Vietnam insurance report q1 2016

Q1 2016 www.bmiresearch.com VIETNAM INSURANCE REPORT INCLUDES 5-YEAR FORECASTS TO 2019 Published by:BMI Research Vietnam Insurance Report Q1 2016 INCLUDES 5-YEAR FORECASTS TO 2019 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: November 2015 ISSN: 1752-8410 BMI Research Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@bmiresearch.com Web: http://www.bmiresearch.com © 2015 Business Monitor International Ltd All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, 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 DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Insurance Report Q1 2016 INCLUDES 5-YEAR FORECASTS TO 2019 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: November 2015 ISSN: 1752-8410 BMI Research Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@bmiresearch.com Web: http://www.bmiresearch.com © 2015 Business Monitor International Ltd All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, 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 DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Insurance Report Q1 2016 CONTENTS BMI Industry View Table: Headline Insurance Forecasts (Vietnam 2012-2019) SWOT Insurance Industry Forecast 11 Life Premiums Forecast 11 Table: Life Premiums (Vietnam 2012-2019) 14 Table: Life Insurance Claims (Vietnam 2009-2013) 15 Non-Life Premiums Forecast 15 Table: Non-Life Premiums (Vietnam 2012-2019) 18 Table: Non-Life Insurance Claims (Vietnam 2008-2014) 20 Non-Life Sub-Sector Forecast 20 Table: Non-Life Insurance Premiums By Product Line (Vietnam 2012-2019) 28 Insurance Risk/Reward Index 30 Asia Pacific Industry Risk/Reward Index 30 Table: Asia Pacific Insurance Risk/Reward Index 31 Market Overview 32 Life Market Overview 32 The Product Offering 32 The Competitive Landscape 33 Table: Life Insurance Market (USDmn) 2008-2013 35 Non-Life Market Overview 35 The Product Offering 35 The Competitive Landscape 36 Table: Non-Life Insurance Market (USDmn) 2008-2013 38 Company Profile 40 AIA Group 40 American International Group (AIG) 43 Bao Viet Holdings Manulife Financial Prudential plc PVI Holdings Sun Life Financial 45 48 50 53 56 Methodology 58 Industry Forecast Methodology 58 Risk/Reward Index Methodology 61 Table: Indicators 63 © Business Monitor International Ltd Page Vietnam Insurance Report Q1 2016 Table: Weighting of Indicators 64 © Business Monitor International Ltd Page Vietnam Insurance Report Q1 2016 BMI Industry View BMI View: Vietnam's insurance industry is growing rapidly, bolstered both by domestic economic growth and by a gradual improvement in terms of the range of products available in the market The non-life sector is more established, with motor and health and personal accident insurance particularly popular Life insurance is currently the smaller sector, and demand for long-term savings or retirement products continues to be hampered by low household income levels Premiums across both life and non-life are expected to increase throughout our forecast period through to 2019 As the investment environment gradually improves, we expect to see more multinationals entering the market who are keen to take advantage of the strong growth potential Table: Headline Insurance Forecasts (Vietnam 2012-2019) 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 18,390.85 22,650.00 23,482.35 26,271.96 29,022.73 31,733.50 34,389.68 36,989.79 Gross life premiums written, VND, % y-o-y 61.6 23.2 3.7 11.9 10.5 9.3 8.4 7.6 Gross life premiums written, USDbn 0.88 1.08 1.11 1.18 1.26 1.39 1.52 1.64 Gross life premiums written, USD, % y-o-y 59.9 22.2 2.8 6.9 6.6 9.8 9.3 8.5 Gross non-life premiums written, VNDbn 22,757.99 24,454.99 28,341.94 32,077.98 35,876.86 39,829.17 44,075.64 48,526.36 Gross non-life premiums written, VND, % y-o-y 11.0 7.5 15.9 13.2 11.8 11.0 10.7 10.1 Gross non-life premiums written, USDbn 1.09 1.16 1.34 1.45 1.56 1.74 1.94 2.16 Gross non-life premiums written, USD, % y-o-y 9.9 6.7 15.0 8.1 7.9 11.5 11.6 11.1 Gross life premiums written, VNDbn e/f = BMI estimate/forecast Source: AVI/BMI © Business Monitor International Ltd Page Vietnam Insurance Report Q1 2016 Key Updates And Forecasts ■ The larger non-life sector will see the strongest growth throughout our forecast period, with gross nonlife premiums written expected to increase by an average annual rate of over 10% to reach USD2.2bn in 2019, up from USD1.4bn in 2015 ■ Although slightly slower, growth will also be strong in the smaller life sector, where premiums are expected to increase by around 8% annually to reach USD1.6bn in 2019, up from USD1.2bn in 2015 ■ Health insurance providers may face an increase in claims amid reports that the cost of healthcare services at state-owned hospitals may increase by two to seven times the current costs Fees are being raised to include the salary of medical personnel © Business Monitor International Ltd Page Vietnam Insurance Report Q1 2016 SWOT Insurance