M&A deals predicted for insurance sector
After an economic crisis, businesses usually have demand for restructuring their operations. This explains why economists believe that a merger and acquisition (M&A) wave in Vietnam is looming, including in the insurance sector.
At the beginning of 2010, British Prudential announced its purchase of AIA belonging to the US AIG Finance Group. The Asian branch of AIG is considered a blockbuster for VIetnam, since both companies have subsidiaries in Vietnam.
Economists believe that difficulties in the expansion of operations have led to the mushrooming of M&A deals.
Prior to that, many M&A agreements occurred in Vietnam. In 2005, the Bank of Investment and Development of Vietnam (BIDV) purchased the joint-venture insurance between Vietnam and Australia to set up BIDV insurance company (BIC). Japanese Dai-ichi Life purchased Bao Minh CMG to establish the successful Dai-ichi Life Vietnam.
The M&A of Prudential and AIA in Vietnam has not been finalized as there is no precedent in merging two 100 percent foreign-owned insurance companies in Vietnam. Although an agreement has been reached, the move must go through many other procedures to be completed that may last through the end of 2010 and even into the next years. Therefore, both Prudential Vietnam and AIA Vietnam will operate as normal until they officially merge.
Financial analysts believe that the move will kick start other M&A in Vietnam’s insurance sector, especially non-life insurance companies. The lack of capital and difficulties in expanding business will be the main reasons.
According to the Ministry of Finance, by December 31, 2009, some non-life insurance companies still had yet to wrap up the process of increasing chartered capital to 300 billion dong as required, including Bao Long, Bao Tin, Hung Vuong, UIC and Samsung Vina.
Tags: Vietnam insurance sector, Vietnam M&A, Vietnam M&A deals
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