Q2 2014
www.businessmonitor.com
VIETNAM
INSURANCE REPORT
INCLUDES 5-YEAR FORECASTS TO 2018
Vietnam Insurance Report Q2
2014
INCLUDES 5-YEAR FORECASTS TO 2018
Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor InternationalCopy deadline: February 2014
Business Monitor International
Senator House
85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: [email protected] Web: http://www.businessmonitor.com
© 2014 Business Monitor International All rights reserved.
All information contained in this publication is copyrighted in the name of Business Monitor
International, and as such no part of this
publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher.
CONTENTS
BMI Industry View ... 7
SWOT ... 9
Insurance ... 9 Political ... 11 Economic ... 12 Business Environment ... 13Industry Forecast ... 14
Total Premiums Forecast ... 14
Total premiums ... 14
Table: Total Gross Premiums Written 2011-2018 . . . 14
Total Claims ... 15
Table: Total Insurance Claims 2009-2012 . . . 15
Life Premiums Forecast ... 16
Insurance Premiums ... 17
Table: Gross Life Premiums Written 2011-2018 . . . 17
Life Insurance Drivers ... 18
Table: PRIVATE HEALTH EXPENDITURE 2011-2018 . . . 18
Table: DISEASE ADJUSTED LIFE YEARS 2011-2018 . . . 19
Life Claims ... 19
Table: Life Insurance Claims 2009-2012 . . . 20
Non-Life Premiums Forecast ... 21
Non-Life Premiums ... 22
Table: Gross Non-Life Premiums 2011-2018 . . . 22
Table: Net Non-Life Premiums 2011-2018 . . . 23
Non-Life Reinsurance ... 23
Table: Reinsurance Non-Life Premiums 2011-2018 . . . 23
Non-Life Claims ... 24
Table: Non-Life Insurance Claims 2008-2012 . . . 25
Non-Life Sub-Sector Forecast ... 26
Table: Non-Life % Breakdown 2011-2018 . . . 26
Motor Vehicle And Transport Insurance ... 27
Table: Motor Vehicle Insurance 2011-2018 . . . 28
Table: Transport Insurance 2011-2018 . . . 29
Table: INSURANCE KEY DRIVERS, FREIGHT TONNAGE 2011-2018 . . . 29
Property Insurance ... 30
Table: Property Insurance 2011-2018 . . . 31
Industry Risk Reward Ratings ... 32
Asia Risk/Reward Ratings ... 32
Life Market Overview ... 38
Non-Life Market Overview ... 39
Table: Non-Life Insurance Market (US$mn) 2006-2012 . . . 40
Table: Non-Life Insurance Market (%) 2006-2012 . . . 41
Company Profile ... 43
AIA Group ... 43
American International Group (AIG) ... 46
Bao Viet Holdings ... 50
Manulife Financial ... 53
Prudential plc ... 57
PVI Holdings ... 61
Sun Life Financial ... 64
Demographic Forecast ... 66
Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . 67
Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . 68
Table: Vietnam's Key Population Ratios, 1990-2020 . . . 69
Table: Vietnam's Rural And Urban Population, 1990-2020 . . . 69
Methodology ... 70
Industry Forecast Methodology ... 70
Risk/Reward Rating Methodology ... 73
Table: Indicators . . . 74
BMI Industry View
BMI View: Vietnam's insurance sector appears to be one of the most dynamic in South East Asia. By many
metrics, it is growing rapidly. In both of the main segments, companies are undertaking initiatives to grow premiums and profits. Nevertheless, a number of constraints and challenges remain. The small absolute size of the market, and a very challenging business environment mean that it may be some years before
multinationals who have been attracted to Vietnam come close to building substantial local businesses in the way that they have in other countries in South East Asia.
BMI's new insurance report format provides forecasts of the life and non-life markets, including gross and
net premiums, reinsurance premiums and assets. Moreover, it provides forecasts for key growth drivers such as vehicle fleet size, demographic factors and private health expenditure. The report also contains a
comprehensive breakdown of the non-life insurance market, providing forecasts for motor and transport insurance, property, personal accident, health, general liability and credit insurance. Finally, the new report offers a detailed breakdown of the life and non-life competitive landscapes, covering the top companies present in each segment by premiums and market share.
There was a time when Vietnam was one of the new frontiers of insurance in the Asia Pacific, but the sector has moved into a more exciting phase of its development. Foreign insurance companies (particularly in the life segment) are present, and see Vietnam as a natural extension of their regional or global footprints. In 2012, Sun Life Financial (through a JV with PVI) was a newcomer to the life segment, as was Generali. In the non-life segment, Australia's IAG has taken a strategic stake in AAA, while Talanx has increased its shareholding in PVI. New products are being developed. Agency networks are being built. As in the rest of South East Asia, bancassurance is being seen as an opportunity by some of the players. In the non-life segment, the local companies have generally shown more pricing discipline than have their counterparts elsewhere in the region. Motor insurance so often a thankless and profitless line in emerging markets -accounts for only about one third of the premiums written in the non-life segment in Vietnam.
Nevertheless, there are reasons for caution. Non-life penetration stopped growing in 2012 . Although the non-life segment is less fragmented than its peers in other countries in South East Asia, most of the players are sub-scale local firms that do not necessarily have access to the capital that they need to grow.
In the life segment, the main challenge is that most of the households who can afford to use life insurance products understand the benefits, and are already doing so. In the short-to-medium term, there are not actually all that many potential new users. Most of the more than 90% of households who lack cover are too
poor to pay for life insurance. How this is reconciled by the life insurers with the substantial expansions in agency forces through 2013 remains to be seen.
Key BMI Forecasts
■ In 2014, total premiums will rise by 13.6% to US$2.4bn.
■ Life premiums will grow by 10.2% to US$1.0bn.
■ Non-Life premiums will rise by 16.2% to US$1.4bn.
■ Within the non-life segment, motor vehicle insurance premiums will grow by 16.8% to US$0.4bn.
SWOT
Insurance
Vietnam Insurance SWOT Analysis
Strengths ■ Both the life and non-life insurance segments are growing at double-digit rates, and
should continue to do so for the foreseeable future.
■ There are clear signs of pricing discipline in the non-life segment.
■ Given the domination of the life segment by subsidiaries of regional and global
majors, lack of capital will not pose a constraint.
■ The non-life segment is well diversified away from motor insurance - a staple line in
many under-developed markets.
Weaknesses ■ The high growth anticipated in the life and non-life segments of the Vietnamese
market is coming off a very small base.
■ Many of the non-life companies are subscale and lack ready access to new capital. ■ Many Vietnamese households are too poor to use life insurance.
■ Growth in the non-life segment is patchy.
Opportunities ■ The massive growth in agency networks that is currently underway in the life segment
should enable a sizeable increase in overall premiums.
• The size and importance of commercial lines means that the non-life segment should grow in real terms as long as the economy can continue to expand.
• Life companies are developing new and improved products.
• Life companies are entering into bancassurance relationships and are undertaking other distribution initiatives.
• The government has launched a trial program to promote the development of export credit insurance.
Vietnam Insurance SWOT Analysis - Continued
• Substantial foreign companies continue to develop subsidiaries in the non-life and life segments.
Threats ■ High inflation. This could constrain households from becoming first time users of life
insurance, in a country where well over 90% lack cover.
■ Lack of development and volatility in the Vietnamese capital and bond markets
Political
SWOT Analysis
Strengths ■ The Communist Party of Vietnam remains committed to market-oriented reforms and
we do not expect major shifts in policy direction over the next five years. The one-party system is generally conducive to short-term political stability.
■ Relations with the US have witnessed a marked improvement, and Washington sees
Hanoi as a potential geopolitical ally in South East Asia.
Weaknesses ■ Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party.
■ There is increasing (albeit still limited) public dissatisfaction with the leadership's tight
control over political dissent.
