BACHELOR THESIS Major Finance SOLUTIONS TO IMPROVE THE DEBT MANAGEMENT OF AVIVA VIETNAM LIFE INSURANCE CO , LTD TABLE OF CONTENT INTRODUCTION OF THE THESIS 1 1 The rationale of the thesis 1 3 The rese.
BACHELOR THESIS Major: Finance SOLUTIONS TO IMPROVE THE DEBT MANAGEMENT OF AVIVA VIETNAM LIFE INSURANCE CO., LTD TABLE OF CONTENT ABBREVIATIONS Number Abbreviation Content Aviva Vietnam Vietinbank Bao Viet Prudential Prudential Vietnam Life Insurance Company Limited Manulife Manulife Vietnam Company Limited AIA ACE Life (Chubb) Chubb Vietnam Life Insurance Company Limited Prévoir Prévoir Vietnam Life Insurance Company Limited Dai-ichi Dai-ichi Vietnam Life Insurance Company Limited 10 Cathay Cathay Vietnam Life Insurance Company Limited 11 Great Eastern (FWD) FWD Vietnam Life Insurance Company Limited 12 Hanwha Hanwha Life Vietnam Life Insurance Company Limited 13 VCLI FWD Assurance Vietnam Company Limited 14 Fubon Fubon Vietnam Life Insurance Company Limited Aviva Vietnam Life Insurance Company Limited Vietnam Joint Stock Commercial Bank for Industry and Trade Bao Viet Life Corporation AIA Vietnam Life Insurance Company Limited 15 Generali Generali Vietnam Life Insurance Company Limited 16 (PVI)*Sun Life Sun Life Vietnam Life Insurance Company Limited 17 Phu Hung Phu Hung Vietnam Life Insurance Company Limited 18 (BIDV)*MetLife 19 MB*Ageas MB Ageas Vietnam Life Insurance Company Limited 20 MANCOM Manager Committee 21 TRL Trillion 22 VND Vietnam Dong 23 ROE Return on Equity 24 ROA Return on Asset 25 D/E ratio BIDV Metlife Vietnam Life Insurance Company Limited Debt-to-Equity ratio LIST OF FIGURES Figure 1.1: Four main categories of debt according to Investopedia5 Figure 1.2: Two main categories of debt6 Figure 1.3: Internal factors that affect debt management among life insurance companies 12 Figure 1.4: External factors that affect debt management among life insurance companies 17 Figure 2.1: Organization chart of Aviva Vietnam22 Figure 2.2: Organization chart of Aviva Vietnam’s Finance & Accounting department26 Figure 2.3: The average debt ratio of Vietnam insurance industry in the period of 2011202129 Figure 2.4: Total debt of Aviva and other companies in 2017-202132 Figure 2.5: Total assets of Aviva and other companies in 2017-202134 Figure 2.6: Total equity of Aviva and other companies in 2017-20215 Figure 2.7: Debt ratios of Aviva and other companies in 2017-20217 Figure 2.8: Debt-to-equity ratios of Aviva and other companies in 2017-20219 Figure 2.9: Comparing Aviva’s debt ratio to the benchmark of 2011-202141 Figure 3.1: Aviva Vietnam’s milestones for 2021-202444 Figure 3.2: Aviva Vietnam’s recommendation for the company’s growth in 2021-2024 47 LIST OF TABLES Table 2.1: Debt ratio 18 insurance companies in Vietnam during 2017-2021 Table 2.2: Total debt of Aviva and other companies in 2017-202131 Table 2.3: Total assets of Aviva and other companies in 2017-202133 Table 2.4: Total equity of Aviva and other companies in 2017-202134 Table 2.5: Debt ratio of Aviva and other companies in 2017-202136 Table 2.6: Debt-to-equity ratio of Aviva and other companies in 2017-202138 EXECUTIVE SUMMARY Vietnam's insurance firms and Aviva both locally and globally must contend with increased competitive pressure While new and small businesses battle for market dominance by pushing sales despite risks, resulting in losses owing to higher compensation expenses, the market leaders restructure their product groups and pick clients to enhance profitability The Vietnamese market is being targeted by foreign corporations with the potential to supply distinctive products at a higher profit margin Purchasing shares in domestic companies is the quickest option to access Vietnam's stilldeveloping and competitive market In addition to favorable business outcomes, insurance business methods and policies continue to be established, finalized, and issued on schedule, steadily strengthening administrative reform transparency