Foreign businesses in the insurance industry are in a race to raise capital in Vietnam.
In early April, FWD Vietnam was approved by the Ministry of Finance to increase charter capital by more than 10.3 trillion dong, equivalent to 420 million US dollars. The company’s charter capital is now 13.937 trillion dong and FWD has become the largest insurance company in Vietnam in both life and non-life insurance fields. So far, this capital level is also the largest amount of capital that an insurance company has ever invested in Vietnam.
Previously, FWD Vietnam’s parent group and Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) signed a contract to exclusively distribute insurance products in 15 years worth more than 400 million US dollars, according to Bloomberg. FWD acquired Vietcombank Cardif life insurance joint venture as a part of the agreement. This is the largest deal in Vietnam’s insurance market, according to Vietcombank Chair Nghiem Xuan Thanh.
Not only FWD, Sin Life Vietnam earlier this year raised capital from 2.570 trillion dong to 5.070 trillion dong. By the end of 2019, Sumitomo Life Insurance Company spent more than four trillion dong, raising its ownership in Bao Viet Group (HoSE: BVH) from 17.48 percent to 22.09%, after the first capital contribution from 2012. In 2018, Manulife also increased capital by nearly four trillion dong to more than 9.695 trillion dong, while Hanwha Life Vietnam raised capital by nearly three trillion dong to 4.9 trillion dong. Some other names also increased charter capital such as Cathay Life Vietnam, Prudential Vietnam, Aviva Vietnam, etc.
As of March 2020, Vietnam’s market had five insurance companies with capital of more than five trillion dong and only one company exceeded 10 trillion dong, which is FWD. Most of the capital raising deals were made in foreign insurance companies in the life insurance field.
The life insurance market currently has 17 businesses, while non-life insurance market has 29 businesses. According to current regulations, the minimum capital of non-life insurers for all operations is 400 billion dong, while that is one trillion dong for life insurers. The continuous increase of chartered capital of foreign companies, in addition to the improvement of financial capacity, partly shows the attractiveness of Vietnam’s insurance market, as these companies are preparing for a long-term race.
According to statistics of the general Statistical Office (GSO), in the first quarter, under the impact of Covid-19 epidemic, the insurance market continued to grow with a premium revenue growth of 26%, in which the growth of life insurance was 21 percent and of non-life insurance fields was eight percent. In 2020, the Vietnam’s insurance market targets to increase premium revenue by 18 percent to 188.730 trillion dong, and expand total assets by 13 percent to 514.795 trillion dong,
In 2019, the insurance market of Vietnam also recorded positive growth. In terms of scale, the total assets of the market were 454.4 trillion dong, up by 15 percent compared to 2018. The total equity was 89.3 trillion dong, up by 9.3%; and the total premium revenue in the year reached 160.3 trillion dong, up by 20.5%.
According to the GSO, Vietnam has more than 96 people, and their income and living standards of are increasing, while Vietnam’s insurance market still has plenty of available room for growth.
In Asian countries, about 20-40 percent of the population buy insurance, the spending for insurance from Gross Domestic Product (GDP) in developed countries is about 10-15%, while the number of people buying insurance is less than 10 percent and spending for insurance only accounts for about two percent of GDP.
The outlook report of the industry by Bao Viet Securities Company stated that Vietnam is one of the potential insurance markets, in which life insurance and health insurance will be the main drivers of growth due to the gradual increase in the population’s awareness of the importance of insurance products.
BIDV Securities Company and Viet Dragon Securities Company said that non-life insurance also continues the growth trend in personal insurance segment (human and motor vehicles), thanks to the growing middle class.
Leaders of foreign insurance companies all shared that there are great potential and long-term opportunities in the insurance market of Vietnam.
Huynh Huu Khang, general director of FWD Vietnam said that Vietnam is one of the fastest growing insurance market in Asia. FWD has confidence in the Vietnam’s market and would expand its presence in this market through the latest capital increase. Sun Life Vietnam’s representative also said that Vietnam is an important market in the company’s expansion strategy.
In the recent time, foreign insurance companies have continuously developed through bancassurance banking channels with many exclusive contracts signed such as the deals of FWD and Vietcombank, Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and Manulife, AIA and Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Dai-ichi and Saigon Hanoi Commercial Joint Stock Bank (SHB), etc. This shows that foreign businesses are constantly expanding their operations in Vietnam’s market.