Opportunities ■ The government recognises the threat corruption poses to its legitimacy, and has
acted to clamp down on graft among party officials.
■ Vietnam has allowed legislators to become more vocal in criticising government
policies. This is opening up opportunities for more checks and balances within the one-party system.
Threats ■ Macroeconomic instabilities continue to weigh on public acceptance of the one-party
system, and street demonstrations to protest economic conditions could develop into a full-on challenge of undemocractic rule.
■ Although strong domestic control will ensure little change to Vietnam's political scene
in the next few years, over the longer term, the one-party-state will probably be unsustainable.
■ Relations with China have deteriorated over recent years due to Beijing's more
assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage.
Economic
SWOT Analysis
Strengths ■ Vietnam has been one of the fastest-growing economies in Asia in recent years, with
GDP growth averaging 7.1% annually between 2000 and 2012.
■ The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20.7% in 2012.
Weaknesses ■ Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy
vulnerable to global economic uncertainties. The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw.
■ The heavily-managed and weak currency reduces incentives to improve quality of
exports, and also keeps import costs high, contributing to inflationary pressures.
Opportunities ■ WTO membership and the upcoming ASEAN AEC in 2015 should give Vietnam
greater access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition.
■ The government will in spite of the current macroeconomic woes, continue to move
forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector.
■ Urbanisation will continue to be a long-term growth driver. The UN forecasts the
urban population rising from 29% of the population to more than 50% by the early 2040s.
Threats ■ Inflation and deficit concerns have caused some investors to re-assess their hitherto
upbeat view of Vietnam. If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis.
■ Prolonged macroeconomic instability could prompt the authorities to put reforms on
Business Environment
SWOT Analysis
Strengths ■ Vietnam has a large, skilled and low-cost workforce, which has made the country
attractive to foreign investors.
■ Vietnam's location - its proximity to China and South East Asia, and its good sea links
- makes it a good base for foreign companies to export to the rest of Asia, and beyond.
Weaknesses ■ Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to
cope with the country's economic growth and links with the outside world.
■ Vietnam remains one of the world's most corrupt countries. According to
Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123 out of 176 countries.
Opportunities ■ Vietnam is increasingly attracting investment from key Asian economies, such as
Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech skills and know-how.
■ Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry points.
Threats ■ Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.
■ Labour unrest remains a lingering threat. A failure by the authorities to boost skills
Industry Forecast
Total Premiums Forecast
BMI View: Vietnam's insurance sector ranks in international terms as one that is small, but reasonably rapidly growing. During the forecast period, growth will be driven mainly by the expansion in commercial/ industrial lines in the non-life segment.
Basic lines such as motor vehicle and household property insurance are less important than they are in other South East Asian countries, or in other low income countries in the rest of the world. At least until 2018, the non-life segment will be dominated by the underwriting of large scale industrial/commercial risks for (predominantly) state owned companies. Life insurance is growing, but will still be at an embryonic state of development at the end of the forecast period.
Total premiums
In world terms, Vietnam will be an important growth market for corporate planners in global/regional multi-national insurers. However, this will be the case beyond the end of the forecast period. Total premiums appear likely to rise in line with nominal GDP, with the result that overall penetration will remain constant over the next five years at 1.2-1.3%. Total per capita premiums will nearly double over the period but will only be around US$43 per annum in 2018. These are low levels.
As noted above, growth will be driven mainly by the (currently) more important non-life segment, thanks to the evolution of commercial/industrial lines. Life insurance premiums will rise in absolute terms, but will remain constrained by the low income levels of most households in Vietnam.
Table: Total Gross Premiums Written 2011-2018
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Total gross premiums
written, VNDbn 31,877.2 41,148.8 44,986.7 49,945.5 56,601.4 64,060.6 72,185.8 81,304.7 Total gross premiums
written, VND, % change y-o-y
3.4 29.1 9.3 11.0 13.3 13.2 12.7 12.6
Total gross premiums
written, VND per capita 354,530.1 453,202.2 490,693.9 539,671.3 606,097.5 680,113.9 760,157.6 849,609.0 Total gross premiums
Total Gross Premiums Written 2011-2018 - Continued
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Total gross premiums
written, US$bn 1.5 2.0 2.1 2.4 2.8 3.2 3.6 4.1 Total gross premiums
written, US$, % change y-o-y
-4.3 27.7 8.4 13.6 14.6 13.8 13.9 13.8
Total gross premiums
written, US$ per capita 17.2 21.7 23.3 26.2 29.8 33.6 38.0 42.9
Source: AVI/ BMI
Total Claims
The evolution of claims expenses over recent years has been quite erratic - although the trend has clearly been upwards. Changes from year to year have driven by the surge in life claims and payments from extremely low base levels. They have also been influenced by sizeable industrial/commercial claims. The Vietnamese non-life companies are heavy users of outwards reinsurance.
Table: Total Insurance Claims 2009-2012
2009 2010 2011 2012
Total insurance claims, VNDbn 7,780.00 9,170.70 12,666.80 14,613.70 Total insurance claims, VND, %
change y-o-y n.a. 17.9 38.1 15.4 Total insurance claims, VND per
capita 88,209.10 102,986.30 140,876.40 160,951.70 Total insurance claims, % of GDP 0.4 0.4 0.5 0.5 Total insurance claims, US$bn 0.4 0.5 0.6 0.7 Total insurance claims, US$, %
change y-o-y n.a. 9.7 27.9 14.2 Total insurance claims, US$ per capita 5 5.4 6.8 7.7
Life Premiums Forecast
BMI View: The latest data suggests that life insurance should grow quite rapidly, but from a very low base. By all metrics, the segment will remain underdeveloped at the end of the forecast period. The multi-national companies that have entered the market in the last three years clearly expect life insurance to play a key role in organised savings in Vietnam -just as it does elsewhere in South East Asia (and, to a greater extent, in North East Asia). This may yet happen, but is most unlikely to do so prior to 2018.
We would also note that the growth in premiums is vulnerable to setbacks from economic shocks.
Vietnamese households generally do not yet understand the benefits of life insurance, although the insurers themselves are working to correct this. A more fundamental problem is that most households cannot afford life insurance.
Growth May Be Volatile
Life Premiums (US$bn) And Y-o-Y Change (%)
Gross life premiums written, US$bn (LHS) Gross life premiums written, US$~ % y-o-y (RHS) 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f 0 1 2 -50 0 50 100
Notes: 1 "AVI/BMI" 2 "AVI/BMI"
Relative to others in South East Asia, Vietnam is, and for sometime will remain, a small opportunity for international life insurers. Nevertheless, the segment benefits hugely from the product and distribution
know-how and regional scale of (most of) the international companies. Particular companies have
highlighted how they have been expanding their agency forces in the country over the last two years or so.
Insurance Premiums
Life density is currently around US$10 per capita in Vietnam. Life penetration is around 0.5% of GDP. Low figures such as these are normally associated with countries where lack of property rights and/or persistently high inflation mean that households are very reluctant to enter into long-term contracts with life insurers. Neither of these structural challenges are present in Vietnam. Instead, the basic problem is that too many households are unable to afford to save via life insurance.
