BVH – Stronger-than-expected financial income drives earnings growth - Earnings Flash
  • 2024-05-03T00:00:00
  • Company Research

BVH released its consolidated Q1 2024 results with a gross written premium of VND10.4tn (USD418mn; -1.7% YoY) and PBT of VND741bn (USD30mn; +13% YoY), achieving 23% and 32% of our respective FY2024 forecasts. The Q1 2024 earnings tracked ahead of our forecasts primarily due to a 14.7% YoY increase in net financial income, which outweighed a 15.2% YoY increase in underwriting losses. Overall, though Q1 2024’s earnings were better than our expectations, we still expect pressure on earnings in the coming quarters due to (1) slow premium growth recovery, and (2) lower net financial income and higher technical reserve expenses due to the low interest rate in the last few quarters. 

  • Both Q1 2024 life and non-life premiums of VND7.8tn (-2.7% YoY) and VND2.6tn (+1.5% YoY) tracked in line with our expectations. According to the General Statistics Office of Vietnam (GSO), systemwide life premiums decreased by 10.9% YoY, while systemwide non-life premiums rose by 9.8% YoY in Q1 2024. Therefore, we believe BVH could have expanded its market share in the life insurance sector and lost market share in the non-life sector.  
  • The claims ratio and reserve ratio in Q1 2024 were 45.4% (+2.7 ppts YoY) and 50.1% (+1.4 ppts YoY), respectively. The YoY increase in Q1 2024 claim expenses was mainly driven by the life insurance sector, in which net claim expenses for life insurance increased 5.4% YoY and net claim expenses for non-life insurance decreased 4.3% YoY. In addition, Q1 2024 mathematical reserve expenses of life insurance decreased 7.1%, which we attribute to (1) weak new business premiums and (2) a higher YoY technical discount rate. 
  • In Q1 2024, (1) premium growth decreased YoY and (2) the net claims and reserve ratio increased YoY, and total underwriting and G&A expenses decreased 4.3% YoY, which helped to ease underwriting losses. 
  • Q1 2024 net financial income was VND2.9tn (+15% YoY), achieving 28% of our full-year forecast mainly due to a 37% YoY decrease in financial expenses, which we believe was due to the interest rate cuts that started in mid-2023. Although Q1 2024 net financial income tracked ahead of our expectation, we believe that there could also be pressure on BVH’s financial income in the remainder of 2024F given the current low deposit rates.

BVH’s consolidated Q1 2024 results

VND bn

Q1 2023

Q1 2024

YoY

Direct premium

 10,584 

 10,406 

-1.7%

of which – Life

 7,978 

 7,760 

-2.7%

of which – Non-life

 2,606 

 2,646 

1.5%

Inward reinsurance premium

 44 

 41 

-6.1%

Gross written premium

 10,628 

 10,447 

-1.7%

Outward reinsurance premium

 (932)

 (925)

-0.8%

Net written premium

 9,696 

 9,522 

-1.8%

Unearned premium reserve

 (29)

 (73)

155.0%

Net earned premium

 9,667 

 9,449 

-2.3%

Other premiums earned

 179 

 170 

-5.1%

Claims and reserves

 (8,844)

 (9,023)

2.0%

of which - math expense

 (3,190)

 (2,965)

-7.1%

Underwriting expense

 (1,710)

 (1,404)

-17.9%

G&A expense

 (1,163)

 (1,346)

15.7%

Operating income/(loss)

 (1,870)

 (2,154)

15.2%

Financial income

 3,125 

 3,258 

4.3%

Financial expense

 (631)

 (397)

-37.0%

Net financial income

 2,494 

 2,861 

14.7%

Income from affiliates

 21 

 21 

-1.2%

Other income

 2 

 5 

96.5%

PBT

 657 

 741 

12.7%

Income tax expense

 (111)

 (125)

12.6%

NPAT

 546 

 616 

12.8%

Minority interest

 18 

 31 

73.1%

NPAT-MI

 528 

 585 

10.7%

Loss ratio*

42.8%

43.4%

0.6 ppts

Expense ratio*

51.6%

54.9%

3.3 ppts

Combined ratio*

94.4%

98.2%

3.9 ppts

Source: BVH, Vietcap.(*) Loss ratio, expense ratio, and combined ratio here refer to the non-life business only.  

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