Q2 2015 Vietnam

Q2 2015 www.bmiresearch.com

VIETNAM INSURANCE REPORT

INCLUDES 5-YEAR FORECASTS TO 2019

ISSN 1752-8410 Published by:BMI Research Vietnam Insurance Report Q2 2015

INCLUDES 5-YEAR FORECASTS TO 2019

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: March 2015

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Vietnam Insurance Report Q2 2015

CONTENTS

BMI Industry View ...... 7

SWOT ...... 9 Insurance ...... 9 Political ...... 11 Economic ...... 12 Operational Risk ...... 14 Industry Forecast ...... 16 Total Premiums Forecast ...... 16 Total premiums ...... 16 Table: Total Gross Premiums Written (Vietnam 2012-2019) ...... 18 Total Claims ...... 18 Table: Total Insurance Claims (Vietnam 2009-2013) ...... 18 Life Premiums Forecast ...... 19 Insurance Premiums ...... 20 Table: Gross Life Premiums Written (Vietnam 2012-2019) ...... 20 Life Insurance Drivers ...... 21 Table: Insurance Key Drivers, Private Health Expenditure (Vietnam 2012-2019) ...... 22 Table: Insurance Key Drivers, Disease Adjusted Life Years (Vietnam 2012-2019) ...... 22 Life Claims ...... 23 Table: Life Insurance Claims (Vietnam 2009-2013) ...... 23 Non-Life Premiums Forecast ...... 24 Non-Life Premiums ...... 24 Table: Gross Non-Life Premiums Written (Vietnam 2012-2019) ...... 26 Table: Net Non-Life Premiums Written (Vietnam 2012-2019) ...... 27 Non-Life Reinsurance ...... 27 Table: Reinsurance Non-Life Premiums Written (Vietnam 2012-2019) ...... 28 Non-Life Claims ...... 28 Table: Non-Life Insurance Claims (Vietnam 2008-2013) ...... 29 Table: Non-Life Insurance Claims by Line (Vietnam 2008-2013) ...... 30 Non-Life Sub-Sector Forecast ...... 31 Table: Non-Life % Breakdown (Vietnam 2012-2019) ...... 31 Motor Vehicle And Transport Insurance ...... 32 Table: Motor Vehicle Insurance (Vietnam 2012-2019) ...... 33 Table: Transport Insurance (Vietnam 2012-2019) ...... 34 Table: Insurance Key Drivers, Freight Tonnage (Vietnam 2012-2019) ...... 35 Property Insurance ...... 35 Table: Property Insurance (Vietnam 2012-2019) ...... 36 Industry Risk Reward Ratings ...... 37 Asia Pacific Industry Risk/Reward Index Q2 2015 ...... 37

Table: Asia Pacific Insurance Risk/Reward Index - Q2 2015 ...... 38 Market Overview ...... 39 Life Market Overview ...... 39 Table: Life Insurance Market (USDmn) 2008-2013 ...... 40 Table: Life Insurance Market (%) 2008-2013 ...... 42 Non-Life Market Overview ...... 42 Table: Non-Life Insurance Market (USDmn) 2007-2013 ...... 44 Table: Non-Life Insurance Market (%) 2007-2013 ...... 45 Company Profile ...... 47 AIA Group ...... 47 American International Group (AIG) ...... 51 Bao Viet Holdings ...... 54 Manulife Financial ...... 57 Prudential plc ...... 60 PVI Holdings ...... 63 Sun Life Financial ...... 66 Demographic Forecast ...... 68 Table: Population Headline Indicators (Vietnam 1990-2025) ...... 69 Table: Key Population Ratios (Vietnam 1990-2025) ...... 69 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) ...... 70 Table: Population By Age Group (Vietnam 1990-2025) ...... 70 Table: Population By Age Group % (Vietnam 1990-2025) ...... 71 Methodology ...... 73 Industry Forecast Methodology ...... 73 Risk/Reward Index Methodology ...... 76 Table: Indicators ...... 78 Table: Weighting of Indicators ...... 79

Vietnam Insurance Report Q2 2015

BMI Industry View

BMI View: We have a positive outlook for Vietnam's overall insurance sector over the 2015-2019 forecast period and confirm rapid growth in both the life and non-life segments. Economic strengthening and new innovations induced by continued foreign direct investment (FDI) should impact positively on household confidence and future demand for insurance products. Also taking into account Vietnam's growing middle- class, we believe that there are ample attractive opportunities for future investment.

Vietnam's insurance sector is set to catch up with its counterpart markets across South East Asia in the medium to long term. Insurance providers in both the country's life and non-life segments are expected to increase their written premiums at double-digit rates throughout the 2015-2019 forecast period. The sector is becoming more attractive for future investment, as has become evident by renewed interest of foreign investors - such as Sunlife and Generali, which both entered the market in the last two years. Aside of the well-received product innovations and distribution channels introduced by these multinational companies, several other factors underlie our forecast positive industry outlook. These are discussed subsequently.

Vietnam's life insurance segment will account for roughly 43% of total written premiums over the next five years, and is characterised by slightly slower growth prospects in comparison with non-life insurance. Nevertheless, life insurance is set to grow rapidly at an average annual rate of 12.5%, in spite of potential setbacks due primarily to low understanding and awareness of the benefits of life insurance among Vietnamese households. A more important issue faced by industry players, however, is the fact that most households cannot currently afford life insurance. In light of efforts of the Vietnamese government to improve macroeconomic fundamentals to keep the country's economy growing strongly in 2015 onwards, we therefore consider it likely that by 2019, significant success may have been achieved by at least one of the major players in developing and distributing micro-insurance products among also the lower-income population.

As we forecast Vietnam's real GDP growth to accelerate to consistently over 6.0% between 2015 and 2019, we also see opportunities for non-life insurers to increase their written premiums - particularly in the motor vehicle and transport insurance sub-segments. This rate of economic strengthening, combined with the country's demographic structure, places considerable upside potential on the sectors for autos, freight transportation, and construction, among others. With GDP per capita growing from USD2,133 in 2015 to USD3,266 in 2019 and a growing middle-class, we expect to see that increased spending by households in particularly these sectors will translate to greater demand for non-life insurance products for motor vehicles, transport, and properties. In addition, ongoing governmental commitment to streamlining the country's

regulatory framework with international best practices and standards, as well as its efforts to comply with Vietnam's WTO commitments, should further attract strong FDI and resultant innovations and know-how.

Recent Developments

■ The non-life market continues to struggle to capture new business in the Vietnam market.

■ Many insurance providers are putting greater emphasis on product innovation which is proving effective.

■ On December 11 2014, Manulife Vietnam and Mekong Housing Bank (MHB) signed a three-year bancassurance agreement, enabling Manulife Vietnam to capitalise on the network of MHB.

■ On January 1 2015, the new Law on Health Insurance was implemented to further increase health insurance coverage among 80% of the Vietnamese population by 2020 - notably the poor and ethnic minorities in disadvantaged areas.

Key BMI Forecasts

■ In 2015, total premiums should rise by 10.0% to USD2.7bn.

■ Life premiums should rise by 8.5% to USD1.2bn in 2015.

■ Non-Life premiums should grow by 11.3% to USD1.5bn in 2015.

■ Within this sub-total, motor vehicle insurance premiums should grow by 8.7% to USD399.4mn, and property insurance premiums should increase by 7.5% to USD115mn.

SWOT

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.

■ 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 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 ■ 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 6.6% annually between 2000 and 2013.

■ The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 17.2% in 2012.

■ Vietnam has been strengthening its trade and aid ties in a bid to increase exports and diversify its export sector.

Weaknesses ■ Vietnam still suffers from 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 economic integration in 2015 should give Vietnam greater access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased foreign competition.

■ The government has continued to move forward with market reforms, including privatisation of state-owned enterprises, addressing the high level of bad loans in the banking sector as well as liberalising the banking sector.

■ Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population rising from 32% of the population in 2013 to more than 50% by the early 2040s.

Threats ■ Although inflation has subsided in 2014, complacency by the State Bank of Vietnam on this front could result in a decline in investment.

■ The potential for an escalation of political tensions with China over sovereign claims to parts of the South China Sea could have a negative impact on the economy.

SWOT Analysis - Continued

■ Market reforms could progress at a much slower pace as the government remains cautious about ceding ownership to foreign investors.

Operational Risk

SWOT Analysis

Strengths ■ Vietnam has a high number of university graduates with skilled degrees and a high literacy rate for its income level.

• In addition to a number of regional and international flight options, Vietnam has an extensive inland waterway system.

■ Strong contract enforcement capabilities increase security.

• Vietnam's rate of violent crime is generally low, and foreigners are unlikely to be targeted.

Weaknesses ■ High labour costs increase overall operating costs, and difficulty in hiring foreigners creates shortages of skilled labour.

• Underdeveloped rail capacity overburdens the road network.

• One of the worst tax administration systems in Asia.

• The police force is under-equipped and under-resourced in many areas.

Opportunities ■ Fairly high expenditures in secondary education by regional standards will help close gaps in access to education.

• Vietnam is easily accessible from the main shipping routes, and growth in the number of port facilities will provide adequate capacity.

• Declining trade barriers are making it easier to enter the market.

• Increased foreign participation in the banking sector will increase the availability of funds for loans.

Threats ■ Unequal access to secondary education will result in a lower-quality workforce in poorer regions.

• Vietnam's reliance on imported oil poses risks in the form of energy and fuel shortages.

SWOT Analysis - Continued

• Corruption and inefficiency in the legal system.

• Anti-Chinese violence, as seen in May 2014, could be a harbinger of wider political and social unrest.

Industry Forecast Total Premiums Forecast

BMI View: We have a positive outlook for Vietnam's insurance sector, with insurance companies expected to increase their written premiums at double-digit rates in the next five years. Important factors that underlie this rapid growth include the country's improving regulatory system, general economic strengthening and effective product innovations. Non-life insurance will account for the largest share of growth, which is in line with increased spending on autos and properties, and Vietnam's increasingly more significant role in international trade. Accordingly, we believe that there will be attractive opportunities for long-term investment within Vietnam's insurance sector.

Within non-life insurance, basic lines such as motor vehicle and household property insurance are less important in Vietnam compared to other South East Asian countries, or other low income countries in other parts of the world. Although these lines are growing at rapid rates, at least until 2019, we expect that 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 remain at an embryonic stage of development until at least the end of our forecast period.

Total premiums

Ongoing growth in Vietnam's overall insurance sector will be driven primarily by positive developments within non-life insurance. Whereas life insurance will account for roughly 44% of total premiums written in 2015, non-life will account for 56%; and, as non-life insurance will grow at a more rapid pace than life insurance in the next five years, it is also expected to become increasingly more important for the sector's overall growth. Overall, we see rapidly growing investment opportunities within both major segments.

