BMI Vietnam Insurance Report Q2 2014

Q2 2014www.businessmonitor.com

VIETNAMINSURANCE REPORTINCLUDES 5-YEAR FORECASTS TO 2018

ISSN 1752-8410Published by:Business Monitor International

Vietnam Insurance Report Q22014INCLUDES 5-YEAR FORECASTS TO 2018

Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: February 2014

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CONTENTS

BMI Industry View ............................................................................................................... 7

SWOT .................................................................................................................................... 9Insurance ................................................................................................................................................. 9Political ................................................................................................................................................. 11Economic ............................................................................................................................................... 12Business Environment .............................................................................................................................. 13

Industry Forecast .............................................................................................................. 14Total Premiums Forecast .......................................................................................................................... 14Total premiums ...................................................................................................................................... 14

Table: Total Gross Premiums Written 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Total Claims ......................................................................................................................................... 15Table: Total Insurance Claims 2009-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Life Premiums Forecast ............................................................................................................................ 16Insurance Premiums ............................................................................................................................... 17

Table: Gross Life Premiums Written 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Life Insurance Drivers ............................................................................................................................ 18

Table: PRIVATE HEALTH EXPENDITURE 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Table: DISEASE ADJUSTED LIFE YEARS 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Life Claims ........................................................................................................................................... 19Table: Life Insurance Claims 2009-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Non-Life Premiums Forecast ..................................................................................................................... 21Non-Life Premiums ................................................................................................................................ 22

Table: Gross Non-Life Premiums 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22Table: Net Non-Life Premiums 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Non-Life Reinsurance ............................................................................................................................. 23Table: Reinsurance Non-Life Premiums 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Non-Life Claims ..................................................................................................................................... 24Table: Non-Life Insurance Claims 2008-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Non-Life Sub-Sector Forecast .................................................................................................................... 26Table: Non-Life % Breakdown 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Motor Vehicle And Transport Insurance ..................................................................................................... 27Table: Motor Vehicle Insurance 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Table: Transport Insurance 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Table: INSURANCE KEY DRIVERS, FREIGHT TONNAGE 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Property Insurance ................................................................................................................................. 30Table: Property Insurance 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Industry Risk Reward Ratings .......................................................................................... 32Asia Risk/Reward Ratings ......................................................................................................................... 32

Market Overview ............................................................................................................... 38

Vietnam Insurance Report Q2 2014

Business Monitor International Page 4

Life Market Overview ............................................................................................................................... 38Non-Life Market Overview ........................................................................................................................ 39

Table: Non-Life Insurance Market (US$mn) 2006-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Table: Non-Life Insurance Market (%) 2006-2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Company Profile ................................................................................................................ 43AIA Group ............................................................................................................................................. 43American International Group (AIG) ........................................................................................................... 46Bao Viet Holdings .................................................................................................................................... 50Manulife Financial .................................................................................................................................. 53Prudential plc ......................................................................................................................................... 57PVI Holdings .......................................................................................................................................... 61Sun Life Financial ................................................................................................................................... 64

Demographic Forecast ..................................................................................................... 66Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Methodology ...................................................................................................................... 70Industry Forecast Methodology ................................................................................................................ 70Risk/Reward Rating Methodology ............................................................................................................. 73

Table: Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74Table: Weighting of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76



BMI Industry View

BMI View: Vietnam's insurance sector appears to be one of the most dynamic in South East Asia. By manymetrics, it is growing rapidly. In both of the main segments, companies are undertaking initiatives to growpremiums and profits. Nevertheless, a number of constraints and challenges remain. The small absolute sizeof the market, and a very challenging business environment mean that it may be some years beforemultinationals who have been attracted to Vietnam come close to building substantial local businesses in

the way that they have in other countries in South East Asia.

BMI's new insurance report format provides forecasts of the life and non-life markets, including gross and

net premiums, reinsurance premiums and assets. Moreover, it provides forecasts for key growth drivers such

as vehicle fleet size, demographic factors and private health expenditure. The report also contains a

comprehensive breakdown of the non-life insurance market, providing forecasts for motor and transport

insurance, property, personal accident, health, general liability and credit insurance. Finally, the new report

offers a detailed breakdown of the life and non-life competitive landscapes, covering the top companies

present in each segment by premiums and market share.

There was a time when Vietnam was one of the new frontiers of insurance in the Asia Pacific, but the sector

has moved into a more exciting phase of its development. Foreign insurance companies (particularly in thelife segment) are present, and see Vietnam as a natural extension of their regional or global footprints. In2012, Sun Life Financial (through a JV with PVI) was a newcomer to the life segment, as was Generali.In the non-life segment, Australia's IAG has taken a strategic stake in AAA, while Talanx has increased its

shareholding in PVI. New products are being developed. Agency networks are being built. As in the rest of

South East Asia, bancassurance is being seen as an opportunity by some of the players. In the non-life

segment, the local companies have generally shown more pricing discipline than have their counterparts

elsewhere in the region. Motor insurance - so often a thankless and profitless line in emerging markets -

accounts for only about one third of the premiums written in the non-life segment in Vietnam.

Nevertheless, there are reasons for caution. Non-life penetration stopped growing in 2012 . Although the

non-life segment is less fragmented than its peers in other countries in South East Asia, most of the players

are sub-scale local firms that do not necessarily have access to the capital that they need to grow.

In the life segment, the main challenge is that most of the households who can afford to use life insurance

products understand the benefits, and are already doing so. In the short-to-medium term, there are not

actually all that many potential new users. Most of the more than 90% of households who lack cover are too



poor to pay for life insurance. How this is reconciled by the life insurers with the substantial expansions in

agency forces through 2013 remains to be seen.

Key BMI Forecasts

In 2014, total premiums will rise by 13.6% to US$2.4bn.

Life premiums will grow by 10.2% to US$1.0bn.

Non-Life premiums will rise by 16.2% to US$1.4bn.

Within the non-life segment, motor vehicle insurance premiums will grow by 16.8% to US$0.4bn.

Commercial and industrial lines will rise by 16.0% to US$0.6bn.



SWOT

Insurance

Vietnam Insurance SWOT Analysis

Strengths Both the life and non-life insurance segments are growing at double-digit rates, and

should continue to do so for the foreseeable future.

There are clear signs of pricing discipline in the non-life segment.

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 non-life companies are subscale and lack ready access to new capital.

Many Vietnamese households are too poor to use life insurance.

Growth in the non-life segment is patchy.

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.

Life companies are entering into bancassurance relationships and are undertaking

other distribution initiatives.

The government has launched a trial program to promote the development of export

credit insurance.



Vietnam Insurance SWOT Analysis - Continued

Substantial foreign companies continue to develop subsidiaries in the non-life and life

segments.

Threats High inflation. This could constrain households from becoming first time users of life

insurance, in a country where well over 90% lack cover.

Lack of development and volatility in the Vietnamese capital and bond markets

complicate investment strategies.



Political

SWOT Analysis

Strengths The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the next five years. The one-

party system is generally conducive to short-term political stability.

Relations with the US have witnessed a marked improvement, and Washington sees

Hanoi as a potential geopolitical ally in South East Asia.

Weaknesses Corruption among government officials poses a major threat to the legitimacy of the

ruling Communist Party.

There is increasing (albeit still limited) public dissatisfaction with the leadership's tight

control over political dissent.

Opportunities The government recognises the threat corruption poses to its legitimacy, and has

acted to clamp down on graft among party officials.

Vietnam has allowed legislators to become more vocal in criticising government

policies. This is opening up opportunities for more checks and balances within the

one-party system.

Threats Macroeconomic instabilities continue to weigh on public acceptance of the one-party

system, and street demonstrations to protest economic conditions could develop into

a full-on challenge of undemocractic rule.

Although strong domestic control will ensure little change to Vietnam's political scene

in the next few years, over the longer term, the one-party-state will probably be

unsustainable.

Relations with China have deteriorated over recent years due to Beijing's more

assertive stance over disputed islands in the South China Sea and domestic criticism

of a large Chinese investment into a bauxite mining project in the central highlands,

which could potentially cause wide-scale environmental damage.



