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Bancassurance bringing in massive profits for banks in Vietnam

Bancassurance bringing in massive profits for banks in Vietnam

Wednesday 22, 06 2022
Bancassurance has been playing an important role in the business activities of many insurance businesses as well as bringing in massive profits for banks in Vietnam. Bancassurance is expected to continue to boom in revenue in the coming time.

Banks profit from bancassurance

Mr. Tran Hung Huy, Chairman of the Asia Commercial Bank’s (ACB) Board of Directors, said that by the end of the first quarter of 2022, the bank is estimated to achieve a pre-tax profit of more than 4,200 billion VND. Notably, non-interest income contributed about 1,300 billion VND, up 37% over the same period in 2021. Bancassurance activities contributed 390 billion VND in revenue.

In 2021, the insurance business contributed over 1,300 billion VND to nearly 12,000 billion VND in the total profit of ACB. From 2020, ACB signed a 15-year exclusive cooperation contract with Sun Life Vietnam Life Insurance Company. According to the leader of ACB, the prepaid fee for this contract is 370 million USD and is paid throughout the cooperation process.

Vietcombank

Similarly, bancassurance has brought great profit to Vietcombank (VCB). The bank's financial statements show that this service segment contributed significantly to more than 6,000 billion VND in service revenue in the past year. The cooperation between VCB and FWD is still one of the most prominent deals in the bancassurance market. By the end of 2021, the VCB - FWD cooperation recorded a growth rate nearly 4 times higher than the market - an impressive number despite the heavy impacts of the COVID-19 pandemic.

Meanwhile, Techcombank's insurance service fees reached 1,600 billion VND in 2021, a growth rate of over 88%. Annual premium equivalent in the fourth quarter of 2021 increased by 39.5% year-on-year and 104.5% from the previous quarter after social distancing measures were gradually eased and by strengthening the partnership between Techcombank and Manulife Vietnam. Over the past year, Techcombank has renegotiated the terms of service deployment with Manulife, thereby promoting closer cooperation between the two parties. Bao Viet Securities Company (BVSC) expects Techcombank's premium revenue to continue to grow positively in the coming years.

At Orient Commercial Bank (OCB), General Director Nguyen Dinh Tung said that revenue from the insurance segment contributes nearly 300 billion VND to the total profit of 5,519 billion VND before tax in 2021. Mr. Tung assessed the growth prospect of the service segment in Vietnam is still very large, especially for insurance premiums.

VIB

Last year, VIB recorded a total operating income of nearly 15,000 billion VND, of which, income from fees from products and services such as bancassurance and cards contributed nearly 20%. According to calculations by SSI Securities Company, retail insurance usually accounts for 20% of VIB's pre-tax profit.

Fee income, including bancassurance, has become a highlight of many banks in the past year. VCBS statistics on insurance sales of 14 participating banks show that more than 10,200 billion VND has flowed through the bancassurance channel in just the first 10 months of 2021. HDBank recorded growth in service revenue 2 times the same period in 2020.

Continue to grow

According to insurance industry experts, bancassurance was boosted by many banks recording impressive growth in net premium income. In particular, at some banks, digital insurance sales platforms have been built, increasing the efficiency of insurance sales.

In the life insurance market, there are currently 15/18 insurers that have implemented bancassurance. Currently, bancassurance has become the distribution channel accounting for the second position in the proportion of contributions to new revenue and total premium revenue of insurance companies.

insurance industry

With positive growth since the beginning of the year, the bancassurance market is forecast to grow by more than 30% this year, and at some insurance companies with large banking partners, this channel can bring in revenue growth. The new fee is higher than the market growth rate of 30%.

In the recently published banking industry update report, Yuanta Vietnam's experts expect bancassurance to account for about 50% of total first-year premium revenue by 2025.

The fees collected from the sale of bancassurance contribute about 37% (17 listed banks) to the total fee income of the banks in 2021 on average. Yuanta Vietnam expects this rate to reach 50% of the whole industry in the coming time.

 

Compiled by VietnamCredit

Categories
Banking & Finance

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