KB Insurance joins M&A race in Vietnam
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By Jhoo Dong-chan
KB Insurance is seeking an entry into Vietnam's insurance market through merger and acquisition (M&A).
The move came after Korea's leading insurers ― Samsung Fire & Marine and Hyundai Marine & fire Insurance ― have already been expanding their presences in the rapidly-growing Southeast Asian market.
A series of non-life insurers' moves to enter foreign markets are believed to be part of their efforts to overcome the nation's saturated insurance market.
Related regulations are another factor behind their exodus to the Southeast Asian country as the Moon Jae-in administration has barred the nation's non-life insurers from raising auto insurance premiums despite their worsening loss ratio.
According to industry sources and company officials, KB Insurance is reviewing its plan to acquire a local non-life insurer in Vietnam. The country's third-largest insurance firm Bao Minh Insurance is said to be the most likely candidate.
Bao Minh is a state-run insurer controlled by Vietnam's State Capital Investment Corp. with a 50.7 percent stake. It occupies an 8.2 percent market share.
KB Insurance allegedly plans to acquire a 17 percent stake in Bao Minh Insurance. If it does, KB will be the Vietnamese insurer's second-largest shareholder.
The net assets of Bao Minh Insurance are 107.88 billion won ($95.6 million) with original premium of 172.21 billion won.
KB Insurance first entered the Vietnamese market by establishing its first office in Hanoi in 1995. It opened an additional office in Ho Chi Minh in 2001, but didn't expand to such an extent as to set up a local subsidiary like those in the U.S. and Indonesia.
The sources said that KB Insurance is expected to hold a board meeting soon to discuss the stake acquisition plan.
“We can neither confirm nor reveal any details of the acquisition plan at this moment because it is a matter subject to public notice,” said a KB Insurance official asking not to be named.
If KB Insurance acquires Bao Minh Insurance, it will be the largest M&A carried out by a domestic insurance firm in Vietnam.
In 2017, Samsung Fire & Marine Insurance acquired a 20 percent stake in PJICO to become the Vietnamese insurer's second-largest shareholder. PJICO is Vietnam's fifth-largest non-life insurer with a 7 percent market share.
This was the first time a Korean insurer acquired a stake in a Vietnamese insurance company.
Hyundai Marine & Fire Insurance announced in November that it will acquire a 25 percent stake in VietinBank Insurance. If the acquisition is completed, Hyundai will be the state-run insurer's second-largest shareholder.
“VietinBank Insurance occupies only 2 percent market share, but is a state-run firm. It has great potential for growth,” said a Hyundai Marine & Fire Insurance official.
According to the Financial Supervisory Service, Korean insurers' foreign branches in Vietnam posted $8.6 million earnings in the first half of this year, up $5.2 million from a year ago.