The impact of covid 19 on vietnam insurance industry

According to the Ministry of Finance, health insurance accounted for the highest proportion of gross premiums in 2021, with 32.05%, followed by automobile insurance 27.44%, property and

Dissertation submitted in partial fulfillment of the Requirement for the MSc in Finance

Supervisor: Ass Prof Dr Do Thi Van Trang

September 2023

Acknowledgement

Initially, I am deeply grateful for the guidance and assistance I received while writing this dissertation My supervisor, Assoc Prof Dr Do Thi Van Trang, was instrumental in helping me formulate research questions and methodology Her feedback was insightful and constructive, and it challenged me to elevate my work to a higher standard

I also appreciate the cooperation and support of my colleagues from United Insurance Company of Vietnam I especially thank my Manager, Ms Trinh Thi Thanh Van, for providing me with the necessary documents for my research

Furthermore, I thank my family, especially my parents and my husband, for their unwavering love, support, and encouragement

Finally, I commit that this dissertation is my independent research work, with the dedicated guidance of Assoc Prof Dr Do Thi Van Trang The data in the dissertation are completely honest, have clear origins and are noted in the reference section or notes right below the illustrations and tables

I take full responsibility for the above commitment

Assoc Prof Dr Do Thi Van Trang

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Executive summary

The Covid-19 pandemic has been a global challenge that has affected various sectors of the economy, including the insurance sector Vietnam, as one of the few countries that has successfully contained the virus and maintained positive economic growth, has also faced significant changes and opportunities in its insurance industry This dissertation aims to analyze the impact of Covid-19 on the Vietnam insurance industry, focusing on analyzing some key indicators of three outstanding insurance companies in Vietnam from non-life insurance and life insurance markets to see the difference of Vietnam insurance industry overview before and after covid-19 period

The Ministry of Finance reported that the insurance premium revenue in Vietnam was 186.22 trillion VND in 2020, up 16.5% from 2019 The non-life insurance market increased by 8%, while the life insurance market increased much higher by 21% (Vietnam Insurance Market report 2021) The report also mentioned that some insurance lines were negatively affected by the Covid-19 pandemic, such as travel insurance, aviation insurance and credit insurance, while some other lines were positively affected, such as health insurance, personal accident insurance and property insurance The pandemic also boosted the digital transformation of the insurance industry, as more customers used online channels to purchase and renew insurance policies Moreover, the report pointed out the challenges and opportunities for the insurance industry in the pandemic situation, such as improving risk management, diversifying products, and services, enhancing customer experience, and expanding financial inclusion Vietnam’s economy also demonstrated remarkable resilience and recovery during the

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pandemic, especially GDP (Gross domestic product) growth of Vietnam was

8.02% in 2022 over the past decade, this could create favorable conditions for the growth of the insurance industry in the future

The topic “Vietnam insurance industry” is studied by many different articles or reports For example, according to the “Scientific Conference on Vietnam’s Insurance Industry CVII2021: Impact of covid-19, Insurtech, Market and Policies” which was held by the University of Economics Ho Chi Minh City and some Insurance units in April 2021 to discuss the current situation and future trends of the insurance industry in Vietnam, especially in the context of Covid-19 and digital transformation “This change will inevitably bring challenges and opportunities for global value chains and insurance chains are no exception Vietnam needs strategic steps to develop the insurance market in the new normal context” (UEH News – UEH University, 2021) Or in Vietnam’s Insurance Industry Outlook for 2022, it mentioned the statistics and performance of the insurance industry in Vietnam in 2021, as well as the forecasts and recommendations for 2022 (Vietnam credit, 2022) However, there is a lack of studies on how the Vietnam insurance industry changed due to Covid-19 through

“talking numbers”

The Vietnam insurance industry is growing fast, thanks to the good economic and financial situation of the country The industry is also changing and improving recently, because of the Covid-19 pandemic, the digital transformation,

and customer awareness The industry is also seeing a lot of M&A (Mergers and acquisitions) deals, which create opportunities and challenges for foreign firms who want to join or grow in the Vietnam market The market risks and

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opportunities brought on by the pandemic had an impact on the Vietnamese insurance sector It is necessary to research these consequences to comprehend

how the market transformed its goods and services to accommodate consumer preferences and demands, such as digitalization, health protection, and financial inclusion As more people sought insurance protection due to the pandemic, the industry's income and market share increased, particularly in the life insurance segment Besides, how the pandemic's numerous waves, which affected diverse economic sectors and industry could be discovered Therefore, studying how Covid-19 affected the Vietnamese insurance market might help us better understand the sector's advantages, disadvantages, possibilities, and risks

