Vietnam insurance report q1 2016

The non-life sector is more established, with motor and health and personal accident insurance particularly popular.. We expect to see solid growth in premiums throughout our forecast pe

Q1 2016 www.bmiresearch.com

VIETNAM

INSURANCE REPORT

INCLUDES 5-YEAR FORECASTS TO 2019

INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: November 2015

© 2015 Business Monitor International Ltd

All rights reserved

All information contained in this publication is

copyrighted in the name of Business Monitor

International Ltd, and as such no part of this

publication may be reproduced, repackaged,redistributed, resold in whole or in any part, or used

in any form or by any means graphic, electronic ormechanical, including photocopying, recording,taping, or by information storage or retrieval, or byany other means, without the express written consent

of the publisher

DISCLAIMER

INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: November 2015

© 2015 Business Monitor International Ltd

All rights reserved

All information contained in this publication is

copyrighted in the name of Business Monitor

International Ltd, and as such no part of this

publication may be reproduced, repackaged,redistributed, resold in whole or in any part, or used

in any form or by any means graphic, electronic ormechanical, including photocopying, recording,taping, or by information storage or retrieval, or byany other means, without the express written consent

of the publisher

DISCLAIMER

BMI Industry View 7

Table: Headline Insurance Forecasts (Vietnam 2012-2019) 7

SWOT 9

Insurance 9

Industry Forecast 11

Life Premiums Forecast 11

Table: Life Premiums (Vietnam 2012-2019) 14

Table: Life Insurance Claims (Vietnam 2009-2013) 15

Non-Life Premiums Forecast 15

Table: Non-Life Premiums (Vietnam 2012-2019) 18

Table: Non-Life Insurance Claims (Vietnam 2008-2014) 20

Non-Life Sub-Sector Forecast 20

Table: Non-Life Insurance Premiums By Product Line (Vietnam 2012-2019) 28

Insurance Risk/Reward Index 30

Asia Pacific Industry Risk/Reward Index 30

Table: Asia Pacific Insurance Risk/Reward Index 31

Market Overview 32

Life Market Overview 32

The Product Offering 32

The Competitive Landscape 33

Table: Life Insurance Market (USDmn) 2008-2013 35

Non-Life Market Overview 35

The Product Offering 35

The Competitive Landscape 36

Table: Non-Life Insurance Market (USDmn) 2008-2013 38

Company Profile 40

AIA Group 40

American International Group (AIG) 43

Bao Viet Holdings 45

Manulife Financial 48

Prudential plc 50

PVI Holdings 53

Sun Life Financial 56

Methodology 58

Industry Forecast Methodology 58

Risk/Reward Index Methodology 61

Table: Indicators 63

Table: Weighting of Indicators 64

BMI Industry View

BMI View: Vietnam's insurance industry is growing rapidly, bolstered both by domestic economic growth

and by a gradual improvement in terms of the range of products available in the market The non-life sector

is more established, with motor and health and personal accident insurance particularly popular Life insurance is currently the smaller sector, and demand for long-term savings or retirement products

continues to be hampered by low household income levels Premiums across both life and non-life are expected to increase throughout our forecast period through to 2019 As the investment environment gradually improves, we expect to see more multinationals entering the market who are keen to take

advantage of the strong growth potential.

Table: Headline Insurance Forecasts (Vietnam 2012-2019)

Gross life premiums

written, VNDbn 18,390.85 22,650.00 23,482.35 26,271.96 29,022.73 31,733.50 34,389.68 36,989.79Gross life premiums

written, VND, % y-o-y 61.6 23.2 3.7 11.9 10.5 9.3 8.4 7.6Gross life premiums

written, USDbn 0.88 1.08 1.11 1.18 1.26 1.39 1.52 1.64Gross life premiums

written, USD, % y-o-y 59.9 22.2 2.8 6.9 6.6 9.8 9.3 8.5Gross non-life

premiums written,

VNDbn 22,757.99 24,454.99 28,341.94 32,077.98 35,876.86 39,829.17 44,075.64 48,526.36Gross non-life

premiums written,

VND, % y-o-y 11.0 7.5 15.9 13.2 11.8 11.0 10.7 10.1Gross non-life

Key Updates And Forecasts

■ The larger life sector will see the strongest growth throughout our forecast period, with gross life premiums written expected to increase by an average annual rate of over 10% to reach USD2.2bn in