Table: Gross Life Premiums Written 2011-2018
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Gross life premiums
written, VNDbn 11,380.2 18,390.8 19,223.9 20,705.6 23,504.6 26,730.1 30,299.0 34,390.6 Gross life premiums
written, VND, % change y-o-y
-17.5 61.6 4.5 7.7 13.5 13.7 13.4 13.5
Gross life premiums written, VND per capita
126,567.7 202,551.8 209,685.3 223,728.8 251,691.6 283,785.7 319,065.8 359,371.6
Gross life premiums
written, % of GDP 0.4 0.6 0.5 0.5 0.5 0.5 0.5 0.5 Gross life premiums
written, % of gross premiums written
35.7 44.7 42.7 41.5 41.5 41.7 42.0 42.3
Gross life premiums
written, US$bn 0.6 0.9 0.9 1.0 1.2 1.3 1.5 1.7 Gross life premiums
written, US$, % change y-o-y
-23.6 59.9 3.7 10.2 14.8 14.4 14.6 14.7
Gross life premiums written, US$ per capita
6.1 9.7 10.0 10.9 12.4 14.0 16.0 18.2
Source: BMI/ AVI
Our expectation is that premiums will rise, but in a somewhat erratic way, through the forecast period. Total premiums written in the segment should increase from about US$900mn now to US$1,700mn or so in 2018. Growth will likely be much more substantial after 2018. The various multi-national insurers that have
established operations in Vietnam are, we believe, right to see the market as an attractive opportunity - but in the long-term. Between now and the end of the forecast period, it is likely that at least one of the majors will have significant success with the development and distribution of micro-insurance products.
Life Insurance Drivers
There are some life insurance markets where the rapid growth of private healthcare expenditure offers a substantial opportunity - through the provision of health insurance riders to policies and/or other product offerings. Vietnam is not currently such a market and is unlikely to become one within the forecast period. In essence, the overall insurance market is too underdeveloped, because of widespread poverty.
Nevertheless, we note that per capita spending on private healthcare is considerably higher than life insurance density (i.e. per capita premiums). This suggests that, for the small minority of households who understand and afford life insurance, there is some potential for the insurers to sell healthcare-related products and riders.
Table: PRIVATE HEALTH EXPENDITURE 2011-2018
2011 2012f 2013e 2014f 2015f 2016f 2017f 2018f Private health expenditure, VNDbn 102,984.4 120,644.8 138,626.4 160,406.7 184,723.3 210,185.0 237,652.8 267,263.9 Private health expenditure, VND, % change y-o-y 21.0 17.1 14.9 15.7 15.2 13.8 13.1 12.5 Private health expenditure, US$bn 5.0 5.8 6.6 7.8 9.1 10.4 11.9 13.5 Private health expenditure, US$bn, % change y-o-y 12.0 15.9 13.9 18.4 16.5 14.4 14.3 13.6 Private health expenditure, US$ per capita 55.4 63.7 71.8 84.3 97.3 110.4 125.1 141.1 Private health expenditure, % of GDP 3.7 3.7 3.9 4.0 4.1 4.2 4.2 4.3
Source: AVI/ BMI
For countries at Vietnam's level of development, private healthcare spending is driven principally by changes in morbidity. In terms of Disease Adjusted Life Years (DALYs, a widely used metric) morbidity should increase slightly over the forecast period. Rising incomes and effective child healthcare policies
should result in a fall in DALYs for the youngest age cohorts (to 15 years). However, these declines will be more than offset by an increase in DALYs in most older age cohorts.
Table: DISEASE ADJUSTED LIFE YEARS 2011-2018
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
All Causes, DALYs 11,898,272 11,933,865 11,968,439 12,001,992 12,034,522 12,066,030 12,096,513 12,125,971 Communicable, maternal, perinatal and nutritional conditions, DALYs 3,361,708 3,366,403 3,371,022 3,375,565 3,380,031 3,384,422 3,388,736 3,392,973 Noncommunicable diseases, DALYs 6,884,945 6,928,102 6,970,173 7,011,157 7,051,055 7,089,863 7,127,581 7,164,209 All diseases and
injuries, 0-4 yrs, total, DALYs
1,468,354 1,399,208 1,333,074 1,270,112 1,210,424 1,154,059 1,101,023 1,051,282
All diseases and injuries, 15-29 yrs, total, DALYs
2,392,289 2,406,024 2,418,817 2,431,012 2,442,923 2,454,811 2,466,841 2,479,058
All diseases and injuries, 30-44 yrs, total, DALYs
2,077,024 2,123,095 2,168,709 2,212,369 2,252,764 2,288,799 2,319,618 2,344,638
All diseases and injuries, 45-59 yrs, total, DALYs
2,422,440 2,426,292 2,425,683 2,421,889 2,416,058 2,409,202 2,402,194 2,395,781
All diseases and injuries, 5-14 yrs, total, DALYs
596,136 581,029 566,147 551,433 536,886 522,547 508,490 494,820
All diseases and injuries, 60-69 yrs, total, DALYs
1,425,932 1,447,547 1,467,741 1,487,452 1,507,330 1,527,762 1,548,883 1,570,589
All diseases and injuries, 70+ yrs, total, DALYs
1,516,097 1,550,670 1,588,268 1,627,726 1,668,137 1,708,851 1,749,463 1,789,803
Source: WHO/World Bank/IMF/BMI
Life Claims
The embryonic level of development of Vietnam's life segment means that it is difficult to comment on claims in a meaningful way. We suggest that the very rapid rise in claims and payments over recent years has been due to the fact that the claims and payments have been rising from a very low base. We expect that the pace of growth will moderate in the coming years.
Table: Life Insurance Claims 2009-2012
2009 2010 2011 2012
Life insurance claims,
VNDbn 2,507.70 2,786.50 4,221.80 5,740.10 Life insurance claims,
VND, % change y-o-y n.a. 11.1 51.5 36 Life insurance claims,
VND per capita 28,432.10 31,292.50 46,953.20 63,220.40 Life insurance claims
life, % of GDP 0.1 0.1 0.2 0.2 Life insurance claims,
% of total claims 32.2 30.4 33.3 39.3
Life insurance claims,
US$bn 0.1 0.1 0.2 0.3
Non-Life Premiums Forecast
BMI View: Thanks mainly to the ongoing development of industrial and commercial lines, which account for around 40% of all premiums written in Vietnam's non-life segment, growth should remain consistently in double digits through the forecast period. Nevertheless, we are not looking for non-life penetration to rise, as we see no obvious catalyst for this outcome.
By most metrics, the non-life segment will remain underdeveloped at the end of the forecast
period. Premiums will also rise in absolute terms thanks to the further growth of motor vehicle insurance, transport insurance and property insurance.
Not Large, But Steadily Growing
Non-Life Premiums (US$bn) And Y-o-Y Growth (%)
Gross non-life premiums written, US$bn (LHS) Gross non-life premiums written, US$~ % y-o-y (RHS)
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f 0 1 2 3 10 15
Notes: 1 "AVI/BMI" 2 "AVI/BMI"
With total premiums of around US$1bn, Vietnam's non-life segment is small in absolute terms and in relation to its counterparts in other countries in South East Asia. This will remain the case in 2018. However, premiums should consistently sustain double-digit growth in the meantime.
Non-Life Premiums
Having fallen over recent years, non-life penetration (premiums as a percentage of GDP has stabilised at around 0.7%. At some stage in the future, it is reasonable to expect that some catalyst will cause penetration to rise. However, we anticipate this will happen only after the end of the forecast period. Per capita
premiums (density) of around US$13 are indicative of most households being too poor to afford non-life insurance. Nevertheless, the likely growth of the economy, and associated increases in industrial/ commercial lines, imply that the segment should sustain double-digit growth rates.