Economic

SWOT Analysis

Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with

GDP growth averaging 7.1% annually between 2000 and 2012.

The economic boom has lifted many Vietnamese out of poverty, with the official

poverty rate in the country falling from 58% in 1993 to 20.7% in 2012.

Weaknesses Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy

vulnerable to global economic uncertainties. The fiscal deficit is dominated by

substantial spending on social subsidies that could be difficult to withdraw.

The heavily-managed and weak currency reduces incentives to improve quality of

exports, and also keeps import costs high, contributing to inflationary pressures.

Opportunities WTO membership and the upcoming ASEAN AEC in 2015 should give Vietnam

greater access to both foreign markets and capital, while making Vietnamese

enterprises stronger through increased competition.

The government will in spite of the current macroeconomic woes, continue to move

forward with market reforms, including privatisation of state-owned enterprises, and

liberalising the banking sector.

Urbanisation will continue to be a long-term growth driver. The UN forecasts the

urban population rising from 29% of the population to more than 50% by the early

2040s.

Threats Inflation and deficit concerns have caused some investors to re-assess their hitherto

upbeat view of Vietnam. If the government focuses too much on stimulating growth

and fails to root out inflationary pressure, it risks prolonging macroeconomic

instability, which could lead to a potential crisis.

Prolonged macroeconomic instability could prompt the authorities to put reforms on

hold as they struggle to stabilise the economy.



Business Environment

SWOT Analysis

Strengths Vietnam has a large, skilled and low-cost workforce, which has made the country

attractive to foreign investors.

Vietnam's location - its proximity to China and South East Asia, and its good sea links

- makes it a good base for foreign companies to export to the rest of Asia, and

beyond.

Weaknesses Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to

cope with the country's economic growth and links with the outside world.

Vietnam remains one of the world's most corrupt countries. According to

Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123

out of 176 countries.

Opportunities Vietnam is increasingly attracting investment from key Asian economies, such as

Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech

skills and know-how.

Vietnam is pressing ahead with the privatisation of state-owned enterprises and the

liberalisation of the banking sector. This should offer foreign investors new entry

points.

Threats Ongoing trade disputes with the US, and the general threat of American

protectionism, which will remain a concern.

Labour unrest remains a lingering threat. A failure by the authorities to boost skills

levels could leave Vietnam a second-rate economy for an indefinite period.



Industry Forecast

Total Premiums Forecast

BMI View: Vietnam's insurance sector ranks in international terms as one that is small, but reasonably

rapidly growing. During the forecast period, growth will be driven mainly by the expansion in commercial/industrial lines in the non-life segment.

Basic lines such as motor vehicle and household property insurance are less important than they are in other

South East Asian countries, or in other low income countries in the rest of the world. At least until 2018, the

non-life segment will be dominated by the underwriting of large scale industrial/commercial risks for

(predominantly) state owned companies. Life insurance is growing, but will still be at an embryonic state ofdevelopment at the end of the forecast period.

Total premiums

In world terms, Vietnam will be an important growth market for corporate planners in global/regional multi-

national insurers. However, this will be the case beyond the end of the forecast period. Total premiums

appear likely to rise in line with nominal GDP, with the result that overall penetration will remain constant

over the next five years at 1.2-1.3%. Total per capita premiums will nearly double over the period but will

only be around US$43 per annum in 2018. These are low levels.

As noted above, growth will be driven mainly by the (currently) more important non-life segment, thanks tothe evolution of commercial/industrial lines. Life insurance premiums will rise in absolute terms, but will

remain constrained by the low income levels of most households in Vietnam.

Table: Total Gross Premiums Written 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Total gross premiumswritten, VNDbn

31,877.2 41,148.8 44,986.7 49,945.5 56,601.4 64,060.6 72,185.8 81,304.7

Total gross premiumswritten, VND, % changey-o-y

3.4 29.1 9.3 11.0 13.3 13.2 12.7 12.6

Total gross premiumswritten, VND per capita

354,530.1 453,202.2 490,693.9 539,671.3 606,097.5 680,113.9 760,157.6 849,609.0

Total gross premiumswritten, % of GDP

1.1 1.3 1.3 1.2 1.3 1.3 1.3 1.3



Total Gross Premiums Written 2011-2018 - Continued

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Total gross premiumswritten, US$bn

1.5 2.0 2.1 2.4 2.8 3.2 3.6 4.1

Total gross premiumswritten, US$, % changey-o-y

-4.3 27.7 8.4 13.6 14.6 13.8 13.9 13.8

Total gross premiumswritten, US$ per capita

17.2 21.7 23.3 26.2 29.8 33.6 38.0 42.9

Source: AVI/ BMI

Total Claims

The evolution of claims expenses over recent years has been quite erratic - although the trend has clearly

been upwards. Changes from year to year have driven by the surge in life claims and payments from

extremely low base levels. They have also been influenced by sizeable industrial/commercial claims. The

Vietnamese non-life companies are heavy users of outwards reinsurance.

Table: Total Insurance Claims 2009-2012

2009 2010 2011 2012

Total insurance claims, VNDbn 7,780.00 9,170.70 12,666.80 14,613.70

Total insurance claims, VND, %change y-o-y

n.a. 17.9 38.1 15.4

Total insurance claims, VND percapita

88,209.10 102,986.30 140,876.40 160,951.70

Total insurance claims, % of GDP 0.4 0.4 0.5 0.5

Total insurance claims, US$bn 0.4 0.5 0.6 0.7

Total insurance claims, US$, %change y-o-y

n.a. 9.7 27.9 14.2

Total insurance claims, US$ per capita 5 5.4 6.8 7.7

Source: AVI/BMI



Life Premiums Forecast

BMI View: The latest data suggests that life insurance should grow quite rapidly, but from a very low base.By all metrics, the segment will remain underdeveloped at the end of the forecast period. The multi-nationalcompanies that have entered the market in the last three years clearly expect life insurance to play a keyrole in organised savings in Vietnam -just as it does elsewhere in South East Asia (and, to a greater extent,in North East Asia). This may yet happen, but is most unlikely to do so prior to 2018.

We would also note that the growth in premiums is vulnerable to setbacks from economic shocks.

Vietnamese households generally do not yet understand the benefits of life insurance, although the insurers

themselves are working to correct this. A more fundamental problem is that most households cannot afford

life insurance.

Growth May Be Volatile

Life Premiums (US$bn) And Y-o-Y Change (%)

Gross life premiums written, US$bn (LHS)Gross life premiums written, US$~ % y-o-y (RHS)

2011

2012

2013

e

2014

f

2015

f

2016

f

2017

f

2018

f0

1

2

-50

0

50

100

Notes: 1 "AVI/BMI" 2 "AVI/BMI"

Relative to others in South East Asia, Vietnam is, and for sometime will remain, a small opportunity for

international life insurers. Nevertheless, the segment benefits hugely from the product and distribution



know-how and regional scale of (most of) the international companies. Particular companies havehighlighted how they have been expanding their agency forces in the country over the last two years or so.

Insurance Premiums

Life density is currently around US$10 per capita in Vietnam. Life penetration is around 0.5% of GDP. Lowfigures such as these are normally associated with countries where lack of property rights and/or persistently

high inflation mean that households are very reluctant to enter into long-term contracts with life insurers.

Neither of these structural challenges are present in Vietnam. Instead, the basic problem is that too many

households are unable to afford to save via life insurance.