Insurance

Vietnam Insurance SWOT Analysis

Strengths ■ Both the life and non-life insurance segments have been growing at double-digit

rates, and have the potential to do so for the foreseeable future

■ There are clear signs of pricing discipline in the non-life segment and claims control isimproving

■ Given the domination of the life segment by subsidiaries of regional and globalmajors, lack of capital will not pose a constraint

■ The non-life segment is well diversified away from motor insurance - a staple line inmany 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 domestic non-life companies are subscale and lack ready access to newcapital

■ Many Vietnamese households do not have sufficient income to purchase essential life or non-life products

non-■ The domestic economy remains undiversified which limits potential for growth of linessuch as credit/financial guarantee and general liability insurance

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 shouldgrow in real terms as long as the economy can continue to expand

■ Life companies are developing new and improved products such as educationsavings plans for children

Vietnam Insurance SWOT Analysis - Continued

■ Life companies are entering into bancassurance relationships and are undertakingother distribution initiatives

■ The government has launched a trial program to promote the development of exportcredit insurance

■ Substantial multinationals continue to develop subsidiaries in the non-life and lifesegments

Threats ■ High inflation 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 marketscomplicate investment strategies

■ Restrictions on foreign investment/ownership in many sectors could deter potentialinvestors

■ Vietnam is vulnerable to natural disasters which would impact heavily upon thecountry's non-life firms

Industry Forecast

Life Premiums Forecast

BMI View: The outlook is increasingly positive for Vietnam's emerging life insurance market Although

rates of penetration and density are currently low, premiums are growing rapidly and the industry

continues to develop in terms of product offerings and the scope of distribution channels We expect to see solid growth in premiums throughout our forecast period to 2019, based largely on wider domestic

economic growth and rising household income levels - though we do note that at present life insurance

products remain unaffordable for many households in Vietnam

Latest Updates

■ Ongoing currency movements mean we have adjusted our short-term forecasts for gross life insurancepremiums written and now expect to see an increase of 6.9% to USD1.18bn, while in local currencyterms growth will be more positive at 11.9% to VND26,272.0bn

Structural Trends

While we foresee sustained longer term growth in life insurance premiums, we are mindful of potentialsetbacks due to economic shocks and general low levels of awareness among Vietnamese households of thebenefits of various life insurance products Although the insurers have been working to improve customers'understanding of life insurance, a more fundamental problem is that most households cannot afford it

In spite of ongoing growth, therefore, Vietnam's life insurance segment remains a relatively small

investment opportunity for international life insurers, in comparison to other countries across South EastAsia Nevertheless, the segment has been benefitting hugely from the product and distribution know-howand regional scale of (most of) the international companies which are establishing a presence in the country

As the country's business environment becomes more favourable to foreign investors and as wider

economic growth improves household income levels, we expect to see further long-term growth in

Vietnam's life insurance sector

Premiums Expected To Rise

Gross Life Insurance Premiums (2012-2019)

Gross life premiums written, VNDbn (LHS) Gross life premiums written, VND, % y-o-y (RHS)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 0

10,000 20,000 30,000 40,000

0 20 40 60 80

e/f = BMI estimate/forecast Source: AVI/BMI

Life Insurance Premiums: Growing Rapidly From Low Base

Ongoing commitment by the Vietnamese government to improving macroeconomic fundamentals andforging financial stability should bode well for the country's economy as a whole, and notably also for theinsurance sector Accordingly, we expect to see gross life insurance premiums grow by 6.9% to USD1.18bn

in 2015 However, with life density (life premiums per capita) at around USD12.7 in 2015, and life

penetration (life premiums as percentage of GDP) of 0.6%, we are mindful that many households are stillstruggling to properly afford life insurance Looking forward, we foresee that life premiums will continue torise at solid single-digit rates through to 2019, to reach USD1.64bn Accordingly, the various multinationalinsurers that have established operations in Vietnam are, in our view, right to see the market as an attractiveopportunity for future investment Thus, it is likely that by 2019 at least one of the largest players will havesignificant success with the development and distribution of micro-insurance products to reach out to thelow-income households