Gross Written Premiums

Total Gross Premiums, USDbn (2012-2019)

6 30

4 20

2 10

0 0 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Total gross premiums written, USDbn (LHS) Total gross premiums written, USD, % y-o-y (RHS)

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

Vietnam's total insurance sector should continue to grow in 2015, at a rate of 10.0% to reach USD2.7bn in written premiums. While this increase will be driven by favourable trends in both the country's life and non- life segments, developments within non-life insurance, such as growth in the commercial/industrial lines, should account for the predominant share of growth. We see total insurance density (premiums per capita) grow from USD28.4 in 2015 to USD46.8 in 2019. We anticipate total written premiums to continue growing at an average annual rate of 13.3%, to reach USD4.5bn in 2019.

Table: Total Gross Premiums Written (Vietnam 2012-2019)

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

Total gross premiums written, VNDbn 41,148.84 47,104.99 51,161.09 57,002.37 64,486.83 73,467.79 83,296.06 93,988.46 Total gross premiums written, VND, % y-o-y 29.1 14.5 8.6 11.4 13.1 13.9 13.4 12.8 Total gross premiums written, VND per 453,202.2 513,799.4 552,806.3 610,391.1 684,638.7 773,657.2 870,418.3 975,033.4 capita Total gross premiums written, % of GDP 1.3 1.3 1.3 1.3 1.4 1.4 1.4 1.4 Total gross premiums written, USDbn 1.97 2.24 2.41 2.66 3.01 3.46 3.96 4.51 Total gross premiums written, USD, % y-o-y 27.7 13.6 7.7 10.0 13.2 15.0 14.5 13.9 Total gross premiums written, USD per 21.7 24.4 26.1 28.4 31.9 36.4 41.4 46.8 capita

AVI/BMI

Total Claims

The evolution of claims expenses since 2010 has been quite erratic - although the trend has clearly shown a rapid increase in claims. This development can be explained by the initial extremely low base levels of life claims and payments from which the surge commenced. In addition, the trend has been driven further by sizeable industrial/commercial claims, as well as the substantial usage of outwards reinsurance by the Vietnamese non-life companies.

Table: Total Insurance Claims (Vietnam 2009-2013)

2009 2010 2011 2012 2013

Total claims, VNDbn 7,780.04 9,170.66 12,666.75 14,613.73 18,806.25

Total claims, VND, % y-o-y 17.9 38.1 15.4 28.7

Total insurance gross loss ratio 30.5 29.7 39.7 35.5 39.9 Total claims, USDbn 0.44 0.48 0.61 0.70 0.89

Total claims, USD, % y-o-y 9.7 27.9 14.2 27.7

Source: AVI/BMI

Life Premiums Forecast

BMI View: The most recent figures of Vietnam's life insurance segment confirm our view that it is reasonable to look for double-digit growth over our 2015-2019 forecast period. The segment is becoming an increasingly more attractive destination for investment by foreign multinationals as Vietnam's government introduces changes to the country's outdated insurance regulations. In addition, rapidly growing real GDP, as well as improved market penetration induced by new product innovations and distribution channels, should further drive ongoing growth within the segment.

While we foresee rapid growth in life insurance premiums, we are mindful of potential setbacks due to economic shocks and general low levels of awareness among Vietnamese households of the benefits of life insurance. Although the insurers have been working to improve customers' understanding of life insurance, a more fundamental problem is that most households cannot afford it.

Growth May Be Volatile

Total Gross Life Premiums, USDbn (2012-2019)

2.5 75

2 50

1.5 25 1

0 0.5

0 -25 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Gross life premiums written, USDbn (LHS) Gross life premiums written, USD, % y-o-y (RHS)

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

In spite of ongoing growth, Vietnam's life insurance segment remains a relatively small investment opportunity for international life insurers, in comparison to other countries across South East

Asia. Nevertheless, the segment has been benefitting hugely from the product and distribution know-how and regional scale of (most of) the international companies. As the country's business environment becomes more favourable to foreign investors, various multinational companies have highlighted the rapid expansion of their agency forces in Vietnam over the last few years.

Insurance Premiums

Ongoing commitment by the Vietnamese government to improving macroeconomic fundamentals and forging financial stability should bode well for the country's economy as a whole, and notably also for the insurance sector. As the country witnessed a rapid decline in inflation, households should become more confident to enter into long-term contracts with life insurers. Accordingly, we see gross life insurance premiums grow by 8.5% to USD1.2bn in 2015. However, with life density (life premiums per capita) at around USD12.4 in 2015, and life penetration (life premiums as percentage of GDP) of 0.6%, we are mindful that many households are still struggling to properly afford life insurance.

Looking forward, we foresee that life premiums will continue to rise at rapid, double-digit rates through to 2019; to reach USD1.9bn. Accordingly, the various multinational insurers that have established operations in Vietnam are, in our view, right to see the market as an attractive opportunity for future investment. As such, it is likely that by 2019, at least one of the largest players will have significant success with the development and distribution of micro-insurance products to reach out to the low-income households.

Table: Gross Life Premiums Written (Vietnam 2012-2019)

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

Gross life premiums written, VNDbn 18,390.85 22,650.00 22,710.88 24,945.75 27,946.66 31,597.92 35,698.69 40,200.52 Gross life premiums written, VND, % y-o-y 61.6 23.2 0.3 9.8 12.0 13.1 13.0 12.6 Gross life premiums written, VND per 202,551.8 247,055.7 245,395.8 267,123.3 296,702.0 332,743.8 373,040.4 417,039.0 capita Gross life premiums written, % of GDP 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 Gross life premiums written, % of gross 44.7 48.1 44.4 43.8 43.3 43.0 42.9 42.8 premiums written Gross life premiums written, USDbn 0.88 1.08 1.07 1.16 1.30 1.49 1.70 1.93 Gross life premiums written, USD, % y-o-y 59.9 22.2 -0.5 8.5 12.1 14.1 14.1 13.7

Gross Life Premiums Written (Vietnam 2012-2019) - Continued

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

Gross life premiums written, USD per 9.7 11.7 11.6 12.4 13.8 15.7 17.7 20.0 capita

AVI/BMI

Life Insurance Drivers

Unlike in several other countries, the growth of Vietnam's life insurance market is not predicated on the increasing provision of health insurance drivers as a consequence of rapid growth of private healthcare expenditures. This is predominantly due to poor government initiatives in light of healthcare, as it is encouraging the Vietnamese population to opt for private healthcare. More specifically, over 40% of the country's spending on healthcare is private - this is substantially higher than in other countries which share similar levels of GDP per capita. We do not expect that the landscape of Vietnam's life segment will change in the coming years. Namely, in spite of relative high levels of per capita spending on private healthcare (USD86.1) in comparison to life insurance density (USD12.4), the country's insurance market is still too underdeveloped due to widespread poverty.

However, looking forward through to 2019, we see that private spending on healthcare is set to grow from USD8.0bn in 2015 to USD14.8bn in 2019 in accordance with Vietnam's strong economic growth. This trend is reflective of a growing group of Vietnamese households that understand the benefits of having life insurance, and that can also afford it. Therefore, we do see that there would be potential scope for Vietnam's life insurers to provide health insurance products.

Table: Insurance Key Drivers, Private Health Expenditure (Vietnam 2012-2019)

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

Private health expenditure, VNDbn 111,332.7 128,028.7 147,150.7 168,908.8 193,634.5 221,696.1 253,503.2 289,510.0 Private health expenditure, VNDbn, 17.9 15.0 14.9 14.8 14.6 14.5 14.3 14.2 % y-o-y Private health expenditure, USDbn 5.3 6.1 6.9 8.0 9.4 11.1 12.8 14.8 Private health expenditure, USDbn, 16.7 14.1 13.8 16.1 17.2 17.7 15.5 15.4 % y-o-y Private health expenditure, USD per 58.7 66.4 74.8 86.1 100.0 116.7 133.8 153.2 capita Private health expenditure, % of 3.4 3.6 3.7 3.8 3.9 4.0 4.1 4.2 GDP

World Health Organization (WHO)/ BMI

The rise in Vietnam's private healthcare spending is driven principally by changes in morbidity. More specifically, over the 2015-2019 forecast period, we expect that both communicable and non-communicable diseases will increase and lead to an overall rise in Disease Adjusted Life Years (DALYs; a widely used metric for morbidity). Most notably, Vietnam is experiencing a rising burden of communicable diseases such as tuberculosis, AIDS, and hand, foot and mouth disease. These diseases will be especially suffered by nearly all people who are over the age of 14.

Table: Insurance Key Drivers, Disease Adjusted Life Years (Vietnam 2012-2019)

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

All Causes, DALYs 11,933,865 11,968,439 12,001,992 12,034,522 12,066,030 12,096,513 12,125,971 12,154,404 Communicable, maternal, perinatal and nutritional conditions, DALYs 3,366,403 3,371,022 3,375,565 3,380,031 3,384,422 3,388,736 3,392,973 3,397,134 Noncommunicable diseases, DALYs 6,928,102 6,970,173 7,011,158 7,051,055 7,089,863 7,127,581 7,164,209 7,199,744 All diseases and injuries, 0-4 yrs, total, DALYs 1,399,208 1,333,074 1,270,112 1,210,424 1,154,059 1,101,023 1,051,282 1,004,772 All diseases and injuries, 5-14 yrs, total, DALYs 581,029 566,147 551,433 536,886 522,547 508,490 494,820 481,659

Insurance Key Drivers, Disease Adjusted Life Years (Vietnam 2012-2019) - Continued

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

All diseases and injuries, 15-29 yrs, total, DALYs 2,406,024 2,418,817 2,431,012 2,442,923 2,454,811 2,466,841 2,479,058 2,491,358 All diseases and injuries, 30-44 yrs, total, DALYs 2,123,095 2,168,709 2,212,369 2,252,764 2,288,799 2,319,618 2,344,638 2,363,569 All diseases and injuries, 45-59 yrs, total, DALYs 2,426,292 2,425,683 2,421,889 2,416,058 2,409,202 2,402,194 2,395,781 2,390,593 All diseases and injuries, 60-69 yrs, total, DALYs 1,447,547 1,467,741 1,487,452 1,507,330 1,527,762 1,548,883 1,570,589 1,592,538 All diseases and injuries, 70+ yrs, total, DALYs 1,550,670 1,588,268 1,627,726 1,668,137 1,708,851 1,749,463 1,789,803 1,829,914

National Sources/BMI

Life Claims

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 from USD150mn to USD380mn. While this shows that claims and payments have been growing from a rather low base, we believe that this development does also reflect the growth of the country's life insurance segment, as well as the positive receipt of effective product innovations. As such, we expect that such considerably increases may persist over the coming years, in line with Vietnam's overall rapid economic growth.

Table: Life Insurance Claims (Vietnam 2009-2013)

2009 2010 2011 2012 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 Claims life, USDbn 0.14 0.15 0.20 0.28 0.38

Claims life, USD, % y-o-y 3.4 40.2 34.6 40.0

Source: AVI/BMI

Non-Life Premiums Forecast

BMI View: With Vietnam's non-life insurers set to experience double-digit growth in their performance through the coming years, we have a positive outlook for the country's non-life insurance sector over the 2015-2019 forecast period. This is largely due to conducive monetary conditions, an improving economic environment and renewed interest from foreign investors. These macro developments are expected to impact positively on demand in the auto and other household sectors, which should subsequently transfer to increasing purchases of non-life insurance products. As such, in our view, Vietnam's non-life insurance segment provides attractive opportunities for new investment.

