FRANCE'S AXA is moving into Vietnam's insurance market and is eyeing the high potential growth of the motor insurance segment.

Last month, AXA announced that it will be acquiring a 54 million euro (S$112.8 million) stake in Bao Minh Insurance Corporation, after reaching an agreement to establish a strategic partnership.

As part of this agreement, AXA will acquire a 16.6 per cent stake of the share capital of Bao Minh for a total amount of 1,194 billion dong (S$108.8 million).

Bao Minh is the second largest player in Vietnam's non-life insurance market. It has a 21 per cent market share and a strong and diversified distribution network.

In 2006, its gross written premiums amounted to 1,387 billion dong (around US$86 million), while net income was 100 billion dong. Motor insurance makes up a quarter of Bao Minh's total business.

From a wider perspective, however, AXA notes that while there are an estimated 14 million vehicles on Vietnamese roads, an overwhelming proportion - 95 per cent - are motorcycles.

'Therefore, penetration is still very low, which could augur a high potential growth,' explained Stanislas Conseiller, AXA Asia's executive vice-president for corporate communication and strategic projects.

He said motor insurance in Vietnam is the second largest class in the P&C, or property & casualty, market with 27 per cent, after property insurance.

Bao Minh is the country's No 2 motor insurer with a 23 per cent market share.

'After poor results some years ago that forced several insurers to withdraw from the motor market, the profitability of the class has improved and there are reports that companies are once again entering the market,' said Mr Conseiller.

He added that as part of the strategic cooperation agreed between Bao Minh and AXA, Bao Minh will have access to AXA's technical expertise, notably on underwriting and IT, with the opportunity to leverage on AXA's global and regional platforms.

At a later stage, AXA will also provide Bao Minh with more tailor-made and time-consuming technical support in areas such as claim management, product design, investment and risk management.

AXA said the stake in Bao Minh is a strategic move which underscores AXA's ambition to grow its presence in key markets in Asia. Bao Minh is 'the ideal partner' to enter the promising Vietnamese insurance market.

'Vietnam is one of the fastest growing economies and its recent accession to the World Trade Organization should accelerate its economic development,' said Mr Conseiller.

Overall, the Vietnamese insurance market has experienced double-digit growth rates over recent years and is expected to continue to grow at the same pace, he said.

'At the end of 2006, the total non-life market was around US$430 million. The market is profitable and we expect it to stay so.'