Vietnam Insurance SWOT Analysis Strengths ■ Both the life and non-life insurance segments have been growing at double-digit rates, and have the potential to so for the foreseeable future ■ There are clear signs of pricing discipline in the non-life segment and claims control is improving ■ Given the domination of the life segment by subsidiaries of regional and global majors, lack of capital will not pose a constraint ■ The non-life segment is well diversified away from motor insurance - a staple line in many under-developed markets Weaknesses ■ The high growth anticipated in the life and non-life segments of the Vietnamese market is coming off a very small base ■ Many of the domestic non-life companies are subscale and lack ready access to new capital ■ Many Vietnamese households not have sufficient income to purchase nonessential life or non-life products ■ The domestic economy remains undiversified which limits potential for growth of lines such as credit/financial guarantee and general liability insurance Opportunities ■ The massive growth in agency networks that is currently underway in the life segment should enable a sizeable increase in overall premiums ■ The size and importance of commercial lines means that the non-life segment should grow in real terms as long as the economy can continue to expand ■ Life companies are developing new and improved products such as education savings plans for children © Business Monitor International Ltd Page Vietnam Insurance Report Q1 2016 Prudential plc SWOT Analysis Strengths ■ Massive scale, financial strength and access to capital from global markets ■ Multi-national diversification, across Asia, the US, the UK and through M&G and Eastspring Investments ■ Leadership positions in many of the markets in which it operates ■ Huge variety of products and distribution channels ■ Strong brands ■ Par excellence an example of a leading multi-national insurer that can benefit from both the ageing of populations in rich countries and from the strong growth in demand for long-term savings products in emerging markets ■ Proven capability to undertake successful acquisitions - of which the SRLC deal in the US is the latest example Weaknesses ■ Clear and proven strategy ■ Some of the markets in which Prudential operates are mature and/or highly competitive ■ A small player in (or absent from) some of the most important emerging markets in Asia Opportunities ■ Impacted, like many insurance companies, by low interest rates ■ Product innovation ■ Further expansion by way of acquisitions ■ Further growth in agency force in Asia ■ Further growth in agent productivity in Asia ■ A natural beneficiary of the relatively strong growth of emerging markets in Asia © Business Monitor International Ltd Page 50 Vietnam Insurance Report Q1 2016 SWOT Analysis - Continued Threats ■ Further development of Eastspring Investments' business ■ Potential, but unlikely, turmoil in global financial markets ■ Robust competition in some markets, from companies that have many of the same strengths as Prudential plc Company Overview Originally founded in 1848, Prudential plc is one of the world's largest and financially strongest listed multi-national life insurance companies Globally, it has assets under management (AUM) of over GBP496bn It serves 26mn customers and is listed in London, New York, Singapore and Hong Kong Around the world, Prudential plc has over 26,000 employees There are four main business units: Prudential Corporation Asia; Jackson National Life Insurance Company; Prudential UK; and M&G, the group's principal asset management operation In terms of APE new business premiums, around 45% of Prudential plc's overall business is derived from Prudential Corporation Asia Jackson and the UK account for around 35% and 20% respectively In relation to new business profit, the corresponding figures are 50%, 38% and 12% Prudential Corporation Asia is active in 12 markets in Asia and provides regular premium savings and protection products, through agents and a growing number of bancassurance partners Across the region, there are over 350,000 agents and 12mn clients Across the region, Prudential Corporation Asia identifies six businesses: life insurance; fund management; consumer finance (in Vietnam); retirement planning; health solutions; and Islamic financial products (in Malaysia, Indonesia and the Gulf) Prudential has been present in Vietnam since 1995 and has expanded to have a branch network of around 200 offices across the country The firm continues to expand its range of products available in Vietnam, including the recent introduction of casualty insurance which was launched alongside a 24/7 emergency assistance line and new medical expense escrow payment system which sees customers present their insurance card at the point of use (instead of paying for medical care up front and then making a claim) Prudential Vietnam contributes extensively to local social