Vietnam's life expectancy at 76.2 years on average (71.2 years for men and 80.6 years for women) is aboutaverage for the South East Asia region, higher than states such as Malaysia, China and Thailand but lower

than more developed states such as Japan and Hong Kong, which reflects the progress which still needs to

be made in terms of public healthcare in Vietnam The government has invested heavily in improvinginfrastructure and staffing levels - including recently increasing pay for medical staff in order to keep moretrained personnel working in state facilities - however, access to medical care remains limited, particularly

in poorer rural areas

The Vietnamese population is generally a young one The group of over 65s numbers around 6.29mn (in2015), which represents 6.7% of the total population This is a much smaller proportion of the overallpopulation than Japan, China and Thailand While the increasing life expectancy means that the over 65sgroup will grow to some 7.5mn in 2019, this will still represent just 7.7% of the total population Lifeinsurance providers are therefore presented with a young potential market, one where the large working agepopulation is well able to work for longer and contribute more to life savings plans which support thepayment of claims to retirees The increasing life expectancy also suggests scope for rising demand forvarious life products as individuals are increasingly aware of the need to provide for later in life incomecover and support - particularly in light of limited government provided social welfare benefits

Life Expectancy And Old-Age Demographics

Life Expectancy And Population Aged 75+ (2012-2019)

Life expectancy at birth, male, years (LHS) Life expectancy at birth, female, years (LHS) Population, 75+, total, '000 (RHS)

2012 2013 2014 2015f 2016f 2017f 2018f 2019f 0

100

25 50 75

2,900 2,950 3,000 3,050 3,100 3,150

f = BMI forecast Source: National Sources/BMI

The primary risk to our current forecasts for growth in the Vietnamese life insurance market are economic

in nature At present the BMI Country Risk team expects to see annual real GDP growth of over 6% over

the medium term However, the potential for a renewed maritime dispute with China does pose a downsiderisk to these forecasts and, in addition, should the US economic recovery hit a standstill, this would pose asalient risk to Vietnam's export sector, and consequently our economic growth forecast, given the sector'sstrong orientation to the US economy If Vietnam's GDP growth rate stalls, this would impact householdincome and investment returns and would therefore require a downwards revision of our current forecastsfor growth in life insurance premiums written

Table: Life Premiums (Vietnam 2012-2019)

Gross life premiums

written, VNDbn 18,390.85 22,650.00 23,482.35 26,271.96 29,022.73 31,733.50 34,389.68 36,989.79Gross life premiums

written, VND, % y-o-y 61.6 23.2 3.7 11.9 10.5 9.3 8.4 7.6Gross life premiums

written, USDbn 0.88 1.08 1.11 1.18 1.26 1.39 1.52 1.64Gross life premiums

written, USD, % y-o-y 59.9 22.2 2.8 6.9 6.6 9.8 9.3 8.5Gross life premiums

written, % of GDP 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6Gross life premiums

written, % of gross

premiums written 44.7 48.1 45.3 45.0 44.7 44.3 43.8 43.3

e/f = BMI estimate/forecast Source: AVI/BMI

Claims: Growing As Industry Develops

The trend of life payments and claims by Vietnam's life insurers has been one of rapid growth since 2011

We observe an average growth rate of 38.3% between 2011 and 2013, with an absolute increase fromUSD150mn to USD380mn (VND4,221.75bn to VND8,095.00bn) While this shows that claims andpayments have been growing from a rather low base, we believe that this development does also reflect thegrowth of the country's life insurance segment, as well as the positive receipt of effective product

innovations As a result, we expect that such considerable increases in claims may persist over the comingyears, in line with Vietnam's overall rapid economic growth and the further development of the life

insurance sector

Table: Life Insurance Claims (Vietnam 2009-2013)