Non-Life Premiums

With gross non-life premiums set to increase by 11.3% in 2015, reaching USD1.5bn, we have a positive outlook for Vietnam's non-life insurance segment. In spite of low per capita premiums of USD16 and low non-life penetration (premiums as a percentage of GDP) of 0.7%, we anticipate that increasingly more households should become better able to afford non-life insurance products as Vietnam's economy continues to strengthen. However, we note that this will only materialise in increased non-life insurance purchases in the long term.

Gross Non-Life Premiums Written

Gross Non-Life Premiums (2012-2019)

3 20

15 2

1 5

0 0 2012 2013 2014e 2015f 2016f 2017f 2018f 2019f Gross non-life premiums written, USDbn (LHS) Gross non-life premiums written, USD, % y-o-y (RHS)

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

The non-life segment should grow at an annual rate of around 14% between 2015 and 2019, to reach USD2.6bn in 2019. In addition to increases in industrial/commercial lines following the countries rapid economic expansion (we forecast 6.4% growth in real GDP in 2015), the rise of non-life insurance will predominantly be driven by motor vehicle insurance. Namely, our Auto team forecasts vehicle sales to grow at an average annual rate of 11.4% over the 2015-2019 period, which we expect to translate to great increases in demand and sales of motor vehicle insurance. We highlight the prevailing loose credit conditions in the economy for providing strong support to the rising auto sales.

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

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

Gross non-life premiums written, 22,757.99 24,454.99 28,450.21 32,056.62 36,540.16 41,869.87 47,597.37 53,787.94 VNDbn Gross non-life premiums written, 11.0 7.5 16.3 12.7 14.0 14.6 13.7 13.0 VND, % y-o-y Gross non-life premiums written, 250,650.4 266,743.7 307,410.5 343,267.8 387,936.8 440,913.3 497,377.9 557,994.5 VND per capita Gross non-life premiums written, % 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 of GDP Gross non-life premiums written, % of gross premiums 55.3 51.9 55.6 56.2 56.7 57.0 57.1 57.2 written Gross non-life premiums written, 1.09 1.16 1.34 1.49 1.70 1.97 2.26 2.58 USDbn Gross non-life premiums written, 9.9 6.7 15.4 11.3 14.1 15.7 14.8 14.1 USD, % y-o-y Gross non-life premiums written, 12.0 12.7 14.5 16.0 18.1 20.7 23.6 26.8 USD per capita

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

Identical to gross non-life premiums, we see net non-life premiums rise by 11.3% through 2015, to reach USD0.9bn. This indicates that Vietnam's non-life insurers' reliance on reinsurance will remain unchanged in comparison to the past year. Looking forward, net non-life premiums will track gross non-life premiums through to 2019, reaching USD1.6bn. Comparing these absolute figures to the gross premiums, we see that retention ratios (i.e. net premiums as a percentage of gross premiums) are consistently low at roughly 60% across the next years. This shows that Vietnam's non-life insurers lack economies of scale, and they do not necessarily have access to global capital markets.

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

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

Net non-life premiums written, VNDbn 17,074.11 14,766.00 17,215.71 19,407.01 22,123.53 25,350.98 28,818.94 32,567.20 Net non-life premiums written, VND, % y-o-y 10.5 -13.5 16.6 12.7 14.0 14.6 13.7 13.0 Net non-life premiums written, VND per 188,049.6 161,060.7 186,019.3 207,813.6 234,879.4 266,960.1 301,149.1 337,851.2 capita Net non-life premiums written, % of GDP 0.5 0.4 0.4 0.5 0.5 0.5 0.5 0.5 Net non-life premiums written, USDbn 0.82 0.70 0.81 0.90 1.03 1.19 1.37 1.56 Net non-life premiums written, USD, % y-o-y 9.3 -14.2 15.7 11.3 14.1 15.7 14.8 14.1 Net non-life premiums written, USD per 9.0 7.7 8.8 9.7 11.0 12.6 14.3 16.2 capita

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

Non-Life Reinsurance

The low retention ratios indicate that outwards reinsurance premiums are, and will remain quite substantial. As such, we also see non-life reinsurance premiums rise by 11.2% in 2015, to reach USD0.6bn. In our view, the predominant share of this growth will pertain to motor vehicle insurance and large scale commercial/ industrial risks, which collectively account for over half of the total non-life premiums written.

Looking forward, reinsurance premiums will continue to grow at an average annual rate of 14.0% over the 2015-2019 forecast period. As mentioned in the previous section, retention ratios will remain unchanged. Although the reliance of Vietnam's non-life insurers on reinsurance will exhibit a static trend in the coming years, we do note that the substantial size of the country's reinsurance segment will provide attractive opportunities to well-capitalised providers of reinsurance products.

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

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

Reinsurance non-life premiums written, 9,156.56 9,688.99 11,234.51 12,649.61 14,416.63 16,518.89 18,778.43 21,220.74 VNDbn Reinsurance non-life premiums written, 17.2 5.8 16.0 12.6 14.0 14.6 13.7 13.0 VND, % y-o-y Reinsurance non-life premiums written, 100,847.9 105,683.0 121,391.2 135,454.2 153,057.4 173,953.2 196,228.8 220,143.3 VND per capita Reinsurance non-life premiums written, % 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 of GDP Reinsurance non-life premiums written, 0.44 0.46 0.53 0.59 0.67 0.78 0.89 1.02 USDbn Reinsurance non-life premiums written, 16.0 5.0 15.0 11.2 14.1 15.7 14.8 14.1 USD, % y-o-y Reinsurance non-life premiums written, 4.8 5.0 5.7 6.3 7.1 8.2 9.3 10.6 USD per capita

e/f = BMI estimate/forecast. Source: National Sources, BMI

Non-Life Claims

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 22.4% and 19.8% respectively. This trend can be attributed to the nature of the segment, where large scale commercial and industrial risks account for a substantial share of non-life premiums. As such, although losses are not frequent, they are substantial when they do occur. We anticipate that non-life claims will grow even more rapidly as motor vehicle and property insurance are accounting for an increasingly larger share of total written premiums.

Table: Non-Life Insurance Claims (Vietnam 2008-2013)

2008 2009 2010 2011 2012 2013

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 Claims non-life, USDbn 0.27 0.30 0.33 0.41 0.43 0.51

Claims non-life, USD, % y-o-y 8.0 12.7 22.4 4.0 19.8

Source: AVI/BMI

While the growth in claims in Vietnam's motor vehicle sub-segment has had a material impact on the overall growth in non-life claims in the last years until 2013, we note that the relative importance of this has changed. Following strong support to auto sales provided by the prevailing loose credit conditions in Vietnam's economy, as well as a faster expansion in credit, we have seen motor vehicle sales increase substantially by 21.5% and 36.7% in 2013 and 2014 respectively. Motor vehicle sales will continue this trend, to reach 223,508 units in 2019 in comparison to 95,430 units in 2013. Accordingly, we see that motor vehicle insurance accounts for the predominant share of overall non-life claims.

However, we note that the share of motor vehicle claims has dropped from 42.0% in 2010 to 30.2% in 2013, which indicates that other insurance lines are becoming increasingly more important. As such, we see transport claims increase from USD61.3mn in 2010 to USD110.2mn in 2013, when it accounted for 21.6% of all non-life claims. We believe that this follows Vietnam's increasingly more important role in international trade. Similarly, as mentioned before, claims due to large scale commercial and industrial risks have grown from USD36.3mn in 2009 to USD94.5mn in 2013, when they accounted for 18.5% of total non- life claims. In our view, as Vietnam's economy continues to strengthen in the coming future, these sub- segments should persist to grow and account for an increasingly larger share of the total non-life claims.

Table: Non-Life Insurance Claims by Line (Vietnam 2008-2013)

2008 2009 2010 2011 2012 2013

Motor vehicle claims, USDmn 111.3 117.3 140.3 160.8 162.0 153.9 Motor vehicle claims, % of non-life claims 40.6 39.6 42.0 39.3 38.1 30.2 Property claims, USDmn 13.2 30.6 24.4 49.4 38.8 42.5 Property claims, % of non-life claims 4.8 10.3 7.3 12.1 9.1 8.4 Transport claims, USDmn 62.8 59.8 61.3 100.7 67.5 110.2 Transport claims, % of non-life claims 22.9 20.2 18.3 24.6 15.9 21.6 Health and personal accident claims, USDmn 44.0 51.6 56.4 71.0 87.9 102.9 Health and personal accident claims, % of non-life claims 16.0 17.4 16.9 17.4 20.7 20.2 General liability claims, USDmn 0.6 0.7 0.8 1.7 5.6 3.7 General liability claims, % of non-life claims 0.2 0.2 0.3 0.4 1.3 0.7 Other non-life claims, USDmn 42.4 36.3 50.7 38.7 62.9 94.5 Other non-life claims, % of non-life claims 15.5 12.3 15.2 9.5 14.8 18.5

Source: AVI/BMI

Non-Life Sub-Sector Forecast

BMI View: Excluding health insurance not provided by Vietnam's non-life insurance companies, we see that the overall growth within the segment is driven primarily by motor vehicle insurance; the country's largest sub-segment. This is the result of a recent surge in increasing demand for autos, which we believe should continue to impact positively on motor vehicle insurance purchases through to 2019. Furthermore, as Vietnam is taking on an increasingly more important role in international trade, we expect that the anticipated growth in overall freight tonnage should transfer to greater demand for transport insurance. Accordingly, we see ample opportunities for future growth.

We do not see any particular reason why this should change during the 2015-2019 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 (Vietnam 2012-2019)

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

Motor vehicle insurance, % of non-life insurance 27.8 28.0 27.4 26.7 26.3 26.0 25.8 25.7 Property insurance, % of non-life insurance 9.6 7.2 8.0 7.7 7.3 6.8 6.4 6.0 Transport insurance, % of non-life insurance 19.7 18.1 17.5 16.7 15.8 14.9 14.3 13.4 General liability insurance, % of non-life insurance 2.3 2.5 2.4 2.3 2.2 2.2 2.1 2.1 Credit/financial guarantee insurance, % of non-life insurance 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.2 Other insurance, % of non-life insurance 22.8 23.1 22.6 21.9 21.3 20.8 20.5 20.3

e/f = BMI estimate/forecast. 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 and account for about 22% of all non-life premiums. Following this are motor vehicle insurance, transport insurance and property insurance, which respectively hold 26.7%, 16.7% and 7.7% in 2015. The non-life companies do currently not provide health insurance. Other lines, such as credit/financial guarantee insurance as well as general liability insurance, remain small. None of the sub-sectors - including the larger ones - represents a substantial commercial opportunity in regional terms.