This dissertation is valuable for both academic and practical purposes with the data collected from trustworthy sources: International monetary funds (IMF), the Vietnam Ministry of Finance, audited annual financial and financial statement reports of insurance companies, and other sources from domestic and foreign channels It contributes to the literature on the insurance industry in Vietnam, which

is relatively scarce compared to other countries It also provides some information for readers about the insurance industry, customers, regulators, and policymakers

on how to cope with the challenges and opportunities brought by Covid-19 The dissertation is structured as follows: Chapter 1: Introduction, Chapter 2: Macroeconomic analysis; Chapter 3: Vietnam insurance industry analysis; Chapter 4: Some insurance companies’ analysis in Vietnam; Chapter 5: Concludes and suggests implications and limitations

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Table of contents

Abbreviations .8

List of figures and tables 9

Chapter 1: Introduction .10

Chapter 2: Macroeconomic analysis 12

1 Political 12

2 Economics: 14

2.1 GDP amount and GDP growth in Vietnam .14

2.2 Exchange rate, inflation rate .16

3 Foreign Direct Investment (FDI) and export-import 17

3.1 Foreign Direct Investment (FDI) in Vietnam: 17

3.2 Export-Import activities in Vietnam: 19

4 Social .20

5 Technology and innovation in Vietnam 22

Chapter 3: Industry analysis 24

1 General overview of the Vietnam insurance industry .24

2 Industry performance .27

Chapter 5: Insurance companies analysis .33

1 PVI Insurance Company .33

1.1 Business description .33

1.2 Business strategy 35

1.3 SWOT analysis .36

1.4 Financial statement analysis .39

1.5 Financial ratio analysis .42

1.6 Recommendation: 43

2 Bao Minh insurance company 44

2.1 Business description: 44

2.2 Business strategy 45

2.3 SWOT analysis: 46

2.4 Financial statement analysis 49

2.5 Financial ratios analysis 52

2.6 Recommendation .53

3 Dai-ichi life insurance company 54

3.1 Business description .54

6 3.2 Business strategy 56

3.3 SWOT analysis .57

3.4 Financial statement analysis .60

3.5 Financial ratios analysis 63

3.6 Recommendation .64

Chapter 5: Concludes and suggests implications and limitations .65

1 Conclusion and recommendation 65

2 Limitations 66

References 67

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Abbreviations

GDP – Gross domestic product

IMP – The International Monetary Fund PVI – Petrol Vietnam Insurance company GWP – Gross written premium/ insurance premium

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List of figures and tables

Figure 1 Vietnam GDP and GDP growth from 2017 to 2025f .14

Figure 2 Vietnam exchange rate and inflation rate from 2017 to 2025f 16

Figure 3 Foreign direct investment (FDI) inflows in Vietnam from 2018 to 2023f 17

Figure 4 Export-import turnover in Vietnam from 2018 to 2022 .19

Figure 5 Vietnam's population during 2017 - 2022 .20

Figure 6 Structure of Vietnam insurance industry in 2020 25

Figure 7 Vietnam insurance market growth and GDP growth 25

Figure 8 Vietnam insurance market overview .28

Figure 9 Vietnam non-life insurance performance from 2016 to 2021 .30

Figure 10 Vietnam life-insurance performance from 2016 to 2021 .31

Figure 11 Claims payment of Vietnam insurance industry from 2017 to 2021 32

Figure 12 Vietnam non-life insurance share market in 2022 34

Figure 13 Line of business share of PVI in 2022 34

Figure 14 Line of business share of Bao Minh Ins in 2022 .45

Figure 15 Top 5 largest life insurance companies in Vietnam 2022 56

Table 1 Top 3 FDI investors to Vietnam .17

Table 2 PVI company's summary balance sheet from 2017 to 2022 .39

Table 3 PVI company's summary income statement from 2017 to 2022 .40

Table 4 PVI company's summary cash management from 2017 to 2022 41

Table 5 PVI company's financial ratios from 2017 to 2022 .42

Table 6 Bao Minh insurance company's summary balance sheet from 2017 to 2022 49

Table 7 Bao Minh insurance company's summary income statement .50

Table 8 Bao Minh insurance company's summary cash management from 2017 to 2022 51

