State to shed most insurance stakes
Vietnam News
- (10/10/2003)
The Government has drawn up a schedule to partially divest its stakes in insurance companies, except the Viet Nam Insurance Corporation, by 2010.
Under a Strategy for Development of the Insurance Market it announced last month, the Government will develop the giant corporation (Bao Viet) into a financial group straddling the insurance, securities and investment sectors.
Bao Viet, the only player in both non-life and life insurance services, will then see its legal capital increase from the present VND586 billion to VND3,000 billion in 2005 and VND5,000 billion in 2010.
To sell its stake in HCM City Insurance Company (Bao Minh), the Government will first augment the company’s capital by VND3 billion by next year to meet the VND70 billion requirement under the Law for Insurance Business. Bao Minh will then equitise, or restructure its capital, by issuing shares worth a minimum VND500 billion to State-owned corporations.
If the capital still does not reach VND1,100 billion by 2010, the company will capitalise its profits and other reserves to issue more shares.
The Government will retain a major stake in the new entity which will focus mainly on non-life insurance, in addition to investment and financial services.
The PetroVietnam Insurance Company (PVI), under the State-owned Viet Nam Oil and Gas Corporation, or PetroVietnam, will be merged with Bao Minh with PetroVietnam a shareholder representing the State.
PVI provides insurance services in the oil and gas sector and barely competes in a market to be increasingly thrown open to foreign companies, under the strategy.
The Viet Nam Re-insurance Corporation (Vinare) will also become a joint stock business, with the State holding a majority stake, specialising in the re-insurance field.
By 2005, Vinare is expected to be capable of regulating the country’s re-insurance market, which would become independent of the international re-insurance market for arranging major contracts in the aviation, oil and gas sectors. The document envisages the company becoming financially capable of joining the international re-insurance market by 2010.
Now capitalised at VND40.5 billion, Vinare will receive funds from the Government besides reassessing its net worth to issue shares worth at least VND200 billion. If its capital still fails to reach VND500 billion, it will capitalise reserves and issue additional shares to reach the figure.
The new strategy also sets out certain important conditions for insurance companies. It prohibits State-owned enterprises from using public funds for setting up new insurance companies or to enter joint stock insurance companies that will provide services to a single industry.
It encourages domestic businesses to expand operations into regional and global insurance markets.