Table: Gross Non-Life Premiums 2011-2018
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f Gross non-life premiums written, VNDbn 20,497.0 22,758.0 25,762.8 29,239.8 33,096.8 37,330.6 41,886.8 46,914.1 Gross non-life premiums written, VND, % change y-o-y 20.2 11.0 13.2 13.5 13.2 12.8 12.2 12.0 Gross non-life premiums written, VND per capita 227,962.4 250,650.4 281,008.6 315,942.6 354,405.9 396,328.1 441,091.8 490,237.5 Gross non-life premiums written, % of GDP 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 Gross non-life premiums written, % of gross premiums written 64.3 55.3 57.3 58.5 58.5 58.3 58.0 57.7 Gross non-life premiums written, US $bn 1.0 1.1 1.2 1.4 1.6 1.8 2.1 2.4 Gross non-life premiums written, US $, % change y-o-y 11.3 9.9 12.3 16.2 14.5 13.4 13.4 13.1 Gross non-life premiums written, US $ per capita 11.0 12.0 13.4 15.4 17.4 19.6 22.1 24.8
Source: BMI/ AVI
Retention ratios (net premiums as a percentage of gross premiums) are low, at around 60%. This reflects three factors: most of the Vietnamese non-life companies lack economies of scale; some 40% of the activity undertaken in the segment involves complex and large industrial/commercial risks; and the Vietnamese
companies do not necessarily have ready access to global capital markets. Accordingly, net premiums should remain significantly below - and move in line with - gross premiums through the forecast period.
Table: Net Non-Life Premiums 2011-2018
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Net non-life premiums
written, VNDbn 15,572.3 17,074.1 15,550.7 17,595.4 19,935.3 22,478.8 25,224.7 28,251.4 Net non-life premiums
written, VND, % change y-o-y
20.0 9.6 -8.9 13.1 13.3 12.8 12.2 12.0
Net non-life premiums written, VND per capita
173,191.5 188,049.6 169,619.4 190,121.8 213,470.9 238,651.5 265,630.6 295,218.3
Net non-life premiums
written, % of GDP 0.6 0.5 0.4 0.4 0.4 0.4 0.4 0.5
Net non-life premiums
written, US$bn 0.8 0.8 0.7 0.9 1.0 1.1 1.3 1.4 Net non-life premiums
written, US$, % change y-o-y
11.1 8.5 -9.7 15.8 14.6 13.4 13.4 13.1
Net non-life premiums written, US$ per capita
8.4 9.0 8.1 9.2 10.5 11.8 13.3 14.9
Source: BMI/ AVI
Non-Life Reinsurance
The corollary of this is that Vietnam represents a currently small opportunity for reinsurers, but one that is growing at double-digit rates. We are looking for outwards reinsurance premiums to grow from around US $500mn in 2013 to about US$900mn in 2018. Most of this business will pertain to large scale commercial/ industrial risks, which account for well over one third or the premiums written in the non-life segment.
Table: Reinsurance Non-Life Premiums 2011-2018
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f Reinsurance non-life premiums written, VNDbn 7,853.8 9,156.6 10,212.1 11,644.5 13,161.4 14,851.7 16,662.1 18,662.7 Reinsurance non-life premiums written, VND, % change y-o-y 24.4 16.6 11.5 14.0 13.0 12.8 12.2 12.0
Reinsurance Non-Life Premiums 2011-2018 - Continued 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f Reinsurance non-life premiums written, VND per capita 87,347.7 100,847.9 111,389.2 125,820.8 140,935.0 157,676.6 175,461.2 195,019.2 Reinsurance non-life premiums written, % of GDP 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Reinsurance non-life premiums written, US $bn 0.4 0.4 0.5 0.6 0.6 0.7 0.8 0.9 Reinsurance non-life premiums written, US$, % change y-o-y
15.1 15.4 10.6 16.7 14.3 13.5 13.4 13.1
Reinsurance non-life premiums written, US$ per capita
4.2 4.8 5.3 6.1 6.9 7.8 8.8 9.8
Source: BMI/ AVI
Non-Life Claims
Except in 2011, when non-life claims jumped by about one fifth, claims costs have typically evolved quite slowly in Vietnam. We would attribute this to the nature of the business that is written in the segment. With large scale commercial and industrial risks accounting for about 40% of premiums written, losses are relatively rare but, when they occur, substantial. Until motor vehicle and household lines come to dominate the business mix of the non-life segment (an outcome which we do not expect prior to 2018), claims should continue to grow quite slowly.
Table: Non-Life Insurance Claims 2008-2012 2008 2009 2010 2011 Non-life insurance claims, VNDbn 4,510.70 5,272.30 6,384.20 8,445.00 Non-life insurance claims, VND, % change y-o-y n.a. 16.9 21.1 32.3 Non-life insurance claims, VND per capita 51,627.70 59,777.00 71,693.90 93,923.10 Non-life insurance claims, % of GDP 0.3 0.3 0.3 0.3 Non-life insurance claims, % of total claims n.a. 67.8 69.6 66.7
Non-Life Sub-Sector Forecast
BMI View: For a non-life segment that is still, by almost all metrics, underdeveloped, Vietnam's is unusual
in that industrial/ commercial covers are relatively important. Conversely, basic motor vehicle insurance and household property lines account for a small percentage of premiums than would otherwise be the case. This is the consequence of the peculiar competitive landscape, in which many of the leading local non-life companies are affiliated with, and serve, state-owned enterprises.
Looking forward, we do not see any particular reason why this should change during the forecast period. Overall premiums have for several years been growing in line with GDP. In the absence of a clear catalyst for penetration to rise, the relative sizes of the various sub-sectors should stay broadly unchanged.
Table: Non-Life % Breakdown 2011-2018
2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
Motor vehicle insurance 29.9 27.8 27.7 27.8 28.0 28.2 28.4 28.7 Property insurance 8.4 9.6 9.3 9.2 9.0 8.8 8.5 8.1 Transport insurance 20.6 19.7 19.8 19.8 19.8 19.8 19.8 19.7 General liability insurance 2.1 2.3 2.3 2.3 2.2 2.2 2.2 2.2 Credit/financial guarantee insurance 0.4 0.2 0.3 0.3 0.3 0.3 0.3 0.3 Other insurance 38.5 40.4 40.7 40.6 40.6 40.7 40.8 41.0
Source: AVI/ BMI
Commercial and industrial covers, which are predominantly provided to the various industrial state owned enterprises that play a dominant role in Vietnam's economy, account for about 40% of all non-life
premiums. The next largest lines by this metric are motor vehicle insurance, transport insurance and property insurance. The non-life companies basically do not (yet) provide health insurance. Other lines, such as general liability insurance, are miniscule. None of the subsectors including the larger ones -represents a substantial commercial opportunity in regional terms.
Commercial/ Industrial Lines Well Developed...
Gross Written Premiums, Non-Life Segment (US$mn), 2013
Source: AVI/ BMI
Motor Vehicle And Transport Insurance
Motor vehicle insurance is relatively less important in Vietnam's non-life segment than in counterparts in other low income countries. Nevertheless, motor vehicle related lines accounted for a little over one quarter of all premiums written in the segment during 2013, and should continue to do so through the forecast period. In essence, we are looking for steady double-digit growth in premiums over the next five years, as the sub-sector expands in line with the non-life segment. Given the fragmentation of the competitive landscape, we expect that the rise will be driven mainly by the increase in the numbers of vehicles on Vietnam's roads. In short, the development of the sub-sector will be driven by volume, rather than price/ rate, increases.
Table: Motor Vehicle Insurance 2011-2018 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f Motor vehicle insurance, VNDmn 6,134,000.0 6,329,214.0 7,126,728.4 8,135,470.8 9,269,922.2 10,537,068.4 11,909,588.8 13,446,284.8 Motor vehicle insurance, VND, % change y-o-y 14.1 3.2 12.6 14.2 13.9 13.7 13.0 12.9 Motor vehicle insurance, US$mn 296.9 303.2 338.6 395.6 456.0 521.2 595.5 679.1 Motor vehicle insurance, US$, % change y-o-y 5.6 2.1 11.7 16.8 15.3 14.3 14.2 14.0 Motor vehicle insurance, % of non-life insurance 29.9 27.8 27.7 27.8 28.0 28.2 28.4 28.7
Source: BMI/ AVI
Accounting for around one fifth of non-life premiums, transport insurance is not much less important by that measure than motor vehicle insurance. In other words, transport insurance accounts for a larger
percentage of activity in the segment than one might expect in a country with Vietnam's per capita incomes. We think that this is reflective of buying of transport insurance by (predominantly) state owned enterprises -and, very often, through the non-life insurance companies that are affiliated with them.
