Techcombank, Vingroup okayed to form life insurance firm

Techcombank, a major private lender in Vietnam, said it has secured a license from the Ministry of Finance to set up a life insurance firm, with itself and leading conglomerate Vingroup as major shareholders.

The insurance company, TCLife, has a charter capital of VND1.3 trillion ($49.71 million), with Chung Ba Phuong serving as general director and legal representative.

Headquartered at Tower C5, D'Capitale Building, 119 Tran Duy Hung street, Hanoi, the firm will offer life and health insurance, reinsurance, retrocession, and other services in line with legal regulations.

Techcombank’s board of directors on March 20 approved a resolution on capital contribution and share purchase for the establishment of TCLife. Accordingly, Techcombank (HoSE: TCB) will contribute VND1.04 trillion ($39.76 million), securing an 80% stake in the new entity.

The remaining 20% will be held by Vingroup (HoSE: VIC) and other investors, the lender noted.

TCLife is expected to leverage the combined strengths of its two major shareholders, backed by strong financial capacity and a broad customer base. Techcombank brings about 31 years of experience and expertise in the financial sector, while Vingroup contributes a diverse ecosystem.

According to the lender, Vietnam’s life insurance market still holds significant growth potential, supported by a favorable demographic structure - over half of the population in the working age group, a key segment in need of protection.

The life insurance penetration rate remained relatively low, with the premium-to-GDP ratio standing at only 1.2%, well below the 2.9% average seen in other developing countries, along with 12.44 million active policies as of December 31, 2023.

In addition, Vietnam’s economy continues to recover, with GDP growth reaching about 7.09% in 2024 and projected to rise to 8% in 2025.

Household incomes in the Southeast Asian country have seen strong growth, the bank said, citing a study by Ho Chi Minh City-based market research company Cimigo in the 2017-2022 period showing that the number of households earning between $500 and $999 per month rose by 67%, while those earning over $1,000 surged by 378%.

With rising affordability and improved financial literacy, life insurance is expected to gain further traction in the coming years, the lender said.

The Ministry of Finance projected the life insurance premium-to-GDP ratio to rise to 1.5% by 2030. Gross revenue from life insurance distributed via bancassurance grew at a compound rate of 26% between 2017 and 2023.

In addition, the recent volatility in the life insurance market, driven by fractured distribution channels and advisory quality, has created opportunities for new players.

Life insurers with a focus on digitalizing advisory services and post-sale support, coupled with a professional and efficient advisory team, are well-positioned to serve a new generation of customers and expand market reach.

Techcombank expects the insurer to incur planned losses in its first two years, before generating VND1.19 trillion ($45.52 million) in net profit after five years of operation, with a profit margin of 23.4%.

In addition to the projected earnings, TCLife is also expected to contribute to the net asset growth of its founding shareholders, including Techcombank. The insurer’s total assets are projected to reach VND728 billion ($27.85 million) in its first year and grow to VND16.08 trillion ($615.14 million) by the fifth year - a 22-fold increase.

Last October, Techcombank terminated a 15-year bancassurance partnership with Manulife Vietnam, a subsidiary of Canada’s Manulife. Following the separation, Techcombank stated that it sees an opportunity to revitalize its insurance business with a differentiated strategy.

Additionally, the bank announced plans to seek shareholder approval to increase its stake in Techcom Nonlife Insurance JSC (TCGIns) beyond 11%, making it a subsidiary.