VCBS: ACB receives Upfront fee of VND8 trillion from bancassurance deal with Sun Life

28-Nov-2020 Intellasia | Tri Thuc Tre | 6:02 AM Print This Post

Vietcombank Securities Company (VCBS) has released an analysis report on Asia Commercial Joint Stock Bank (ACB).

According to VCBS, ACB and Sunlife insurance company signed the exclusive insurance contract with an Upfront fee of up to 370 million US dollars (8.5 trillion dong), much higher than the Upfront fee that banks of the same asset size obtained from their exclusive insurance cooperation deals.

The high Upfront fee that ACB earned is due to reasons such as ACB’s insurance sales reaching 939 billion dong in 2019, the sixth highest result in the whole banking system. In addition, ACB also climbed to the third position in insurance sales in the first six months of 2020 according to information from the Association of Vietnam Insurers.

Thus, ACB is the bank with the best insurance sales among banks that have not had an exclusive insurance agreement. Since the number of banks not yet signing an exclusive insurance deal makes their power in negotiation to increase against insurance companies.

ACB also has a large base of potential customers for exploitation. The bank currently has a network of 371 branches and a high number of regular individual customers of up to 3.6 million people. ACB’s business is spread across the country with 103 branches in the North, 58 branches in the Central, and 210 branches in the South.

Currently, the percentage of ACB employees buying insurance through the bank is only 16 percent and the number of customers buying insurance through the bank is only one percent. These rates are lower than some banks in which the insurance activities were accelerated earlier, and lower than the insurance penetration rate through bancassurance in the world which is currently 15%. In addition, ACB’s customer base is selective with high income. The numbers of customers cancelled their insurance contracts in 2019 and 2020 were respectively 5.5 percent and 10%, lower than the 20 — 30 percent in some other banks.

ACB’s representative said that since Sunlife has experience in implementing exclusive insurance contracts with some other banks, it has a diversified product list with many benefits for customers. In addition, the process of internal changing and training will begin right in December 2020, and the business is expected to be in stable operation from the second quarter of 2021. Regarding the Upfront fee profit accounting, ACB is most likely choose to account over the years to avoid a major impact on its equity as well as its business plans of the following years.

 

Category: Finance, Vietnam

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