Insurance market heats up with series of great deals

Global insurance companies are vying with rivals to buy the Singaporean and Vietnamese businesses of Britain’s Aviva in a deal likely to be worth $2.5 billion.

Aviva set foot in Vietnam in 2011 through a joint venture with VietinBank. In April 2017, Aviva bought out VietinBank from the insurance company in Vietnam, as well as signed an 18-year exclusive agreement for distributing life insurance products through VietinBank. So, if the M&A deal is completed, VietinBank will have to co-operate with a new partner.

Asia’s fast-growing economies and its relatively low penetration by insurance make the region a promising market for global insurers – the regional market, worth $1.7 trillion in premiums, is expected to account for 42 per cent of global premiums by 2029 from about a third currently, a Swiss Re Institute report showed.

However, some overseas insurers have been struggling to scale up in the face of tough competition from larger regional players, as well as regulatory restrictions on foreign ownership in large markets including China and India.

The divestment of the Aviva units, if completed, would add to the last couple of years' strong M&A momentum in the regional insurance sector, which has also been aided by local banks looking to exit this capital-intensive business.

In Vietnam, Vietcombank is also negotiating for the distribution of life insurance in the time coming. Bloomberg has just reported that FWD (controlled by billionaire Richard Li) has already won over competitors like Prudential Plc to partner with Vietcombank. This insurance company from Singapore is nearing an agreement to pay about $400 million for a subsidiary of Vietnam’s biggest lender, Vietcombank,and a long-term insurance distribution agreement with the bank.

As part of the deal, FWD will buy Vietcombank Cardif Life Insurance, which is owned by Vietcombank and BNP Paribas SA’s life insurance unit Cardif.

This is expected to be the largest bancassurance transaction in Vietnam, where the insurer pays an upfront amount for the exclusive right to sell its products in the bank's branches. Bancassurance has been a popular way of expanding in Southeast Asia.

Previously, in early-September, the two life insurers with the largest market share, Prudential and Manulife, have officially announced their new banking partners.

On September 9, 2019, Manulife Vietnam signed a bancassurance co-operation agreement with Asia Commercial Bank (ACB). ACB customers will be able to purchase two key types of life insurance: unit-linked insurance and a critical illness product.

Meanwhile, Prudential Vietnam Assurance and Shinhan Bank signed a long-term strategic bancassurance agreement to expand the potential retail market for both banking and insurance. So Prudential has partnered with seven domestic and foreign units so far.