and establishing circumstances for insurance businesses to expand in a healthy, safe, and effective way Require enterprises to improve their competitiveness in order to avoid being pushed out of the market and to be progressively placed in a position to control its market Aviva Vietnam's market competitiveness has improved over the last year, and the company's ability to meet long-term insurance obligations, as well as its financial obligations to customers, partners, shareholders, and investors, has risen to new heights and will continue to meet international standards Aviva Vietnam will also have better options to participate in bidding, competitive bidding, and large-scale insurance services, as well as more prospects for international cooperation with reinsurers, brokers, and overseas clients This will serve as a firm platform for Aviva Vietnam to grow and achieve greater success in the future However, when new companies enter the market, the insurance industry in Vietnam is regarded to be more competitive, and these firms are always strengthening their competitiveness Some significant variables have been concerned to give remedies and recommendations to enhance Aviva Vietnam As a result, the subject concentrates on Aviva Vietnam's competitiveness research using the following criteria: financial status, market share, resources, customers, rivals, and so on This represents the company's overall achievements and limitations, from which a variety of suggestions to contribute to the construction of Aviva Vietnam in order to boost competitiveness may be proposed 10 INTRODUCTION OF THE THESIS The rationale of the thesis Vietnam's progress during the past 30 years has been exceptional, according to Dr Le Dang Doanh's paper "Vietnam after 30 years of renovation: Achievements and Prospects" (2016, p.26) Economic and political changes since 1986 have fostered fast and economic development Vietnam went from being one of the world's poorest countries to a low to middle-income country in a matter of years This statement is completely consistent with the data presented by Dr Dao Thu Hang (2020) in his overview of the Vietnamese economy: from 2002 to 2018, GDP per capita increased by 2.7 times, reaching more than US$2,700 in 2019 As a result, people's living standards and the quality of their health care have significantly improved Despite the fact that the COVID-19 pandemic will have a large impact on Vietnam's economy in 2020, signals of our country's economic recovery remain encouraging and considerable, and people remain healthy Vietnam's GDP growth in 2020 is 2.9 percent, according to World Bank figures "Overview of Vietnam" (2021); Vietnam is one of the few nations in the world with a positive economic growth rate "Probable health concerns associated to the COVID-19 pandemic," according to doctor and researcher Paul Schuler (2021) According to the survey results recently released by Vietnam Report in 2021, the COVID-19 pandemic has made people acutely aware of their own health risks, as evidenced by nearly 71 percent of insurers in Vietnam believing that the impact of the COVID-19 epidemic has significantly improved people's awareness and understanding of insurance Not only that, but the unpredictability of COVID-19's progression in Vietnam serves as a motivator for the government to push and urge individuals to get commercial health insurance The National Assembly agreed on the target of achieving a coverage rate of over 91 percent of the population by 2021 in the Resolution on the socio-economic development plan for 2021, which was enacted on November 11, 2020 This is a lofty aim that, at the same time, emphasizes the need of 65 Ramamoorthy, R (2014) Role of Services Marketing Mix on Purchase Intention: A Study with Special Reference to Health Insurance Products among Unorganized Sector Workers (Doctoral dissertation) Slocombe, T E (1999) Applying the theory of reasoned action to the analysis of an