Insurance Australia Group Limited (IAG) have inked a deal to acquire 30% of Vietnam-based AAA Assurance Corporation (AAA).
IAG claim the strategic stake will deliver an exposure to the rapidly growing Vietnamese insurance market via an established participant.
"Our goal is for our business in Asia to represent 10% of IAG's Gross Written Premium on a proportional basis by 2016," said IAG Managing Director and Chief Executive Officer, Mike Wilkins, who said the investment, valued at less than $20 million, marked another step in IAG's strategy to boost its Asian footprint.
"We have previously indicated that we were targeting six markets in the region: India, China, Thailand and Malaysia, where we already have a presence, as well as Vietnam and Indonesia,” said Wilkins.
"This investment will allow us to enter Vietnam's general insurance market, which has been growing at a compound rate of 25% per annum since 2009.
"With a low level of insurance penetration, the market is expected to continue growing at similar levels for another three to five years," he said.
AAA is predominantly a motor insurer, selling directly to customers through a network of regional and city-based branches. Since its establishment in 2005, AAA has grown to become the sixth largest motor insurer in Vietnam.
IAG Chief Executive Officer, Asia, Justin Breheny, said IAG would have an option to increase its shareholding in AAA to 49% subject to regulatory approval.
"In line with our strategy, IAG would bring to this partnership proven capabilities in the areas of underwriting, pricing and actuarial, and risk and claims management, enabling AAA to expand its operations and become a more significant player in this exciting market," Mr Breheny said.
"AAA has demonstrated strong underwriting control and risk management and we are pleased to be partnering with a company with such an ambitious, yet disciplined culture.
"We have a successful track record with other partners in the Asian region and we look forward to working with AAA as we continue to grow this successful general insurance business together."
Under the joint venture arrangements, IAG will have board representation, the right to appoint certain key management personnel and affirmative voting rights over key business matters. The investment is subject to regulatory approval and is expected to be completed by June 2012.