Table: Gross Life Premiums Written 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Gross life premiumswritten, VNDbn

11,380.2 18,390.8 19,223.9 20,705.6 23,504.6 26,730.1 30,299.0 34,390.6

Gross life premiumswritten, VND, %change y-o-y

-17.5 61.6 4.5 7.7 13.5 13.7 13.4 13.5

Gross life premiumswritten, VND percapita

126,567.7 202,551.8 209,685.3 223,728.8 251,691.6 283,785.7 319,065.8 359,371.6

Gross life premiumswritten, % of GDP

0.4 0.6 0.5 0.5 0.5 0.5 0.5 0.5

Gross life premiumswritten, % of grosspremiums written

35.7 44.7 42.7 41.5 41.5 41.7 42.0 42.3

Gross life premiumswritten, US$bn

0.6 0.9 0.9 1.0 1.2 1.3 1.5 1.7

Gross life premiumswritten, US$, %change y-o-y

-23.6 59.9 3.7 10.2 14.8 14.4 14.6 14.7

Gross life premiumswritten, US$ percapita

6.1 9.7 10.0 10.9 12.4 14.0 16.0 18.2

Source: BMI/ AVI

Our expectation is that premiums will rise, but in a somewhat erratic way, through the forecast period. Total

premiums written in the segment should increase from about US$900mn now to US$1,700mn or so in 2018.Growth will likely be much more substantial after 2018. The various multi-national insurers that have



established operations in Vietnam are, we believe, right to see the market as an attractive opportunity - but

in the long-term. Between now and the end of the forecast period, it is likely that at least one of the majorswill have significant success with the development and distribution of micro-insurance products.

Life Insurance Drivers

There are some life insurance markets where the rapid growth of private healthcare expenditure offers a

substantial opportunity - through the provision of health insurance riders to policies and/or other product

offerings. Vietnam is not currently such a market and is unlikely to become one within the forecast period.

In essence, the overall insurance market is too underdeveloped, because of widespread poverty.

Nevertheless, we note that per capita spending on private healthcare is considerably higher than life

insurance density (i.e. per capita premiums). This suggests that, for the small minority of households whounderstand and afford life insurance, there is some potential for the insurers to sell healthcare-related

products and riders.

Table: PRIVATE HEALTH EXPENDITURE 2011-2018

2011 2012f 2013e 2014f 2015f 2016f 2017f 2018f

Private healthexpenditure, VNDbn

102,984.4 120,644.8 138,626.4 160,406.7 184,723.3 210,185.0 237,652.8 267,263.9

Private healthexpenditure, VND, %change y-o-y

21.0 17.1 14.9 15.7 15.2 13.8 13.1 12.5

Private healthexpenditure, US$bn

5.0 5.8 6.6 7.8 9.1 10.4 11.9 13.5

Private healthexpenditure, US$bn,% change y-o-y

12.0 15.9 13.9 18.4 16.5 14.4 14.3 13.6

Private healthexpenditure, US$ percapita

55.4 63.7 71.8 84.3 97.3 110.4 125.1 141.1

Private healthexpenditure, % ofGDP

3.7 3.7 3.9 4.0 4.1 4.2 4.2 4.3

Source: AVI/ BMI

For countries at Vietnam's level of development, private healthcare spending is driven principally by

changes in morbidity. In terms of Disease Adjusted Life Years (DALYs, a widely used metric) morbidityshould increase slightly over the forecast period. Rising incomes and effective child healthcare policies



should result in a fall in DALYs for the youngest age cohorts (to 15 years). However, these declines will bemore than offset by an increase in DALYs in most older age cohorts.

Table: DISEASE ADJUSTED LIFE YEARS 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

All Causes, DALYs 11,898,272 11,933,865 11,968,439 12,001,992 12,034,522 12,066,030 12,096,513 12,125,971

Communicable,maternal, perinataland nutritionalconditions, DALYs

3,361,708 3,366,403 3,371,022 3,375,565 3,380,031 3,384,422 3,388,736 3,392,973

Noncommunicablediseases, DALYs

6,884,945 6,928,102 6,970,173 7,011,157 7,051,055 7,089,863 7,127,581 7,164,209

All diseases andinjuries, 0-4 yrs,total, DALYs

1,468,354 1,399,208 1,333,074 1,270,112 1,210,424 1,154,059 1,101,023 1,051,282


2,392,289 2,406,024 2,418,817 2,431,012 2,442,923 2,454,811 2,466,841 2,479,058


2,077,024 2,123,095 2,168,709 2,212,369 2,252,764 2,288,799 2,319,618 2,344,638


2,422,440 2,426,292 2,425,683 2,421,889 2,416,058 2,409,202 2,402,194 2,395,781


596,136 581,029 566,147 551,433 536,886 522,547 508,490 494,820


1,425,932 1,447,547 1,467,741 1,487,452 1,507,330 1,527,762 1,548,883 1,570,589

All diseases andinjuries, 70+ yrs,total, DALYs

1,516,097 1,550,670 1,588,268 1,627,726 1,668,137 1,708,851 1,749,463 1,789,803

Source: WHO/World Bank/IMF/BMI

Life Claims

The embryonic level of development of Vietnam's life segment means that it is difficult to comment on

claims in a meaningful way. We suggest that the very rapid rise in claims and payments over recent years

has been due to the fact that the claims and payments have been rising from a very low base. We expect that

the pace of growth will moderate in the coming years.



Table: Life Insurance Claims 2009-2012

2009 2010 2011 2012

Life insurance claims,VNDbn

2,507.70 2,786.50 4,221.80 5,740.10

Life insurance claims,VND, % change y-o-y

n.a. 11.1 51.5 36

Life insurance claims,VND per capita

28,432.10 31,292.50 46,953.20 63,220.40

Life insurance claimslife, % of GDP

0.1 0.1 0.2 0.2

Life insurance claims,% of total claims

32.2 30.4 33.3 39.3

Life insurance claims,US$bn

0.1 0.1 0.2 0.3

Source: BMI/VI



Non-Life Premiums Forecast

BMI View: Thanks mainly to the ongoing development of industrial and commercial lines, which accountfor around 40% of all premiums written in Vietnam's non-life segment, growth should remain consistentlyin double digits through the forecast period. Nevertheless, we are not looking for non-life penetration torise, as we see no obvious catalyst for this outcome.

By most metrics, the non-life segment will remain underdeveloped at the end of the forecast

period. Premiums will also rise in absolute terms thanks to the further growth of motor vehicle insurance,

transport insurance and property insurance.

Not Large, But Steadily Growing

Non-Life Premiums (US$bn) And Y-o-Y Growth (%)

Gross non-life premiums written, US$bn (LHS)Gross non-life premiums written, US$~ % y-o-y (RHS)

2011

2012

2013

e

2014

f

2015

f

2016

f

2017

f

2018

f0

1

2

3

10

15

Notes: 1 "AVI/BMI" 2 "AVI/BMI"

With total premiums of around US$1bn, Vietnam's non-life segment is small in absolute terms and inrelation to its counterparts in other countries in South East Asia. This will remain the case in 2018.

However, premiums should consistently sustain double-digit growth in the meantime.



Non-Life Premiums

Having fallen over recent years, non-life penetration (premiums as a percentage of GDP has stabilised ataround 0.7%. At some stage in the future, it is reasonable to expect that some catalyst will cause penetration

to rise. However, we anticipate this will happen only after the end of the forecast period. Per capita

premiums (density) of around US$13 are indicative of most households being too poor to afford non-lifeinsurance. Nevertheless, the likely growth of the economy, and associated increases in industrial/

commercial lines, imply that the segment should sustain double-digit growth rates.

Table: Gross Non-Life Premiums 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Gross non-lifepremiums written,VNDbn

20,497.0 22,758.0 25,762.8 29,239.8 33,096.8 37,330.6 41,886.8 46,914.1

Gross non-lifepremiums written,VND, % change y-o-y

20.2 11.0 13.2 13.5 13.2 12.8 12.2 12.0

Gross non-lifepremiums written,VND per capita

227,962.4 250,650.4 281,008.6 315,942.6 354,405.9 396,328.1 441,091.8 490,237.5

Gross non-lifepremiums written, %of GDP

0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7

Gross non-lifepremiums written, %of gross premiumswritten

64.3 55.3 57.3 58.5 58.5 58.3 58.0 57.7

Gross non-lifepremiums written, US$bn

1.0 1.1 1.2 1.4 1.6 1.8 2.1 2.4

Gross non-lifepremiums written, US$, % change y-o-y

11.3 9.9 12.3 16.2 14.5 13.4 13.4 13.1

Gross non-lifepremiums written, US$ per capita

11.0 12.0 13.4 15.4 17.4 19.6 22.1 24.8

Source: BMI/ AVI

Retention ratios (net premiums as a percentage of gross premiums) are low, at around 60%. This reflectsthree factors: most of the Vietnamese non-life companies lack economies of scale; some 40% of the activity

undertaken in the segment involves complex and large industrial/commercial risks; and the Vietnamese



companies do not necessarily have ready access to global capital markets. Accordingly, net premiums

should remain significantly below - and move in line with - gross premiums through the forecast period.