Claims life, VNDbn 2,507.71 2,786.51 4,221.75 5,740.15 8,095.00 Claims life, VND, % y-o-y - 11.1 51.5 36.0 41.0 Life insurance gross loss ratio 21.2 20.2 37.1 31.2 35.7

Source: AVI/BMI

Non-Life Premiums Forecast

BMI View: We are forecasting healthy growth in non-life insurance premiums written in Vietnam

throughout the forecast period to 2019 Wider domestic economic growth is boosting household income rates, providing scope for greater spending on non-essential insurable items, and demand for health insurance is rising Public investments in infrastructure will also boost demand for currently less developed lines such as property insurance.

Latest Updates

■ Updated industry figures and ongoing currency movements mean we have updated our forecasts for grossnon-life premiums written in 2015 and now expect to see growth of 13.2% in local currency terms toVND32,078.0bn (in US dollar terms growth of 8.1% to USD1.4bn)

Structural Trends

The non-life sector in Vietnam is slightly more developed than the life sector, with motor, health andpersonal accident and transport insurance constituting the key lines Over the longer term we expect to seegrowth across all of the non-life sectors, though some, such as credit/financial guarantee insurance, willremain minor lines in light of the limited penetration of formal banking services in the country As

premiums grow and the investment environment is improved, we expect to see more multinationals enteringthe Vietnamese non-life market, which would help to diversify the product offering and potentially expandthe reach of non-life insurance via the introduction of more affordable products catering to the large section

of the market with low household incomes

Growth Continues

Gross Non-Life Premiums (2012-2019)

Gross non-life premiums written, VNDbn (LHS) Gross non-life premiums written, VND, % y-o-y (RHS)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 0

20,000 40,000 60,000

5 7.5 10 12.5 15 17.5

e/f = BMI estimate/forecast Source: AVI/BMI

Non-Life Insurance Premiums: Healthy Growth Potential

With gross non-life premiums set to increase by 8.1% in 2015, reaching USD1.45bn, we have a positiveoutlook for Vietnam's non-life insurance segment In spite of low per capita premiums of USD15.5 and lownon-life penetration (premiums as a percentage of GDP) of 0.7% (in 2015), we anticipate that increasinglymore households should become better able to afford non-life insurance products as Vietnam's economycontinues to strengthen The non-life segment is expected to grow at an annual rate of around 10.5%between 2016 and 2019, to reach USD2.16bn by the end of the current forecast period In addition toincreases in industrial/commercial lines following the countries rapid economic expansion (we forecast6.4% growth in real GDP in 2015), the rise of non-life insurance will predominantly be driven by motorvehicle insurance

Growth Across All Lines

Non-Life Premium Growth Rates (2012-2019)

Motor vehicle insurance, VND, % y-o-y Property insurance, VND, % y-o-y Transport insurance, VND, % y-o-y

Health and personal accident insurance, VND, % y-o-y Credit/financial guarantee insurance, VND, % y-o-y General liability insurance, VND, % y-o-y

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f -50

0 50

-100

e/f = BMI estimate/forecast Source: AVI/BMI

As with the life insurance sector, the primary risk to our current forecasts stems from the potential

derailment of domestic economic growth prospects Currency weakness and high fiscal deficits have thepotential to impact economic expansion, and should the expected GDP growth of over 6% not materialise

we would need to revise downwards our positive forecasts for non-life premiums growth Conversely,should economic growth prove better than expected, creating the potential for faster growth in private finalconsumption and enhanced investment in infrastructure, we would be looking to an upwards revision ofgrowth forecasts

Table: Non-Life Premiums (Vietnam 2012-2019)

