Q1 2010 www.businessmonitor.com INSURANCE REPORT ISSN 1752-8410 Published by Business Monitor International Ltd. VIETNAM INCLUDES 5-YEAR FORECASTS TO 2014 Business Monitor International Mermaid House, 2 Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2009 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. 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Vietnam Insurance Report Q1 2010 Including 5-year industry forecasts by BMI Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Publication date: December 2009 Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 2 Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 3 CONTENTS Executive Summary 5 Table: Overview Of Vietnam’s Insurance Sector 5 Key Insights On Vietnam’s Insurance Sector 5 SWOT Analysis 7 Vietnam Insurance Industry SWOT 7 Vietnam Political SWOT 7 Vietnam Economic SWOT 8 Vietnam Business Environment SWOT 8 Global Outlook 9 Asia Pacific Overview 11 Projections And Forecasts 15 Table: Insurance Premiums, 2006-2014 15 Projections And Drivers Of Growth 15 Table: Growth Drivers, 2006-2014 16 Country Update 17 Macroeconomic Forecast 17 Table: Vietnam – Economic Activity, 2007-2014 19 Political Outlook 19 Insurance Business Environment Rating 22 Table: Vietnam’s Insurance Business Environment Indicators 22 Table: Asia Pacific Insurance Business Environment Ratings 23 Regional Context 24 Table: Non-Life Premiums In A Regional Context, 2008 24 Table: Life Premiums In A Regional Context, 2008 25 Major Players In Vietnam’s Insurance Sector 26 Table: Non-Life Segment By Lines, H109 (VNDmn) 26 Table: Life Segment By Lines, H109 (VNDmn) 27 Table: Leading Non-Life Companies By Gross Written Premiums, H109 (VNDmn) 27 Table: Leading Life Companies By Gross Written Premiums, H109 (VNDmn) 27 Analysis Of Regional Competitive Conditions 28 Local Company Profiles 33 Bao Minh 33 Bao Viet 34 PJICO 35 Regional Company Profiles 36 AEGON 36 AIG 37 Allianz 42 Aviva 45 Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 4 AXA 47 Cardif 49 Fortis 52 Generali 54 Groupama 56 HDI-Gerling 58 HSBC Insurance 61 ING Group 64 Liberty Mutual 65 Manulife 67 MetLife 69 Prudential Financial 72 Prudential Plc 75 QBE 78 RSA 80 Sun Life Financial 81 The Principal 83 Zurich Financial Services 84 Country Snapshot: Vietnam Demographic Data 86 Section 1: Population 86 Table: Demographic Indicators, 2005-2030 86 Table: Rural/Urban Breakdown, 2005-2030 87 Section 2: Education And Healthcare 87 Table: Education, 2002-2005 87 Table: Vital Statistics, 2005-2030 87 Section 3: Labour Market And Spending Power 88 Table: Employment Indicators, 1999-2004 88 Table: Consumer Expenditure, 2000-2012 (US$) 88 Methodology 89 Insurance Business Environment Ratings 90 Table: Insurance Business Environment Indicators And Rationale 90 Table: Weighting Of Indicators 91 Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 5 Executive Summary Table: Overview Of Vietnam’s Insurance Sector Non-life segment VNDmn US$mn EURmn 2008 premiums, mn 10,855,000 661 449 2008-2013 premium growth, mn 12,641,000 763 690 2008-2013 CAGR, % 17% 17% 20% 2008 penetration, % of GDP 0.7% Segment Measure of Openness to New Entrants (out of 10) 5.0 BMI Segment Rating 32.5 Life segment 2008 premiums, mn 10,330,000 629 428 2008-2013 premium growth, mn 11,106,800 671 612 2008-2013 CAGR, % 16% 16% 19% 2008 penetration, % of GDP 0.7% Segment Measure of Openness to New Entrants (out of 10) 5.0 BMI Segment Rating 35.0 Total insurance sector 2008 premiums, mn 21,185,000 1,289 877 2008-2013 CAGR, % 16% 16% 20% 2008 penetration, % of GDP 1.4% BMI insurance business environment rating 44.2 CAGR = compound annual growth rate. Source: BMI Key Insights On Vietnam’s Insurance Sector This report differs from its predecessors in several respects. In our analysis of competitive conditions, we provide a much more comprehensive ranking of insurance companies in the major segments from the point of view of the organisation that is providing the data (in practice almost always the national insurance regulator or the national insurance trade association). In Poland, for instance, the three largest non-life companies in the first half of 2009 – in terms of Gross Written Premiums written - were PZU SA, STU ERGO Hestia SA and TUiR WARTA SA, whose market shares were 38.9%, 10.0% and 9.4% respectively. In the life segment, the leaders in the first half of 2009 were PZU Życie SA, ING TUnŻ SA and TUnŻ WARTA SA, whose market shares were 28.1%, 11.1% and 9.4% respectively. Over time, we hope to derive insights from observing how market shares change. We emphasise though, that a decline in Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 6 share of Gross Written Premiums is not automatically a bad thing and is often the result of a deliberate corporate decision to focus on more profitable business lines. In this report, we also provide a breakdown of the insurance sector by line – from the point of view of the regulator or the trade association. In Poland, for instance, the largest non-life lines in 2008 were compulsory motor third party liability (CMTPL), land vehicles voluntary insurance (CASCO) and fire and diverse risks. These accounted for 35%, 26% and 10%, respectively, of total non-life premiums. Over time, we should be able to use this information to bring greater sophistication to our forecasting process. Writing in December 2009, we have been able to ensure that the report includes actual data for 2008. We have generally been able to use data that has been published over the course of 2009 to adjust our forecasts for the year as a whole. We have also extended the forecasts out to 2014. We are looking for total premiums in 2009 of VND21,743,254mn. This includes non-life premiums of VND11,757,081mn and life premiums of VND9,986,174mn. In 2014, the corresponding figures should be VND54,079,998mn, VND26,575,793mn and VND27,504,205mn. In terms of the key drivers that underpin our forecasts, we are looking for non-life penetration to rise from .77% in 2009 to 1.08% in 2014, and for life density to rise from US$6 to US$9. BMI’s proprietary Insurance Business Environment Rating for Vietnam is 44.2. This quarter, we include a discussion of developments within regional markets on the basis of results published by major cross-border companies in relation to Q209 or Q309 and the latest information provided by regulators and/or trade associations. Aside from Singapore, most of the markets of South East Asia represent small portions of the regional businesses of cross-border insurers in Asia Pacific. The individual markets of South East Asia, other than Singapore, typically represent a small portion of the regional business of the various multinational insurers who are active across the region. Nevertheless, it is significant that many of the larger cross-border groups commented favourably on the performance of their operations in Malaysia, the Philippines, Thailand, Vietnam and Indonesia through the first six to first nine months of 2009. Improving perceptions of risk on the part of domestic investors have boosted demand for long-term savings products. In many cases, it is the large multinationals that have benefited, at the expense of smaller local groups. Thanks to reasonably resilient domestic demand, non-life insurance has continued to develop, in some cases from low bases. Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 7 SWOT Analysis Vietnam Insurance Industry SWOT Strengths Both Vietnam’s life and non-life segments are rapidly growing. Authorities are increasingly disposed to the benefits of foreign competition. The economic conditions are – and are likely to remain – favourable, with a low prospect of risks to the realisation of potential returns. Weaknesses The high growth anticipated in both the life and non-life segments of the Vietnamese market is nonetheless coming off a very small base. Even if our optimistic projections for 2008-2013 turn out to be correct, both segments will still be, relatively speaking, underdeveloped in 2013. Small number of players; particularly in the life segment. GDP per capita is tiny, limiting the market for insurance products. Opportunities The ceding by large local firms of market share to rivals in the non-life segment demonstrates the openness of the market to new players. There are still large numbers of people who are underinsured (or uninsured). Threats Increasing prospect of high ongoing inflation represents a general economic threat. Lack of development, volatility in Vietnamese capital and bond markets are a threat. Vietnam Political SWOT Strengths Communist Party government appears committed to market-oriented reforms, although specific economic policies will undoubtedly be discussed at the 2011 National Congress. One-party system generally conducive to short-term stability. Relations with US generally improving; US sees Hanoi as a potential regional ally. Weaknesses Corruption among government officials a major threat to Communist Party legitimacy. Increasing (albeit limited) public dissatisfaction with leadership's control over dissent. Opportunities The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. Has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the system. Threats The slowdown in growth in 2009 and 2010 is likely 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 the past year 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 large-scale environmental damage. Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 8 Vietnam Economic SWOT Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.6% annually between 2000 and 2007. 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% in 2004. Weaknesses Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable as the global economy continues to suffer in 2010. The fiscal picture is clouded by considerable 'off-the-books' spending. The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures. Opportunities WTO membership has given Vietnam 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 to rise 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 hold, as they struggle to stabilise the economy. Vietnam Business Environment SWOT Strengths Large, skilled, low-cost workforce has made Vietnam attractive to foreign investors. Vietnam's location (proximity to China and other South East Asian states and its good sea links) makes it good base for foreign firms to export to 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. One of the world's most corrupt countries. Its score in Transparency International's 2008 Corruption Perceptions Index was 2.7,in 20th place in the Asia Pacific region. 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 rivatisation of state-owned enterprises and liberalisation of 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 levels could leave Vietnam a second-rate economy for an indefinite period. Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 9 Global Outlook There is little doubt now that the global recession is over, and that the prospects for 2010 are improving. Our global growth forecast for 2009 has been revised up to -2.0% (from -2.1% in September); while for 2010 we project 2.5% global expansion (from 2.3%). One of the distinctive characteristics of this recovery is the degree to which it is being driven by emerging – rather than developed – markets. Our core view for most developed states continues to include deflationary pressures, deleveraging and sluggish growth going into 2010. But in emerging states, output is rebounding quickly and inflationary pressures are more acute. This is reflected in our aggregate estimates for developed market versus emerging market real GDP growth in 2010, at 1.3% versus 4.4%. The most substantial revision to our global assumptions stems from a significant shift in outlook from our oil and gas team, which now envisages much higher oil prices in coming years. Our 2010 forecasts have been raised to US$83.00 per barrel (bbl) for the OPEC basket (from US$60.00/bbl) and US$86.00/bbl for Brent Crude (from US$61.00/bbl), while our long-term forecasts have increased to the low US$90s/bbl from the low US$70s/bbl. According to our oil and gas team, these new assumptions are based on a significant and sustained improvement in 2010 oil demand as economic activity picks up. Developed States We forecast developed state aggregate growth of 1.3% in 2010, up slightly from 1.2%. Notably, our forecasts for the eurozone and Canada have been revised modestly upward. Our projections for Germany and France have proved slightly pessimistic given the run of increasingly positive economic data, and this has led to an upgrade of the eurozone real GDP growth aggregate to -3.9% from -4.3% previously for 2009, and to 0.5% from 0.4% for 2010. Meanwhile, Canada’s resilience through the global downturn, and the prospects for higher commodity prices, led us to upgrade our 2010 forecast to 2.4%, from 1.6%. Our current US forecast remains unchanged, at -2.7% in 2009 and 1.9% in 2010. However, both could be revised depending on incoming data for Q309. Emerging Markets Emerging market growth is forecast at 4.4% in 2010, up from 4.3% and a significant rebound from the 0.7% we forecast for 2009. We expect to see greater inflationary pressures in the emerging market universe compared with developed states, which will lead to more aggressive tightening among emerging market monetary authorities. While our core view is that growth is set to persist in most emerging markets beyond 2010, tightening policy puts a ‘double-dip’ scenario back into play. Emerging Asia is forecast to grow by 6.7% in 2010, an upgrade from 6.5% previously and ahead of the 6.6% growth in 2008. Base effects, particularly in exports and inventories, will be key to this growth. Our near-term forecasts are also driven by our China outlook, as we see the country’s economy expanding by [...]... 