Hanoi (VNS/VNA) – The non-life insurance sector has seen a flurry of
merger and acquisition (M&A) deals over the past two years, partly
reflecting the attractiveness and keen competition of the market, which still
has room for growth.
DB Insurance, which is one of the Republic of Korea’s leading non-life
insurance companies, has just completed another step of its purchase strategy
to take control of Vietnam National Aviation Insurance Company (VNI).
Expectations of fresh momentum from foreign capital inflows helped VNI’s stock
prices soar last week.
The transfer value is determined by the two parties’ agreement, but it is
estimated to be worth about a trillion dong at the current market price.
VNI has a charter capital of 1 trillion VND (42.2 million USD), which is the
largest charter capital in M&A deals over the past two years. Three
noteworthy M&A transactions in the insurance sector occurred during this
time, but the parties involved were not experts in the non-life sector.
In particular, VPBank increased its shareholding of OPES Insurance from 6.05
million units to 53.9 million units last November, or 98% of charter capital,
by purchasing an additional 47.85 million shares of the company.
Additionally, in the fourth quarter of 2022, Tasco spent more than 402 billion VND
to acquire Groupama Vietnam’s entire share capital, changing the company’s name
to Tasco Insurance. The plan calls for Tasco to invest an additional 612
billion VND in this business.
Previously, in September 2021, BCG invested a total of 316.5 billion VND to
acquire a controlling interest in AAA Insurance.
Vietnam was one of the insurance marketplaces with the highest growth rates in
the world prior to the COVID-19 pandemic. Statistics for 2011–2019 showed that
the country’s annual growth rate in insurance premium revenue was 20% while the
global average was 3%.
In the two years affected by the pandemic, the growth of insurance premium
revenue in Vietnam was only a few%. It grew by 1.7% in 2021 alone.
However, after the pandemic was controlled in 2022, insurance premium revenue
recovered quickly, increasing by 16.2% for the whole market, with the non-life
segment gaining by 17.3% year-on-year.
As there is still much room for development in the domestic insurance market,
the industry’s growth target is set at double-digits.
The industry’s rivalry is still fierce, though.
By the end of 2022, the insurance market had 78 businesses, including 31
non-life insurers, two reinsurers, 19 life insurance businesses, and 26
Since the launch of HD Insurance (in 2020), the management agency has not
granted more establishment licences, but M&A transactions have altered the
fundamentals of many businesses.
Fierce competition leads to high costs for insurance companies to pay for
distribution channels. In 2022, profits from the insurance activities of many
non-life insurers went down despite higher revenue.
Under competitive pressure, it is difficult for new entrants to find a
VPBank’s 2022 segment reporting showed that this division’s business results posted
a slight loss of nearly 6 billion VND. Meanwhile, BCG’s investment in AAA
Insurance also lost nearly 35 billion VND out of the total investment capital
of nearly 320 billion VND in the first financial year of merging.
However, the results of the first few years cannot reflect the results of the
M&A deal. After a long enough time, many M&A deals have produced
For example, more than seven years after FairFax Financial Group (Fairfax Asia
Limited) bought 35% of shares of BIDV Insurance (BIC) through the offering of
new shares through private placement, the rate of return on average equity
(ROEA) increased from 7.72% in 2015 to over 12% in 2022, although there was a
significant decrease in the first three years.
In 2019, BIC’s ROEA saw a significant breakthrough after A.M. Best lifted its
credit rating and it received support from Fairfax’s information technology
experts to invest in a core banking system.
There are also cases of conflicts after a reorganisation of shareholders. For
example, at the 2022 Annual General Meeting of Shareholders of Post and
Telecommunications Insurance Joint Stock Company (PTI), plans to offer shares
to the public and issue shares to increase capital from equity and the issuance
of ESOP shares were all vetoed.
In the case of DB Insurance, if the deal is successful, the RoK insurance
company will hold the controlling percentage in VNI, avoiding conflicts between
major shareholder groups./.