Higher premiums boost profitability

Global tension raises returns for investors and risks for insurance companies

Walailak Keeratipipatpong

The Sept 11 events sparked a sharp lift in insurance premiums, especially for high-risk properties. And customers in Thailand did not escape the fall-out.

The attacks contributed to an increase of between 6% and 10% in premiums written in Thailand this year, to between 58 billion and 60 billion baht, according to Thai Reinsurance Plc.

Premiums for shipping and cargo, airlines, gas separation plants and oil tankers are examples of substantial increases, while premiums charged in war risks soared several-fold.

Among the firms to benefit from higher returns was Dhipaya Insurance Co, which reported receiving premiums of three billion baht in the first half of this year, 68% more than in the same period last year. This was the highest premium income among 20 listed insurance firms.

The market capital of listed insurance firms was 18.4 billion baht at the end of June, with a return on stock investment of 33.4% in the year to June and 0.9% for the past five years.

Bangkok Insurance Plc showed the highest return on investment among the big players at 80.3% for one year (5% over five years), while Nam Seng Insurance, a small firm, was the lowest at -33.3% (-31% over five years).

Over five years, Dhipaya Insurance stocks reported the highest return on investment among the big firms at 29% and Nam Seng was last at -30.7%.

A small firm, Samaggi Insurance, posted a 100% return over the year to June and 32% over the past five years.

Charuek Kungwanpanich, the managing director of Dhipaya, said that in the first half of this year the company posted 210 million baht net profit (8.80 baht per share), up from 162.3 million baht (6.99 baht) a year earlier.

He said the leap in growth stemmed from higher premiums charged to airlines and high-risk customers. The company is the leader of three insurance firms that cover the fleet of Thai Airways International Plc.

After Sept 11, the airline had to double its annual premium payments to about three billion baht, of which 40% goes to Dhipaya, and the balance to Bangkok Insurance Plc and Deves Insurance Co in equal portions.

Mr Charuek said the growth for the second half would not be as high as the first six months of this year, bringing the company's business expansion for the entire year to about 20%, a higher level than the industry's average.

``We prefer to grow steadily and to avoid high risks and quick-cash products such as auto insurance,'' he said.

Dhipaya collected only 590 million baht of the 17 billion baht paid in auto premiums in the first half.

Bangkok Insurance Plc also benefited from the higher premiums and improvement in the economy. In the first six months of this year, it posted a net profit of 321.6 million baht (10.72 baht per share), compared with 227.6 million baht (7.59 baht) in the same period last year.

Voravit Rojraputada, company director, projected the firm's growth this year at 5-6% but it could be 20% if premiums from airline insurance were included. The stagnant US economy and Middle East tension could negatively affect business expansion.

A researcher at the Insurance Department, Bancherd Ophasnipat, said the trend for non-life insurance in Thailand was promising in line with economic growth. Written premiums averaged 51 billion baht annually over the past five years with payouts taking 58.6%.

Auto insurance on a voluntary basis showed the highest payout rate of 74.39%, followed by 69.93% for health insurance. However, the payout ratio for fire, miscellaneous and marine insurance was much lower. _Walailak Keeratipipatpong

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