Table: Transport Insurance 2011-2018 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f Transport insurance, VNDmn 4,214,000.0 4,493,131.0 5,104,693.5 5,792,681.0 6,558,509.1 7,384,425.5 8,285,054.5 9,265,397.0 Transport insurance, VND, % change y-o-y 18.3 6.6 13.6 13.5 13.2 12.6 12.2 11.8 Transport insurance, US$mn 204.0 215.3 242.5 281.7 322.6 365.3 414.3 467.9 Transport insurance, US$, % change y-o-y 9.5 5.5 12.7 16.1 14.5 13.2 13.4 13.0 Transport insurance, % of non-life insurance 20.6 19.7 19.8 19.8 19.8 19.8 19.8 19.7
Source: AVI/ BMI
For now, we look for steady, double-digit, gains in transport insurance premiums each year through the forecast period. This will be driven mainly by the likely growth in road freight transport in Vietnam. Road freight easily dominates the nation's transport system in terms of tonnes carried. We also assume that the market will be orderly: rates/prices should increase slightly.
Table: INSURANCE KEY DRIVERS, FREIGHT TONNAGE 2011-2018
2011 2012f 2013e 2014f 2015f 2016f 2017f 2018f Air Freight Tonnes (000) 200.3 178.7 189.0 202.3 216.9 232.4 248.5 265.5 Air Freight Tonnes (000), % change y-o-y 5.4 -10.8 5.8 7.0 7.2 7.1 7.0 6.8 Rail Freight Tonnes (000) 7,285.1 7,003.5 7,292.0 7,519.6 7,759.3 8,010.4 8,269.7 8,537.8 Rail Freight Tonnes (000), % change y-o-y -7.3 -3.9 4.1 3.1 3.2 3.2 3.2 3.2
INSURANCE KEY DRIVERS, FREIGHT TONNAGE 2011-2018 - Continued 2011 2012f 2013e 2014f 2015f 2016f 2017f 2018f Road Freight Tonnes (000) 654,127.1 722,156.4 806,648.7 902,639.9 1,010,054.0 1,126,210.3 1,253,472.0 1,392,607.4 Road Freight Tonnes (000), % change y-o-y 11.4 10.4 11.7 11.9 11.9 11.5 11.3 11.1 Inland Waterway Freight Tonnes (000) 160,164.5 168,493.0 177,454.6 186,691.3 196,424.5 206,615.1 217,144.5 228,010.9 Inland Waterway Freight Tonnes (000), % change y-o-y 11.1 5.2 5.3 5.2 5.2 5.2 5.1 5.0 Source: AVI/BMI
Property Insurance
Property insurance accounts for about one tenth of the total activity in Vietnam's non-life segment. We presume that it will achieve high single digit growth through the forecast period. This is a respectable outcome by most standards, but is consistent with the sub-sector slipping in importance relative to the non-life segment as a whole, and in relation to the overall economy. We are taking the view that price
Table: Property Insurance 2011-2018 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f Property insurance, VNDmn 1,723,000.0 2,185,362.0 2,399,020.6 2,700,247.3 2,994,576.8 3,279,767.9 3,554,125.0 3,815,620.6 Property insurance, VND, % change y-o-y 20.0 26.8 9.8 12.6 10.9 9.5 8.4 7.4 Property insurance, US$mn 83.4 104.7 114.0 131.3 147.3 162.2 177.7 192.7 Property insurance, US$, % change y-o-y 11.0 25.5 8.9 15.2 12.2 10.1 9.5 8.4 Property insurance, % of non-life insurance 8.4 9.6 9.3 9.2 9.0 8.8 8.5 8.1
Source: BMI/ AVI
In most of the countries whose insurance sectors are monitored by BMI, 'other' insurance is something of a balancing item. It includes minor lines whose relative (and often absolute) sizes mean that we refrain (for now) from commenting on them specifically. In Vietnam, 'other' insurance includes industrial business that is undertaken for state owned enterprises by the non-life companies. Historically, the state owned
enterprises have worked with the insurers that are affiliated with them. This business accounts for around 40% of total premiums written in the non-life segment. That premiums in this sub-sector have held up relative to the non-life insurance as a whole and in relation to GDP suggests to us that: it is benefiting from investment in plant, equipment and infrastructure as Vietnam's economy develops; and, the sub-sector is characterised by pricing discipline. We see no reason why this should not continue.
Industry Risk Reward Ratings
Asia Risk/Reward Ratings
BMI View: Geographic diversification may be a favourable strategy for multinational pharmaceutical companies, but it is vital that firms recognise both the rewards and the risks present in a market, whether developed or emerging. BMI's Risk/Rewards Ratings (RRR) tool, which provides a globally comparative and numerically based assessment of a market's attractiveness, was established to address this. In BMI's Q214 RRRs, the Asia Pacific region scores 52 out of 100, below Western Europe (67), similar to Central and Eastern Europe (52) but compares favourably against Americas (51) and Middle East and Africa (42) regions.
The indicators used to assess the attractiveness of a pharmaceutical market are now visible, improving the transparency of the rating system and enabling the identification of regional or group outperformers across single indicators. A market's RRR score is made up of a sum of the Rewards score (Industry Rewards + Country Rewards) and the Risks score (Industry Risks + Country Risks).
The weight assigned to each subsector (such as Industry Rewards or Industry Risks) shows its influence within the final Rewards or Risks score and the final RRR score. The Rewards component accounts for 65% of the final RRR, while the Risks component accounts for 35%.
Q214 Asia Pacific Pharmaceutical Risk/Reward Ratings
Rewards And Risks Scores
Source: BMI. RRR scores out of 100, with 100 highest.
The Industry Rewards, Country Rewards, Industry Risks and Country Risks subsectors are each made up of a number of indicators. The weighting of each indicator (such as market expenditure which is used to assess Industry Reward or economic diligence which is used to assess Country Risk) reflects its relative
importance to the pharmaceutical industry and subsequently the relative reward or risk that each factor poses to drug companies. In Q214, Japan is ranked as the most attractive market in the Asia Pacific region (scoring 74.5 out of 100), followed by Australia (67.0) and Taiwan (65.7). In the same quarter, Myanmar is ranked as the least attractive market in the region (scoring 26.9 out of 100), followed by Cambodia (32.4) and Sri Lanka (37.0).
With regards to assessing rewards, we identify industry-specific factors, such as the size of the
pharmaceutical market, and country-specific factors, such as the size of the pensionable population, which represent opportunities to would-be investors. Focusing on the rewards component of the rating system, Japan scores a total of 47.0 out of 65, the highest score in subsector. Japan's score is boosted by the large multi-billion dollar drug market (market expenditure score of 18.0 out of 20) and large pensionable population (pensionable population score of 8.0 out of 8), but dragged down by a declining pharmaceutical market (sector value growth score of 0 out of 12) and a declining population (population growth score of 1.0 out of 5). Meanwhile, Myanmar scores a total of 18.5 out of 65, the lowest score in the subsector.
Q214 Asia Pacific Pharmaceutical Rewards
Industry Rewards And Country Rewards Scores
Source: BMI. RRR scores out of 100, with 100 highest.
With regards to assessing risks, we identify industry-specific dangers, such as approvals expediency, and those emanating from the state's political and economic profile, such as bureaucracy, which call into question the likelihood of anticipated returns being realised over the assessed time period. With regards to the economic and political assessment, only the aspects most relevant to the pharmaceutical industry are incorporated into the assessment. Focusing on the risks component of the rating system, Myanmar scores a total of 8.4 out of 35, the lowest score in subsector. Compared to its peers, Myanmar's score is dragged
down by industry characteristics such as the absence of patent respect (patent respect score of 0 out of 7) and policy enforcement (policy enforcement score of 1.5 out of 7). Meanwhile, Singapore scores a total of 28.1 out of 35, the highest score in the subsector.
