MIG – A solid choice in a high rate environment – Initiation

• MIG, a fast-growing midcap non-life insurer, is a solid play that combines both growth and defensive features in a high interest rate environment.
• We expect MIG will deliver robust EPS CAGR of 21% over FY22-25F, driven by better investment yields and continued strong topline growth.
• Current valuation is undemanding; initiate ADD with TP of VND19,500.

Initiate coverage with ADD rating
We initiate MIG with an ADD rating and 1-year TP of VND19,500 based on target FY23F P/B multiple of 1.5x. As the 5th largest non-life insurance player by direct premium with the backing of both Military Bank and Viettel Group, MIG is well-positioned to capture the significant growth potential of Vietnam’s insurance industry. We forecast MIG will deliver strong earnings growth of 21% on average over the next 3 years and ROE in the 11-12% range.
Strong topline growth across products fueled by market share gain
Over the past 3 years, MIG gained 2.9% market share in terms of direct premium – the highest increase in a crowded industry with over 30 players – to rise from the 7th position to the 5th position. Strong share gain allowed the company to grow its direct premium at a 28% CAGR, significantly higher than industry at a mere 9%. We believe MIG’s unique ability to leverage the MBBank/Viettel ecosystem and its focus on the bancassurance channel have contributed to its strong outperformance on the topline and set company up for continued share gain in the years to come.
Big beneficiary from higher rates and a rebound in equity market
Unlike many insurers who elect to invest most of their portfolios in bank deposits, MIG adopts a more flexible investment approach, whereby the insurer invests a sizeable percentage of its portfolio in other asset classes such as corporate bonds and equity in order to improve its investment yield. While this approach may expose MIG to higher investment risks, we believe over the long run it will allow the company to deliver stronger yields than its average peer. As interest rates turned meaningfully higher and a rebound in equity market looks imminent, MIG should enjoy better investment results in 2023.
Undemanding valuation
MIG is trading at current P/B of 1.4x, slightly below its 3-year average of 1.6x. We believe this level of valuation is undemanding for a fast-growing insurer that can deliver both topline growth and defense in a high interest rate environment. Upside catalysts include (i) better-than-expected non-life combined ratio and (ii) strong equity market. Downside risks include (i) catastrophe losses and (ii) unexpected provision expenses on financial investments

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