Quite Broadly Diversified

Non-Life Insurance Breakdown (USDmn), 2015

Source: BMI/AVI

Motor Vehicle And Transport Insurance

Motor vehicle insurance is relatively less important in Vietnam's non-life segment than in other low income countries. Nevertheless, motor vehicle related lines are forecast to account for a little over one quarter of all premiums written in the segment in 2015. In this year, we see motor vehicle insurance premiums increase rapidly by 8.7% to reach USD399.4mn.

We anticipate steady double-digit growth in premiums between 2015 and 2019, as the sub-sector expands in line with the overall non-life segment. Motor vehicle premiums should grow at an average annual rate of 12.6%, to reach USD663mn in 2019. 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 motor vehicle insurance will be driven by volume, rather than by increases in prices/rates.

Table: Motor Vehicle Insurance (Vietnam 2012-2019)

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

Motor vehicle insurance, 6,329,214.0 6,849,960.0 7,791,437.1 8,574,176.6 9,614,756.9 10,874,081.3 12,284,199.3 13,828,708.2 VNDmn Motor vehicle insurance, 3.2 8.2 13.7 10.0 12.1 13.1 13.0 12.6 VND, % y- o-y Motor vehicle insurance, % of non- 27.8 28.0 27.4 26.7 26.3 26.0 25.8 25.7 life insurance Motor vehicle insurance, 303.2 325.7 367.5 399.4 448.2 511.7 583.6 663.2 USDmn Motor vehicle insurance, 2.1 7.4 12.8 8.7 12.2 14.2 14.0 13.7 USD, % y- o-y

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

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 increase by 6.2%, to reach USD249.4mn in 2015. This rise is reflective of the 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 (Vietnam 2012-2019)

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

Transport insurance, 4,493,131.0 4,422,748.0 4,979,888.3 5,354,493.0 5,778,135.7 6,256,125.5 6,805,546.5 7,223,060.3 VNDmn Transport insurance, VND, % y- 6.6 -1.6 12.6 7.5 7.9 8.3 8.8 6.1 o-y Transport insurance, % of non- 19.7 18.1 17.5 16.7 15.8 14.9 14.3 13.4 life insurance Transport insurance, 215.3 210.3 234.9 249.4 269.4 294.4 323.3 346.4 USDmn Transport insurance, USD, % y- 5.5 -2.3 11.7 6.2 8.0 9.3 9.8 7.2 o-y

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

We expect transport insurance to increase at an average annual rate of 8.1% through the 2015-2019 forecast period, to reach USD346.4 in 2019. We believe that this positive outlook is underpinned by Vietnam's increasingly more 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 on written transport insurance premiums.

Table: Insurance Key Drivers, Freight Tonnage (Vietnam 2012-2019)

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

Air freight tonnes , '000 178.7 183.7 189.2 195.6 203.3 212.4 223.0 235.3 Air freight tonnes, % y-o-y -10.8 2.8 3.0 3.4 3.9 4.5 5.0 5.5 Rail freight tonnes , '000 7,003.5 6,525.9 6,729.5 6,958.3 7,215.8 7,504.4 7,834.6 8,187.2 Rail freight tonnes, % y-o-y -3.9 -6.8 3.1 3.4 3.7 4.0 4.4 4.5 Road freight tonnes , '000 722,156.4 765,070.4 810,663.1 859,302.9 915,157.6 979,218.7 1,054,205.1 1,133,926.9 Road freight tonnes, % y-o-y 10.4 5.9 6.0 6.0 6.5 7.0 7.7 7.6 Inland waterway freight tonnes , 168,493.0 180,812.7 192,753.4 204,971.6 217,942.5 231,537.7 245,814.0 260,991.8 '000 Inland waterway freight tonnes, % 5.2 7.3 6.6 6.3 6.3 6.2 6.2 6.2 y-o-y

e/f = BMI estimate/forecast. Source: BMI, National Statistics Agency

Property Insurance

Property insurance accounts for about one tenth of the total activity in Vietnam's non-life segment and will reach USD115mn in written gross premiums in 2015. We expect that this sub-segment will achieve high single-digit growth through the 2015-2019 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. In 2019, we see property insurance reach USD153.5mn.

Table: Property Insurance (Vietnam 2012-2019)

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

Property insurance, 2,185,362.0 1,768,586.0 2,267,220.5 2,469,069.4 2,664,651.3 2,852,803.3 3,032,134.9 3,201,368.1 VNDmn Property insurance, VND, % y- 26.8 -19.1 28.2 8.9 7.9 7.1 6.3 5.6 o-y Property insurance, % of non- 9.6 7.2 8.0 7.7 7.3 6.8 6.4 6.0 life insurance Property insurance, 104.7 84.1 107.0 115.0 124.2 134.2 144.0 153.5 USDmn Property insurance, USD, % y- 25.5 -19.7 27.2 7.5 8.0 8.1 7.3 6.6 o-y

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

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 (for now) from commenting on them specifically. In Vietnam, 'other' insurance includes industrial business that is 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. In 2015, this business accounts for around 22% of total premiums written in the non-life segment. As premiums in this sub-sector have held up relative to the non-life insurance as a whole and in relation to GDP, it is reasonable to believe that it is benefiting from investment in plant, equipment and infrastructure as Vietnam's economy develops. We anticipate that this sub-segment will continue to grow in the years to come.

Industry Risk Reward Ratings Asia Pacific Industry Risk/Reward Index Q2 2015

BMI View: The national markets of the Asia-Pacific vary markedly. In terms of non-life insurance, most are benefiting from superior economic growth, rising penetration and opportunities for economies of scale. In many, life insurers are enjoying a bonanza in terms of growth and profitability and should continue to do so for some time.

The Insurance Risk/Reward Index takes into account objective measures of the current state and long-term potential 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 objective assessment of the limits to potential returns across all countries and over a period of time. The ratings also incorporate an objective assessment of the risks to the realisation of returns. The risk assessment is based on BMI's country risk rating. 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 - Q2 2015

Industry Insurance Rewards Industry Risk/ Industry - Non- Rewards Country Industry Country Reward Rewards Life - Life Rewards Rewards Risk Risks Risks Rating Rank Hong Kong 76.25 62.50 90.00 72.58 74.78 100.00 21.64 52.98 68.24 1 Singapore 75.00 67.50 82.50 71.88 73.75 95.00 27.78 54.67 68.03 2 South Korea 82.50 82.50 82.50 63.64 74.96 60.00 29.92 41.95 65.06 3 Taiwan 76.25 70.00 82.50 58.72 69.24 70.00 28.95 45.37 62.08 4 Australia 60.00 62.50 57.50 62.29 60.92 90.00 36.81 58.08 60.07 5 Malaysia 63.75 57.50 70.00 60.90 62.61 75.00 21.53 42.92 56.70 6 Japan 67.50 60.00 75.00 54.01 62.10 55.00 33.62 42.17 56.12 7 New Zealand 43.75 50.00 37.50 65.76 52.55 90.00 37.45 58.47 54.33 8 Thailand 62.50 55.00 70.00 52.01 58.30 70.00 15.11 37.07 51.93 9 China 70.00 67.50 72.50 44.18 59.67 55.00 10.97 28.58 50.34 10 India 61.25 52.50 70.00 40.62 53.00 45.00 24.15 32.49 46.84 11 Indonesia 57.50 47.50 67.50 47.37 53.45 55.00 14.96 30.97 46.71 12 Philippines 47.50 37.50 57.50 44.03 46.11 75.00 17.04 40.22 44.34 13 Macau 28.75 22.50 35.00 65.68 43.52 65.00 16.00 35.60 41.15 14 Vietnam 36.25 37.50 35.00 41.03 38.16 55.00 9.14 27.48 34.96 15 Fiji 26.25 27.50 25.00 42.25 32.65 50.00 8.30 24.98 30.35 16 Sri Lanka 20.00 20.00 20.00 40.21 28.08 45.00 18.30 28.98 28.35 17 Mongolia 10.00 12.50 7.50 49.68 25.87 40.00 27.12 32.27 27.79 18 Pakistan 21.25 17.50 25.00 35.88 27.10 40.00 5.92 19.55 24.84 19 Bangladesh 21.25 17.50 25.00 32.53 25.76 20.00 11.07 14.64 22.42 20 Cambodia 6.25 12.50 0.00 37.56 18.77 40.00 6.57 19.94 19.12 21

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

Market Overview Life Market Overview

BMI View: The latest financial results of Vietnam's major life insurance providers confirm the rapid and ongoing growth in the country's life segment. Developments such as the country's improving business environment, regulatory changes, the establishment of increasingly more subsidiaries of large multinational companies and the introduction of new product innovations will be supportive of future growth of the segment.

Recent Developments

The life market results for 2014 have exceeded all expectations in terms of growth. In H114, life premiums increased 19.5% y-o-y to VND11.05trn (USD520.3mn) compared to the same period in 2013. These strong results are due to a number of factors, which stimulated massive growth in demand for life products during the early part of 2014. In terms of life claims there has also been an overall increase with insurers paying about VND9.81trn (USD461.1mn) in claims during H114, of which life insurers paid around VND3.89trn (USD182.8mn) and non-life insurers paid VND5.91trn (USD277.8mn).

One development in the sector that has proved quite successful so far is the use of product innovation and diversification in the life market. This has been a strategy imposed by many large global insurance providers in the Asia Pacific region and has proved to be a very successful means of improving market penetration. One aspect of product innovation which is particularly successful is the provision of voluntary pension funds by life providers; the initiative, which was started in 2013, has seen good growth and is just one example of effective product innovation.

Furthermore, significant regulatory improvements have further facilitated growth in Vietnam's life insurance sector. In the past, multinational companies had noted difficulties with regard to operating in Vietnam, highlighting excessive and unnecessary regulation in the market which made the market entry process much slower and less profitable. The Vietnamese government has recognised this and has introduced a new set of regulations in the insurance sector. In particular, the government is trying to streamline the regulatory framework in line with international best practices and standards and to comply with Vietnam's WTO Commitments. This has already been a success with many insurance companies complementing the efforts; however, the full effects of the changes will not be felt for at least three to five years.

Life density and overall market penetration in Vietnam are very low compared to other countries. This, however, is not necessarily negative for the life market, as there is significant room for growth taking into account the country's population of 90mn. Accordingly, many multinational companies have established themselves in the Vietnamese market, as they recognise the long term value in entering the market.

Market Shares

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).

The four largest insurance companies operating in Vietnam's life insurance segment (in terms of gross written premiums) are Prudential plc, Bao Viet Life, Manulife, and Dai-Ichi Life. Collectively, these companies wrote nearly USD900mn in gross premiums in 2013. Prudential plc and Bao Viet Life both wrote premiums of over USD300mn in Vietnam in 2013, which is not substantial when compared with other countries; however, premiums have been growing rapidly in the past years, indicating the potential for growth in this market.

