Foreign insurers rush to take over as state firms pull out

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A man sits at a sidewalk coffee shop in front of the headquarters of AAA Assurance Company in Ho Chi Minh City. AAA has announced recently that Jonathan Delalande from Insurance Australia Group would take over as CEO after the Australian insurer acquired a 30 percent stake in April last year. PHOTO: TUAN ANH

Foreign insurers are eyeing the potentially lucrative Vietnamese insurance industry even as some state companies are preparing to reduce their holdings following a decree by the government.

The Vietnam Insurance Association forecast the industry to grow at around 12 percent this year after averaging growth of 18-20 percent for many years. Last year, the industry reported revenues of VND40.59 trillion (US$1.95 billion), an increase of 11 percent year-on-year.

But foreign insurance companies see the potential in a country where more than 90 percent of the 90 million population do not have life insurance.

The non-life market is also promising with annual revenues of a mere $1 billion, which is very modest for a rapidly growing economy.

At the beginning of this year Canadian-owned Sun Life Financial Inc., which has nearly 150 years of experience in life insurance, entered the local market through a joint venture with PetroVietnam Insurance Joint-stock Corporation, a subsidiary of the Vietnam National Oil and Gas Group.

PVI Sun Life will have a chartered capital VND1 trillion ($47.8 million) in which PVI, which has a 21 percent share of the non-life market, holds 51 percent.

In a recent high-profile deal, Sumitomo Life, one of Japan's top four insurers, paid HSBC Holding $340 million for an 18 percent stake in Vietnam's biggest insurance company, Bao Viet.

Subsequently Bao Viet was allowed to increase its chartered capital from VND1.5 trillion to VND2 trillion ($95.6 million). 

Existing foreign operators are planning various initiatives like raising funds to increase their share in the increasingly competitive market.

Last week AAA Assurance Company announced that Jonathan Delalande from Insurance Australia Group would take over as CEO after the Australian insurer acquired a 30 percent stake in April last year.

Generali Vietnam, set up by Italy's largest insurer Generali two years ago, has recently announced an increase in capital from VND720 billion to VND800 billion ($34.4-38.2 million) for business expansion.

Simon Lam, CEO of Generali Vietnam, said with the life insurance market having many potentials, the company plans to expand its distribution channels by developing new ones like banks and other financial institutions.

He also said that with customers becoming increasingly knowledgeable about insurance and demanding professionalism from providers, customer service would play an important role in the market in the next five years.

Thus, insurers would rely on consultancy and customers' demands to sell products instead of approaching them to sell what they have, he added.

Stephen Clark, CEO of AIA Vietnam, agreed saying thanks to competitive customer-based products and professional agents, his company had achieved good results last year with premiums increasing by 17 percent and new contracts by 24 percent.

AIA Vietnam plans to increase its capital from $30 million to $100 million this year. 

Back Jong Kook, CEO of Hanwha Life Vietnam, also said the quality of products and benefits offered to customers would be important factors in his company's plans to achieve a 10 percent market shares by 2016, up from the current 3.5 percent.

Meanwhile, state-owned companies in other sectors will begin to pare investment in insurance companies following
a restructuring plan proposed
by the Ministry of Finance last year.

The plan envisages their stake in insurance businesses not exceeding 20 percent of chartered capital by 2015.

Analysts thus expect a shakeout in the industry, leading to increased competitiveness and entry of new businesses.

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