welfare programmes, such as the recent donation of VND5bn to Saigon Children's Charity for the construction of three new schools In April 2014 Prudential and Standard Chartered Bank (entered into a new agreement to establish a 15-year strategic partnership to grow their bancassurance business together Vietnam is one of the markets where Standard Chartered Bank branches will © Business Monitor International Ltd Page 51 Vietnam Insurance Report Q1 2016 exclusively distribute a range of Prudential Vietnam's life insurance products In 2013 Prudential signed a 10-year bancassurance partnership with Vietnam's Maritime bank Financial Data Group financial results for H1 2015 include: ■ ■ ■ ■ ■ Group IFRS operating profit of GBP1,881mn Asia life and asset management operating profit of GBP632mn EEV New Business Profit of GBP1,190mn EEV operating profit of GBP2,278mn In Vietnam, APE sales increased by 36% and the company reported single sales of GBP3mn, regular sales of GBP34mn, annual premium and contribution equivalents of GBP34mn and present value of new business premiums of GBP140mn - operating profit in Vietnam came to GBP34mn © Business Monitor International Ltd Page 52 Vietnam Insurance Report Q1 2016 PVI Holdings SWOT Analysis Strengths ■ A leading player in the non-life segment, with dominant position in the energy and marine sub-sectors ■ Blue chip corporate clients ■ Capital strength, with backing of PetroVietnam, OIC and Talanx ■ Growing rapidly and profitably ■ A major player in reinsurance in Vietnam ■ Capital strength ■ A key beneficiary of the growth of the overall economy and the increase in insurable assets • Partnerships with major foreign insurers provide access to know-how Weaknesses Opportunities Threats ■ Vulnerable to swings in the economy, if they affect the energy and marine sectors ■ Vulnerable to volatility in Vietnam's financial markets ■ Lack of scale in anything other than a local context ■ Relative lack of presence in personal lines ■ Further growth in the overall market for non-life insurance ■ Development of PVI Sun Life JV ■ Product innovation ■ Further improvements to cost control and business systems ■ Optimisation of the investment portfolio ■ Development of diversified financial services business ■ Volatile financial markets © Business Monitor International Ltd Page 53 Vietnam Insurance Report Q1 2016 SWOT Analysis - Continued ■ Company Overview Potential major catastrophe losses PetroVietnam Insurance Corporation (PVI) was established in 1996 as a captive insurer for PetroVietnam - the state-owned oil and gas company The firm dominates the energy insurance sector and also accounts for a large portion of marine insurance and property/engineering insurance PVI's share of the overall non-life market has varied over the last few years, but has generally been in excess of 20% Unsurprisingly, given the nature of its business, PVI's customers include major stateowned enterprises (such as shipbuilder Vinashin) and the local subsidiaries of international energy companies (such as Gazprom, Conoco Phillips, and Chevron) The company claims to have consistently achieved faster growth and lower loss ratios than major rivals in the non-life market, such as Bao Minh, Bao Viet, and PJICO The lines offered by PVI are dominated by oil & gas and marine insurance However, it also offers property insurance, liability/workers' compensation insurance, motor insurance and personal lines (including personal accident, travel and voluntary medical insurance) PVI is also a significant non-life reinsurer Since 2010, PVI has been 'an Offshore Facility with the Lloyd's market and an Onshore Facility with leading international reinsurers having limits of liability of USD450mn and USD1,540mn respectively.' Like other Vietnamese insurers, PVI is now a listed public company (since 2006) Oman Investment Fund (OIF) is a strategic shareholder, with a 10.4% stake in PVI It is hoped that OIF's involvement will facilitate the transformation, over the longer term, of PVI into a 'combined finance-insurance institution.' Talanx Group, the German multinational giant, is also a strategic investor in PVI and has a 25% stake PetroVietnam Group and PetroVietnam Finance Corp speak for 39.1% and 7.6% of the equity respectively Red River Holdings/Temasia Capital are the fifth largest shareholder, with a 4.3% stake The free float is 13.6% Associated companies of PVI include: Petrovietnam Sapa Travel JSC; PVI Services JSC; Petrovietnam Hospital JSC; PV2 Investment JSC; Nangluongmoi Trading & Communication JSC; and Viet Xuan Investment JSC Recent Developments PVI's rating of B++ was reaffirmed by AM Best in April 2015 This rating was based on PVI's dominance of the non-life market, profitable operating performance and the company's strong risk adjusted capitalisation © Business Monitor International Ltd Page 54 Vietnam Insurance Report Q1 2016 PVI is expanding outside of Vietnam and recently