Gross non-life

premiums written,

VNDbn 22,757.99 24,454.99 28,341.94 32,077.98 35,876.86 39,829.17 44,075.64 48,526.36Gross non-life

premiums written,

VND, % y-o-y 11.0 7.5 15.9 13.2 11.8 11.0 10.7 10.1Gross non-life

e/f = BMI estimate/forecast Source: AVI/BMI

Claims: Costs Will Increase

Similar to Vietnam's life insurance segment, non-life insurance claims have also grown rapidly since 2009.Especially the years 2011 and 2013 exhibited significant growth rates of 32.3% and 20.7% respectively (inlocal currency terms), with total claims reaching VND10,7110.25bn in 2013, up from VND4,510.67bn in

2008 This trend can be attributed to the nature of the segment, where large-scale commercial and industrialrisks account for a substantial share of non-life premiums As a result, although losses are not frequent, theyare substantial when they do occur We anticipate that non-life claims will grow even more rapidly as motorvehicle and property insurance are accounting for an increasingly larger share of total written premiums

High Motor And Transport Costs

Non-Life Insurance Claims By Type (2013) USDmn

currently the third largest source of claims, has seen costs increasing rapidly in recent years, a trend which

we expect to continue moving forward as Vietnam raises fees in state owned medical facilities and as carestandards and availability are generally improved

Table: Non-Life Insurance Claims (Vietnam 2008-2014)

Claims non-life, VNDbn 4,510.67 5,272.33 6,384.15 8,445.00 8,873.58 10,711.25 Claims non-life, VND, % y-o-y - 16.9 21.1 32.3 5.1 20.7 Non-life insurance gross loss ratio 41.5 38.6 37.4 41.2 39.0 43.8

Source: AVI/BMI

Non-Life Sub-Sector Forecast

BMI View: Vietnam's non-life insurance sector has a healthy mix of well-established lines and we expect to

see sustained growth across all sub-sectors throughout our forecast period to 2019 Motor insurance will retain its dominant position, followed closely by health and personal accident insurance, which is

increasingly popular among those who can afford it in Vietnam Transport insurance will likely lose some market share due to stronger growth in motor insurance, while the smaller lines such as credit and

financial guarantee insurance will struggle to gain any significant ground.

■ Growth in property insurance has accelerated, and we now expect to see premium growth of 4.3% over

2015 leading to premiums of USD112.0mn

Structural Trends

Vietnam's non-life market is more diversified than many other emerging insurance markets While motorinsurance dominates, transport insurance and health and personal accident insurance are also very wellestablished in the country Property insurance is an underdeveloped line and one we expect to see grow overthe longer term, though in the medium-term the development of this line will remain hampered by lowhousehold income rates and limitations on foreign home ownership

There are avenues for further growth in the non-life sector Microinsurance, catering to the many income households, could significantly expand the reach of insurance cover Development of lines underthe catch-all 'other' category, such as agricultural insurance, is also progressing, with Vietnam's

low-vulnerability to extreme weather events making crop failure cover an increasingly popular line As

restrictions on foreign investment are lifted and the insurance market opens to more multinationals, weexpect to see a greater level of product availability, which will help to ensure long-term and sustainablegrowth in premiums

Relatively Diverse Non Life Market

Non-Life Insurance Premiums By Product Line (2016) USDmn

Source: AVI/BMI

Motor Insurance: Remaining The Major Line

Although motor vehicle insurance is relatively less important in Vietnam's non-life segment than in otherlow income countries, motor vehicle related lines are nevertheless forecast to account for a little over onequarter of all premiums written in the segment in 2015, making it the most well established line in themarket In this year, we see motor vehicle insurance premiums increasing rapidly by 5.1% to reach

USD386.3mn, broadly in line with our expectations for wider economic growth in Vietnam, though

currency movements mean growth will be stronger when measured in local currency terms (at 10.0%)

Strong growth in the autos market in Vietnam underpins our optimistic outlook for motor vehicle insurance

The BMI Autos team expects vehicle sales to grow by 17.9% in 2015, followed by average annual growth

of around 9.8% through to 2019 At the same time, domestic vehicle production capacity is growing rapidly.The country's vehicle fleet is therefore expected to increase from 3.2mn in 2015 to around 3.6mn in 2019,leading to an increase in passenger car density from 24.0 vehicles per 1,000 of the population to 26.4vehicles by the end of the forecast period All of this indicates higher demand for motor vehicle insurance.

