Higher costs, harder deals
It's very likely that AGF (Assurance Générale de France), a
big name in the international insurance community, will leave
Vietnam. Meanwhile, soaring costs have made reinsurance
arrangements more difficult.
The Ministry of Finance has just
received a proposal from the
100% foreign-owned insurer
Allianz-AGF for changing its
name into Allianz General
Insurance Vietnam. The
proposal is now under
consideration, but behind it is
AGF's imminent departure from
Vietnam.
In 1999, the US$5-million
Allianz-AGF Vietnam joint
venture was set up by two
international insurers, Allianz of Germany and AGF. This was the first
foreign investment in the non-life insurance industry in Vietnam. Less
than three years later, Allianz-AGF is performing well, as its sales
increased from US$3 million in 2000 to US$4 million in 2001, and is
expected to be US$7 million this year.
According to statistics obtained from the Vietnam Association of
Insurers, Allianz-AGF insurance premium in the first quarter of 2002 rose
by 398.2% year-on-year, posting the highest rate in the local non-life
insurance industry. This is a result of the fact that many multinationals
present in Vietnam are Allianz-AGF's customers. It has also been
supported by global insurance contracts. For instance, as Coca-Cola
in America and Europe have signed insurance policies with
Allianz-AGF, Coca-Cola Vietnam also buys insurance from Allianz-AGF
Vietnam.
While business was sailing smoothly, AGF decided to transfer its 45%
stake worth US$2.25 million in the joint venture to Allianz. The value of
the transfer is of course higher than that amount because Allianz-AGF
Vietnam is doing well and AGF has made a lot of efforts to build up the
joint venture. According to a reliable source from the International
Finance Corporation (IFC), IFC will help the joint venture increase its
capital. That means that IFC will invest in the JV. The source said IFC is
waiting for the green light from the Ministry of Finance.
Why is AGF pulling out of Vietnam? According to sources from the
insurance industry, AGF's stake transfer was planned previously. AGF
group is being bought out worldwide and the name Allianz-AGF exists
only in some markets. The change of name and stakeholder will not
influence its operations in Vietnam. Notably, some investors pull out
bringing considerable profits from stake transfers. This proves that
Vietnam's non-life insurance market is attractive to foreign investors.
By Thanh Nam - The Saigon Times Weekly - August 31, 2002.
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