Table: Life Insurance Market (USDmn) 2008-2013

2008 2009 2010 2011 2012 2013 Prudential 259.7 265.7 281.0 290.9 312.5 359.8 Bao Viet Life 208.3 207.1 210.4 218.6 249.1 300.3 Manulife 65.7 70.6 76.4 86.1 103.4 124.6 Dai-ichi Life 35.6 41.8 51.8 55.9 70.2 87.4

Source: BMI/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 multinationals 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 in Vietnam include Great Eastern, Cathay Life, Dai-Ichi Life and Korea Life. Vietnam is one of the three foreign countries in which France's Groupe Prévoir is active (the others being Portugal and Poland). Finally, the segment includes

VCLI, an insurance joint venture that is 45% owned by Vietcombank, 43% by BNP Paribas Cardif and 12% by SeAbank, a local joint stock commercial bank.

Two Horse Race?

Life Insurance Market Shares (USD), 2013

Source: BMI/AVI

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 32.5% market share), Bao Viet (27.2%), Manulife (11.3%), and Dai-Ichi Life (7.9%).

While the life segment is developing quite rapidly, and in an erratic fashion, the widespread poverty (or, more correctly, incidence of household incomes that are too small to support purchase of life insurance products) continues to constrain the potential of the segment.

Table: Life Insurance Market (%) 2008-2013

2008 2009 2010 2011 2012 2013 Prudential 41.3 40.0 39.0 37.5 35.5 32.5 Bao Viet Life 33.1 31.2 29.2 28.2 28.3 27.2 Manulife 10.5 10.6 10.6 11.1 11.7 11.3 Dai-Ichi Life 5.7 6.3 7.2 7.2 8.0 7.9

Source: BMI/AVI

Non-Life Market Overview

BMI View: In line with the substantial overall growth rates which are anticipated to be seen within Vietnam's non-life insurance segment, we have growing financial results of the segment's leading players. With the segment's overall double-digit growth rates, we see a rising number of multinationals entering the market by setting up local subsidiaries. However, with roughly 96% of market share held by all major companies, Vietnam's non-life insurance market remains dominated by local insurance providers. We foresee that this may change as the country's business environment becomes more favourable for entry by foreign firms.

Recent Developments

Non-life premiums grew a modest but stable 7.3% year-on-year (y-o-y) to reach around VND13.08trn (USD615.9mn) in H114, reflecting a decent first six months of the year for non-life premiums; however, the market on the whole remains underdeveloped. Insurers paid about VND9.81trn (USD461.1mn) in claims during H114, of which life insurers paid around VND3.89trn (USD182.8mn) and non-life insurers paid VND5.91trn (USD277.8mn).

The results so far remain fairly mixed for the non-life market; even though we see growth in premiums, value of new business (VONB) and profits, the market remains still underdeveloped compared to its international counterparts. There is, however, potential for the non-life market to pick up and grow its premium base given a number of underlying factors in Vietnam.

The most positive aspect of the Vietnamese insurance sector is the demographic structure of Vietnam. The country's population is over 90mn, 60% of which are under 30 years old. This obviously has benefits for the non-life market as the under 30 demographic is a key market. Moreover, much like other South East Asian

countries, there is a large emergence of a middle/upper middle class in the country. This again is a positive for the market, as the middle and upper middle class represent the vast majority of the non-life market.

There is, however, a caveat with the emergence of a large middle class in Vietnam. In particular, growth in the number of higher income citizens is directly related to economic growth in the country, as we know Vietnam remains in a tumultuous economic situation with long-term prospects remaining unclear.

Market Shares

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 joint ventures, foreign groups are active.

Locals To The Fore

Non-Life Insurance Market Shares (USD), 2013

Source: AVI/BMI

The 3 largest players in Vietnam's non-life insurance market are Bao Viet, PVI, and BAO Minh; together, they accounted for more than half of the total premiums written in 2013. However, the remainder of the market is fragmented, with particular groups focusing on niche specialties.

Aside from the 3 largest companies, there are 25 players in the non-life segment. Local companies include AAA, Agricultural Bank Insurance, BIC (a subsidiary of Bank for Investment and Development of Vietnam), Bao Tin, GIC, Great Mountain JSC, Hung Vuong JSC, Military Insurance, 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. 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 (USDmn) 2007-2013

2007 2008 2009 2010 2011 2012 2013 Bảo Viảt 161.7 201.9 206.6 219.6 236.1 257.9 269.8 PVI 102.6 122.9 155.6 183.7 205.3 223.2 242.5 Bảo Minh 100.2 114.6 102.5 101.5 107.0 109.5 109.4 PJICO 54.8 64.5 72.9 83.3 91.4 94.4 94.4 PTI 19.0 27.0 25.8 35.5 51.8 78.6 70.3 Samsung Vina 4.8 5.3 8.3 12.7 21.3 35.1 43.6 BIC 9.2 16.1 20.6 26.6 30.2 32.1 37.6 MIC n.a. 8.7 19.2 21.7 20.9 22.7 33.0 ABIC 1.0 7.9 15.5 20.3 19.7 21.8 25.2 AAA 9.7 12.3 18.9 20.0 22.4 22.7 25.2 Toàn Cảu - GIC 10.8 11.8 13.9 19.4 23.3 23.5 23.3 Liberty 0.3 2.7 9.7 12.4 19.5 21.2 21.3 Hàng Không n.a. 4.4 16.8 25.2 28.7 21.5 21.0 Bảo Long 10.2 15.4 18.2 19.8 14.8 12.1 20.4 AIG Viảt Nam 4.2 6.3 7.3 10.1 12.1 13.0 17.8 MSIG n.a. n.a. 2.3 9.0 12.0 14.0 15.7 Baoviet Tokio Marine 7.6 10.3 10.8 10.4 12.0 13.1 13.6 Viản Đông 9.7 13.4 14.8 14.9 14.1 10.8 12.9 UIC 10.3 10.8 6.9 6.5 6.7 8.8 10.8 BSH n.a. n.a. 8.0 14.4 15.1 14.9 10.4

Source: BMI/AVI

The development of the premiums of the various non-life companies over 2007-2013 highlights a number of key features and trends. First, Vietnam's non-life segment is growing steadily in absolute terms, even if this due to a rise in overall GDP rather than non-life penetration. Second, the larger companies (other than Bao Viet) have close links with state-owned enterprises that are not naturally 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, even though few of them 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 USD10mn annually. They are rather small by almost all standards.

Table: Non-Life Insurance Market (%) 2007-2013

2007 2008 2009 2010 2011 2012 2013 Bảo Viảt 31.1 30.5 26.9 24.6 23.6 23.7 23.2 PVI 19.7 18.6 20.3 20.6 20.6 20.5 20.9 Bảo Minh 19.3 17.3 13.4 11.4 10.7 10.0 9.4 PJICO 10.5 9.8 9.5 9.3 9.2 8.7 8.1 PTI 3.6 4.1 3.4 4.0 5.2 7.2 6.0 Samsung Vina 0.9 0.8 1.1 1.4 2.1 3.2 3.7 BIC 1.8 2.4 2.7 3.0 3.0 2.9 3.2 MIC n.a. 1.3 2.5 2.4 2.1 2.1 2.8 ABIC 0.2 1.2 2.0 2.3 2.0 2.0 2.2 AAA 1.9 1.9 2.5 2.2 2.2 2.1 2.2 Toàn Cảu - GIC 2.1 1.8 1.8 2.2 2.3 2.2 2.0 Liberty 0.1 0.4 1.3 1.4 1.9 1.9 1.8 Hàng Không n.a. 0.7 2.2 2.8 2.9 2.0 1.8 Bảo Long 2.0 2.3 2.4 2.2 1.5 1.1 1.8 AIG Viảt Nam 0.8 1.0 1.0 1.1 1.2 1.2 1.5 MSIG n.a. n.a. 0.3 1.0 1.2 1.3 1.4 Baoviet Tokio Marine 1.5 1.6 1.4 1.2 1.2 1.2 1.2 Viản Đông 1.9 2.0 1.9 1.7 1.4 1.0 1.1 UIC 2.0 1.6 0.9 0.7 0.7 0.8 0.9 BSH n.a. n.a. 1.0 1.6 1.5 1.4 0.9

Source: BMI/AVI

The various shifts in market shares (in terms of gross premiums written) are indicative of a market that is at a fairly embryonic stage of development, and which is being liberalised. Over the six years to the end of 2013, 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 Profile AIA 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).

As of late July 2012, AIG retains an 18.6% stake in AIA, having previously owned one third of the Asian life insurance company. At AIG's Annual General Meeting in May 2012, Chief Executive Bob Benmosche said that AIG will look to sell its remaining shares in AIA in September 2012.

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).

AIA has a presence in 15 different countries across the Asia Pacific.

Financial Data AIA Group announced unaudited consolidated results for the period ended November 30 2014.

The main highlights of the results are:

■ 24% growth in value of new business (VONB) to USD1.8bn. ■ Annualised new premium (ANP) up 11% to USD3.7bn. ■ 5.0pps increase in VONB margin to 49.1%. ■ 14% growth in embedded value (EV) operating profit to USD4.5bn. ■ USD4.2bn increase in EV Equity to USD39.0bn, up 12%. ■ 16% growth in IFRS operating profit after tax (OPAT) to USD2.9bn. ■ Net profit up22% to USD3.5bn. ■ IFRS operating earnings per share up 16% to USc24.31.

AIA has delivered another excellent set of financial results in the first half of 2014. They have achieved significant growth across all key performance metrics including VONB up 23%. Their strong performance is the direct result of the consistent execution of their growth strategy, the prudent management of their balance sheet and the resilience of their portfolio of life insurance operations in diversified markets across the Asia-Pacific region.

The emergence of the Asia Pacific as a key growth market was a key theme in the CEOs discussion of these results. He was quoted as saying: 'The Asia Pacific region offers one of the most attractive and resilient life insurance markets in the world. A young and upwardly mobile population is driving rapid urbanisation and significant growth in disposable incomes across the region. Combined with low levels of social welfare support and existing private provision, these long-term structural trends provide the foundation for the large and growing need for AIA's products and services in the region.'

AIA also remains exceptionally well-placed to benefit from these structural drivers through the quality and scale of their distribution, along with the strong brand position established through a long history in Asia.

The key markets for AIA in Asia remain China and Hong Kong, which once again delivered an excellent performance with VONB up 58% and 55% respectively driven by a strong product strategy. Malaysia, Singapore, Vietnam and Thailand also delivered strong double-digit VONB growth with Malaysia progressing well post the integration of the acquisition of ING Malaysia in 2013. Vietnam while lagging behind other Asian countries in the sophistication of their insurance industry remains a key market for long term growth.

ANP grew by 11% to USD1.69bn in Asia compared with USD1.53bn and VONB margin was 46.2% compared with 41.6% for the first half of 2013.

The reported ANP growth rate in Thailand, Singapore, Malaysia and AIA's Other Markets was affected by local currency depreciation. Margin expansion of 4.6 percentage points (pp) was mainly driven by product mix improvements of 3.8pp and 0.9pp from assumption changes and other items, partly offset by negative contribution of 0.1pp from channel and geographical mix.

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 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.

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.