Q214 Asia Pacific Pharmaceutical Risks
Industry Risks And Country Risks Scores
Source: BMI. RRR scores out of 100, with 100 highest.
In the table below, the subsector scores (ie, Industry Rewards) and full component scores (ie, Rewards) have been expressed as a percentage of the total weight or as a percentage of the maximum score that can be
achieved. This allows for the identification of the sub-sector or component that will most positively or negatively affect a single market.
Q214 Asia Pacific Pharmaceutical Risk/Reward Ratings
Rewards And Risks Scores As A Percentage Of The Maximum Score
Market Overview
Life Market Overview
BMI View: As is the case in China, the insurance sector of Vietnam is characterised by the strong presence of companies in which the state maintains a strategic interest, whether direct or indirect. Regional life insurance companies play a key role in that segment.
In Vietnam, the insurance sector is regulated by the Insurance Supervisory Division within the Ministry of Finance. The insurance trade association, covering both the life and the non-life segments, is the
Association of Vietnamese Insurers (AVI).
Bao Viet, the former state-owned monopoly insurer, is the only company that is effectively a composite
insurer, active in both the non-life and the life segments. As of late 2013, the AVI identified another 14 players in the life segment. Among the major multi-nationals that have a presence across the region, AIA,
Prudential plc and Manulife all have subsidiaries in Vietnam. Also on the ground is ACE Life. Asian life
companies that are substantial in their home markets and which are present include Great Eastern, Cathay
Life, Dai-Ichi Life and Korea Life. Vietnam is one of the three foreign countries in which France's Groupe Prévoir is active (the others being Portugal and Poland). Finally, the segment includes VCLI, an
insurance joint venture that is 45% owned by Vietcombank, 43% by BNP Paribas Cardif and 12% by
SeAbank, a local joint stock commercial bank.
Data published by the trade association in late 2013 showed that, in terms of gross written premiums, the leading players were Prudential plc (with a 34% market share), Bao Viet (29%) and Manulife (12%)
The latest newsflow from the segment indicates that it is developing quite rapidly, if in an erratic fashion. The widespread poverty (or, more correctly, incidence of household incomes that are too small to support purchase of life insurance products continues to constrain the potential of the segment. The leading insurers are competing through innovation in distribution and product development, and through enlargement of agency forces.
Non-Life Market Overview
BMI View: As of early 2014, it is possible to identify a number of strengths of Vietnam's non-life segment. A significant presence of leading foreign groups ensures that there is competition in terms of innovation and distribution. Unlike in many emerging markets where household incomes are low, the segment is not dominated by basic lines such as motor vehicle insurance. Premiums have been increasing in line with overall GDP and should continue to do so.
Vietnam's non-life segment is still in transition from a situation where it consisted of a state owned
monopoly (the composite group Bao Viet) to one where local private sector firms and, usually through joint ventures, foreign groups are active.
A Fairly Fragmented Marketplace
Non-Life Market Shares (%), 2012
Source: BMI/ AVI
The three largest players accounted for nearly half of the total premiums written in 2012. However, the remainder of the market is fragmented, with particular groups focusing on niche specialties. The insurance
sector is overseen by the Insurance Supervisory Division within the Ministry of Finance. The trade association is the Association of Vietnamese Insurers (AVI).
Aside from Bao Viet, there are 25 players in the non-life segment, according to the AVI. Local companies include AAA, Agricultural Bank Insurance, Bao Minh JSC, BIC (a subsidiary of Bank for Investment and Development of Vietnam), Bao Tin, GIC, Great Mountain JSC, Hung Vuong JSC, Military
Insurance, Petrolimex Joint Stock Insurance Company (PJICO), Nha Rong Insurance (Bao Long), Petrovietnam Insurance (PVI), Post Office Insurance, SVIC, Union Insurance, VietinBank Insurance, VNA Insurance, Vietnam National Reinsurance (VinaRe) and VASS. A key development in August
2011 was the announcement that HDI Gerling Industrie Versicherung, a subsidiary of Germany's Talanx, has agreed to buy a 25% stake in PVI, a listed subsidiary of Petrovietnam, for VND1,920bn (US$92mn). Reports in late 2011 indicated that PVI Re, a reinsurance subsidiary of PVI, will be entering the local reinsurance market. In April 2012, Australia's IAG announced that it had reached agreement to buy a 30% stake in AAA.
Joint ventures include Samsung Vina Insurance and Bao Viet Tokio Marine Insurance.
Foreign groups with a presence on the ground include AIG, QBE, Liberty Mutual, Fubon Insurance,
MSIG and ACE (Non-Life).
Table: Non-Life Insurance Market (US$mn) 2006-2012
2007 2008 2009 2010 2011 2012
Bảo Viảt 161.7 201.9 n.a. n.a. 237.2 257.9 PVI 102.6 122.9 n.a. n.a. 204.7 223.2 Bảo Minh 100.2 114.6 n.a. n.a. 103.6 109.5 PJICO 54.8 64.5 n.a. n.a. 89.7 94.4 PTI 19.0 27.0 n.a. n.a. 53.0 78.6 Samsung Vina 4.8 5.3 n.a. n.a. n.a. 35.1 BIC 9.2 16.1 n.a. n.a. n.a. 32.1 Toàn Cảu 10.8 11.8 n.a. n.a. n.a. 23.5 MIC n.a. 8.7 n.a. n.a. n.a. 22.7 AAA 9.7 12.3 n.a. n.a. n.a. 22.7 ABIC 1.0 7.9 n.a. n.a. n.a. 21.8 VNI n.a. n.a. n.a. n.a. n.a. 21.5 Liberty 0.3 2.7 n.a. n.a. n.a. 21.2
Non-Life Insurance Market (US$mn) 2006-2012 - Continued
2007 2008 2009 2010 2011 2012
SVIC n.a. n.a. n.a. n.a. n.a. 14.9 MSIG n.a. n.a. n.a. n.a. n.a. 14.0 Baoviet Tokio Marine 7.6 10.3 n.a. n.a. n.a. 13.1 AIG Viảt Nam 4.2 6.3 n.a. n.a. n.a. 13.0 Bảo Long 10.2 15.4 n.a. n.a. n.a. 12.1 Viản Đông 9.7 13.4 n.a. n.a. n.a. 10.8 Xuân Thành n.a. n.a. n.a. n.a. n.a. 10.6
Source: BMI/ AVI
The development of the premiums of the various non-life companies from 2007 to 2012 highlights a number of key features and trends. First, Vietnam's non-life segment is growing steadily in absolute terms, even if this increase is the result of an expansion in overall GDP rather than a life in penetration. Second, the larger companies (other than Bao Viet) have close links with state-owned enterprises that are not naturally in the insurance businesses. These insurance subsidiaries continue to handle industrial risks for their parents: this is an aspect of the market which makes it fairly unusual. Third, very few of the players have scale - although a number are affiliates of regional/ global insurers who can see their Vietnam
operations in the context of a larger entity. Many of the companies that are active in the segment are writing premiums of around US$10mn annually. They are tiny by almost all standards.