Table: Net Non-Life Premiums 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Net non-life premiumswritten, VNDbn

15,572.3 17,074.1 15,550.7 17,595.4 19,935.3 22,478.8 25,224.7 28,251.4

Net non-life premiumswritten, VND, %change y-o-y

20.0 9.6 -8.9 13.1 13.3 12.8 12.2 12.0

Net non-life premiumswritten, VND percapita

173,191.5 188,049.6 169,619.4 190,121.8 213,470.9 238,651.5 265,630.6 295,218.3

Net non-life premiumswritten, % of GDP

0.6 0.5 0.4 0.4 0.4 0.4 0.4 0.5

Net non-life premiumswritten, US$bn

0.8 0.8 0.7 0.9 1.0 1.1 1.3 1.4

Net non-life premiumswritten, US$, %change y-o-y

11.1 8.5 -9.7 15.8 14.6 13.4 13.4 13.1

Net non-life premiumswritten, US$ percapita

8.4 9.0 8.1 9.2 10.5 11.8 13.3 14.9

Source: BMI/ AVI

Non-Life Reinsurance

The corollary of this is that Vietnam represents a currently small opportunity for reinsurers, but one that is

growing at double-digit rates. We are looking for outwards reinsurance premiums to grow from around US

$500mn in 2013 to about US$900mn in 2018. Most of this business will pertain to large scale commercial/industrial risks, which account for well over one third or the premiums written in the non-life segment.

Table: Reinsurance Non-Life Premiums 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Reinsurance non-lifepremiums written,VNDbn

7,853.8 9,156.6 10,212.1 11,644.5 13,161.4 14,851.7 16,662.1 18,662.7

Reinsurance non-lifepremiums written, VND,% change y-o-y

24.4 16.6 11.5 14.0 13.0 12.8 12.2 12.0



Reinsurance Non-Life Premiums 2011-2018 - Continued

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Reinsurance non-lifepremiums written, VNDper capita

87,347.7 100,847.9 111,389.2 125,820.8 140,935.0 157,676.6 175,461.2 195,019.2

Reinsurance non-lifepremiums written, % ofGDP

0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3

Reinsurance non-lifepremiums written, US$bn

0.4 0.4 0.5 0.6 0.6 0.7 0.8 0.9

Reinsurance non-lifepremiums written, US$,% change y-o-y

15.1 15.4 10.6 16.7 14.3 13.5 13.4 13.1

Reinsurance non-lifepremiums written, US$per capita

4.2 4.8 5.3 6.1 6.9 7.8 8.8 9.8

Source: BMI/ AVI

Non-Life Claims

Except in 2011, when non-life claims jumped by about one fifth, claims costs have typically evolved quiteslowly in Vietnam. We would attribute this to the nature of the business that is written in the segment. With

large scale commercial and industrial risks accounting for about 40% of premiums written, losses are

relatively rare but, when they occur, substantial. Until motor vehicle and household lines come to dominate

the business mix of the non-life segment (an outcome which we do not expect prior to 2018), claims shouldcontinue to grow quite slowly.



Table: Non-Life Insurance Claims 2008-2012

2008 2009 2010 2011

Non-life insuranceclaims, VNDbn

4,510.70 5,272.30 6,384.20 8,445.00

Non-life insuranceclaims, VND, %change y-o-y

n.a. 16.9 21.1 32.3

Non-life insuranceclaims, VND percapita

51,627.70 59,777.00 71,693.90 93,923.10

Non-life insuranceclaims, % of GDP

0.3 0.3 0.3 0.3

Non-life insuranceclaims, % of totalclaims

n.a. 67.8 69.6 66.7

Source: BMI/ AVI



Non-Life Sub-Sector Forecast

BMI View: For a non-life segment that is still, by almost all metrics, underdeveloped, Vietnam's is unusualin that industrial/ commercial covers are relatively important. Conversely, basic motor vehicle insurance

and household property lines account for a small percentage of premiums than would otherwise be the case.This is the consequence of the peculiar competitive landscape, in which many of the leading local non-lifecompanies are affiliated with, and serve, state-owned enterprises.

Looking forward, we do not see any particular reason why this should change during the forecast period.

Overall premiums have for several years been growing in line with GDP. In the absence of a clear catalyst

for penetration to rise, the relative sizes of the various sub-sectors should stay broadly unchanged.

Table: Non-Life % Breakdown 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Motor vehicle insurance 29.9 27.8 27.7 27.8 28.0 28.2 28.4 28.7

Property insurance 8.4 9.6 9.3 9.2 9.0 8.8 8.5 8.1

Transport insurance 20.6 19.7 19.8 19.8 19.8 19.8 19.8 19.7

General liability insurance 2.1 2.3 2.3 2.3 2.2 2.2 2.2 2.2

Credit/financial guarantee insurance 0.4 0.2 0.3 0.3 0.3 0.3 0.3 0.3

Other insurance 38.5 40.4 40.7 40.6 40.6 40.7 40.8 41.0

Source: AVI/ BMI

Commercial and industrial covers, which are predominantly provided to the various industrial state owned

enterprises that play a dominant role in Vietnam's economy, account for about 40% of all non-life

premiums. The next largest lines by this metric are motor vehicle insurance, transport insurance and

property insurance. The non-life companies basically do not (yet) provide health insurance. Other lines,such as general liability insurance, are miniscule. None of the sub-sectors - including the larger ones -

represents a substantial commercial opportunity in regional terms.



Commercial/ Industrial Lines Well Developed...

Gross Written Premiums, Non-Life Segment (US$mn), 2013

Source: AVI/ BMI

Motor Vehicle And Transport Insurance

Motor vehicle insurance is relatively less important in Vietnam's non-life segment than in counterparts in

other low income countries. Nevertheless, motor vehicle related lines accounted for a little over one quarter

of all premiums written in the segment during 2013, and should continue to do so through the forecast

period. In essence, we are looking for steady double-digit growth in premiums over the next five years, as

the sub-sector expands in line with the non-life segment. Given the fragmentation of the competitive

landscape, we expect that the rise will be driven mainly by the increase in the numbers of vehicles on

Vietnam's roads. In short, the development of the sub-sector will be driven by volume, rather than price/

rate, increases.



Table: Motor Vehicle Insurance 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Motorvehicleinsurance,VNDmn

6,134,000.0 6,329,214.0 7,126,728.4 8,135,470.8 9,269,922.2 10,537,068.4 11,909,588.8 13,446,284.8

Motorvehicleinsurance,VND, %change y-o-y

14.1 3.2 12.6 14.2 13.9 13.7 13.0 12.9

Motorvehicleinsurance,US$mn

296.9 303.2 338.6 395.6 456.0 521.2 595.5 679.1

Motorvehicleinsurance,US$, %change y-o-y

5.6 2.1 11.7 16.8 15.3 14.3 14.2 14.0

Motorvehicleinsurance,% of non-lifeinsurance

29.9 27.8 27.7 27.8 28.0 28.2 28.4 28.7

Source: BMI/ AVI

Accounting for around one fifth of non-life premiums, transport insurance is not much less important by

that measure than motor vehicle insurance. In other words, transport insurance accounts for a larger

percentage of activity in the segment than one might expect in a country with Vietnam's per capita incomes.

We think that this is reflective of buying of transport insurance by (predominantly) state owned enterprises -and, very often, through the non-life insurance companies that are affiliated with them.



Table: Transport Insurance 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Transportinsurance,VNDmn

4,214,000.0 4,493,131.0 5,104,693.5 5,792,681.0 6,558,509.1 7,384,425.5 8,285,054.5 9,265,397.0

Transportinsurance,VND, %change y-o-y

18.3 6.6 13.6 13.5 13.2 12.6 12.2 11.8

Transportinsurance,US$mn

204.0 215.3 242.5 281.7 322.6 365.3 414.3 467.9

Transportinsurance,US$, %change y-o-y

9.5 5.5 12.7 16.1 14.5 13.2 13.4 13.0

Transportinsurance,% of non-lifeinsurance

20.6 19.7 19.8 19.8 19.8 19.8 19.8 19.7

Source: AVI/ BMI

For now, we look for steady, double-digit, gains in transport insurance premiums each year through the

forecast period. This will be driven mainly by the likely growth in road freight transport in Vietnam. Road

freight easily dominates the nation's transport system in terms of tonnes carried. We also assume that the

market will be orderly: rates/prices should increase slightly.