SWOT Analysis - Continued

■ 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 USD182bn rescue by the United States Government in 2008 and subsequent restructuring (which resulted in a profit to tax payers of nearly USD23bn) 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 US and Canada. It is also the largest foreign property/casualty company in China and Japan and has a growing position in other parts of the Asia Pacific, as well as Latin America. It is also a significant non-life company across Europe, 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

Financial Data ■ Q114 after-tax operating income attributable to AIG of USD1.8bn, USD1.21 per diluted share. ■ Q114 insurance pre-tax operating income of USD2.7bn. ■ Share repurchases of approximately USD867mn in Q114. ■ Book value per share grew 6% from Q113 to USD71.77; book value per share excluding accumulated other comprehensive income (AOCI) grew 10% from first Q113 to USD65.49.

■ USD1.7bn of cash dividends from AIG Life and Retirement in Q114.

American International Group reported net income attributable to AIG of USD1.6bn for the quarter ended March 31 2014, compared to USD2.2bn for Q113. After-tax operating income attributable to AIG was USD1.8bn for Q114, compared to USD2.0bn for the prior-year quarter. Diluted earnings per share attributable to AIG were USD1.09 for Q114, compared to USD1.49 for Q113. After-tax operating income per diluted share attributable to AIG was USD1.21 for Q114, compared to USD1.34 in the prior-year quarter.

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.

SWOT Analysis - Continued

Threats ■ Volatile financial markets.

■ Potential major catastrophe losses.

■ Strong competition in the life segment from subsidiaries of major foreign multinationals.

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 2011-2015 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.

Financial Data Bao Viet General Insurance (BVGI) maintained its market leadership position in terms of direct premium revenue (reaching VND1,414bn, an increase of 8.8% y-o-y) with a market share of 21.4%. Total revenue was VND1.654bn, up 8.2% y-o-y; profit after tax was VND103bn, an increase of 5.6% y-o-y.

Boa Viet Life recorded strong Q114 growth in both total premium and new business premium. In Q114, the company achieved VND1,623bn in terms of total premiums, and VND627bn in terms of new business premiums, growing 22% and 26% respectively against Q113. Total revenue reached VND2,252bn and profit before tax hit VND196bn, up by 23% and 5% respectively from 2013.

■ Total consolidated revenue reached VND4,468bn (+15.4% y-o-y). ■ Revenue from insurance business reached VND3,165bn (+14.9% y-o-y). ■ Revenue from financial investment amounted to VND874bn (+16.3% y-o-y). ■ Revenue from banking services and others reached VND348bn (+7.6% y-o-y) and VND80bn (+91.1%). ■ Profit before tax achieved VND539bn (+28.4%). ■ Total assets, as at March 31 2014, rose VND12,929bn to VND60,781bn (+27% y-o-y). ■ Owner's equity increased VND133bn to VND12,528bn.

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.

■ 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 in Asia.

Threats ■ Potential, but unlikely, turmoil in global financial markets.

■ Robust competition in some markets, from companies that have many of the same strengths as Manulife.

Company Overview Originally founded in 1887, Manulife is one of the world's largest and financially strongest listed multi-national (mainly) life insurers. In general terms, it describes its product and service offerings as including: individual life insurance; group life and health insurance; long-term care insurance; retirement products; annuities; mutual funds and banking products. Manulife Asset Management serves external institutional clients around the world.

Manulife has four main businesses: Canada; US (John Hancock); Asia; and Manulife Asset Management. As of Q112, Manulife's total investment assets amounted to CAD224bn. Total assets under management (AUM) amounted to CAD512bn. The global workforce exceeded 26,000. In Asia, Manulife is present in 11 geographic markets, 'with a wide array of product offerings and a diversified network of distribution channels including (around) 50,000 contracted agents, over 100 bank partnerships and more than 500 dealers, independent agents and brokers.' Product offerings across the region include: traditional individual life insurance; group life & health insurance; accident & health; investment-linked products; universal life; mutual funds; variable & fixed annuities; group retirement products and; credit life insurance.

Operational Data China: Manulife-Sinochem Life, which was originally set up in 1996 as the first foreign invested joint venture (JV). The company has over 650,000 customers in 50 cities (e.g. Shanghai, Beijing, Guangdong, Zhejiang, Jiangsu, Sichuan, Shandong, Fujian, Chongqing, Liaoning, Tianjin, Hubei and Hebei). It has 16,000 agents and employees. At the end of 2011, AUM amounted to US1.5bn. The main products are individual lines, group life & health and group pension.

Hong Kong: Manulife (International) Limited, Manulife Asset Management (Hong Kong) Limited, and Manulife Provident Funds Trust Company Limited are the three main subsidiaries. Manulife has had a presence in Hong Kong since 1987, where it 'is one of the largest financial services organisations. The company takes care of the financial and protection needs of about 1.7mn people in Hong Kong.' There are over 5,000 agents. At the end of 2011, AUM amounted to USD25bn. The main products are individual lines, employee benefits and investment funds.

Financial Data Manulife Financial has reported the following consolidated results for 2014:

■ Net income of CAD3.5bn and core earnings of CAD2.9bn, up 12% and 10%, respectively, over 2013. ■ Insurance sales of CAD2.5bn. ■ Insurance New Business Embedded Value of CAD761mn. ■ Wealth sales of CAD52.6bn. ■ Wealth New Business Embedded Value of CAD513mn. ■ Assets under management of CAD691bn.

Manulife financial performed very well across the majority of its Asian markets; in particular the Philippines and Vietnam were pointed to as a source of good premium growth, while on the other hand competitive pressures in Singapore caused a contraction in premium growth. The company's CEO suggests that the growing youth population, increasing disposable incomes, and all around improvement in economic activity underpinned these positive results. On the strategic side, increases in product innovation and diversification further provided significant new business for the company in the Asian Pacific region.

Asia Other (excludes Japan, Hong Kong and Indonesia) insurance sales of USD60mn were in line with Q213 results. Double digit growth in most Asian markets, in particular, record sales in the Philippines following a successful agency sales campaign, was offset by competitive pressures in Singapore.

Manulife had a strong second quarter in 2014, building on the insurance sales momentum noted in the first quarter. Japan continued to be the most significant driver of insurance sales growth, but the overall results were augmented by good growth in several other markets across Asia, reflecting the ongoing success of product enhancement initiatives and Prudential's multi-channel distribution strategy. The company also delivered significantly improved wealth sales in the second quarter with a 32% increase over the prior quarter, reflecting successful marketing campaigns and improved market sentiment.

Manulife's Q214 insurance sales of USD304mn were 26% higher than 2Q13 and 18% higher compared to Q114. Furthermore, premiums and deposits for insurance products were USD6bn in Q214, a decrease of 8% on a constant currency basis from Q213. In- force growth in Asia, including strong sales in Japan, was more than offset by a decline in Canada which benefited from large Group Benefits single premium sales in Q213, and lower US premiums.

Prudential plc

SWOT Analysis

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

■ Multi-national diversification, across Asia, the United States, the UK and through M&G and Eastspring Investments.

■ Leadership positions in many of the markets in which it operates.

■ Huge variety of products and distribution channels.

■ Strong brands.

■ Proven capability to undertake successful acquisitions - of which the SRLC deal in the US is the latest example.

■ Clear and proven strategy.

Weaknesses ■ Some of the markets in which Prudential operates are mature and/or highly competitive.

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

■ Impacted, like many insurance companies, by low interest rates.

Opportunities ■ Product innovation.

■ Further expansion by way of acquisitions.

■ Further growth in agency force in Asia.

■ Further growth in agent productivity in Asia.

■ A natural beneficiary of the relatively strong growth of emerging markets in Asia.

SWOT Analysis - Continued

■ Further development of Eastspring Investments' business.

Threats ■ Potential, but unlikely, turmoil in global financial markets.

■ Robust competition in some markets, from companies that have many of the same strengths as Prudential plc.

Company Overview Originally founded in 1848, Prudential plc is one of the world's largest and financially strongest listed multi-national life insurance companies. Globally, it has assets under management (AUM) of over GBP351bn. It serves 26mn customers and is listed in London, New York, Singapore and Hong Kong. Around the world, Prudential plc has over 26,000 employees. There are four main business units: Prudential Corporation Asia; Jackson National Life Insurance Company; Prudential UK; and M&G, the group's principal asset management operation. In terms of APE new business premiums, around 45% of Prudential plc's overall business is derived from Prudential Corporation Asia. Jackson and the UK account for around 35% and 20% respectively. In relation to new business profit, the corresponding figures are 50%, 38% and 12%.

Prudential Corporation Asia 'is a leading international life insurer in Asia with operations in 12 markets.' It has 'more market leading positions than any other life insurer in the region and the region's largest onshore mutual fund manager.' It provides regular premium savings and protection products, through agents and a growing number of bancassurance partners. Across the region, there are over 350,000 agents and 12mn clients.

In February 2012, the asset management operation of Prudential Corporation Asia was rebranded as Eastspring Investments. It operates in 11 markets across the region (and, from July 2012, in the US). It has 2,000 employees and, as of the end of Q112, AUM of USD85bn. About half of its total AUM comes from third party clients. Eastspring is 'the largest multinational onshore mutual fund manager in the region.'

Eastspring Investments, Prudential Corporation Asia's fund management business, manages assets for Prudential Corporation Asia and for Prudential plc. It also handles significant assets under management (AUM) for third party investors. It is 'one of the largest by measure of Asia-sourced AUM'. As at the end of 2011, Eastspring Investments' AUM amounted to GBP50.3bn. It has asset management operations in 11 locations - China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, Taiwan, Vietnam and the UAE.

Across the region, Prudential Corporation Asia identifies six businesses: life insurance; fund management; consumer finance (in Vietnam); retirement planning; health solutions; and Islamic financial products (in Malaysia, Indonesia and the Gulf).

Financial Data Prudential plc has announced the following full year results for 2014:

■ Consolidated gross premiums earned of GBP32.8bn. ■ Consolidated net premiums earned of GBP32.0bn. ■ Consolidated profit for the year of GBP2.2bn. ■ Life APE sales of GBP4.2bn (total group), up 12%; and GBP1,946mn (Asia), up 15%. ■ IFRS operating profit of GBP3.2bn, up 14%. ■ EEV new business profit of GBP2.1bn, up 10% ■ Consolidated total assets of GBP369.2bn. ■ Vietnam APE sales grew by 20% on higher levels of agency activity.

Prudential has performed well both globally and in the Asian Pacific region. In total the Asian life operating profit was up 19% underpinned by performance in what Prudential call their seven 'sweet spot' markets, including Malaysia, Indonesia and Vietnam. Prudentials focus on proactively managing such a diverse business portfolio has helped offset the short-term headwinds experienced in a few of their markets including Thailand and Singapore.

Prudential in Vietnam has performed well during H114. The company had a solid first half, with APE sales growing 10%, and new business profit rising by 20% through increases in agency activity. These factors led to a 97% increase in profits, which means that Prudential now accounts for 13% of Asia's life operating profit compared to 8% in the prior half year. Prudential's interim report noted that Vietnam's insurance market remains on the top of the company's list for the next few years, as the size of population and relatively underpenetrated market make it a very attractive market for the future.