Table: Non-Life Insurance Market (%) 2006-2012
2007 2008 2009 2010 2011 2012
Bảo Viảt 31.1 30.5 n.a. n.a. 23.9 23.7 PVI 19.7 18.6 n.a. n.a. 20.6 20.5 Bảo Minh 19.3 17.3 n.a. n.a. 10.4 10.0 PJICO 10.5 9.8 n.a. n.a. 9.0 8.7 PTI 3.6 4.1 n.a. n.a. 5.3 7.2 Samsung Vina 0.9 0.8 n.a. n.a. n.a. 3.2 BIC 1.8 2.4 n.a. n.a. n.a. 2.9 Toàn Cảu 2.1 1.8 n.a. n.a. n.a. 2.2 MIC n.a. 1.3 n.a. n.a. n.a. 2.1 AAA 1.9 1.9 n.a. n.a. n.a. 2.1
Non-Life Insurance Market (%) 2006-2012 - Continued
2007 2008 2009 2010 2011 2012
ABIC 0.2 1.2 n.a. n.a. n.a. 2.0 VNI n.a. n.a. n.a. n.a. n.a. 2.0 Liberty 0.1 0.4 n.a. n.a. n.a. 1.9 SVIC n.a. n.a. n.a. n.a. n.a. 1.4 MSIG n.a. n.a. n.a. n.a. n.a. 1.3 Baoviet Tokio Marine 1.5 1.6 n.a. n.a. n.a. 1.2 AIG Viảt Nam 0.8 1.0 n.a. n.a. n.a. 1.2 Bảo Long 2.0 2.3 n.a. n.a. n.a. 1.1 Viản Đông 1.9 2.0 n.a. n.a. n.a. 1.0 Xuân Thành n.a. n.a. n.a. n.a. n.a. 1.0
Source: BMI/AVI
The various shifts in market shares (in terms of gross premiums written) are indicative of a market that is at a fairly embryonic state of development and which is being liberalised. Over the six years to the end of 2012, Bao Viet - the former state-owned monopoly - gradually lost market share. Not all the smaller companies achieved increases in market share. However, some players came from nowhere to positions with market shares in excess of 1%.
Company Profile
AIA Group
SWOT Analysis
Strengths ■ Very large scale by any standard.
■ Strength of capital and access to global financial markets. ■ Strong and growing cashflows.
■ Unique status as the largest independent pan-Asian life insurer, with a footprint that
spans 15 markets.
■ Only foreign company to operate on its own (as opposed to as a JV partner) in China. ■ Leadership, by many metrics, in many of the markets in which AIA operates (and
crushing domination in some of these).
■ Continuing growth in annualised new premiums (ANP), value of new business (VONB)
and VONB margins - across almost all the markets in which AIA operates.
■ Diverse products, for both individual and corporate clients.
■ Multi-channel distribution - complements very strong proprietary agency distribution
channel in most of AIA's markets.
■ Clear strategy to 'deliver quality growth'. ■ Long-standing presence in many of its markets. ■ Strong/improving brand in many of its markets.
Weaknesses ■ There are some countries (e.g. South Korea, Taiwan and China) where AIA is still, by
many metrics, a relatively minor player.
■ Like all large life companies, AIA is exposed to the challenges that arise from a global
investment environment in which interest rates are, and will likely remain, low.
Opportunities ■ Arguably the leading beneficiary of the growth of organised savings in East and South
SWOT Analysis - Continued
■ Clear strategies to boost profitability - as well as premium income.
■ Successful product innovation in many of the markets in which AIA operates. ■ Potential to undertake substantial acquisitions.
■ Well placed to benefit from improving perceptions of risk in emerging markets of
South East Asia.
■ Development of relationship with Nippon Life.
Threats ■ Potential but unlikely turmoil in regional financial markets. However, AIA has plainly
thrived in spite of the Asian financial crisis of 1997-99, the critical phase of the global financial crisis (2008-09) and the massive financial problems of its previous
shareholder.
■ Given the current structure of AIA's overall business, growth and profitability would
suffer for a time in the event of political and/or economic instability in Thailand.
■ Robust competition, in some markets, from very large multi-national insurers, many of
which share some of AIA's strengths.
■ Robust competition, in some markets, from truly enormous local insurance
companies. (In China and India, the rules governing participation by foreigners present challenges.)
■ At some stage, the absolute size of AIA alone will mean that it becomes significantly
more difficult to maintain growth in business and profitability at the rates that have been achieved in recent years.
Company Overview AIA Group (AIA) describes itself as 'the largest independent listed pan-Asian life insurance group in the world', with a 'broad footprint spanning 15 markets in the Asia-Pacific'. It is one of the three main insurance companies (the others being Alico, which is now a part of MetLife's global operations and Chartis) whose origins date back to the establishment of an insurance agency in Shanghai by Cornelius Vander Starr in 1919. For a long time, AIA was an important component of American International Group (AIG). The problems of AIG in the wake of the global financial crisis forced it to look for a
sale. Through much of 2010, Prudential plc sought to purchase AIA, but was unable to raise the funds that it needed. In late October 2010, AIA was listed in Hong Kong in what was, at that time, the largest ever initial public offering (IPO).
Although AIA offers accident and health products (which we would normally consider as part of the non-life segment) in some of the markets that it serves, it is - as its self description indicates - overwhelmingly a life insurer. The company classifies its wide range of products in six major groups: protection; savings; investment; retirement; wealth management, and corporate solutions (employee benefits, credit insurance and retirement services).
As noted above, AIA has a presence in 15 different countries across the Asia-Pacific. AIA Vietnam has over 400 employees and more than 9,000 professional agents. It operates in 23 cities and provinces across Vietnam. 'AIA Vietnam offers a wide range of life insurance products and services including universal life, savings, education and protection, each designed to meet the needs and demands of individuals, corporates and banks customers.'
Financial Data E AIA reported that H113 (the six months to May 31) saw very good growth in both value of new business (VONB - the company's key performance measure) and
annualised new premiums (ANP). Across the company as a whole, VONB rose by 27% to US$711mn, while ANP grew by 29% to US$1,527mn. Within national markets, changes in ANP were: Hong Kong, up 34% to US$326mn; Thailand, up 9% toUS $265mn; Singapore, down 3% to US$147mn; Malaysia, up 100% to US$152mn (thanks to the inclusion of the businesses bought from ING); China, up 11% to US$120mn; South Korea, up 75% to US$182mn and; other markets, up 29% to US$335mn. Total weighted premium income rose by 16%, from US$7,305mn in H112 to US $8,495mn in H113. Thanks to the ING acquisition, premiums rose by 106% to US $1,002mn in Malaysia. In most markets, though, they rose by 5-10%. Investment income amounted to US$2,465mn in H113, or 18% more than in H112.
At the end of H113, total equity amounted to US$27,172mn, or 2% more than at the end of November 2012. Total assets rose by 9% over the six month period, to US $146,926mn. Total investments grew by 9% to US$125,421mn.
American International Group (AIG)
SWOT AnalysisStrengths ■ AIG enjoys the benefits of diversification across one of the leading US life companies
and one of the world's largest non-life insurance companies, as well as additional businesses.
■ In its own right, AIG Life benefits from scale, diversity of products and diversity of
distribution channels.
■ In its own right, AIG is one of the largest and (in terms of product range) diversified
non-life groups.
■ AIG also has one of the broadest geographical footprints of any non-life company.
This includes two major markets - Japan and the UK - where AIG Property Casualty has operations, which would count as large non-life insurers by any standard.
■ In Japan, in particular, AIG is unusual as it is a well established foreign company with
a leadership position in the non-life market.
■ AIG also has a significant presence in many emerging markets- in all parts of the
world.
■ AIG has low cost of capital that comes from being a large and strong financial
institution.
■ The restructuring of AIG is over. Management can focus on growth opportunities
once more.
■ Like virtually all major global non-life groups, AIG coped well with the massive
catastrophes of 2011.
Weaknesses ■ Many of the markets in which AIG Life and AIG operate are relatively mature.
■ The low interest rate environment is having an adverse impact on sales of various of
SWOT Analysis - Continued
• In many of the geographic markets in which AIG operates, it is a small player - often facing competition from well-entrenched and massive local non-life companies. This is true of Brazil, Russia, India, China and South Africa.
Opportunities ■ AIG Life can benefit from product innovation and (re) development of particular
distribution channels.