Table 9 Bao Minh insurance company's financial ratios from 2017 to 2022 .52

Table 10 Dai-ichi life insurance company's summary balance sheet 60

Table 11 Dai-ichi life insurance company's summary income statement from 2017 to 2022 61

Table 12 Dai-ichi insurance company's summary cash management from 2017 to 2022 62

Table 13 Dai-ichi life insurance company's financial ratios from 2017 to 2022 .63

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or an entity's property as well as medical emergencies and legal liabilities Automobile insurance, health insurance, fire insurance, and liability insurance are

a few non-life insurance examples Contrarily, life insurance is a sort of insurance that disburses a quantity of money to the insured person's heirs or beneficiaries upon their demise or after a predetermined amount of time There are various types

of life insurance, including term life, whole life, endowment insurance, and annuity insurance (Martin Hodula, Jan Janků, Martin Časta, Adam Kučera, 2020)

Insurance is one of the most dynamic and quickly expanding industries in Vietnam, with a total gross premium of roughly 186.22 trillion VND (8.1 billion USD) in 2021, up 16.3% from 2020 (The annual report of Vietnam insurance market of Vietnam Ministry of Finance, 2021) The Covid-19 pandemic, which has impacted both the supply and demand sides of the business, has caused the industry to go through considerable adjustments and problems

On the supply side, the pandemic has accelerated the adoption of digital technologies and innovation in the insurance sector, such as online sales channels,

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mobile applications, blockchain, artificial intelligence, and big data analytics These technologies have helped improve customer service, operational efficiency,

risk management, and fraud prevention

On the demand side, the pandemic has increased the awareness and demand for insurance products, especially health and life insurance, as people face higher health risks and uncertainties According to the Ministry of Finance, health

insurance accounted for the highest proportion of gross premiums in 2021, with 32.05%, followed by automobile insurance (27.44%), property and casualty insurance (13.12%), and fire and engineering insurance (10.01%) (The annual report of Vietnam insurance market of Vietnam Ministry of Finance, 2021) The demand for non-life insurance products, such as travel and business interruption insurance, has declined due to the restrictions on mobility and economic activities

A long with that, the government has also played a role in the expansion of the insurance sector in Vietnam during the pandemic by putting in place laws and regulations that assist insurance providers and clients in navigating the risks and difficulties brought on by COVID-19

In conclusion, the Vietnam insurance industry has shown remarkable resilience and adaptability in facing the challenges posed by Covid-19 The industry has also seized the opportunities to modernize its operations and products, increase its penetration and outreach, and contribute to the social and economic development

of the country However, there are still some areas that need further improvement, such as enhancing the quality and availability of data, strengthening the capacity and skills of human resources, addressing the gaps and

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risks in cyber security, and fostering collaboration among stakeholders in the insurance ecosystem

Chapter 2: Macroeconomic analysis

1 Political

In general, Vietnam is a country having stable politics and only one party called “The Communist Party of Vietnam” is dominating the political system in Vietnam This is one of the reasons why Vietnam is one of the countries successfully navigating the covid-19 pandemic with a consistent operation For the Vietnam insurance industry, the primary body in charge of regulating insurance-related businesses in Vietnam is the Insurance Supervisory Authority, which is part of the Ministry of Finance (Nu Thi To Nguyen, Tilleke & Gibbins, 2022)

There are some laws and regulations dominate mostly the insurance business activities in the Vietnam market: Enterprise Law, Insurance Business Law 24/2000/QH10 which was issued firstly in 2000 and then amended again before officially effective on 01/01/2023 for purposes of enhancing the legal framework and supervision of the insurance sector, promote fair competition and consumer protection, and encourage innovation and diversification of insurance products., besides there are some relevant regulations and decrees issued by Vietnam Ministry of Finance and Vietnam Government

During and after covid-19 period, the Vietnam Government was applying suitable policies to maintain and support the business activities of sectors in the market Firstly, it is necessary to mention that the Vietnam Government extended

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tax payment deadlines and reduction of tax rates for insurers and policyholders (Era Dabla-Norris and Yuanyan Sophia Zhang, 2021) In 2020, the National Assembly promulgates Resolution No 116/2020/QH14 on reducing corporate income tax (CIT) payable in 2020 for businesses, cooperatives, non-business units and other

organizations In 2021, the National Assembly Standing Committee issued Resolution No 406/NQ-UBTVQH15 on a number of solutions to support businesses and people affected by the Covid-19 pandemic in terms of tax payment, and financial support On January 11, 2022, the National Assembly promulgated Resolution No 43/2022/QH15, contributing to early overcoming difficulties for the economy, creating a foundation and favorable conditions for socio-economic development for the whole period of 2021 - 2025 and the following years, improving efficiency, labor productivity, competitiveness, internal capacity and autonomy in the medium and long term Moreover, the Vietnam Government issued Decree No 21/2023/ND-CP dated May 5, 2023 on microinsurance to expand the coverage and accessibility of insurance for low income and vulnerable groups (Vu Phuong Nhi, 2023)