PVI Holdings

SWOT Analysis

Strengths ■ A leading player in the non-life segment, with dominant position in the energy and marine sub-sectors.

■ Blue chip corporate clients.

■ Capital strength, with backing of PetroVietnam, OIC and Talanx.

■ Growing rapidly and profitably.

■ A major player in reinsurance in Vietnam.

■ Capital strength.

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

• Partnerships with major foreign insurers provide access to know-how.

Weaknesses ■ Vulnerable to swings in the economy, if they affect the energy and marine sectors.

■ Vulnerable to volatility in Vietnam's financial markets.

■ Lack of scale in anything other than a local context.

■ Relative lack of presence in personal lines.

Opportunities ■ Further growth in the overall market for non-life insurance.

■ Development of PVI Sun Life JV.

■ Product innovation.

■ Further improvements to cost control and business systems.

■ Optimisation of the investment portfolio.

■ Development of diversified financial services business.

Threats ■ Volatile financial markets.

SWOT Analysis - Continued

■ Potential major catastrophe losses.

Company Overview PetroVietnam Insurance Corporation (PVI) was established in 1996 as a captive insurer for PetroVietnam; the state-owned oil and gas company. According to its website, 'PVI currently holds nearly the entire energy market (insurance) share.' It also accounts for 30% of marine insurance premiums written in Vietnam and about 40% of the property/ engineering insurance market. PVI's share of the overall non-life market has varied over the last few years, but has generally been in excess of 20%.

Unsurprisingly, given the nature of its business, PVI's customers include major state- owned enterprises (such as shipbuilder Vinashin) and the local subsidiaries of international energy companies (such as Gazprom, Conoco Phillips, and Chevron). The company claims to have consistently achieved faster growth and lower loss ratios than major rivals in the non-life market, such as Bao Minh, Bao Viet, and PJICO.

PVI was the only Vietnamese insurer to be rated by AM Best (as of early 2012, at B+). It was also the 'only local insurer to accept foreign risks including risks in Singapore, Malaysia, Japan and Russia.'

The lines offered by PVI are dominated by oil & gas and marine insurance. However, it also offers property insurance, liability/workers' compensation insurance, motor insurance and personal lines (including personal accident, travel and voluntary medical insurance).

PVI is also a significant non-life reinsurer. Since 2010, PVI has been 'an Offshore Facility with the Lloyd's market and an Onshore Facility with leading international reinsurers having limits of liability of US$450mn and US$1,540mn respectively.'

Like other Vietnamese insurers, PVI is now a listed public company (since 2006). Oman Investment Fund (OIF) is a strategic shareholder, with a 10.4% stake in PVI. It is hoped that OIF's involvement will facilitate the transformation, over the longer term, of PVI into a 'combined finance-insurance institution.' Talanx Group, the German multinational giant, is also a strategic investor in PVI and has a 25% stake. PetroVietnam Group and PetroVietnam Finance Corp. speak for 39.1% and 7.6% of the equity respectively. Red River Holdings/Temasia Capital are the fifth largest shareholder, with a 4.3% stake. The free float is 13.6%.

Associated companies of PVI include: Petrovietnam Sapa Travel JSC; PVI Services JSC; Petrovietnam Hospital JSC; PV2 Investment JSC; Nangluongmoi Trading & Communication JSC; and Viet Xuan Investment JSC.

Financial Data The shareholders at the end of 2012 were: Vietnam Oil & Gas Group (35.5%); Talanx (31.8%); Funderburk Lighthouse Group (11.6%); Petrovietnam Finance JSC (6.2%), and other shareholders (14.9%).

■ Total assets rose from VND10,771bn at the end of 2012 to VND12,400bn at the end of 2013. ■ Short term financial investments increased from VND5,356bn to VND6,328bn. ■ Total gross revenues increased from VND5,597bn to VND7,338bn. ■ Net profits slipped from VND389bn to VND330bn.

PVI reported that premiums from direct insurance increased from VND4,659bn in 2012 to VND6,125bn in 2013. Inwards reinsurance premiums jumped from VND613bn to VND917bn. Conversely, outwards reinsurance premiums increased from VND2,942bn to VND3,198bn.

Claims on direct policies rose from VND1,128bn to VND1,161bn. However, claims settlements of assumed policies jumped from VND137bn to VND551bn.

Sun Life Financial

SWOT Analysis

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

■ A leading North American life insurance company, with international presence through SLF Asia and SLF UK and, globally, through MFS.

■ Leadership positions in many of the markets in which it operates.

■ Huge variety of products and distribution channels - including the largest force of career agents in Canada.

■ Strong brands.

• Clear and proven strategy.

Weaknesses ■ Some of the markets in which Sun Life Financial operates are mature and/or highly competitive.

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

■ Impacted, like many insurance companies, by low interest rates.

Opportunities ■ Product innovation.

■ Further expansion by way of acquisitions.

■ A potential major beneficiary of the relatively strong growth of emerging markets in Asia.

Threats ■ Potential, but unlikely, turmoil in global financial markets.

■ Robust competition in some markets, from companies that have many of the same strengths as Sun Life Financial.

Company Overview Originally founded in 1865, Sun Life Financial is one of the world's largest and financially strongest listed international life insurers. It describes its main product offerings as including life and disability insurance, savings, investment management, retirement and pension products and services. It works with both individual and corporate clients.

SLF Asia operates in seven markets - the Philippines, Hong Kong, Malaysia, Vietnam, Indonesia, India and China - through subsidiaries, joint ventures and strategic investments. The company's goal is to 'gain scale in each of the markets where (it) operates and develop into a significant long-term revenue and earnings growth operation.'

SLF Asia's regional head office is in Hong Kong. The various operations include: Sun Life Everbright Life Insurance (JV - China); Sun Life Hong Kong Limited; Birla Sun life Insurance Company Limited and Birla Sun Life Asset Management Company Limited (JVs - India); PT Sun Life Financial Indonesia and PT CIMB Sun Life; Sun Life (Philippines).

Financial Data Sun Life Financial has reported the following consolidated financial results for the year ended December 31, 2014:

■ Gross premiums of CAD15.5bn, up from CAD15.1bn (2013). ■ Net premiums of CAD10.0bn, up from CAD9.6bn (2013). ■ Total net income of CAD1.9bn, up from CAD1.1bn (2013). ■ SLF Asia reported gross life insurance premiums of CAD823mn, and gross health insurance premiums of CAD14mn. ■ SLF Asia reported total net income of CAD182mn, up from CAD150mn (2013).

SLF Asia's Overall insurance sales were down slightly in 2014, with growth reported in Hong Kong and Indonesia where the company persists to expand its agency sales force, offset by lower sales in the Philippines, China and India.

Total individual life sales in Q114 decreased slightly from Q113. Sales increases in Hong Kong and Indonesia were offset by lower sales in the Philippines, India and China. Sales in Hong Kong and Indonesia increased 13% and 36%, respectively, measured in local currency, driven by growth in the agency channel. Sales in Q114 also include SLF Asia's new joint ventures in Malaysia and Vietnam.

Demographic Forecast

Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues ranging from future population trends to productivity growth and government spending requirements.

The accompanying charts detail the population pyramid for 2015, the change in the structure of the population between 2015 and 2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split and life expectancy.

Population

(1990-2050)

150

100

0 1990 2000 2005 2010 2050f 2020f 2025f 2030f 2035f 2040f 2045f 2015f

Vietnam - Population, mn

f = BMI forecast. Source: World Bank, UN, BMI

Vietnam Population Pyramid

2015 (LHS) & 2015 Versus 2050 (RHS)

Source: World Bank, UN, BMI

Table: Population Headline Indicators (Vietnam 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Population, total, '000 68,909 80,887 84,947 89,047 93,386 97,057 99,811 Population, % y-o-y na 1.1 0.9 1.0 0.9 0.7 0.5 Population, total, male, '000 33,892 39,827 41,830 43,970 46,158 47,980 49,302 Population, total, female, '000 35,017 41,060 43,117 45,077 47,228 49,076 50,508 Population ratio, male/female 0.97 0.97 0.97 0.98 0.98 0.98 0.98

na = not available; f = BMI forecast. Source: World Bank, UN, BMI

Table: Key Population Ratios (Vietnam 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Active population, total, '000 39,197 50,153 56,330 62,305 66,093 68,401 70,001 Active population, % of total population 56.9 62.0 66.3 70.0 70.8 70.5 70.1 Dependent population, total, '000 29,712 30,733 28,617 26,741 27,292 28,655 29,810 Dependent ratio, % of total working age 75.8 61.3 50.8 42.9 41.3 41.9 42.6

Key Population Ratios (Vietnam 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f

Youth population, total, '000 25,778 25,543 23,038 20,918 20,950 20,690 19,395 Youth population, % of total working age 65.8 50.9 40.9 33.6 31.7 30.2 27.7 Pensionable population, '000 3,934 5,190 5,578 5,823 6,342 7,964 10,414 Pensionable population, % of total working age 10.0 10.3 9.9 9.3 9.6 11.6 14.9

f = BMI forecast. Source: World Bank, UN, BMI

Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Urban population, '000 13,957.7 19,715.6 23,174.6 27,064.2 31,383.5 35,771.3 40,027.3 Urban population, % of total 20.3 24.4 27.3 30.4 33.6 36.9 40.1 Rural population, '000 54,952.2 61,172.3 61,773.2 61,983.2 62,003.1 61,285.7 59,783.9 Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.1 59.9 Life expectancy at birth, male, years 66.1 69.0 69.9 70.7 71.7 72.7 73.7 Life expectancy at birth, female, years 75.1 78.5 79.6 80.2 80.7 81.2 81.7 Life expectancy at birth, average, years 70.6 73.8 74.8 75.5 76.2 77.0 77.8

f = BMI forecast. Source: World Bank, UN, BMI

Table: Population By Age Group (Vietnam 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Population, 0-4 yrs, total, '000 9,314 7,127 6,897 7,228 7,012 6,574 5,922 Population, 5-9 yrs, total, '000 8,606 9,253 7,023 6,790 7,180 6,968 6,535 Population, 10-14 yrs, total, '000 7,856 9,162 9,117 6,898 6,757 7,147 6,936 Population, 15-19 yrs, total, '000 7,359 8,492 9,050 9,011 6,865 6,725 7,116 Population, 20-24 yrs, total, '000 6,644 7,672 8,332 8,873 8,936 6,802 6,664 Population, 25-29 yrs, total, '000 6,005 7,065 7,470 8,111 8,772 8,837 6,717 Population, 30-34 yrs, total, '000 5,138 6,351 6,909 7,285 8,021 8,680 8,747 Population, 35-39 yrs, total, '000 3,888 5,803 6,241 6,763 7,207 7,939 8,596 Population, 40-44 yrs, total, '000 2,462 4,994 5,719 6,147 6,684 7,127 7,856 Population, 45-49 yrs, total, '000 2,016 3,753 4,935 5,647 6,054 6,588 7,031

Population By Age Group (Vietnam 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f