Expecting Healthy Growth

Motor Premiums (2012-2019)

Motor vehicle insurance, VNDmn (LHS) Motor vehicle insurance, VND, % y-o-y (RHS)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 0

5,000,000 10,000,000 15,000,000

5 10 15

0

e/f = BMI estimate/forecast Source: AVI/BMI

We anticipate steady double-digit growth in motor insurance premiums between 2016 and 2019, due to thegrowth in the autos sector as noted above, and as the sub-sector expands in line with the overall non-lifesegment Motor vehicle premiums are expected to grow at an average annual rate of 12.3%, to reachUSD614.6mn in 2019 Given the fragmentation of the competitive landscape, we expect that the rise will bedriven mainly by the increase in the numbers of vehicles on Vietnam's roads In short, the development ofmotor vehicle insurance will be driven by volume, rather than by increases in prices/rates

More Cars Equals More Insurance

Vehicle Fleet Size (2012-2019)

Vehicle fleet, units (LHS) Vehicles per 1,000 of population (RHS)

2012 2013e 2014e 2015f 2016f 2017f 2018f 2019f 0

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000

30 35 40

25

e/f = BMI estimate/forecast Source: BMI/OICA

Beyond the current forecast period there is certainly scope for continued growth in the motor vehicleinsurance sector Auto sales in Vietnam continue to rise as more households can afford new car purchases,and the country is also expanding its domestic autos manufacturing capacity in order to meet demand -though Vietnam will be reliant upon autos imports for some time to come As car insurance is a compulsoryline in Vietnam, an increase in new car sales indicates long-term growth potential for the motor insurancesector

Transport Insurance: Well Established Line

Accounting for nearly one fifth of total non-life premiums, 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 see transport premiums increasing by 4.9%, to reach USD246.7mn in 2015 This rise is reflective of thebuying of transport insurance by (predominantly) state-owned enterprises, and, very often, through the non-life insurance companies that are affiliated with them

Transport A Key Line

Transport Premiums (2012-2019)

Transport insurance, VNDmn (LHS) Transport insurance, VND, % y-o-y (RHS)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 0

2,500,000 5,000,000 7,500,000 10,000,000

-5 0 5 10 15

e/f = BMI estimate/forecast Source: AVI/BMI

We expect transport insurance to increase at an average annual rate of 8.0% through the 2016-2019 forecastperiod, to reach USD335.7 in 2019 We believe that this positive outlook is underpinned by Vietnam'sincreasingly significant role in international trade For example, the country is seeking to play a greater role

in the electronics supply chain in the near future, which is a key source of demand for air freight transport

In addition, Vietnam's pharmaceutical sector exports much of its output, but it also imports a lot

Trade by the country's pharmaceutical sector is expected to grow at double-digit rates in the coming years,which will further drive up demand for transportation, and this will consequently impact positively onwritten transport insurance premiums These positive economic growth factors support our expectations ofcontinued long-term growth in Vietnam's transport insurance sub-sector beyond the end of the currentforecast period in 2019 This is particularly the case as several of the leading domestic non-life firmsspecialise in various transport lines, including the provision of specialised transport insurance for thegrowing energy sector or for the large fishing industry

Property Insurance: Potential Over The Long Term

Property insurance accounts for less than one tenth of the total activity in Vietnam's non-life segment, arelatively small share for such a major line, and premiums are expected to reach USD112mn in writtengross premiums in 2015, reflecting growth of 4.3% - a small market by global standards Vietnam's housingmarket is generally underdeveloped and many households are still unable to afford conventional insuranceproducts, which contributes to the limited penetration of property insurance at present

Small Housing Market Limits Demand

Property Premiums (2012-2019)

Property insurance, VNDmn (LHS) Property insurance, VND, % y-o-y (RHS)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 0