To sum up, the insurance industry is receiving more and more concerns from the Vietnam Government, although the insurance market is still young and developing, it will become one of the important parts of the Vietnam economy in the future

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2 Economics

2.1 GDP amount and GDP growth in Vietnam

Figure 1 Vietnam GDP and GDP growth from 2017 to 2025f

Source: Data.worldbank

The definition of GDP is that GDP stands for gross domestic product, which

is the total value of goods and services produced in a country each year GDP is an indicator of the size and performance of a country’s economy (Jason Fernando, 2023) According to data from the World Bank, despite the consequences of covid-

19, it is forecasted that Vietnam GDP will keep moving forward in the upcoming years, and Vietnam will still be a developing economy in the region and in the world

Next, GDP growth reflects how fast or slow a country’s economy is growing or shrinking (Jason Fernando, 2023) Overall, it can be seen a decreasing trend in Vietnam GDP growth Based on the data from World Bank and Asia Development Bank (ADB)’s report, from 2017 to 2019 the Vietnam GDP growth was a stable increase of approximately 7% on average However, in 2020 and 2021 - the re-emergence of the Covid-19 pandemic and the lockdown period caused Vietnam to lose more than 2 points of GDP, from 4.8% as expected to

years later due to the beginning of Ukraine and Russia war in the early of 2022 which influenced in global supplies as well as demands, this event impacted not only on the global but also in Vietnam’s GDP growth, it has been just 3.72% falling far short of the 6-6.5% projection in the first half of 2023's GDP growth (Mark Barnes, 2023) Regarding to the World Bank’s outlook forecast, Vietnam GDP growth was forecasted to be quite positive and bright along with 5.5% in 2024f and 6% in 2025f which means that Vietnam will be developing in the upcoming years

In terms of insurance market growth, GDP growth is considered as one of the factors impacting positively on it, because it illustrates the growth in both economic activity and income Due to individuals' and businesses' desire to safeguard their assets and income, higher GDP growth may result in an increase in demand for insurance products like life, health, property, and liability insurance (Vivek Agrawal, Ramnath Balasubramanian, Pierre-Ignace Bernard, Henri de Combles de Nayves, Kristin Cummings Cook, Bernhard Kotanko, 2023) That could be a reason explains for the increase in gross written premium of insurance market in 2022 was much higher compared to previous years

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2.2 Exchange rate, inflation rate

Figure 2 Vietnam exchange rate and inflation rate from 2017 to 2025f

Source: Worldbank and Statista

Before and after covid-19, exchange rate between VND and USD fluctuated slightly due to effective monetary policies of the Vietnam Government at that time and it is also forecasted that the USD/VND exchange rate would remain same till the end of 2023 according to Mr Luc - a finance expert (Vietnam news - Exchange rate forecast to remain stable in H2- 2023, 2023)

For inflation rate, it was stable at more than 3% in both 2017 and 2018 But during covid-19, inflation rate reduced to under 3% or even under 2% in 2021 because of the lockdown period, people only had basic demands and saved more than paid out When covid-19 was under control, everything went back to normal, and people would like to pay more for other demands besides basic needs At the same time, the war between Ukraine and Russia began and negatively affected supply chains all over the world, especially energy prices which strongly impacted not only the manufacturing industry but also regular life The increasing trend of

companies' purchasing power, which lowers demand for insurance Additionally,

it may result in higher claims expenses for insurers, particularly in non-life insurance where benefits are not predetermined at policy beginning (Fernando Casanova Aizpun, Li Xing, Roman Lechner, 2022)

3 Foreign Direct Investment (FDI) and export-import

3.1 Foreign Direct Investment (FDI) in Vietnam:

Figure 3 Foreign direct investment (FDI) inflows in Vietnam from 2018 to 2023f

Table 1 Top 3 FDI investors to Vietnam

2-Korea 13.8%

1-Singapore 34.4%

2-Korea 15.9%

1-Singapore 23.3%

2-Korea 17.6%

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3-China 8.6% 3-Japan

12.5%

3-Japan 17.3%

Source: Gso.gov.vn and Government news

During the 2017 – 2019 period, Vietnam has always been in top 3 FDI recipients among ASEAN countries, following Singapore and Indonesia From

