issue 17.74 million shares, an equivalent of 20 per cent of its chartered capital, to SFMI via a private placement. This can be considered a perfect cooperation between a domestic insurance firm with a strong foundation and extensive understanding of the domestic market and a foreign insurer with advanced capacity and corporate governance experience.

Following the stock purchase agreement between PJICO and SFMI, Petrolimex also signed a cooperation agreement tying together the three parties. PJICO and SFMI teaming up, with the comprehensive support from Petrolimex, is expected to help PJICO prosper in the upcoming period.

SFMI is a leading insurance company with a global network and over 60 years of experience in the non-life insurance industry. According to global insurance credit ratings and insurance services company A.M. Best, in 2016, SFMI had a financial strength rating of A++ and long-term issuer credit rating of AA+.

Meanwhile, PJICO is one of the biggest non-life insurers in Vietnam with over 20 years of experience. Currently, PJICO has total assets of nearly VND4.3 trillion ($189.2 million) and owners’ equity of over VND900 billion ($39.6 million). In 2016, PJICO earned a premium revenue of VND2.48 trillion ($109.3 million), an increase of 11.4 per cent compared to 2015. Also this year, PJICO’s gross profit from its insurance businesses was nearly VND336 billion ($14.8 million), before-tax profit was over 125 billion ($5.5 million), and after-tax profit was nearly VND102 billion ($4.49 million).

The third partner in this cooperation, Petrolimex, holds 51.18 per cent of PJICO’s shares. After PJICO finishes transferring a 20 per cent stake to SFMI, Petrolimex will hold 40.95 per cent, remaining the biggest shareholder. Thus, as a core firm in the Vietnamese economy, Petrolimex will continue to be a foundation for PJICO in the future.

PJICO looking at bright prospects

Dao Nam Hai, general director of PJICO, said that the strategic cooperation between Petrolimex, PJICO, and SFMI promises to become a huge momentum which will propel PJICO’s growth in the upcoming years.

In 2017, PJICO set the target revenue of VND2.5 trillion ($110 million), 6.7 per cent higher than in 2016. It is expected that the necessary procedures for raising capital will be completed by September 2017, and PJICO targets a profit of VND120 billion ($5.28 million) in 2017. It is hoped that 2018 may be an outstanding year for PJICO as its total revenue is projected to hit VND2.75 trillion ($121 million) and after-tax profit may be nearly VND148 billion ($6.5 million).

Notably, after raising capital, its margin of solvency will sharply increase in the upcoming period. The margin of solvency is an important figure and its sharp growth means PJICO’s financial capacity is getting stronger.

In 2016, PJICO’s margin of solvency was VND673 billion ($29.6 million), which was higher than the minimum stipulated by law (VND502 billion ($22.1 million), but only by 34 per cent. However, after the private placement for SFMI, PJICO’s margin of solvency will rise to VND1.237 trillion ($54.4 million), which is as high as 245 per cent of the minimum requirement.