1,000,000 2,000,000 3,000,000 4,000,000

-20 0 20 40

-40

e/f = BMI estimate/forecast Source: AVI/BMI

We expect that this sub-segment will achieve high single-digit growth through the 2015-2019 forecastperiod This is a respectable outcome by most standards, but is consistent with the sub-sector slipping inimportance relative to the non-life segment as a whole, and in relation to the overall economy We aretaking the view that price competition in household and, perhaps, some commercial lines will be quiteintense

In 2019, we see property insurance reaching USD145mn Over the longer term, changes to the propertymarket may result in more demand for property insurance The government is gradually relaxing restrictions

on foreign property ownership, which could result in an influx in investment and in turn drive demand forproperty insurance Rapid urbanisation is another long-term growth avenue, and as household income risesthis could also indicate increased demand for property insurance as premiums become more affordable

Health And Personal Accident Insurance: Demand Is Rising

A lack of adequate government healthcare infrastructure, including poorly staffed and underequipped publichospitals, is behind the rapid growth in health and personal accident insurance in Vietnam, as those who areable to afford private health insurance increasingly choose to purchase healthcare cover Health and

personal accident insurance is expected to grow by a strong 20.6% in 2015 to reach premiums of

USD347.5mn

Private Healthcare Popular

Health & Personal Accident Premiums (2012-2019)

Health and personal accident insurance, VNDmn (LHS) Health and personal accident insurance, VND, % y-o-y (RHS)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 0

5,000,000 10,000,000 15,000,000

5 10 15 20 25 30

e/f = BMI estimate/forecast Source: AVI/BMI

Although the government is rolling out universal healthcare via mandatory health insurance, uptake in manyareas has been limited and the quality of care provided by state facilities, particularly rural areas, is very

poor Demand for private health insurance and personal accident insurance (which provides disabilitybenefits and income protection which the government is unable to provide) will remain highly popular Assuch, we expect double-digit growth to be maintained and by the end of the forecast period forecast healthand personal accident insurance premiums of USD520.9mn Beyond the current forecast period this growthmay slow down somewhat, but overall the health and personal accident insurance sector is expected toremain one of the fastest growing in the region Government reforms to medical care will be slow tomaterialise, meaning private facilities will remain popular, and the growing number of foreigners living inVietnam will also support growth in demand for private health insurance.

Credit And Financial Guarantee Insurance: Remaining A Minor Line

Credit/financial guarantee insurance occupies only a minute section of the non-life market in Vietnam,representing less than 1% of non-life insurance premiums in 2015 Demand for credit insurance is expected

to grow by a substantial 8.6% in 2015, as the provision of credit in the country sees strong growth over theyear, in line with wider economic growth, meaning premiums written are expected to reach USD4.1mn

Credit And Financial Guarantee Premiums

Credit And Financial Guarantee Premiums (2012-2019)

Credit/financial guarantee insurance, VNDmn (LHS) Credit/financial guarantee insurance, VND, % y-o-y (RHS)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f 0

50,000 100,000 150,000

-75 -50 -25 0 25 50

e/f= BMI estimate/forecast Source: AVI/BMI

A strong growth rate of, on average, 9.8% throughout our forecast period will lead to credit/financialguarantee insurance premiums of USD5.9mn in 2019 Although limited, this growth is a mark of thedevelopment in the Vietnamese financial sector, and the growing uptake of formal banking services.However, this growth is insufficient to expand credit/financial guarantee insurance's share of the non-lifemarket by the end of our forecast period in 2019 Over the longer term, the continued expansion of thedomestic economy, development of the banking sector, improved access to financial services and

diversification of industry all indicate increasing demand for credit/financial guarantee insurance products.While this line is currently small, we do expect to see healthy and sustained growth throughout and beyondthe current forecast period

Table: Non-Life Insurance Premiums By Product Line (Vietnam 2012-2019)