individual’s polychronicity Journal of Managerial Psychology, 14(3/4), 313–324 So Young Bae & Po-Ju Chang (2021) The effect of coronavirus disease-19 (COVID-19) risk perception on behavioural intention towards ‘untact’ tourism in South Korea during the first wave of the pandemic (March 2020), Current Issues in Tourism, 24:7, 1017-1035 Tam, L., Tyquin, E., Mehta, A et al Determinants of attitude and intention towards private health insurance: a comparison of insured and uninsured young adults in Australia BMC Health Serv Res 21, 246 (2021) Triandis, H C (1977) Interpersonal behavior Monterey, CA: Brooks/Cole Psychology & Health, 15, 383 – 393 Wahab, M Z H., & Tajuddin, A M (2020) The Roles of Health Awareness and Knowledge in Medical Takaful Purchase Intention International Journal of Banking and Finance, 14, 95-116 Weber, E U., & Hsee, C (1998) Cross-Cultural Differences in Risk Perception, but Cross-Cultural Similarities in Attitudes Towards Perceived Risk Management Science, 44(9), 1205–1217 Wilfred, V (2020) Factors influencing the purchase intention of health insurance in Kota Kinabalu Sabah Asia Graduate School of Business, UNITAR International University, Petaling Jaya, Selangor, Malaysia Yue, C A., Chung, Y 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34,756,142 29,891,199 120,000 120,000 120,000 120,000 21,219,94 120,000 2,049,097 4,535,937 4,932,207 5,056,188 4,502,440 95,144,685 74,448,916 63,329,534 50,811,131 41,752,31 Historical costs Accumulated depreciation Statutory deposits Other long-term assets Total assets 40,649,820 35,826,959 26,615,06 51,327,922 LIABILITIES AND OWNERS’ EQUITY Liabilities 77,609,732 59,297,175 49,485,761 37,076,610 Current liabilities 6,093,591 7,947,990 5,727,876 3,335,556 290,847 252,998 177,751 28,164 Technical reserves 71,225,293 51,096,188 43,580,134 33,712,890 Owners’ equity 17,534,952 15,151,741 13,843,772 13,734,250 Paid-in capital 28,563,910 28,563,910 25,570,310 25,570,300 Compulsory reserves 161,969 (11,190,92 7) 42,809 (13,454,97 9) 42,809 (11,769,34 7) 37,347 (11,873,13 6) Long-term liabilities Accumulated losses Total liabilities and 95,144,685 74,448,916 63,329,534 50,810,860 owners’ equity III 25,454,16 3,494,384 32,663 21,927,12 16,298,15 25,570,31 37,347 (9,309,50 5) 41,752,31 Income statement of Aviva Vietnam VND million Total income Revenue from insurance 2021 2020 2019 2018 2017 37,796,147 33,202,611 36,018,010 29,815,511 25,720,679 21,835,439 17,010,407 14,274,465 10,876,610 9,501,998 72 operations Financial income Other income Total expenses Expenses related to insurance operations Financial expenses Selling expenses General and administration expenses Net profit (loss) before tax Balancing reserve Business income tax current Business income tax deferred Net profit (loss) after tax 4,583,124 6,144,959 3,813,826 2,719,962 1,357,192 10,412 (34,677,480 ) 57,540 71,414 15,980 17,420 (37,675,203) (25,097,114) (20,214,946) (17,063,327) (26,022,472 ) (25,977,401) (15,203,573 (13,216,704) (12,177,929) (117,577) (309,760) (96,247 (74,352) (59,661) (5,213,151) (8,689,873) (7,389,322 (4,994,520) (3,383,259) (3,324,278) (2,698,169) (2,407,971 (1,929,369) (1,442,477) 3,118,667 (1,657,193) 623,565 (3,204,539) (6,186,717) _ _ _ _ _ _ _ _ _ _ (73,545.481 ) (28,438.09) (514,313.75) 640,907.75 1,237,343.32 2,383.212 (1,685,631.51 ) 109,251.15 (2,563,630.99 ) (4,949,373.27 ) ... the help of life insurance 2.1.2 History of Aviva Vietnam Life Insurance Co., Ltd 2.1.2.1 Foundations of Aviva Vietnam Life Insurance Co., Ltd In Vietnam, Aviva began operating in 2011 with the. .. 2: Current debt managing situation of Aviva Vietnam Life Insurance Co., Ltd CHAPTER 3: Solutions to improve the debt managing of Aviva Vietnam Life Insurance Co., Ltd 14 CHAPTER 1: THEORETICAL... intern of Aviva Vietnam life insurance company With a history of more than 300 years, Aviva life insurance company will be the ideal company for me to have the opportunity to study and improve