Banking partnerships maintain rapid pace

Vietnam’s insurance market becomes increasingly crowded

Last week, VietinBank and Manulife entered an agreement to establish an exclusive 16-year bancassurance partnership to better meet the growing financial and insurance needs of Vietnamese people.

Manulife Vietnam will be the exclusive provider of bancassurance solutions to VietinBank customers in Vietnam soon after regulatory approval is obtained. This partnership will help to grow and further protect the health and wealth of Vietnamese individuals, families, and businesses by offering best-in-class insurance, wealth, and retirement solutions.

As part of the transaction, Manulife Financial Asia Ltd. will also acquire insurance firm Aviva Vietnam. The acquisition of Aviva Vietnam will be subject to regulatory approvals. Manulife expects the partnership to be accretive to diluted core earnings per common share in 2022 and the impact on the Life Insurance Capital Adequacy Test ratio is expected to be less than 1 per cent.

Le Duc Tho, chairman of VietinBank said, “VietinBank and Manulife Vietnam have strengths and ambitions that complement each other. We believe that the relationship will grow strongly as we progress towards our vision of being the leading and most reputable bank in Vietnam.”

Anil Wadhwani, Manulife Asia’s president and CEO added, “We are very excited to expand our ability to support improved health and retirement outcomes for a rising, more digitally enabled population in Vietnam through this partnership. Vietnam is one of the region’s greatest economic success stories.”

As Canada’s largest life insurer, Manulife has faced headwinds in its home market due to the outbreak, while its business in Asia, particularly in Vietnam, remains resilient.

Previously, Manulife also partnered with Saigon Commercial Bank in 2015 and expanded to sign another agreement with Techcombank in 2017.

Earlier this month, Asian Commercial Bank (ACB) confirmed it would halt its bancassurance co-operation with AIA Vietnam and Manulife Vietnam at all branches and transaction offices.

The bank said that the termination of cooperation will not affect previous contracts purchased from the two companies above, and ACB will continue to support customers should anything arise related to insurance agreements.

This is because of the exclusive bancassurance which ACB recently signed to distribute insurance products for Sun Life Vietnam for a period of 15 years.

According to Vietcombank Securities, the bank is predicted to receive an upfront fee of $370 million for its current around 3.6 million customers, one of the most remarkable exclusive deals in the domestic insurance market this year.

Besides a major contract with ACB, Sun Life also signed an exclusive agreement worth around $75 million with TPBank at the end of 2019.

Bancassurance sales rose to achieve 13 per cent of the entire insurance market in 2017 before accelerating to reach 22 per cent in 2018 and 29 per cent in 2019.

“Though no further details on the deal’s terms were disclosed, the bank shared that ACB and Sunlife will mutually go through business plans and targets for each year,” noted Tran Dang Manh, analyst at Bao Viet Securities.

In the short term, Manh added, ACB bancassurance business will slow down, as for well-preparedness to initiate Sunlife Life-insurance products in January 1, 2021, while it will likely take some time for new products from Sun Life to be effectively absorbed by consumers. ACB’s bancassurance business is likely to take off post-2021 on the back of its direct sales model, loyalty and high-income customer base with proven expansion capacity and strong headroom for growing productivity.

In a broader context, foreign insurers are outweighing local peers in the bancassurance competition.

Last year, Vietnam’s top bancassurance bestsellers included VIB-Prudential, Techcombank-Manulife, MB Ageas Life-MB, and Sacombank with Dai-ichi Life.

In April, pan-Asian insurer FWD Group confirmed securing regulatory approval to proceed with the previously announced acquisition of Vietcombank-Cardif Life Insurance, a joint venture between state-owned Vietcombank and French partner BNP Paribas Cardif. The tie-up, rumoured to be worth anywhere between $400 million and $1 billion, is slated to strengthen FWD’s presence in Vietnam.

In 2017, Dai-ichi Life Vietnam officially became the only provider of premier life insurance products and riders through SHB’s extensive network nationwide.

Other lenders are also shaking hands with major foreign insurers, such as Prudential with Shinhan Bank, UOB, SeABank, and PVcomBank; and AIA with Citibank, HSBC, and VPBank, among others.

Italian insurer Generali inked an agreement with local lender OCB last year, whereby the bank will exclusively distribute Generali's insurance products on a national scale.

Besides that, MB Ageas Life – a joint venture of local bank MB, Ageas Group from Belgium, and Muang Thai Life Insurance – is teaming up with MB to increase its customer base. MB Ageas Life surpassed Chubb and Generali to reach the top six insurers in terms of new market share in 2019.

In June, German insurance giant Allianz revealed its intention to jump on the property and casualty insurance bandwagon in Vietnam, with the target date also set for 2021. Allianz once showed its interest in buying Aviva Vietnam, and also formed a joint venture with local technology group FPT.

Digitally-led business and cashless payment trends are also highlighted by other insurers. For instance, Hanwha Life Vietnam is teaming up with e-wallet MoMo and intermediary payment service provider Payoo so as to enhance service quality and experience for customers.