Back to index page

Lack of shares a problem

Samaggi puts profit above market share

Insurers expect steady growth for the near future, as individuals and companies become more sophisticated in their risk planning.

Yet for investors, the sector has been relatively inactive, with low trading volumes resulting in little opportunity for immediate capital gains.

According to an analyst at Yuanta Securities (Thailand), the lack of shares available is the main problem since holders of blue-chip shares prefer dividends from long-term investments.

The sector's top three performers over one year were Syn Mung Kong at 122.3%, Navakij at 121.3% and Samaggi at 117.9%. Siam Commercial New York Life trailed the field at -18%.

Business was growing in both the life and non-life sectors, but overall the sector was not bullish enough to lure new investors, the Yuanta analyst said. Among the 22 listed companies, few provided excellent returns, as their capitalised value was small, she said.

Samaggi Insurance, with a market cap of 878 million baht, has been an A-graded performer for five years. Its total written premiums for the first nine months of this year stood at 841 million baht, up from 804 million in the same period of last year.

Its nine-month net profit to Sept 30 increased to 124.8 million baht from 112.2 million and earnings per share rose to 8.32 from 7.48 baht.

Thanad Jeerapongpaisarn, the senior deputy managing director, said the performance reflected Samaggi's policy of emphasising profits over market share.

As well, he said, it strove to ensure that customers received satisfactory after-sales service and this had led to very few complaints to regulators.

As an affiliate of Siam Commercial Bank, the insurer benefits greatly from the bank's marketing channels that helped push premiums in the miscellaneous category to 37% of total written policies last year. Samaggi has less than 2% of the annual premiums totalling 48 billion baht in its segment.

The non-life sector is projected to grow by at least 6% next year, the global fallout after Sept 11 notwithstanding.

But some insurers are not happy because profit margins are declining amid a price war, especially in vehicle insurance. The automobile segment is the top among four non-life products, commanding 60% of total premiums.

"More players have entered this segment and, to get market share quickly, they offered cheap premiums," said Dhani Jaroenchaiyapongs, managing director of Nam Seng Insurance.

He said that while premium charges for third-party automobile insurance had been cut to between 750 and 800 baht a year from 1,200 baht, underwriting expenses had increased substantially, in particular commissions for sales agents. Fiercer competition forces companies to pay higher commissions than the legal limit of 18%.

Some insurers risked huge losses if they continued to cut premiums to get cash, he said. Nam Seng had no need for quick cash and had tried to reduce dependence on commercial policies such as motor insurance and focus more on personal products, such as accident insurance, to revive profits.

Nam Seng posted nine-month losses of about 500,000 baht while premium income dropped by 10% year-on-year.

Total shareholder returns on Nam Seng stocks showed a 17% one-year contraction, based on market capitalisation of 459 million baht.

For the much bigger Bangkok Insurance, vehicle insurance remains attractive, given total premiums in the segment of 30 billion baht a year.

"We showed interest in motor insurance after the Insurance Department launched a new plan last year to promote good driving habits," said Chai Sophonpanich, the chairman and president of Bangkok Insurance.

The company hopes its income from motor insurance will reach 2.1 billion baht next year, or 35% of its projected gross premiums of 6.2 billion baht.

Mr Chai said the company also profited from other types of business, including investment. Its net profit for the first nine months was 184 million baht, or 9.23 baht per share, 60.2% more than in the same period last year.

- Walailak Keeratipipatpong