Germany’s third biggest insurer, Talanx Group, agreed to invest VND1.92 trillion ($92 million) in Vietnam’s PVI Holdings on Wednesday, August 17.
The foreign insurer, via its unit HDI-Gerling Industrie Versicherung AG, will buy a 25 per cent stake in PVI’s enlarged share capital, according to a PVI statement. The shares were priced at VND36,000 per share, more than double the close price of VND16,200 on the Hanoi Stock Exchange on the same day and 63 per cent higher than the firm’s book value ending 2010.
Christian Hinsch, Talanx’s vice chairman and HDI’s general director, said that Talanx aimed at PVI’s leading position in Vietnamese industrial insurance market when investing in the local firm.
In fact, PVI Holdings is now the Vietnam’s biggest non-life insurer by capital and assets, which takes the dominating positions in the major insurance lines. Within 15 years, the insurance arm of PetroVietnam saw its profit grow 73 times from VND4.6 billion ($418,18) in 1996 to VND336 billion ($17.78 million) in 2010.
“We had prepared to pay a price higher than both the book and market value,” said Hinsch. “The current market price does not reflect the company’s potential value. Vietnam is a promising insurance market with big potential of development, with the market penetration compared with GDP remains very low. That’s the reason why we want to tap this market,” he said.
Before Talanx, Oman Investment Fund had been the first foreign partner invested in PVI after purchasing more than 12 per cent the firm’s stake, also at a price more than double the market price. The fund in May had tended to raise the ratio to some 20 per cent, but the deal was delayed before PVI’s negotiations with Talanx, said PVI general director Bui Van Thuan.
The Talanx-PVI share transaction is expected to take place by the end of this year, as it is pending for local regulatory approval, stated the announcement.
Another Talanx’ unit, Hannover Re, will also provide its support in insurance business to PVI under the agreement.