2.44 101.06 68.72 Vietnam 629 428 0.70 7.24 4.93 Australia Bangladesh Sri Lanka Taiwan Source: BMI estimates © Business Monitor International Ltd Page 25 Vietnam Insurance Report Q1 2010 Major Players In Vietnam s Insurance Sector In Vietnam, the insurance sector is regulated by the Insurance Supervisory Division within the Ministry of Finance (Source: www.mof.gov.vn, May 2009) The insurance trade association... Public liability insurance 100,998 Agricultural insurance Credit/financial risk 271 43,075 EAR insurance 457,038 Oil and gas 325,987 Others 408,030 Total 5,562,715 Source: AVI © Business Monitor International Ltd Page 26 Vietnam Insurance Report Q1 2010 Table: Life Segment By Lines, H109 (VNDmn) Pure endowment 3,468 Whole life 71,265 Term insurance 57,386 Annuity 18,260 Investment insurance 408,262... through higher import prices We are now expecting 500bps of hikes in 2010, bringing the Vietnam base rate from 7.00% in November 2009 to 12.00% © Business Monitor International Ltd Page 17 Vietnam Insurance Report Q1 2010 A reduction of the fiscal deficit from VND118trn (US$6.6bn), or 7.2% of GDP, to VND105trn (US$5.9bn), or 5.7% of GDP, in 2010 on the back of reductions in both current and capital expenditure... would, on the other hand, mean a high risk of a © Business Monitor International Ltd Page 18 Vietnam Insurance Report Q1 2010 continuation of macroeconomic volatility as expressed in Vietnam' s score of 43.8 out of 100 in our shortterm economic risk ratings Table: Vietnam – Economic Activity, 2007-2014 2007 2008e 2009f 2010f 2011f 2012f 2013f 2014f 1,144,015 1,478,695 1,628,770 1,825,075 2,053,255 2,288,455... political risk rating down to 52.8, reflecting our view that one-party rule is unsustainable in the longer term © Business Monitor International Ltd Page 21 Vietnam Insurance Report Q1 2010 Insurance Business Environment Rating Table: Vietnam s Insurance Business Environment Indicators Data Score, out of 10 Rating score, out of 100 Non-life premiums, 2008 Us$660.6mn 2.0 Non-life 32.5 Non-life premium... 49% in 2008 Figures released by the China Insurance Regulatory Commission (CIRC) indicated that, in the first 10 months of 2009, ‘other’ life insurance premiums (meaning premiums that are not for personal accident or © Business Monitor International Ltd Page 11 Vietnam Insurance Report Q1 2010 health cover) increased by 6.7% y-o-y, to CNY625,027.1mn China Life’s report to the Hong Kong Stock Exchange... www.mof.gov.vn, May 2009) The insurance trade association is the Vietnam Insurance Association Key life insurance companies include: Bao Viet (also a non-life insurance company); Prudential; Manulife; AIA; Dai-ichi Life; ACE Life; and Prevoir Key non-life insurance companies include: Bao Viet (also a life insurance company); Bao Minh; Petrovietnam Insurance Co (PVIC); PJICO; PTI; Cong ty BH lienhiep; Bao... first three months of 2009 Vietnam has seen a good turnaround in agency activity and, combined with the smaller operations in Thailand and the Philippines, APE is down only 7% on the first half of 2009.’ © Business Monitor International Ltd Page 14 Vietnam Insurance Report Q1 2010 Projections And Forecasts Table: Insurance Premiums, 2006-2014 VNDbn 2006 2007 2008 2009f 2010f 2011f 2012f 2013f 2014f... Company of India still has an 80% market share, according to the Insurance Regulatory & Development Authority (IRDA) The IRDA notes that in the © Business Monitor International Ltd Page 31 Vietnam Insurance Report Q1 2010 non-life segment New India is the largest player and speaks for about 20% of premiums National Insurance Company, Oriental Insurance and United India each have market shares of about 15%... Business Monitor International Ltd Page 10 Vietnam Insurance Report Q1 2010 Asia Pacific Overview First Nine Months Of 2009 – No Bonanza, But Not Bad Either… By early December 2009 enough information had been made available by the major cross-border insurance companies that have a presence across Asia Pacific to gain a clear picture of general trends in non-life and life insurance markets in the various countries . International Publication date: December 2009 Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 2 Vietnam Insurance Report Q1 2010 © Business Monitor International. Of Vietnam s Insurance Sector 5 Key Insights On Vietnam s Insurance Sector 5 SWOT Analysis 7 Vietnam Insurance Industry SWOT 7 Vietnam Political SWOT 7 Vietnam Economic SWOT 8 Vietnam. non-life insurance has continued to develop, in some cases from low bases. Vietnam Insurance Report Q1 2010 © Business Monitor International Ltd Page 7 SWOT Analysis Vietnam Insurance