signed an agreement with South Korea's Lotte Insurance to joint distribute both companies' products in various Asian markets Strategy PVI Holdings aims to become the leading financial and insurance services provider in Vietnam in the next decade As such it has embarked on a programme of restructuring and consolidation in order to improve the organisational model of both the parent company and various subsidiaries The company will focus on improving management efficiency and expanding business activities Financial Data After-tax profit for the first six months of the year is estimated at VND95.5bn (USD4.5mn), while revenue is estimated at VND4.17trn [USD196.74mn], Chairman Nguyen Anh Tuan told Bloomberg in July For the first nine months of 2015, PVI Holdings has reported consolidated sales of VND6,965bn, with profit before tax estimated at VND299bn © Business Monitor International Ltd Page 55 Vietnam Insurance Report Q1 2016 Sun Life Financial SWOT Analysis Strengths ■ Massive scale, financial strength and access to capital from global markets ■ A leading North American life insurance company, with international presence through SLF Asia and SLF UK and, globally, through MFS ■ Leadership positions in many of the markets in which it operates ■ Huge variety of products and distribution channels - including the largest force of career agents in Canada ■ Strong brands • Clear and proven strategy Weaknesses ■ Some of the markets in which Sun Life Financial operates are mature and/or highly competitive ■ A small player in (or absent from) some of the most important emerging markets in Asia Opportunities ■ Impacted, like many insurance companies, by low interest rates ■ Product innovation ■ Further expansion by way of acquisitions ■ A potential major beneficiary of the relatively strong growth of emerging markets in Asia Threats ■ Potential, but unlikely, turmoil in global financial markets ■ Robust competition in some markets, from companies that have many of the same strengths as Sun Life Financial © Business Monitor International Ltd Page 56 Vietnam Insurance Report Q1 2016 Company Overview Originally founded in 1865, Sun Life Financial is one of the world's largest and financially strongest listed international life insurers It describes its main product offerings as including life and disability insurance, savings, investment management, retirement and pension products and services It works with both individual and corporate clients SLF Asia operates in seven markets - the Philippines, Hong Kong, Malaysia, Vietnam, Indonesia, India and China - through subsidiaries, joint ventures and strategic investments The company's goal is to consolidate its share of the market in each country in order to support learn term revenue growth In Vietnam, Sun Life is present via a joint venture with PVI Holdings - it has 200 employees and around 3,400 advisers in the country and has been present in the market since 2012 It provides a range of products including education endowment policies, life cover, personal accident cover and pension products It reported a 17.4% growth in revenue in 2014 The company continues to expand its range of products available in Vietnam In April 2015 it launched three new products providing life and accident cover, education savings programmes and retirement savings plans targeting people already in middle age Financial Data Sun Life Financial Group Results for Q2 2015 include: ■ ■ ■ ■ ■ ■ Operating net income of CAD731mn Reported net income of CAD726mn Underlying net income of CAD615mn Insurance sales of CAD2,113mn Wealth sales of CAD121bn SLF Asia reported operating earnings of CAD93mn and underlying earnings of CAD71mn © Business Monitor International Ltd Page 57 Vietnam Insurance Report Q1 2016 Methodology Industry Forecast Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined Common to our analysis of every industry, is the use of vector autoregressions Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis Such single-variable analysis is called univariate modelling We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA) In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting BMI mainly uses OLS estimators and, in order to avoid relying on subjective views and encourage the use of objective views, BMI uses a 'general-to-specific' method BMI mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when necessary During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact Effective forecasting depends on appropriately selected regression models BMI selects the best model according to various different criteria and tests, including but not exclusive to: ■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account; ■ Testing the directional movement and magnitude of coefficients; ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); and ■ All results are assessed to alleviate issues related to auto-correlation and multi-co linearity © Business Monitor