2020 to 2022 and continuing to the first 6 months of 2023, the registered FDI inflow growth was slower than the previous years due to the impact of Covid-19 pandemic and later was the global uncertainty environment following the Ukraine War and global inflation issues

The top 3 industries receiving FDI capitals in the last few years are manufacturing, real estate, and electricity production and distribution (accounted for 60.6%, 16.1%, and 8.2% respectively out of total capital) By counterparts, major investors in recent years are Singapore, Korean, Japan, China According to the Foreign Investment Agency under the Ministry of Planning and Investment (MPI), Viet Nam is likely to attract US$36-38 billion in FDI in 2023 According to SBV, Vietnam is considered a successful model in attracting foreign direct investment (FDI) thanks to its attractive investment environment, stable political foundation, and high potential for economic growth

Due to the capital, technology, knowledge, and innovation that FDI can bring to the local insurance business, it can positively affect the growth of the insurance market The competitiveness, effectiveness, and variety of insurance products and services can also grow as a result of FDI, which is advantageous for both the consumer and the economy123 However, FDI may also provide some

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difficulties, including political concerns, cultural differences, and regulatory compliance (J François Outreville, 2021)

3.2 Export-Import activities in Vietnam:

Figure 4 Export-import turnover in Vietnam from 2018 to 2022

Source: Gso.gov.vn

Besides foreign investment, Vietnamese economy also highly depends on foreign trade activities Although the post covid-19 economy recovered difficultly, Export-import turnovers still made a record in recent 5 years at 732.5 billion USD and increased by 9.5% compared to 2021

Big contributions to export-import turnovers mostly came from FDI enterprises such as: Phones and components; computer electronics and components; textiles; etc Top export markets for Vietnam are US and EU countries while top import markets include China, Korea, and ASEAN countries

In 2022, Vietnam surpassed Thailand and Indonesia, ranking second in ASEAN (after Singapore) according to Vietnam Customs news

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In the first 6 months of 2023, due to weakened demand from overseas markets, export/import turnover was 15.2% declined from the same period last year and the trend might continue towards the year end

However, according to the World Bank's April 2023 report, Export-import turnover of Vietnam will be optimistic and positive as economic growth is expected

to rebound to 6.5 percent in 2024 and domestic inflation could subside from 2024

onward This will be further supported by the accelerating recovery of its main export markets (U.S., Eurozone, and China)

Export-import activities can boost the demand for non-life insurance products which provide coverage for hazards other than mortality include property, liability, etc like cargo insurance, trade credit insurance, etc., which can help the insurance market thrive

4 Social

Figure 5 Vietnam's population during 2017 - 2022

Source: Government news.vn

One of the factors that contributes to the potential of the insurance industry in Vietnam is the population growth Vietnam has a large and young population that grows steadily every year, creating a huge market for insurance products and

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services in the long-term However, the current level of insurance penetration and spending in Vietnam is still low compared with other markets, both emerging and developed The insurance penetration rate, which measures the ratio of insurance premiums to GDP, ranges from 2.3% to 2.8% in Vietnam, while it is around 9.6%

in developed markets and 3.5% in emerging markets Similarly, the per capita insurance spending, which measures the average amount of money spent on insurance per person, is only about US$72-75 in Vietnam, while it is around US$4,664 in developed markets and US$175 in emerging markets (Tran Thuy, 2022) These figures indicate that there is a large gap and room for improvement in

the insurance market in Vietnam As the GDP and the income of the people increase, along with the awareness of health and risk prevention, the demand for insurance products and services is expected to rise significantly in the coming years For example, Vietnam’s older population and higher disposable income have made people more interested in healthcare and insurance products of all kinds This has led to a fast growth of both the life insurance and non-life insurance sectors in recent years Another example is the low penetration rate and average premium of the Vietnam insurance market, which show a high potential for more development The number of life insurance policyholders is only about 10 million, equivalent to about 10% of the population This ratio is expected to increase to 15% by 2025 by the Ministry of Finance (Febis.org, 2022) The population influences the Vietnam insurance market by creating both demand and opportunity for the industry Therefore, the Vietnam insurance market is predicted to have a strong growth and development in the future

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5 Technology and innovation in Vietnam