Population, 50-54 yrs, total, '000 1,968 2,345 3,699 4,855 5,521 5,926 6,457 Population, 55-59 yrs, total, '000 2,045 1,885 2,237 3,541 4,677 5,330 5,733 Population, 60-64 yrs, total, '000 1,668 1,790 1,734 2,068 3,352 4,443 5,079 Population, 65-69 yrs, total, '000 1,411 1,770 1,609 1,562 1,906 3,104 4,134 Population, 70-74 yrs, total, '000 1,027 1,322 1,530 1,399 1,379 1,695 2,776 Population, 75-79 yrs, total, '000 752 984 1,080 1,263 1,166 1,159 1,437 Population, 80-84 yrs, total, '000 429 596 731 814 964 900 903 Population, 85-89 yrs, total, '000 223 336 385 482 545 653 617 Population, 90-94 yrs, total, '000 71 132 177 209 267 306 372 Population, 95-99 yrs, total, '000 15 40 52 74 89 115 133 Population, 100+ yrs, total, '000 1 6 11 16 23 30 38

f = BMI forecast. Source: World Bank, UN, BMI

Table: Population By Age Group % (Vietnam 1990-2025)

1990 2000 2005 2010 2015f 2020f 2025f

Population, 0-4 yrs, % total 13.52 8.81 8.12 8.12 7.51 6.77 5.93 Population, 5-9 yrs, % total 12.49 11.44 8.27 7.63 7.69 7.18 6.55 Population, 10-14 yrs, % total 11.40 11.33 10.73 7.75 7.24 7.36 6.95 Population, 15-19 yrs, % total 10.68 10.50 10.65 10.12 7.35 6.93 7.13 Population, 20-24 yrs, % total 9.64 9.49 9.81 9.97 9.57 7.01 6.68 Population, 25-29 yrs, % total 8.72 8.73 8.79 9.11 9.39 9.11 6.73 Population, 30-34 yrs, % total 7.46 7.85 8.13 8.18 8.59 8.94 8.76 Population, 35-39 yrs, % total 5.64 7.17 7.35 7.60 7.72 8.18 8.61 Population, 40-44 yrs, % total 3.57 6.17 6.73 6.90 7.16 7.34 7.87 Population, 45-49 yrs, % total 2.93 4.64 5.81 6.34 6.48 6.79 7.04 Population, 50-54 yrs, % total 2.86 2.90 4.36 5.45 5.91 6.11 6.47 Population, 55-59 yrs, % total 2.97 2.33 2.63 3.98 5.01 5.49 5.74 Population, 60-64 yrs, % total 2.42 2.21 2.04 2.32 3.59 4.58 5.09 Population, 65-69 yrs, % total 2.05 2.19 1.90 1.75 2.04 3.20 4.14 Population, 70-74 yrs, % total 1.49 1.63 1.80 1.57 1.48 1.75 2.78 Population, 75-79 yrs, % total 1.09 1.22 1.27 1.42 1.25 1.20 1.44 Population, 80-84 yrs, % total 0.62 0.74 0.86 0.92 1.03 0.93 0.91

Population By Age Group % (Vietnam 1990-2025) - Continued

1990 2000 2005 2010 2015f 2020f 2025f

Population, 85-89 yrs, % total 0.32 0.42 0.45 0.54 0.58 0.67 0.62 Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.29 0.32 0.37 Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.10 0.12 0.13 Population, 100+ yrs, % total 0.00 0.01 0.01 0.02 0.03 0.03 0.04

f = BMI forecast. Source: World Bank, UN, BMI

Methodology

Industry Forecast Methodology

BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined.

Common to our analysis of every industry, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity.

When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA).

In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.

BMI mainly uses OLS estimators and, in order to avoid relying on subjective views and encourage the use of objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact.

Effective forecasting depends on appropriately selected regression models. BMI selects the best model according to various different criteria and tests, including but not exclusive to:

■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account;

■ Testing the directional movement and magnitude of coefficients;

■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); and

■ All results are assessed to alleviate issues related to auto-correlation and multi-co linearity.

Sector-Specific Methodology

BMI's insurance reports provide detailed insight into insurance markets globally, examining both the present conditions in and prospects for each market. Incorporating the most up-to-date information available from sources such as industry regulators, trade associations, comparable information from other countries and BMI's own economic and risk data, our analysts provide a comprehensive picture of the insurance sector. The principal focus of the reports is on gross written premiums, to which 'premiums' refers unless otherwise stated.

The following are considered in our reporting of the sector:

■ BMI considers health insurance to be included in the non-life sector. As such, in instances where sources report health insurance as part of the life sector, the required adjustments are made to conform to our standardised definitions.

■ Where a market contains a significant inward reinsurance sector, these accepted premiums are considered as part of the non-life sector and are classed within the 'Other' category of our non-life breakdown.

■ Life insurance contains all long-term savings products that are legally structured as insurance products and therefore do not contain pension plan contributions and other long-term saving schemes that are not legally constituted as being within the insurance sector

Life

In projecting life insurance premiums, the following are considered:

■ The likely development of population.

■ The likely development of life density (life premiums per capita).

■ Wider macroeconomic trends.

In some instances, further factors are considered, including:

■ Maturity of the life insurance sector.

■ Competitive and regulatory environments.

■ Life density in nearby markets at similar levels of development.

Non-Life

In projecting non-life insurance premiums on a line-by-line basis, the following are considered:

■ The likely development of nominal GDP.

■ The likely development of non-life penetration (non-life premiums as a percentage of GDP).

■ Autos sector data, typically passenger car fleet size.

■ Banking sector data, typically Client Loans figures.

■ Shipping/Freight data, typically freight tonnage.

■ Household stratification data, typically number of permanent properties.

■ Healthcare data, typically private health expenditure.

In some instances, further factors are considered, including:

■ Maturity of the non-life insurance sector.

■ Competitive and regulatory environments.

■ Non-life penetration in nearby markets at similar levels of development.

Reinsurance and Net Premiums

When forecasting the size of reinsurance markets, the following are considered:

■ Historic levels of reinsurance coverage in both life and non-life sectors.

■ Projected development of the life and non-life sectors.

■ Prevalence of reinsurance in similar markets.

Where applicable, 'net premiums' refers to net written premiums and is considered as gross written premiums, less the cost of reinsurance. In some instances, source data is reported according to different definitions of 'net premiums'. In these cases, this data is used and forecasts for net premiums and reinsurance are made separately.

When forecasting net premiums independently of the reinsurance market, the following are considered:

■ Historic levels of net premiums in both life and non-life sectors.

■ Projected development of the life and non-life sectors.

At a general level we approach our forecasting from both a micro and macro perspective, taking into account the expansion plans of relevant domestic and international firms, as well as wider economic outlook. In this regard, BMI macro variable projections, such as output, consumption, investment, policy, and GDP growth are employed.

Burden of Disease

The 'burden of disease' in a country is forecasted in disability-adjusted life years (DALYs) using BMI's Burden of Disease Database, which is based on the World Health Organization's burden of disease projections and incorporates World Bank and IMF data.

Risk/Reward Index Methodology

BMI's Risk/Reward Index (RRI) provides a comparative regional ranking system evaluating the ease of doing business and the industry-specific opportunities and limitations for potential investors in a given market.

The RRI system divides into two distinct areas:

Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. This is further broken down into two sub categories:

■ Industry Rewards (this is an industry specific category taking into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors).

• Industry Rewards (this is a country specific category, and the score factors in favourable political and economic conditions for the industry).

Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. This is further broken down into two sub categories:

■ Industry Risks (this is an industry specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry, and the relative maturity of a market).

■ Industry Risks (this is a country specific category in which political and economic instability, unfavourable legislation and a poor overall business environment are evaluated to provide an overall score).

We take a weighted average, combining market and country risks, or market and country rewards. These two results in turn provide an overall risk/reward rating, which is used to create our regional ranking system for the risks and rewards of involvement in a specific industry in a particular country.

For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall risk/reward index a weighted average of the total score. Importantly, as most of the countries and territories evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis. This ensures that the rating draws on the latest information and data across our broad range of sources, and the expertise of our analysts.

BMI's approach in assessing the risk/reward balance for infrastructure industry investors globally is

fourfold:

■ First, we identify factors (in terms of current industry/country trends and forecast industry/country growth) that represent opportunities to would-be investors.

■ Second, we identify country and industry-specific traits that pose or could pose operational risks to would-be investors.

■ Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/ trends to avoid subjectivity.

■ Finally, we use BMI's proprietary Country Risk Ratings (CRR) in a nuanced manner to ensure that only the aspects most relevant to the infrastructure industry are incorporated. Overall, the system offers an industry-leading, comparative insight into the opportunities/risks for companies across the globe.

Sector-Specific Methodology

In constructing these ratings, the following indicators have been used. Almost all indicators are objectively based.

Table: Indicators

Rewards Insurance market rewards Rationale Non-life premiums, 2014 (USDmn) Indicates overall sector attractiveness. Large markets more attractive than small ones. Growth in non-life premiums, five Indicates growth potential. The greater the likely absolute growth in premiums the years to end-2018 (USDmn) better. Non-life penetration, % Premiums expressed as % of GDP. An indicator of actual and (to an extent) potential development of non-life insurance. The greater the penetration the better. Non-life segment measure of Measure of market's accessibility to new entrants. The higher the score the better. openness Life premiums, 2014 (USDmn) Indicates overall sector attractiveness. Large markets more attractive than small ones. Growth in life premiums, five years to Indicates growth potential. The greater the likely absolute growth in premiums the end-2018 (USDmn) better. Life penetration, % Premiums as % of GDP. An indicator of actual and (to a certain extent) potential development of life insurance. The greater the penetration the better. Life segment measure of openness Measure of market's accessibility to new entrants. The higher the score the better. Country rewards GDP per capita (USD) A proxy for wealth. High-income states receive better scores than low-income states. Active population Those aged 16-64 in each state, as a % of total population. A high proportion suggests that market is comparatively more attractive. Corporate tax A measure of the general fiscal drag on profits. GDP volatility Standard deviation of growth over 7-year economic cycle. A proxy for economic stability. Financial infrastructure Measure of financial sector's development, a crucial structural characteristic given the insurance industry's reliance on risk calculation. Risks Regulatory framework Regulatory framework and Subjectively evaluates de facto/de jure regulations on development of insurance development sector. Regulatory framework and Subjectively evaluates impact of regulatory environment on the competitive competitive landscape landscape. Country risk (from BMI's Country Risk Ratings) Long-term financial risk Evaluates currency volatility. Long-term external risk State's vulnerability to externally induced economic shock, which tend to be principal triggers of economic crises. Policy continuity Evaluates the risk of sharp change in broad direction of government policy. Legal framework Strength of legal institutions. Security of investment key risk in some emerging markets.

Indicators - Continued

Rewards Bureaucracy Denotes ease of conducting business in a state.

Source: BMI

Weighting

Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal weight. Consequently, the following weighting has been adopted:

Table: Weighting of Indicators

Component Weighting, % Rewards 70, of which - Industry rewards 65 - Country rewards 35 Risks 30, of which - Industry risks 40 - Country risks 60

Source: BMI