Table: INSURANCE KEY DRIVERS, FREIGHT TONNAGE 2011-2018

2011 2012f 2013e 2014f 2015f 2016f 2017f 2018f

Air FreightTonnes (000)

200.3 178.7 189.0 202.3 216.9 232.4 248.5 265.5

Air FreightTonnes (000),% change y-o-y

5.4 -10.8 5.8 7.0 7.2 7.1 7.0 6.8

Rail FreightTonnes (000)

7,285.1 7,003.5 7,292.0 7,519.6 7,759.3 8,010.4 8,269.7 8,537.8

Rail FreightTonnes (000),% change y-o-y

-7.3 -3.9 4.1 3.1 3.2 3.2 3.2 3.2



INSURANCE KEY DRIVERS, FREIGHT TONNAGE 2011-2018 - Continued

2011 2012f 2013e 2014f 2015f 2016f 2017f 2018f

Road FreightTonnes (000)

654,127.1 722,156.4 806,648.7 902,639.9 1,010,054.0 1,126,210.3 1,253,472.0 1,392,607.4

Road FreightTonnes (000),% change y-o-y

11.4 10.4 11.7 11.9 11.9 11.5 11.3 11.1

InlandWaterwayFreightTonnes (000)

160,164.5 168,493.0 177,454.6 186,691.3 196,424.5 206,615.1 217,144.5 228,010.9

InlandWaterwayFreightTonnes (000),% change y-o-y

11.1 5.2 5.3 5.2 5.2 5.2 5.1 5.0

Source: AVI/BMI

Property Insurance

Property insurance accounts for about one tenth of the total activity in Vietnam's non-life segment. We

presume that it will achieve high single digit growth through the forecast period. This is a respectable

outcome by most standards, but is consistent with the sub-sector slipping in importance relative to the non-

life segment as a whole, and in relation to the overall economy. We are taking the view that price

competition in household and, perhaps, some commercial lines will be quite intense.



Table: Property Insurance 2011-2018

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

Propertyinsurance,VNDmn

1,723,000.0 2,185,362.0 2,399,020.6 2,700,247.3 2,994,576.8 3,279,767.9 3,554,125.0 3,815,620.6

Propertyinsurance,VND, %change y-o-y

20.0 26.8 9.8 12.6 10.9 9.5 8.4 7.4

Propertyinsurance,US$mn

83.4 104.7 114.0 131.3 147.3 162.2 177.7 192.7

Propertyinsurance,US$, %change y-o-y

11.0 25.5 8.9 15.2 12.2 10.1 9.5 8.4

Propertyinsurance,% of non-lifeinsurance

8.4 9.6 9.3 9.2 9.0 8.8 8.5 8.1

Source: BMI/ AVI

In most of the countries whose insurance sectors are monitored by BMI, 'other' insurance is something of a

balancing item. It includes minor lines whose relative (and often absolute) sizes mean that we refrain (fornow) from commenting on them specifically. In Vietnam, 'other' insurance includes industrial business thatis undertaken for state owned enterprises by the non-life companies. Historically, the state owned

enterprises have worked with the insurers that are affiliated with them. This business accounts for around

40% of total premiums written in the non-life segment. That premiums in this sub-sector have held up

relative to the non-life insurance as a whole and in relation to GDP suggests to us that: it is benefiting from

investment in plant, equipment and infrastructure as Vietnam's economy develops; and, the sub-sector is

characterised by pricing discipline. We see no reason why this should not continue.



Industry Risk Reward Ratings

Asia Risk/Reward Ratings

BMI View: Geographic diversification may be a favourable strategy for multinational pharmaceuticalcompanies, but it is vital that firms recognise both the rewards and the risks present in a market, whetherdeveloped or emerging. BMI's Risk/Rewards Ratings (RRR) tool, which provides a globally comparativeand numerically based assessment of a market's attractiveness, was established to address this. In BMI'sQ214 RRRs, the Asia Pacific region scores 52 out of 100, below Western Europe (67), similar to Centraland Eastern Europe (52) but compares favourably against Americas (51) and Middle East and Africa (42)regions.

The indicators used to assess the attractiveness of a pharmaceutical market are now visible, improving the

transparency of the rating system and enabling the identification of regional or group outperformers across

single indicators. A market's RRR score is made up of a sum of the Rewards score (Industry Rewards +Country Rewards) and the Risks score (Industry Risks + Country Risks).

The weight assigned to each subsector (such as Industry Rewards or Industry Risks) shows its influencewithin the final Rewards or Risks score and the final RRR score. The Rewards component accounts for 65%

of the final RRR, while the Risks component accounts for 35%.



Q214 Asia Pacific Pharmaceutical Risk/Reward Ratings

Rewards And Risks Scores

Source: BMI. RRR scores out of 100, with 100 highest.

The Industry Rewards, Country Rewards, Industry Risks and Country Risks subsectors are each made up of

a number of indicators. The weighting of each indicator (such as market expenditure which is used to assessIndustry Reward or economic diligence which is used to assess Country Risk) reflects its relativeimportance to the pharmaceutical industry and subsequently the relative reward or risk that each factor

poses to drug companies. In Q214, Japan is ranked as the most attractive market in the Asia Pacific region(scoring 74.5 out of 100), followed by Australia (67.0) and Taiwan (65.7). In the same quarter, Myanmar isranked as the least attractive market in the region (scoring 26.9 out of 100), followed by Cambodia (32.4)and Sri Lanka (37.0).



With regards to assessing rewards, we identify industry-specific factors, such as the size of the

pharmaceutical market, and country-specific factors, such as the size of the pensionable population, which

represent opportunities to would-be investors. Focusing on the rewards component of the rating system,

Japan scores a total of 47.0 out of 65, the highest score in subsector. Japan's score is boosted by the large

multi-billion dollar drug market (market expenditure score of 18.0 out of 20) and large pensionablepopulation (pensionable population score of 8.0 out of 8), but dragged down by a declining pharmaceuticalmarket (sector value growth score of 0 out of 12) and a declining population (population growth score of 1.0out of 5). Meanwhile, Myanmar scores a total of 18.5 out of 65, the lowest score in the subsector.



Q214 Asia Pacific Pharmaceutical Rewards

Industry Rewards And Country Rewards Scores


With regards to assessing risks, we identify industry-specific dangers, such as approvals expediency, and

those emanating from the state's political and economic profile, such as bureaucracy, which call into

question the likelihood of anticipated returns being realised over the assessed time period. With regards to

the economic and political assessment, only the aspects most relevant to the pharmaceutical industry are

incorporated into the assessment. Focusing on the risks component of the rating system, Myanmar scores a

total of 8.4 out of 35, the lowest score in subsector. Compared to its peers, Myanmar's score is dragged



down by industry characteristics such as the absence of patent respect (patent respect score of 0 out of 7)and policy enforcement (policy enforcement score of 1.5 out of 7). Meanwhile, Singapore scores a total of28.1 out of 35, the highest score in the subsector.

Q214 Asia Pacific Pharmaceutical Risks

Industry Risks And Country Risks Scores


In the table below, the subsector scores (ie, Industry Rewards) and full component scores (ie, Rewards)have been expressed as a percentage of the total weight or as a percentage of the maximum score that can be



achieved. This allows for the identification of the sub-sector or component that will most positively or

negatively affect a single market.

Q214 Asia Pacific Pharmaceutical Risk/Reward Ratings

Rewards And Risks Scores As A Percentage Of The Maximum Score




Market Overview

Life Market Overview

BMI View: As is the case in China, the insurance sector of Vietnam is characterised by the strong presenceof companies in which the state maintains a strategic interest, whether direct or indirect. Regional lifeinsurance companies play a key role in that segment.