Vietnam has advanced significantly in recent years in terms of science, technology, and innovation (STI), but still has numerous obstacles in terms of institutional capability, human resources, infrastructure, and financing The COVID-19 pandemic has brought attention to the value of STI for corporate resilience and productivity growth, as well as for social welfare and environmental sustainability (Worldbank.2021, 2021)

In accordance with International Business System Inc., some Vietnamese InsurTechs are digitally transforming the insurance sector by offering innovative solutions, such as online platforms, mobile applications, artificial intelligence,

blockchain, and cloud computing Some outstanding InsurTechs are INSO, GoBear Vietnam, FiinGroup, and Claim Di (Edil Corneille, 2021) After covid 19, consumer’s habits changed strongly compared with the period before covid 19 People are now more interested in online platforms in terms of payments, shopping, entertainment, and communication, etc That is one of the reasons why some insurance companies are investing in their digital systems to enhance the customer’s experience, such as AIA, Prudential Vietnam, Manulife Vietnam, Chubb life Vietnam, Baoviet, etc Some examples of innovative initiatives in the Vietnam insurance industry are:

- The launch of Vietnam’s first online insurance marketplace by Vietnam Insurance Finance Online Company Limited (VIFO) in 2020, which allows customers to compare and buy insurance products from various insurers on a single platform (Era Dabla-Norris and Yuanyan Sophia Zhang, 2021)

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- The introduction of a blockchain-based health insurance claim system by Bao Viet Saigon Company in 2021, which aims to reduce paperwork, processing time, and errors in claim settlement (Era Dabla-Norris and Yuanyan Sophia Zhang, 2021)

- The development of a smart chatbot by Fubon Insurance (Vietnam) Co Ltd

in 2021, which uses natural language processing and machine learning to provide instant answers and solutions to customers’ inquiries and requests (Era Dabla-Norris and Yuanyan Sophia Zhang, 2021)

In conclusion, Vietnam is a dynamic and emerging market with various macroeconomic factors that influence the insurance industry Some of these factors include political stability, economic growth, the inflation rate, foreign

direct investment, the population size and structure, and technological development The insurance industry has the potential to benefit from these factors and seize the opportunities in the Vietnam market, such as increasing demand for insurance products, diversifying distribution channels, and enhancing customer service However, the industry also faces many challenges that it has to overcome, such as low awareness and penetration of insurance, high competition and price sensitivity, regulatory barriers and compliance issues, and cyber risks and frauds Therefore, the insurance industry in Vietnam is a promising but challenging sector that requires careful analysis and strategic planning

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Chapter 3: Industry analysis

1 General overview of the Vietnam insurance industry

The Vietnamese insurance industry has undergone a remarkable transformation in the past few decades, reflecting the rapid and sustained economic development of the country Before the 1990s, the insurance market was dominated by a single state-owned non-life insurance company, Bao Viet, which had a monopoly over all types of insurance products and services Life insurance was not available until

1995, when the first foreign-owned life insurer entered the market Since then, the insurance industry has grown and diversified significantly, with the participation

of many domestic and foreign players As of 2022, there were about 78 insurance businesses operating in Vietnam, offering a variety of insurance products and services to meet the needs of different customers and segments These businesses included 31 non-life insurers, which provide property, casualty, health, motor, and

other types of insurance; 19 life insurers, which provide life, annuity, pension, and savings products; 26 insurance brokers, which act as intermediaries between insurers and customers; and 2 professional reinsurers, which provide reinsurance services to insurers The Vietnamese insurance industry has thus evolved from a monopolistic market with limited choices to a competitive and dynamic market with diverse options

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Figure 6 Structure of Vietnam insurance industry in 2020

Source: Vietnamcredit 2020

Figure 7 Vietnam insurance market growth and GDP growth

Vietnam insurance market growth and GDP growth

GDP growth 6,90% 7,50% 7,40% 2,90% 2,60% 8,02% GWP growth of non-life 12,83% 12,92% 13,62% 6,20% 4,34% 16,80% GWP growth of life insurance 31,15% 30,34% 23,75% 22,42% 21,76% 11,80% GWP growth of Vietnam

insurance market 23,42% 23,62% 20,18% 17,02% 16,49% 15,00%

GDP growth GWP growth of non-life

Source: MOF reports

GWP growth of life insurance GWP growth of Vietnam insurance market

This table above compares Vietnam's GDP growth from 2017 to 2022 with the GWP growth of the insurance sector It demonstrates that the insurance sector consistently outperforms the GDP and that, except for 2020, the life insurance market outperforms the non-life insurance market Additionally, it demonstrates how Covid-19's impact is expected to cause a decline in GDP growth and GWP insurance industry growth in 2020, followed by a rebound in 2021 and 2022 The

