Non-life insurance market: An attractive area for foreign investment.

Top businesses maintain their position.

The National Comprehensive Financial Strategy to 2025, with a vision to 2030, as outlined in Decision 149/QD-TTg, sets a target of 3.5% of insurance premium revenue as a percentage of GDP. The strategy aims to popularize basic financial products and services offered by licensed organizations, including: payments, money transfers, savings, credit, and insurance.

According to data from the Vietnam Insurance Association, from 2019 to 2023, the top 10 non-life insurance companies accounted for 78% of the total market revenue. Notable names include PVI, Bao Viet, PTI, MIC… This group has consistently maintained its leading position, with little change in ranking over the past five years.

A readily apparent characteristic of the leading companies is their strong financial health and robust capital base, stemming from the ecosystem of state-owned corporations and the financial institutions behind them. Behind market leaders PVI is the Vietnam National Petroleum Group, PTI is the Vietnam Post Corporation, MIC is the Military Bank (MBBank) , and companies like Bao Minh and Bao Viet are the two oldest non-life insurance companies in Vietnam.

Many foreign investors have poured capital into M&A deals in Vietnamese insurance companies. (Illustrative image)

In recent years, the shareholder structure of this top group of businesses has included leading global foreign strategic investors. Notable examples include HDI Global SE (Germany), Funderburk Lighthouse (Oman government investment fund), and the International Finance Corporation (IFC) in PVI's shareholder structure, as well as AXA Insurance and Finance Group (France) and Firstland Limited, which are believed to hold more than 20% of Bao Minh Insurance's capital.

Similarly, Hyundai Marine & Fire Insurance - HMFI also acquired shares to hold 25% of VBI's charter capital. Bangkok Insurance and PICC P&C (People's Insurance Group of China) have been cooperating with Bao Viet since 2018.

There is also the participation of foreign investors, backed by some of Vietnam's leading parent banks or large corporations such as BIDV, Agribank , Vietinbank, Vietnam National Petroleum Group, and the BIC, VBI, and PJICO groups, which are three notable bright spots with good growth rates in recent years.

BIC is considered the most prominent name with steady market share growth. In the four years from 2019, BIC's market share increased from 3.8% in 2019 to 4.2% in 2020, 4.6% in 2021, 5.2% in 2022, and currently stands at 6.4% in 2023, ranking 6th in the market. BIC aims to be among the top 5 non-life insurance companies with the largest market share by 2025, backed by foreign investor Fair Fax Asia, which holds 35% of the shares. At VBI, while maintaining steady growth over the past four years, the figures were relatively small, at 3.6% in 2019 and increasing to 4.9% market share in 2023.

Similarly, PJICO's 2023 marked the first time the company reached the milestone of 4 trillion VND in gross insurance revenue. PJICO's pre-tax profit in 2023 reached 283.68 billion VND. Its market share has consistently remained at 5-6% over the past few years. In addition, the market is anticipating new developments with expectations surrounding DB Insurance's M&A deal with VNI and BSH. Currently, DB holds 75% of the charter capital in VNI and BSH, and 37% of the charter capital in PTI.

However, the positive figures of BIC or PJICO are nothing compared to the revenue of PVI, Bao Viet, or Bao Minh. Specifically, at the end of 2023, the entire PVI system had met its targets with total consolidated revenue reaching VND 16,083 billion, Bao Viet reached VND 11,752 billion, and Bao Minh exceeded VND 6,600 billion.

The lower group has fewer opportunities.

In contrast to the aforementioned group, the remaining 22 businesses, which currently hold only about 22% of the market share, are fiercely competing for a foothold. Many businesses in this group now have well-known foreign partners, but most have not been successful, and a significant number of investors have failed and withdrawn.

The first foreign investor to enter the Vietnamese insurance market in 2001, licensed in 2005, was Groupama Vietnam General Insurance Company Limited, backed by Groupama Assurances Mutuelles - a renowned French insurance group.

However, in September 2022, the Ministry of Finance issued a document approving Tasco's acquisition of 100% of the capital contribution of Groupama Vietnam General Insurance Company Limited. This marks Groupama's official withdrawal from the Vietnamese market after nearly 20 years of presence.

In May 2012, IAG, a leading Australian insurance group, completed the purchase of a 30% stake in AAA Insurance Joint Stock Company. Less than a year later, the same group increased its stake in AAA Insurance to 60.9%.

After nearly 10 years of ownership, at the end of 2021, Bamboo Capital Group and BCG Financial acquired 80.64% of the shares, replacing IAG as the largest shareholder of AAA. This can be considered a rather unsuccessful deal for AIG.

In 2011, ERGO Insurance Group (Germany) acquired 10 million shares and became a strategic partner of Global Insurance Company (GIC), owning 25% of the shares. At that time, both parties expected this cooperation agreement to help improve GIC's position in the Vietnamese non-life insurance market. Contrary to expectations, after more than 10 years of investing in GIC, the company still holds a relatively small market share in the non-life insurance market. Its market share was 2.6% in 2019, but by the end of 2023, this figure had decreased to only 2.2%.

Similarly, AFC Vietnam Fund (AFC VF Limited), an investment fund from the Cayman Islands, has been a foreign shareholder of ABIC Agricultural Insurance for over 10 years. However, despite many years of having a foreign shareholder, this insurance company remains in the bottom group, and its market share has even tended to decrease from 3.3% to 2.8% since 2019.

It can be seen that a common point in the aforementioned deals is that foreign investors entered the market quite early, possessing strong financial resources from their parent companies and hundreds of years of experience worldwide… but after many years of doing business in Vietnam, most of them have to make an unhappy choice: withdraw from the market or accept the long wait for new opportunities.

In reality, amidst fierce competition, some smaller brands are proving to be at a disadvantage. Names in the lower tier, such as GIC, ABIC, and Bao Long, share a common characteristic: they have had foreign investors for many years but haven't achieved much success, and these businesses struggle to maintain even 1-3% market share to survive. Some have even experienced a decline in market share.

According to financial experts, most of these small businesses are aware of their competitive disadvantages and quickly seek foreign partners as a way to develop, expecting significant support in terms of finance, management, and market access. However, in reality, most have not met expectations.

Given the specific characteristics of Vietnam's non-life insurance industry, the top 10 market share rankings for non-life insurance companies are unlikely to see significant changes in the near future, and opportunities for small businesses are quite limited. The competition for a market share among these companies is extremely difficult, and this seems inconsistent with the vision of many foreign-owned corporations.

Luu Minh

Source: https://vietnamnet.vn/thi-truong-bao-hiem-phi-nhan-tho-manh-dat-thu-hut-von-ngoai-2292374.html