In Vietnam, the insurance sector is regulated by the Insurance Supervisory Division within the Ministry of

Finance. The insurance trade association, covering both the life and the non-life segments, is the

Association of Vietnamese Insurers (AVI).

Bao Viet, the former state-owned monopoly insurer, is the only company that is effectively a composite

insurer, active in both the non-life and the life segments. As of late 2013, the AVI identified another 14

players in the life segment. Among the major multi-nationals that have a presence across the region, AIA,Prudential plc and Manulife all have subsidiaries in Vietnam. Also on the ground is ACE Life. Asian life

companies that are substantial in their home markets and which are present include Great Eastern, Cathay

Life, Dai-Ichi Life and Korea Life. Vietnam is one of the three foreign countries in which France's

Groupe Prvoir is active (the others being Portugal and Poland). Finally, the segment includes VCLI, aninsurance joint venture that is 45% owned by Vietcombank, 43% by BNP Paribas Cardif and 12% bySeAbank, a local joint stock commercial bank.

Data published by the trade association in late 2013 showed that, in terms of gross written premiums, the

leading players were Prudential plc (with a 34% market share), Bao Viet (29%) and Manulife (12%)

The latest newsflow from the segment indicates that it is developing quite rapidly, if in an erratic fashion.

The widespread poverty (or, more correctly, incidence of household incomes that are too small to supportpurchase of life insurance products continues to constrain the potential of the segment. The leading insurers

are competing through innovation in distribution and product development, and through enlargement of

agency forces.



Non-Life Market Overview

BMI View: As of early 2014, it is possible to identify a number of strengths of Vietnam's non-life segment. Asignificant presence of leading foreign groups ensures that there is competition in terms of innovation anddistribution. Unlike in many emerging markets where household incomes are low, the segment is not

dominated by basic lines such as motor vehicle insurance. Premiums have been increasing in line with

overall GDP and should continue to do so.

Vietnam's non-life segment is still in transition from a situation where it consisted of a state owned

monopoly (the composite group Bao Viet) to one where local private sector firms and, usually through jointventures, foreign groups are active.

A Fairly Fragmented Marketplace

Non-Life Market Shares (%), 2012

Source: BMI/ AVI

The three largest players accounted for nearly half of the total premiums written in 2012. However, the

remainder of the market is fragmented, with particular groups focusing on niche specialties. The insurance



sector is overseen by the Insurance Supervisory Division within the Ministry of Finance. The trade

association is the Association of Vietnamese Insurers (AVI).

Aside from Bao Viet, there are 25 players in the non-life segment, according to the AVI. Local companies

include AAA, Agricultural Bank Insurance, Bao Minh JSC, BIC (a subsidiary of Bank for Investmentand Development of Vietnam), Bao Tin, GIC, Great Mountain JSC, Hung Vuong JSC, MilitaryInsurance, Petrolimex Joint Stock Insurance Company (PJICO), Nha Rong Insurance (Bao Long),Petrovietnam Insurance (PVI), Post Office Insurance, SVIC, Union Insurance, VietinBank Insurance,VNA Insurance, Vietnam National Reinsurance (VinaRe) and VASS. A key development in August2011 was the announcement that HDI Gerling Industrie Versicherung, a subsidiary of Germany's Talanx,

has agreed to buy a 25% stake in PVI, a listed subsidiary of Petrovietnam, for VND1,920bn (US$92mn).Reports in late 2011 indicated that PVI Re, a reinsurance subsidiary of PVI, will be entering the local

reinsurance market. In April 2012, Australia's IAG announced that it had reached agreement to buy a 30%

stake in AAA.

Joint ventures include Samsung Vina Insurance and Bao Viet Tokio Marine Insurance.

Foreign groups with a presence on the ground include AIG, QBE, Liberty Mutual, Fubon Insurance,MSIG and ACE (Non-Life).

Table: Non-Life Insurance Market (US$mn) 2006-2012

2007 2008 2009 2010 2011 2012

Bo Vit 161.7 201.9 n.a. n.a. 237.2 257.9

PVI 102.6 122.9 n.a. n.a. 204.7 223.2

Bo Minh 100.2 114.6 n.a. n.a. 103.6 109.5

PJICO 54.8 64.5 n.a. n.a. 89.7 94.4

PTI 19.0 27.0 n.a. n.a. 53.0 78.6

Samsung Vina 4.8 5.3 n.a. n.a. n.a. 35.1

BIC 9.2 16.1 n.a. n.a. n.a. 32.1

Ton Cu 10.8 11.8 n.a. n.a. n.a. 23.5

MIC n.a. 8.7 n.a. n.a. n.a. 22.7

AAA 9.7 12.3 n.a. n.a. n.a. 22.7

ABIC 1.0 7.9 n.a. n.a. n.a. 21.8

VNI n.a. n.a. n.a. n.a. n.a. 21.5

Liberty 0.3 2.7 n.a. n.a. n.a. 21.2



Non-Life Insurance Market (US$mn) 2006-2012 - Continued

2007 2008 2009 2010 2011 2012

SVIC n.a. n.a. n.a. n.a. n.a. 14.9

MSIG n.a. n.a. n.a. n.a. n.a. 14.0

Baoviet Tokio Marine 7.6 10.3 n.a. n.a. n.a. 13.1

AIG Vit Nam 4.2 6.3 n.a. n.a. n.a. 13.0

Bo Long 10.2 15.4 n.a. n.a. n.a. 12.1

Vin ng 9.7 13.4 n.a. n.a. n.a. 10.8

Xun Thnh n.a. n.a. n.a. n.a. n.a. 10.6

Source: BMI/ AVI

The development of the premiums of the various non-life companies from 2007 to 2012 highlights a

number of key features and trends. First, Vietnam's non-life segment is growing steadily in absolute terms,

even if this increase is the result of an expansion in overall GDP rather than a life in penetration. Second,

the larger companies (other than Bao Viet) have close links with state-owned enterprises that are notnaturally in the insurance businesses. These insurance subsidiaries continue to handle industrial risks for

their parents: this is an aspect of the market which makes it fairly unusual. Third, very few of the players

have scale - although a number are affiliates of regional/ global insurers who can see their Vietnam

operations in the context of a larger entity. Many of the companies that are active in the segment are writing

premiums of around US$10mn annually. They are tiny by almost all standards.

Table: Non-Life Insurance Market (%) 2006-2012

2007 2008 2009 2010 2011 2012

Bo Vit 31.1 30.5 n.a. n.a. 23.9 23.7

PVI 19.7 18.6 n.a. n.a. 20.6 20.5

Bo Minh 19.3 17.3 n.a. n.a. 10.4 10.0

PJICO 10.5 9.8 n.a. n.a. 9.0 8.7

PTI 3.6 4.1 n.a. n.a. 5.3 7.2

Samsung Vina 0.9 0.8 n.a. n.a. n.a. 3.2

BIC 1.8 2.4 n.a. n.a. n.a. 2.9

Ton Cu 2.1 1.8 n.a. n.a. n.a. 2.2

MIC n.a. 1.3 n.a. n.a. n.a. 2.1

AAA 1.9 1.9 n.a. n.a. n.a. 2.1



Non-Life Insurance Market (%) 2006-2012 - Continued

2007 2008 2009 2010 2011 2012

ABIC 0.2 1.2 n.a. n.a. n.a. 2.0

VNI n.a. n.a. n.a. n.a. n.a. 2.0

Liberty 0.1 0.4 n.a. n.a. n.a. 1.9

SVIC n.a. n.a. n.a. n.a. n.a. 1.4

MSIG n.a. n.a. n.a. n.a. n.a. 1.3

Baoviet Tokio Marine 1.5 1.6 n.a. n.a. n.a. 1.2

AIG Vit Nam 0.8 1.0 n.a. n.a. n.a. 1.2

Bo Long 2.0 2.3 n.a. n.a. n.a. 1.1

Vin ng 1.9 2.0 n.a. n.a. n.a. 1.0

Xun Thnh n.a. n.a. n.a. n.a. n.a. 1.0

Source: BMI/AVI

The various shifts in market shares (in terms of gross premiums written) are indicative of a market that is ata fairly embryonic state of development and which is being liberalised. Over the six years to the end of

2012, Bao Viet - the former state-owned monopoly - gradually lost market share. Not all the smaller

companies achieved increases in market share. However, some players came from nowhere to positions

with market shares in excess of 1%.