2020, the pandemic lowered the income and savings of many households, which made them less interested or able to buy life insurance products that combine insurance and savings accounts The pandemic also made it harder for customers

to access these products, as the distribution channels of life insurance products, such as agents and bancassurance, were disrupted

On the other hand, the non-life insurance market growth was increased by the higher demand for health insurance and property insurance due to the pandemic

(Febis.org, 2022) - The non-life insurance market also gained from the presence

of foreign insurers, which improved the credibility and competitiveness of the sector (World Bank Group’s report, 2020)

The Covid-19 pandemic may have had an influence on economic activity and consumer confidence in Vietnam in 2020, which could be one of explanations for why growth in the insurance business and GDP both are anticipated to decline in

2020, then rebound in 2021 and 2022 The Vietnamese economy expanded by 2.9%

in 2020, which was less than the 7% growth in 2019, according to the IMF’s article (Era Dabla-Norris and Yuanyan Sophia Zhang, 2021) Due to lockdown procedures and travel limitations, the pandemic also decreased demand for

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various insurance products, including travel and auto insurance However, as domestic activity and export performance improve and the immunization program proceeds, it is expected that the economic recovery will pick up momentum in 2021 and 2022 And in 2022, the GDP growth reached 8.02% and the World Bank predicts that the figure will be at 6.5% in 2023 (World Bank Press, 2022) The demand for products that mix insurance and savings accounts, such as hybrid health, home, and life insurance, is anticipated to increase between 2021 and 2026, driving the industry's expansion at a CAGR of 8.5% (Global data, 2022)

2 Industry performance

The Vietnamese insurance market has witnessed a strong growth in the demand for healthcare and insurance products of various types, driven by the demographic and economic changes in the country The average life expectancy

of Vietnamese people is increasing, which means that more people need health and retirement insurance products to cope with the rising medical costs and the declining labor force participation Vietnam also has a rising disposable income,

which means that more people can afford to buy insurance products to protect their assets, income, and lifestyle As a result of these factors, both the non-life insurance sector and the life insurance sector have seen significant increases in their insurance premium income in recent years

However, the growth of the Vietnamese insurance market has also been affected by the covid-19 pandemic, which has disrupted the economic and social activities of the country Before covid-19, the Vietnamese insurance market had an annual growth rate of over 20%, which was one of the highest in the region However, since covid-19, the growth rate of the total insurance market in Vietnam

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has dropped sharply by about 4% year by year, compared with the situation before covid-19 This is mainly due to the decline in consumer spending, business activities, and travel demand, which have reduced the demand for some types of insurance products However, there is also a positive sign in the Vietnamese insurance market, which is the increase in the insurance penetration rate measuring the ratio of insurance premiums to GDP and reflects the level of development and awareness of the insurance market The insurance penetration rate in Vietnam increased to 3.38% in 2021, which was higher than the previous years This could indicate that more people in Vietnam have realized the importance and benefits of having insurance products to protect themselves and their families from various risks and uncertainties Therefore, the Vietnamese insurance market has shown both challenges and opportunities amid the covid-19 pandemic

Figure 8 Vietnam insurance market overview from 2018 to 2021

Source: Vietnam MOF’s report 2016 to 2021

For the non-life insurance sector in Vietnam, it has experienced a remarkable expansion in the past decade, with a significant increase in the total

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premium value of the non-life insurance enterprises The total premium value of the non-life insurance enterprises reached over 59 trillion VND in 2021, which was almost three times higher than the value recorded at the beginning of the decade The non-life insurance sector covers various types of insurance products, such as property, casualty, health, motor, and other risks The non-life insurance market was still led by Bao Viet, the state-owned insurance company that had a monopoly over the market before the 1990s However, other Vietnamese insurance companies, such as PVI, PTI, Bao Minh, and Pjico which are top 5 of non-life insurance companies with the highest gross written premium (GWP) or insurance premium in 2022, have also gained significant market shares and increased their competitiveness, according to the reports from the Vietnam Ministry of Finance 2022 The growth rate of the non-life insurance industry reached its peak at 15.6% from 2018 to 2021, which was higher than the average growth rate of the total insurance market However, this ratio dropped dramatically to 4.34% in 2021, even though the insurance premium in 2021 was the highest among the previous years This was mainly due to the impact of the covid-19 pandemic, which reduced the demand for some types of non-life

insurance products, such as travel, aviation, and marine insurance Therefore, the non-life insurance sector in Vietnam has shown a mixed performance in the past decade, with a strong growth but also a sharp decline in 2021