■ AIG is focusing on higher value added products and investing in new systems. ■ AIG Life is, par excellence, a beneficiary of the (gradual) greying of populations in the
US.
■ AIG is well placed to benefit from the growth in the world economy and from rising
demand for a broad variety of insurance solutions in emerging markets.
Threats ■ Potential, but unlikely turmoil in global financial markets.
■ Robust competition, in some markets, from very large local players. In the US, AIG
Life faces competition from a number of rivals that share its advantages AIG is competing with non-life groups that are, by some measures, larger. However, AIG's global reach sets it apart from its US peers.
■ A simultaneous sharp downturn in the UK economy and the Japanese economy, at a
time of volatility in financial markets would present AIG with a challenge.
Company Overview Following its US$182bn rescue by the United States Government in 2008 and subsequent restructuring (which resulted in a profit to tax payers of nearly US$23bn) AIG is today one of the leading composite insurance companies in the United States, whose non-life businesses have a global presence.
AIG Property Casualty is the leading commercial insurer in the United States and Canada. It is also the largest foreign property/casualty company in China and Japan and has a growing position in Latin America. It is also a significant non-life company across Europe and in the Middle East and Africa. AIG Property Casualty has over 70mn corporate and consumer clients globally. It notes that it provides products to 96% of the Fortune 1000 companies, to 90% of the Fortune Global 500 companies and to 40% of the 400 richest Americans as identified by Forbes magazine.
Collectively, the various businesses of AIG Life and Retirement constitute one of the United States' largest life insurance companies. It serves over 18mn customers and works with 300,000 financial professionals who are licensed to sell life insurance and retirement savings products. Among much else, AIG Life and Retirement is: the fifth largest provider of life insurance and fourth of structured settlements; the leading provider of fixed annuities through banks (a position that the company has held for 16 years); one of the leading providers of K-12 and 403(b) group retirement services; and the fifth largest supplier of non-captive variable annuities. In addition, AIG Life and Retirement offers structured settlement annuities and mutual funds. It also runs one of the largest independent broker-dealer networks in the United States.
Other businesses include United Guaranty Corporation (UGC), the leading provider of mortgage insurance in the United States and International Lease Finance Corporation (ILFC- the largest aircraft lesser globally, in terms of the number of aircraft owned (i.e. over 1,000 owned and managed).
AIG Property Casualty is present in 21 markets across the Asia-Pacific: Australia; China; Guam; Hong Kong; Indonesia; Japan; South Korea; Kazakhstan; Macau; Malaysia; New Zealand; Pakistan; Papua New Guinea; Philippines; Saipan; Singapore; Sri Lanka; Taiwan; Thailand; Uzbekistan; and, Vietnam. In most of the major markets, it offers a comprehensive range of both personal and corporate lines.
Recent Developments
AIG published its results for Q213 on August 1, 2013.
AIG Property Casualty reported operating income of US$1.1bn for the quarter, or a little more than the US$936mn of the previous corresponding period. Highlights included: a slight rise in the combined ratio from 102.4% to 102.6%, thanks in part to costs relating to Hurricane Sandy; 1.8% increase in net premiums to US$9.3bn, thanks to firmer pricing and sales/marketing initiatives (such as a focus on higher value lines); a boost to net investment income thanks in part to the contribution from alternative investments. Net premiums written by AIG Property Casualty's commercial insurance business in H113 amounted to US$10,779mn, or the same as in H112. Net premiums written by the consumer insurance business in H113 amounted to US$6,922mn, or 3% less than in H112. Operating income of the former rose by 13% to US$1,576mn: operating income of the latter fell by 43% to US$244mn. Overall, AIG Property Casualty benefited in H113 from a better underwriting result thanks to lower claims. Net investment income rose thanks to 'the strong performance of alternative investments and income associated with the PICC P&C shares.'
Total net premiums written by AIG Property Casualty in H113 amounted to US $17,700mn. Of this, US$8,983mn was derived from the Americas, while US$4,975mn and US$3,742mn came from the Asia Pacific and Europe/Middle East/Africa (EMEA) respectively. Commercial insurance premiums were split between the three main
regions US$7,079mn/ US$1,107mn/ US$2,683mn respectively. Consumer insurance premiums were split US$1,905mn/ US$3,958mn and US$1,059mn respectively
AIG Life and Retirement reported operating income of US$1.2bn for the quarter, or 23% more than the $933mn of Q212. Virtually all major trends were positive: sales of variable annuities and mutual funds were 'robust'; net investment income rose; fee income increased; net flows were positive in spite of outflows from fixed annuities (which, in turn, was partly due to the low interest rate environment; and, adroit management of crediting rates.
At the end of June 2013, AIG Life and Retirement's assets under management were US $294bn, or 10% more than at the end of June 2012. Premiums and deposits during the quarter were US$6.8bn, or 24 more than in the previous corresponding period.
Bao Viet Holdings
SWOT AnalysisStrengths ■ A leading player in both the non-life and the life segments.
■ Breadth of product range, including aviation insurance.
■ Has significant asset management, banking and securities operations. ■ Strong brand and nationwide distribution network.
■ Capital strength.
■ Backing of SCIC and, for now, HSBC (which has an 18% stake and which has
provided substantial technical assistance).
■ A key beneficiary of the growth of the overall economy and the increase in insurable
assets.
■ A key beneficiary of the continuing development or organised savings.
• Strong top-line growth and rising profits in the recent past.
Weaknesses ■ Vulnerable to swings in the economy.
■ Vulnerable to volatility in Vietnam's financial markets. ■ Lack of scale in anything other than a local context.
■ Under-development of bancassurance and alternative channels.
Opportunities ■ Further growth in the overall market for insurance - in both major segments.
■ Cross selling. ■ Product innovation.
■ Further improvements to cost control and business systems. ■ Optimisation of the investment portfolio.
SWOT Analysis - Continued
Threats ■ Volatile financial markets.
■ Potential major catastrophe losses.
■ Strong competition in the life segment from subsidiaries of major foreign
multi-nationals.
Company Overview Founded in 1965 as the state owned insurance monopoly, Bao Viet is today a listed (since 2009) composite insurance company with additional financial services activities. It had been corporatized in 2007.
Bao Viet Life Corporation and Bao Viet Insurance Corporation are, respectively, the life (re)insurance and the general (re)insurance businesses. Bao Viet Fund Management Company is the group's asset management subsidiary. Other interests include Bao Viet Securities JSC (59.9%), Bao Viet Commercial Joint Stock Bank (52%), Bao Viet
Investment JSC (real estate investment - 95%) and Bao Viet Au Lac LLC (vocational driving training services - 60%).
HBSC has been the sole foreign strategic partner of Bao Viet, lifting its stake in the insurer from 8% to 18% in early 2010. HSBC maintained its 18% stake in the rights issue of November 2010. HSBC has provided considerable technical support. On August 9, 2012, Bao Viet issued a note of clarification to the State Securities Commission and the Ho Chi Minh City Stock Exchange: 'According to (the company's corporate charter), the restriction time for transferring of HSBC's shares in Bao Viet Holdings as a strategic shareholder is five years. HSBC has confirmed to Bao Viet Holdings that it is reviewing its strategic options with respect to its shareholding. No decision has been made as yet and a further statement will be made if or when appropriate.'
The other strategic shareholder is the State Capital Investment Corporation (SCIC), the vehicle through which the government holds investments in state owned enterprises. SCIC became a major shareholder in September 2009, when it took over a stake previously held by Vietnam Shipbuilding Industry Corporation (Vinashin).
For its core businesses, the strategic objectives in 2011-15 are as follows: 'General insurance: to maintain the number one position in the non-life insurance market in terms of retained premiums. By the end of 2015, direct insurance premium (should reach) VND8,800bn. PAT is VND480bn.'