Company ProfileAIA Group

SWOT Analysis

Strengths Very large scale by any standard.

Strength of capital and access to global financial markets.

Strong and growing cashflows.

Unique status as the largest independent pan-Asian life insurer, with a footprint that

spans 15 markets.

Only foreign company to operate on its own (as opposed to as a JV partner) in China.

Leadership, by many metrics, in many of the markets in which AIA operates (and

crushing domination in some of these).

Continuing growth in annualised new premiums (ANP), value of new business (VONB)

and VONB margins - across almost all the markets in which AIA operates.

Diverse products, for both individual and corporate clients.

Multi-channel distribution - complements very strong proprietary agency distribution

channel in most of AIA's markets.

Clear strategy to 'deliver quality growth'.

Long-standing presence in many of its markets.

Strong/improving brand in many of its markets.

Weaknesses There are some countries (e.g. South Korea, Taiwan and China) where AIA is still, by

many metrics, a relatively minor player.

Like all large life companies, AIA is exposed to the challenges that arise from a global

investment environment in which interest rates are, and will likely remain, low.

Opportunities Arguably the leading beneficiary of the growth of organised savings in East and South

East Asia.



SWOT Analysis - Continued

Clear strategies to boost profitability - as well as premium income.

Successful product innovation in many of the markets in which AIA operates.

Potential to undertake substantial acquisitions.

Well placed to benefit from improving perceptions of risk in emerging markets of

South East Asia.

Development of relationship with Nippon Life.

Threats Potential but unlikely turmoil in regional financial markets. However, AIA has plainly

thrived in spite of the Asian financial crisis of 1997-99, the critical phase of the global

financial crisis (2008-09) and the massive financial problems of its previous

shareholder.

Given the current structure of AIA's overall business, growth and profitability would

suffer for a time in the event of political and/or economic instability in Thailand.

Robust competition, in some markets, from very large multi-national insurers, many of

which share some of AIA's strengths.

Robust competition, in some markets, from truly enormous local insurance

companies. (In China and India, the rules governing participation by foreigners

present challenges.)

At some stage, the absolute size of AIA alone will mean that it becomes significantly

more difficult to maintain growth in business and profitability at the rates that have

been achieved in recent years.

Company Overview AIA Group (AIA) describes itself as 'the largest independent listed pan-Asian life

insurance group in the world', with a 'broad footprint spanning 15 markets in the Asia-

Pacific'. It is one of the three main insurance companies (the others being Alico, which

is now a part of MetLife's global operations and Chartis) whose origins date back to the

establishment of an insurance agency in Shanghai by Cornelius Vander Starr in 1919.

For a long time, AIA was an important component of American International Group

(AIG). The problems of AIG in the wake of the global financial crisis forced it to look for a



sale. Through much of 2010, Prudential plc sought to purchase AIA, but was unable to

raise the funds that it needed. In late October 2010, AIA was listed in Hong Kong in

what was, at that time, the largest ever initial public offering (IPO).

Although AIA offers accident and health products (which we would normally consider as

part of the non-life segment) in some of the markets that it serves, it is - as its self

description indicates - overwhelmingly a life insurer. The company classifies its wide

range of products in six major groups: protection; savings; investment; retirement;

wealth management, and corporate solutions (employee benefits, credit insurance and

retirement services).

As noted above, AIA has a presence in 15 different countries across the Asia-Pacific.

AIA Vietnam has over 400 employees and more than 9,000 professional agents. It

operates in 23 cities and provinces across Vietnam. 'AIA Vietnam offers a wide range of

life insurance products and services including universal life, savings, education and

protection, each designed to meet the needs and demands of individuals, corporates

and banks customers.'

Financial Data E AIA reported that H113 (the six months to May 31) saw very good growth in both

value of new business (VONB - the company's key performance measure) and

annualised new premiums (ANP). Across the company as a whole, VONB rose by 27%

to US$711mn, while ANP grew by 29% to US$1,527mn. Within national markets,

changes in ANP were: Hong Kong, up 34% to US$326mn; Thailand, up 9% toUS

$265mn; Singapore, down 3% to US$147mn; Malaysia, up 100% to US$152mn (thanks

to the inclusion of the businesses bought from ING); China, up 11% to US$120mn;

South Korea, up 75% to US$182mn and; other markets, up 29% to US$335mn.

Total weighted premium income rose by 16%, from US$7,305mn in H112 to US

$8,495mn in H113. Thanks to the ING acquisition, premiums rose by 106% to US

$1,002mn in Malaysia. In most markets, though, they rose by 5-10%. Investment

income amounted to US$2,465mn in H113, or 18% more than in H112.

At the end of H113, total equity amounted to US$27,172mn, or 2% more than at the

end of November 2012. Total assets rose by 9% over the six month period, to US

$146,926mn. Total investments grew by 9% to US$125,421mn.



American International Group (AIG)

SWOT Analysis

Strengths AIG enjoys the benefits of diversification across one of the leading US life companies

and one of the world's largest non-life insurance companies, as well as additional

businesses.

In its own right, AIG Life benefits from scale, diversity of products and diversity of

distribution channels.

In its own right, AIG is one of the largest and (in terms of product range) diversified

non-life groups.

AIG also has one of the broadest geographical footprints of any non-life company.

This includes two major markets - Japan and the UK - where AIG Property Casualty

has operations, which would count as large non-life insurers by any standard.

In Japan, in particular, AIG is unusual as it is a well established foreign company with

a leadership position in the non-life market.

AIG also has a significant presence in many emerging markets- in all parts of the

world.

AIG has low cost of capital that comes from being a large and strong financial

institution.

The restructuring of AIG is over. Management can focus on growth opportunities

once more.

Like virtually all major global non-life groups, AIG coped well with the massive

catastrophes of 2011.

Weaknesses Many of the markets in which AIG Life and AIG operate are relatively mature.

The low interest rate environment is having an adverse impact on sales of various of

AIG Life's products. It also has implications for AIG.




In many of the geographic markets in which AIG operates, it is a small player - often

facing competition from well-entrenched and massive local non-life companies. This

is true of Brazil, Russia, India, China and South Africa.

Opportunities AIG Life can benefit from product innovation and (re) development of particular

distribution channels.

AIG is focusing on higher value added products and investing in new systems.

AIG Life is, par excellence, a beneficiary of the (gradual) greying of populations in the

US.

AIG is well placed to benefit from the growth in the world economy and from rising

demand for a broad variety of insurance solutions in emerging markets.

Threats Potential, but unlikely turmoil in global financial markets.

Robust competition, in some markets, from very large local players. In the US, AIG

Life faces competition from a number of rivals that share its advantages AIG is

competing with non-life groups that are, by some measures, larger. However, AIG's

global reach sets it apart from its US peers.

A simultaneous sharp downturn in the UK economy and the Japanese economy, at a

time of volatility in financial markets would present AIG with a challenge.

Company Overview Following its US$182bn rescue by the United States Government in 2008 and

subsequent restructuring (which resulted in a profit to tax payers of nearly US$23bn)

AIG is today one of the leading composite insurance companies in the United States,

whose non-life businesses have a global presence.

AIG Property Casualty is the leading commercial insurer in the United States and

Canada. It is also the largest foreign property/casualty company in China and Japan

and has a growing position in Latin America. It is also a significant non-life company

across Europe and in the Middle East and Africa. AIG Property Casualty has over 70mn

corporate and consumer clients globally. It notes that it provides products to 96% of

the Fortune 1000 companies, to 90% of the Fortune Global 500 companies and to 40%

of the 400 richest Americans as identified by Forbes magazine.