Motor vehicle

insurance,

VNDmn 6,329,214 6,849,960 7,791,437 8,574,177 9,614,757 10,874,081 12,284,199 13,828,708Motor vehicle

insurance,

VND, % y-o-y 3.2 8.2 13.7 10.0 12.1 13.1 13.0 12.6Motor vehicle

insurance,

VND, % y-o-y 26.8 -19.1 28.7 9.2 8.2 7.4 6.6 5.9Property

Non-Life Insurance Premiums By Product Line (Vietnam 2012-2019) - Continued

insurance,

VND, % y-o-y 17.3 19.5 9.9 8.7 10.6 11.6 11.6 11.4General liability

insurance,

VND, % y-o-y 10.7 9.0 13.9 9.0 11.0 12.0 12.0 11.7Other

Insurance Risk/Reward Index

Asia Pacific Industry Risk/Reward Index

The national markets of the Asia Pacific region vary markedly In terms of non-life insurance, most arebenefiting from superior economic growth, rising penetration and opportunities for economies of scale Inmany, life insurers are enjoying a bonanza in terms of growth and profitability and should continue to do sofor some time

The Insurance Risk/Reward Index takes into account objective measures of the current state and long-termpotential of both the non-life and the life segments It also takes into account an assessment of the openness

of each segment to new entrants and economic conditions Collectively, these measures enable an objectiveassessment of the limits to potential returns across all countries and over a period of time The scores alsoincorporate an objective assessment of the risks to the realisation of returns The risk assessment is based on

BMI's proprietary Country Risk Index It embodies a subjective assessment of the impact of the regulatory

regime on the development and the competitive landscape of the insurance sector

Table: Asia Pacific Insurance Risk/Reward Index

Industry

Rewards

Industry Rewards Non-Life

Industry Rewards Life Rewards Rewards Country Industry Risk Country Risks Risks

Insurance Risk/Reward

Hong Kong 76.25 62.50 90.00 72.53 74.76 100.00 71.47 82.88 77.20 1 Singapore 73.75 67.50 80.00 71.74 72.94 95.00 77.11 84.27 76.34 2 South Korea 81.25 82.50 80.00 63.66 74.21 60.00 78.25 70.95 73.24 3 Australia 66.25 72.50 60.00 62.37 64.70 90.00 81.97 85.18 70.84 4 Taiwan 75.00 70.00 80.00 60.56 69.22 70.00 76.95 74.17 70.71 5 Japan 70.00 62.50 77.50 54.04 63.61 55.00 81.78 71.07 65.85 6 Malaysia 58.75 52.50 65.00 61.03 59.66 75.00 66.53 69.92 62.74 7 New Zealand 38.75 42.50 35.00 65.69 49.53 90.00 81.78 85.07 60.19 8 China 68.75 65.00 72.50 42.34 58.19 55.00 60.97 58.58 58.30 9 Thailand 58.75 52.50 65.00 51.95 56.03 70.00 59.11 63.47 58.26 10 India 57.50 52.50 62.50 40.50 50.70 45.00 67.65 58.59 53.07 11 Indonesia 52.50 42.50 62.50 45.49 49.70 55.00 58.46 57.07 51.91 12 Philippines 43.75 37.50 50.00 44.21 43.94 75.00 63.54 68.12 51.19 13 Macau 30.00 25.00 35.00 65.60 44.24 65.00 55.00 59.00 48.67 14 Vietnam 33.75 35.00 32.50 40.91 36.62 55.00 47.47 50.48 40.78 15 Sri Lanka 17.50 17.50 17.50 40.25 26.60 45.00 52.47 49.48 33.47 16 Pakistan 25.00 25.00 25.00 35.43 29.17 40.00 39.09 39.45 32.26 17 Mongolia 10.00 12.50 7.50 49.53 25.81 40.00 52.12 47.27 32.25 18 Fiji 20.00 20.00 20.00 42.24 28.90 50.00 32.63 39.58 32.10 19 Bangladesh 21.25 17.50 25.00 32.41 25.71 20.00 48.74 37.24 29.17 20 Cambodia 6.25 12.50 0.00 37.75 18.85 40.00 31.57 34.94 23.68 21

Scores out of 100, with 100 the best Source: BMI