International Ltd Page 58 Vietnam Insurance Report Q1 2016 Sector-Specific Methodology BMI's insurance reports provide detailed insight into insurance markets globally, examining both the present conditions in and prospects for each market Incorporating the most up-to-date information available from sources such as industry regulators, trade associations, comparable information from other countries and BMI's own economic and risk data, our analysts provide a comprehensive picture of the insurance sector The principal focus of the reports is on gross written premiums, to which 'premiums' refers unless otherwise stated The following are considered in our reporting of the sector: ■ BMI considers health insurance to be included in the non-life sector As such, in instances where sources report health insurance as part of the life sector, the required adjustments are made to conform to our standardised definitions ■ Where a market contains a significant inward reinsurance sector, these accepted premiums are considered as part of the non-life sector and are classed within the 'Other' category of our non-life breakdown ■ Life insurance contains all long-term savings products that are legally structured as insurance products and therefore not contain pension plan contributions and other long-term saving schemes that are not legally constituted as being within the insurance sector Life In projecting life insurance premiums, the following are considered: ■ The likely development of population ■ The likely development of life density (life premiums per capita) ■ Wider macroeconomic trends In some instances, further factors are considered, including: ■ Maturity of the life insurance sector ■ Competitive and regulatory environments ■ Life density in nearby markets at similar levels of development © Business Monitor International Ltd Page 59 Vietnam Insurance Report Q1 2016 Non-Life In projecting non-life insurance premiums on a line-by-line basis, the following are considered: ■ The likely development of nominal GDP ■ The likely development of non-life penetration (non-life premiums as a percentage of GDP) ■ Autos sector data, typically passenger car fleet size ■ Banking sector data, typically Client Loans figures ■ Shipping/Freight data, typically freight tonnage ■ Household stratification data, typically number of permanent properties ■ Healthcare data, typically private health expenditure In some instances, further factors are considered, including: ■ Maturity of the non-life insurance sector ■ Competitive and regulatory environments ■ Non-life penetration in nearby markets at similar levels of development Reinsurance and Net Premiums When forecasting the size of reinsurance markets, the following are considered: ■ Historic levels of reinsurance coverage in both life and non-life sectors ■ Projected development of the life and non-life sectors ■ Prevalence of reinsurance in similar markets Where applicable, 'net premiums' refers to net written premiums and is considered as gross written premiums, less the cost of reinsurance In some instances, source data is reported according to different definitions of 'net premiums' In these cases, this data is used and forecasts for net premiums and reinsurance are made separately © Business Monitor International Ltd Page 60 Vietnam Insurance Report Q1 2016 When forecasting net premiums independently of the reinsurance market, the following are considered: ■ Historic levels of net premiums in both life and non-life sectors ■ Projected development of the life and non-life sectors At a general level we approach our forecasting from both a micro and macro perspective, taking into account the expansion plans of relevant domestic and international firms, as well as wider economic outlook In this regard, BMI macro variable projections, such as output, consumption, investment, policy, and GDP growth are employed Burden of Disease The 'burden of disease' in a country is forecasted in disability-adjusted life years (DALYs) using BMI's Burden of Disease Database, which is based on the World Health Organization's burden of disease projections and incorporates World Bank and IMF data Risk/Reward Index Methodology BMI's Risk/Reward Index (RRI) provides a comparative regional ranking system evaluating the ease of doing business and the industry-specific opportunities and limitations for potential investors in a given market The RRI system divides into two distinct areas: Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development This is further broken down into two sub categories: ■ Industry Rewards (this is an industry specific category taking into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors) • Industry Rewards (this is a country specific category, and the score factors in favourable political and economic conditions for the industry) Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period This is further broken down into two sub