Collectively, the various businesses of AIG Life and Retirement constitute one of the

United States' largest life insurance companies. It serves over 18mn customers and

works with 300,000 financial professionals who are licensed to sell life insurance and

retirement savings products. Among much else, AIG Life and Retirement is: the fifth

largest provider of life insurance and fourth of structured settlements; the leading

provider of fixed annuities through banks (a position that the company has held for 16

years); one of the leading providers of K-12 and 403(b) group retirement services; and

the fifth largest supplier of non-captive variable annuities. In addition, AIG Life and

Retirement offers structured settlement annuities and mutual funds. It also runs one of

the largest independent broker-dealer networks in the United States.

Other businesses include United Guaranty Corporation (UGC), the leading provider of

mortgage insurance in the United States and International Lease Finance Corporation

(ILFC- the largest aircraft lesser globally, in terms of the number of aircraft owned (i.e.

over 1,000 owned and managed).

AIG Property Casualty is present in 21 markets across the Asia-Pacific: Australia; China;

Guam; Hong Kong; Indonesia; Japan; South Korea; Kazakhstan; Macau; Malaysia; New

Zealand; Pakistan; Papua New Guinea; Philippines; Saipan; Singapore; Sri Lanka;

Taiwan; Thailand; Uzbekistan; and, Vietnam. In most of the major markets, it offers a

comprehensive range of both personal and corporate lines.

Recent

DevelopmentsAIG published its results for Q213 on August 1, 2013.

AIG Property Casualty reported operating income of US$1.1bn for the quarter, or a little

more than the US$936mn of the previous corresponding period. Highlights included: a

slight rise in the combined ratio from 102.4% to 102.6%, thanks in part to costs relating

to Hurricane Sandy; 1.8% increase in net premiums to US$9.3bn, thanks to firmer

pricing and sales/marketing initiatives (such as a focus on higher value lines); a boost to

net investment income thanks in part to the contribution from alternative investments.

Net premiums written by AIG Property Casualty's commercial insurance business in

H113 amounted to US$10,779mn, or the same as in H112. Net premiums written by the

consumer insurance business in H113 amounted to US$6,922mn, or 3% less than in

H112. Operating income of the former rose by 13% to US$1,576mn: operating income

of the latter fell by 43% to US$244mn. Overall, AIG Property Casualty benefited in H113

from a better underwriting result thanks to lower claims. Net investment income rose

thanks to 'the strong performance of alternative investments and income associated

with the PICC P&C shares.'

Total net premiums written by AIG Property Casualty in H113 amounted to US

$17,700mn. Of this, US$8,983mn was derived from the Americas, while US$4,975mn

and US$3,742mn came from the Asia Pacific and Europe/Middle East/Africa (EMEA)

respectively. Commercial insurance premiums were split between the three main



regions US$7,079mn/ US$1,107mn/ US$2,683mn respectively. Consumer insurance

premiums were split US$1,905mn/ US$3,958mn and US$1,059mn respectively

AIG Life and Retirement reported operating income of US$1.2bn for the quarter, or 23%

more than the $933mn of Q212. Virtually all major trends were positive: sales of variable

annuities and mutual funds were 'robust'; net investment income rose; fee income

increased; net flows were positive in spite of outflows from fixed annuities (which, in

turn, was partly due to the low interest rate environment; and, adroit management of

crediting rates.

At the end of June 2013, AIG Life and Retirement's assets under management were US

$294bn, or 10% more than at the end of June 2012. Premiums and deposits during the

quarter were US$6.8bn, or 24 more than in the previous corresponding period.



Bao Viet Holdings

SWOT Analysis

Strengths A leading player in both the non-life and the life segments.

Breadth of product range, including aviation insurance.

Has significant asset management, banking and securities operations.

Strong brand and nationwide distribution network.

Capital strength.

Backing of SCIC and, for now, HSBC (which has an 18% stake and which has

provided substantial technical assistance).

A key beneficiary of the growth of the overall economy and the increase in insurable

assets.

A key beneficiary of the continuing development or organised savings.

Strong top-line growth and rising profits in the recent past.

Weaknesses Vulnerable to swings in the economy.

Vulnerable to volatility in Vietnam's financial markets.

Lack of scale in anything other than a local context.

Under-development of bancassurance and alternative channels.

Opportunities Further growth in the overall market for insurance - in both major segments.

Cross selling.

Product innovation.

Further improvements to cost control and business systems.

Optimisation of the investment portfolio.

Development of strategic relationship with HSBC or another major foreign group.




Threats Volatile financial markets.

Potential major catastrophe losses.

Strong competition in the life segment from subsidiaries of major foreign multi-

nationals.

Company Overview Founded in 1965 as the state owned insurance monopoly, Bao Viet is today a listed

(since 2009) composite insurance company with additional financial services activities.

It had been corporatized in 2007.

Bao Viet Life Corporation and Bao Viet Insurance Corporation are, respectively, the life

(re)insurance and the general (re)insurance businesses. Bao Viet Fund Management

Company is the group's asset management subsidiary. Other interests include Bao Viet

Securities JSC (59.9%), Bao Viet Commercial Joint Stock Bank (52%), Bao Viet

Investment JSC (real estate investment - 95%) and Bao Viet Au Lac LLC (vocational

driving training services - 60%).

HBSC has been the sole foreign strategic partner of Bao Viet, lifting its stake in the

insurer from 8% to 18% in early 2010. HSBC maintained its 18% stake in the rights

issue of November 2010. HSBC has provided considerable technical support.

On August 9, 2012, Bao Viet issued a note of clarification to the State Securities

Commission and the Ho Chi Minh City Stock Exchange: 'According to (the company's

corporate charter), the restriction time for transferring of HSBC's shares in Bao Viet

Holdings as a strategic shareholder is five years. HSBC has confirmed to Bao Viet

Holdings that it is reviewing its strategic options with respect to its shareholding. No

decision has been made as yet and a further statement will be made if or when

appropriate.'

The other strategic shareholder is the State Capital Investment Corporation (SCIC), the

vehicle through which the government holds investments in state owned enterprises.

SCIC became a major shareholder in September 2009, when it took over a stake

previously held by Vietnam Shipbuilding Industry Corporation (Vinashin).

For its core businesses, the strategic objectives in 2011-15 are as follows:

'General insurance: to maintain the number one position in the non-life insurance

market in terms of retained premiums. By the end of 2015, direct insurance premium

(should reach) VND8,800bn. PAT is VND480bn.'



'Life insurance: to maintain the leading position in the life insurance market in terms of

premium revenue and service quality. By end 2015, total premiums should reach

VND6,700bn. New business premiums should be VND1,350bn. PAT is VND370bn.'

Bao Viet also plans to become the leading Vietnamese retail bank, securities company

and fund management company.

Recent

DevelopmentsIn early September 2013, Bao Viet highlighted that operating conditions had been quite

challenging through the first half of the year, thanks to the slowing of overall economic

growth in Vietnam and bad debt problems for the insurer. Gross written premiums, for

both life and non-life business, rose by 10.3% to VND5,481bn in H113. Life insurance

new business premium jumped by 32% to VND708bn. Profit after tax increased by

1.6% to VND598bn.

Highlights of the first half of 2013 included: an increase in chartered capital to

VND2,000bn; the launch of the OCB Care and a new version of the Medical Care health

insurance products; and the introduction of a new life insurance financial package for

premium and corporate customers. Baoviet Securities was the principal and only

underwriter of the VND1,500bn bond issued by the State Treasury.

The company has benefited from the development of alternative distribution channels.

Bancassurance sales through Baoviet Bank were 52% higher than they had been in

H112. Sales of Baoviet insurance products to Baoviet Life clients increased by 31%.



Manulife Financial

SWOT Analysis

Strengths Massive scale, financial strength and access to capital from global markets

Multi-national diversification, across Canada, the US, Asia and (globally) through

Manulife Asset Management.

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 US insurance

group John Hancock is the most important example.

Clear and proven strategy.

Weaknesses Some of the markets in which Manulife operates are mature and/or highly

competitive.

A small player in (or absent from) some of the most important emerging markets in

Asia. India and South Korea stand out as key markets in which Manulife does not

have a presence.

Impacted, like many insurance companies, by low interest rates

Opportunities Product innovation.

Further expansion by way of acquisitions.

A natural beneficiary of the relatively strong growth of emerging markets

Documents

BMI Vietnam Insurance Report Q2 2014