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Figure 9 Vietnam non-life insurance performance from 2016 to 2021

Source: Vietnam MOF’s report from 2016 to 2021

Regarding the life insurance sector in Vietnam, it has also witnessed a rapid growth in the past decade, despite having a later start than the non-life insurance sector Vietnam’s life insurance has seen a sharp increase in premium values during the past ten years, surpassing non-life insurance in 2021 In recent years, the market leader in this sector has been Bao Viet, the largest insurance business in Vietnam, and Manulife, a Canadian multinational insurance group They have both held nearly 19 percent of the market share each and have competed fiercely for the top position More international players have entered this industry, and there is a high level of market competition

Like the non-life insurance industry in Vietnam, the life insurance industry has also faced a slight decline in its growth rate, even though the insurance premiums have still increased However, the penetration ratio of life insurance is higher than that

of non-life insurance, because of the increase in health awareness

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of people after covid-19 The penetration ratio measures the ratio of insurance premiums to GDP, and it reflects the level of development and awareness of the insurance market The penetration ratio of life insurance in Vietnam was 2.15% in

2021, while that of non-life insurance was only 1.23% This indicates that more people in Vietnam have realized the importance and benefits of having life insurance products to protect their lives and their families from various risks and uncertainties Therefore, the life insurance sector in Vietnam has also shown a strong growth but also a slight decline in 2021

Figure 10 Vietnam life-insurance performance from 2016 to 2021

Source: Vietnam MOF’s report from 2016 to 2021

Besides mentioning data of insurance premium, the claim payment should be considered as one of the indicators affecting insurance business performance Firstly, the claim payment is the amount of money that the insurance companies pay to the customers when they make a claim for their insurance products The data from the reports of the Vietnam Ministry of Finance (MOF) from 2017 to

2021 shows that the claim payment in the Vietnam insurance industry has been

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affected by the covid-19 pandemic During the covid-19 period, the claim payment went down due to the lock-down measures and the 5K policy that Vietnam implemented to prevent the spread of covid-19 These measures reduced the social and economic activities of the people, and thus reduced the number of claims that they made for their insurance products However, after the covid-19 period, the life

in Vietnam has returned to normal as before covid-19, which has increased the claim payment in the Vietnam insurance industry from 20,752 billion VND in 2019

to 29,662 billion VND in 2021 This indicates that more people in Vietnam returned to their normal life and take part in different activities in life as well as in business which make the claim payment increase as people used their insurance products to protect themselves and their assets from various risks and uncertainties Therefore, the claim payment in the Vietnam insurance industry has shown a decrease during covid-19 but an increase after covid-19

Figure 11 Claims payment of Vietnam insurance industry from 2017 to 2021

Source: Vietnam MOF’s reports from 2016 to 2021

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Chapter 5: Insurance companies’ analysis

1 PVI Insurance Company

1.1 Business description

Petro Vietnam Insurance Company (PVI) is a non-life insurance company established in 1996, grew from an insurance company under Petro Vietnam Corporation (now is the Vietnam Oil and Gas Group PVI provides insurance coverage for a variety of industries, including oil and gas, maritime, property, health, and personal injury, as well as travel, third-party liability, product, and public liability, workmen's compensation, and motor vehicles Additionally provides insurance products for voluntary medical, building and erection, money, property all risk, electronic equipment, machine failure, life, and wealth protection Risk management, claim settlements, inspection solutions, survey, consulting, and loss-adjusting services are among the services provided by the organization Besides, PVI also has a reinsurance company called PVIRe (PVI Holdings, 2023)

Since 2022, PVI has become the first leader in the non-life insurance market which was dominated by Bao Viet Insurance company in previous years This outstanding event is a memorable milestone for PVI Insurance as the No 1 industrial insurer in Vietnam's insurance market, leading in terms of market share, revenue and operational efficiency; as well as achieving a proud achievement when being the first and only insurance company in Vietnam to be upgraded its credit rating from B++ to A- by the world's prestigious rating organization A.M.Best This is also the highest rating in the current Vietnamese market for non-life insurance companies (PVI’s annual report, 2022)

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Figure 12 Vietnam non-life insurance share market in 2022