Samsung Fire & Marine Insurance Co. took over a 20 percent stake in Vietnamese non-life insurer PJICO, its first stake acquisition deal with a foreign insurance company, the company said on May 7. President Ahn Min-soo signed a sales agreement with President Do Nam Hai of PJICO in Hanoi on May 5. PJICO is the fifth-largest non-life insurer in the non-life insurance industry in Vietnam where some 30 non-life insurers are in operation.
The per share price of the private placement is VND30,000 ($1.3), which means Samsung Fire & Marine Insurance will need to spend a total of VND532 billion ($23.4 million) for the stake. The South Korean investor is required to hold the shares over a period of five years. Upon closing the transaction, Petrolimex will reduce its ownership in PJICO from 51.18 per cent to 40.95 per cent. Other existing shareholders, including Vietcombank, Vietnam Reinsurance Corporation and others, will also trim their holdings collectively from 37.77 per cent to 23.19 per cent.
Petrolimex, as the largest shareholder at PJICO, will continue to commit its support for the insurance company by promoting PJICO products through its retail network. With a dominant market share of over 50 percent in the local petroleum industry, Petrolimex has been leveraging its network to help PJICO become a major player in the non-life insurance market. “The strategic partnership with Samsung Fire & Marine Insurance is poised to create a significant driving force for PJICO’s growth and business performance within the next five years and beyond,” said PJICO chief executive Dao Nam Hai.
PJICO, founded by Vietnamese state-run Petrolimex, is the fifth largest non-life insurer in the Southeast Asian country with a market share of 7 percent as of 2015. Samsung Fire, had set up its Vietnamese subsidiary in Ho Chi Minh City in 2002, recorded insurance premiums of 53.8 billion won ($47.3 million) and pre-tax income of 6.9 billion won last year.
With the acquisition, Korea’s leading non-life insurer aims to expand its presence in the Vietnamese market by developing insurance products that can meet the demands of local people.
In a ceremony held May 5 to celebrate the takeover deal, Samsung Fire’s Chief Executive Officer Ahn Min-soo discussed ways to strengthen cooperation with Vietnamese Deputy Finance Minister Vu Thi Mai, director of State Securities Commission’s Inspection Department Vu Thi Chan Phoung and Deputy Director of the Insurance Supervisory Authority Nguyen Quang Hyuen.
Vietnam’s insurance market has experienced strong, double-digit premium growth in recent years, and despite the ongoing economic uncertainties around the globe, its expansion is forecasted to continue. An emerging middle class; increased awareness of the benefits of insurance; and compulsory lines of business, including motor third-party liability coverage, are contributing to the success of insurance products.
Furthermore, the Vietnamese economy is continuing to expand, enabling government spending on construction and infrastructure projects. Inflation, currency depreciation and tight fiscal policy led to lower consumption and caused growth in gross domestic product to decelerate to an estimated 5.8 percent in 2011, but economic growth is expected to accelerate to 6.3 percent in 2012. The insurance sector opened up after Vietnam joined the World Trade Organization in 2007 and has experienced a strong increase in direct premiums written, albeit from a low base. The market is served by 29 non-life insurers and 14 life companies, which are regulated by the Ministry of Finance through its Insurance Supervisory Authority Supervisory Authority Nguyen Quang Hyuen.
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