M&A in insurance expected to surge in 2010

Mergers and Acquisitions between companies are blossoming strongly this year on account of difficulties in capital mobilisation and network expansion.

Although in the past time, M&A in the insurance field has not really become a strong wave like other production sectors. But the trend of M&As in insurance is expected to be brisker in the near future.
2010 M&A operation started with a record business deal that UK’s Prudential insurance group took over AIA insurance firm under US AIG Finance Group. Both groups have subsidiaries in Vietnam.

Previously, Vietnam’s insurance market also witnessed several remarkable M&A events.

Over 10 years ago, Allianz Vietnam, a 100 percent foreign invested insurer decided to transfer its entire network to Australia’s QBE Insurance Co after nearly seven years of operation. Terms and compensations of insurance contracts signed before the merger were still valid.

Another deal, Bidv Bank had contributed capital into Viet-Uc (Australia) Co to set up Viet-Australia Insurance JV but the new firm did not operate sufficiently. On December 28, 2005, Bidv officially bought back the JV and establish Bidv Insurance Co (BIC) that came into official operation from 2006.

Or lately, Dai-ichi Life of Japan took over local insurer Bao Minh CMC to form Dai-ichi Life Vietnam. At present, Dai-ichi Life Vietnam posts good performance with seven percent market share and its annual growth rate always is higher two times than the average growth of the whole market.

The quick development in number of insurance companies, especially as for the non-life insurance field, led to the shortage of qualified manpower. Meanwhile, a source from finance ministry’s Insurance Supervision Department said that till the last year end, most non-life insurers met enough authorised capital level of at least 300 billion dong but now some insurers still are implementing the capital increase to 300 billion dong, namely Bao Long, Bao Tin, Hung Vuong, UIC and Samsung Vina.

Shortage of capital, good workforce and IT system has forced insurance firms to look for foreign strategic partners. In 2007, Bao Minh Non-Life Insurance Co officially joined hands with France’s AXA Group through selling its 16.6 percent stake to the foreign insurer.

According to Nguyen Cong Ai, deputy general director of KPMG law consulting firm, Vietnam’s insurance market always welcomes foreign invested companies because local firms need the capital and technical supports from foreign partners.

But the process of looking for foreign partners is not easy. Duong Duc Chuyen, director in charge of investment and strategy construction of Bao Viet Group (that had a successful cooperation deal with HSBC) shared, in M&As, companies will have to define what they want to sell and what foreigners want to buy.

Bao Viet group, for example, previously expected to find out a good partner with business experience and technical support willingness for Bao Viet.

“M&A does not mean to sell a part of companies to take money. After M&A deals, how companies do to develop is the core result”, he added. Before the marriage between HSBC and Bao Viet, two sides had to undergo a detailed and long run negotiation process.

Takashi Fufi, CEO of Dai-ichi Life Vietnam also said that a successful M&A deal requires a clear strategy. The post-M&A strategy are very important also.

Dau tu chung khoan

Tags: Insuarance industry, Vietnam insurance maket, Vietnam M&A