categories: ■ Industry Risks (this is an industry specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry, and the relative maturity of a market) © Business Monitor International Ltd Page 61 Vietnam Insurance Report Q1 2016 ■ Industry Risks (this is a country specific category in which political and economic instability, unfavourable legislation and a poor overall business environment are evaluated to provide an overall score) We take a weighted average, combining market and country risks, or market and country rewards These two results in turn provide an overall risk/reward rating, which is used to create our regional ranking system for the risks and rewards of involvement in a specific industry in a particular country For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall risk/reward index a weighted average of the total score Importantly, as most of the countries and territories evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis This ensures that the rating draws on the latest information and data across our broad range of sources, and the expertise of our analysts BMI's approach in assessing the risk/reward balance for infrastructure industry investors globally is fourfold: ■ First, we identify factors (in terms of current industry/country trends and forecast industry/country growth) that represent opportunities to would-be investors ■ Second, we identify country and industry-specific traits that pose or could pose operational risks to would-be investors ■ Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/ trends to avoid subjectivity ■ Finally, we use BMI's proprietary Country Risk Ratings (CRR) in a nuanced manner to ensure that only the aspects most relevant to the infrastructure industry are incorporated Overall, the system offers an industry-leading, comparative insight into the opportunities/risks for companies across the globe Sector-Specific Methodology In constructing these ratings, the following indicators have been used Almost all indicators are objectively based © Business Monitor International Ltd Page 62 Vietnam Insurance Report Q1 2016 Table: Indicators Rewards Insurance market rewards Rationale Non-life premiums, 2015 (USDmn) Indicates overall sector attractiveness Large markets more attractive than small ones Growth in non-life premiums, five years to end-2019 (USDmn) Indicates growth potential The greater the likely absolute growth in premiums the better Non-life penetration, % Premiums expressed as % of GDP An indicator of actual and (to an extent) potential development of non-life insurance The greater the penetration the better Non-life segment measure of openness Measure of market's accessibility to new entrants The higher the score the better Life premiums, 2015 (USDmn) Indicates overall sector attractiveness Large markets more attractive than small ones Growth in life premiums, five years to Indicates growth potential The greater the likely absolute growth in premiums the end-2019 (USDmn) better Life penetration, % Premiums as % of GDP An indicator of actual and (to a certain extent) potential development of life insurance The greater the penetration the better Life segment measure of openness Measure of market's accessibility to new entrants The higher the score the better Country rewards GDP per capita (USD) A proxy for wealth High-income states receive better scores than low-income states Active population Those aged 16-64 in each state, as a % of total population A high proportion suggests that market is comparatively more attractive Corporate tax A measure of the general fiscal drag on profits GDP volatility Standard deviation of growth over 7-year economic cycle A proxy for economic stability Financial infrastructure Measure of financial sector's development, a crucial structural characteristic given the insurance industry's reliance on risk calculation Risks Regulatory framework Regulatory framework and development Subjectively evaluates de facto/de jure regulations on development of insurance sector Regulatory framework and competitive landscape Subjectively evaluates impact of regulatory environment on the competitive landscape Country risk (from BMI's Country Risk Ratings) Long-term financial risk Evaluates currency volatility Long-term external risk State's vulnerability to externally induced economic shock, which tend to be principal triggers of economic crises Policy continuity Evaluates the risk of sharp change in broad direction of government policy Legal framework Strength of legal institutions Security of investment key risk in some emerging markets © Business Monitor International Ltd Page 63 Vietnam Insurance Report Q1 2016 Indicators - Continued Rewards Bureaucracy Denotes ease of conducting business in a state Source: BMI Weighting Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal weight Consequently, the following weighting has been adopted: Table: Weighting of Indicators Component Rewards Weighting, % 70, of which - Industry rewards 65 - Country rewards 35 Risks 30, of which - Industry risks 40 - Country risks 60 Source: BMI © Business Monitor International Ltd Page 64 [...]