Canada-headquarter Fairfax Financial Holdings, through its subsidiary Fairfax Asia Limited, will purchase a 35 per cent stake of BIDV Insurance Corporation (BIC), according to a share subscription agreement signed by the two companies.
The holding is equivalent to more than 41 million shares of the Vietnamese insurer.
After the transaction, Fairfax will become BIC’s strategic partner, who will provide technical assistance in the areas of underwriting management, risk management, information technology, development of distribution network and investment management.
The transaction is expected to close in the third quarter of 2015, subject to regulatory approval by the authorities in Vietnam.
Pham Quang Tung, chairman of BIC, commented: “With the strategic investment and technical assistance from Fairfax, we expect BIC will become the leading non-life insurer in Vietnam in terms of an advanced distribution network and profitability.”
After acquiring the 35 per cent ownership in BIC, Fairfax will be entitled to appoint two members on the BIC’s board of directors (including one vice chairman) and two nominee members in the supervisory board. Once the transaction is completed, the new executives for the 2015-2020 tenure will be selected at an extraordinary shareholder meeting.
Ramaswamy Athappan, chairman and CEO of Fairfax Asia, sees Vietnam as a fast growing insurance market, which will continue to generate profit as well as growth opportunities for BIC, and assist the performance of its Cambodia and Laos based branches. “We welcome BIC as part of Fairfax,” he said, adding that his firm also looks forward to working with the Bank for Investment and Development of Vietnam (BIDV), the parent bank of BIC.
BIDV, Vietnam’s third largest lender by total asset, is also seeking a foreign strategic shareholder and is already looking at eight foreign investors for a possible tie up. Potentially, BIDV will offload 25 per cent to the overseas institutional buyers (which might include a bank and a financial company.)
The bank’s insurance arm is one of the local leading non-life insurers with 25 member companies and an exclusive distribution right for several insurance services through BIDV.
The listed insurance firm, which has been rated a credit of B+ by the US insurance industry focused rating agency A.M. Best, is currently holding 65 per cent in Lao Viet Insurance Company and 51 per cent in Cambodia Vietnam Insurance Plc. In March, BIC strengthened the presence in Southeast Asia by receiving the registration license to establish a representative office in Myanmar.
Meanwhile, Fairfax Financial Holdings focuses on non-life insurance, reinsurance and investment management segments. The group achieved a $1.67 billion profit after tax last year, its total assets stood at $36.13 billion. In Asia, where the Canadian firm’s premium revenue alone hit over $3 billion, Fairfax has footholds in India, Indonesia, China, Malaysia, Singapore, Hong Kong, Thailand and Sri Lanka and Vietnam.