... vehicle insurance © Business Monitor International Ltd Page 16 Vietnam Insurance Report Q1 2016 Growth Across All Lines Non-Life Premium Growth Rates (2012-2019) 50 0 -50 -100 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Motor vehicle insurance, VND, % y-o-y Property insurance, VND, % y-o-y Transport insurance, VND, % y-o-y Health and personal accident insurance, VND, % y-o-y Credit/financial guarantee insurance, ... life insurance Bancassurance is one In May 2015 Dai-ichi Life Vietnam signed a 10-year partnership with HDBank, one © Business Monitor International Ltd Page 32 Vietnam Insurance Report Q1 2016 of the biggest banks in Vietnam, to supply life insurance products and health riders via its 220 branches With demand for health insurance likely to be strong over the forecast period, coupling it with life insurance. .. 7,553,421.8 Transport insurance, VND, % y-o-y 6.6 -1.6 12.7 9.9 9.5 9.1 8.7 6.3 Transport insurance, % of non-life insurance 19.7 18.1 17.6 17.1 16.7 16.4 16.1 15.6 Health and personal accident insurance, VNDmn 4,011,680.0 5,091,792.0 6,108,574.6 7,711,455.6 8,886,776.2 9,799,493.1 10,711,781.6 11,720,390.2 © Business Monitor International Ltd Page 28 Vietnam Insurance Report Q1 2016 Non-Life Insurance Premiums... persist over the coming years, in line with Vietnam' s overall rapid economic growth and the further development of the life insurance sector © Business Monitor International Ltd Page 14 Vietnam Insurance Report Q1 2016 Table: Life Insurance Claims (Vietnam 2009-2013) 2009 2010 2011 2012 2013 2,507.71 2,786.51 4,221.75 5,740.15 8,095.00 - 11.1 51.5 36.0 41.0 Life insurance gross loss ratio 21.2 20.2 37.1... accident insurance, currently the third largest source of claims, has seen costs increasing rapidly in recent years, a trend which we expect to continue moving forward as Vietnam raises fees in state owned medical facilities and as care standards and availability are generally improved © Business Monitor International Ltd Page 19 Vietnam Insurance Report Q1 2016 Table: Non-Life Insurance Claims (Vietnam. .. for further growth in the non-life sector Microinsurance, catering to the many lowincome households, could significantly expand the reach of insurance cover Development of lines under the catch-all 'other' category, such as agricultural insurance, is also progressing, with Vietnam' s © Business Monitor International Ltd Page 20 Vietnam Insurance Report Q1 2016 vulnerability to extreme weather events making... vehicles on Vietnam' s roads In short, the development of motor vehicle insurance will be driven by volume, rather than by increases in prices/rates © Business Monitor International Ltd Page 22 Vietnam Insurance Report Q1 2016 More Cars Equals More Insurance Vehicle Fleet Size (2012-2019) 5,000,000 40 4,000,000 35 3,000,000 2,000,000 30 1,000,000 0 25 2012 2013e 2014e Vehicle fleet, units (LHS) 2015f 2016f... enterprises, and, very often, through the nonlife insurance companies that are affiliated with them © Business Monitor International Ltd Page 23 Vietnam Insurance Report Q1 2016 Transport A Key Line Transport Premiums (2012-2019) 10,000,000 15 7,500,000 10 5,000,000 5 2,500,000 0 0 -5 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Transport insurance, VNDmn (LHS) Transport insurance, VND, % y-o-y (RHS) e/f = BMI... 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Credit/financial guarantee insurance, VNDmn (LHS) Credit/financial guarantee insurance, VND, % y-o-y (RHS) e/f= BMI estimate/forecast Source: AVI/BMI © Business Monitor International Ltd Page 27 Vietnam Insurance Report Q1 2016 A strong growth rate of, on average, 9.8% throughout our forecast period will lead to credit/financial guarantee insurance premiums... improves household income levels, we expect to see further long-term growth in Vietnam' s life insurance sector © Business Monitor International Ltd Page 11 Vietnam Insurance Report Q1 2016 Premiums Expected To Rise Gross Life Insurance Premiums (2012-2019) 40,000 80 30,000 60 20,000 40 10,000 20 0 0 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Gross life premiums written, VNDbn (LHS) Gross life premiums ... Business Monitor International Ltd Page Vietnam Insurance Report Q1 2016 SWOT Insurance Vietnam Insurance SWOT Analysis Strengths ■ Both the life and non-life insurance segments have been growing... 28 Vietnam Insurance Report Q1 2016 Non-Life Insurance Premiums By Product Line (Vietnam 2012-2019) - Continued 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Health and personal accident insurance, ... Rong Insurance (Bao Long), Petrovietnam Insurance (PVI), Post Office Insurance, SVIC, Union Insurance, VietinBank Insurance, VNA © Business Monitor International Ltd Page 37 Vietnam Insurance Report