Many foreign investors are competing to enter into the insurance industry in Indonesia. Some local-foreign joint venture insurance companies have proven that the insurance market in the country is very promising. Joint venture insurance companies on the average achieved considerable growth in premium.
Foreign insurers dominate the Indonesia insurance market due to strong capital backing that makes joint venture insurance companies expand freely for the sake of enlarging its market share. Foreign insurers are increasingly grabbing the local insurance industry. Look at the Asian giant, namely Japanese investors. They continued expansion. For example, Tokio Marine Group who bough 89% stakes in MAA Life Insurance Indonesia worth Rp275 billion.
On Tuesday (6/4), another Japanese insurer, Dai-ichi life insurance Co, Ltd, agreed to buy 40% stake in PT Panin Life, Tbk. The transaction value reached Rp3.3 trillion, equivalent to USD 336.5 million. Under the terms of the agreement, the Japanese insurance company will own 5% stake in Panin Life by acquiring newly issued shares.
Dai-ichi also buys 36.8% stakes in the parent company that will have a residual effect of Panin Life. “Currently, the transaction is still in progress and just waiting for approval from the regulator”, said Simon Imanto, Vice President Director of Panin Life on Tuesday (6/4).
The acquisition is part of Dai-ichi expansion to many countries in pursuit of growth when the Japanese domestic market provides limited growth for the company. Besides Indonesia, Dai-ichi has also made a bid to become the owner of a controlling stake in life insurance units of Malaysia. The acquisition of the stakes in Panin Life by Dai-ichiis expected to be an entry of the Japanese company into Indonesia with a potential market of 240 million Indonesian populations at this time.
Dai-ichi is supported by more than 44,000 agents and solid financial strength, with total assets of more than JPY 35,694.411 million (or equivalent to USD 379 million) as of March 31, 2013. Dai-ichi life is one of the leading Life Insurance Group in Jakarta and has operational network across Asia Pacific, Europe, America and Australia. Dai-ichi Life is a public listed company in Japan and has a track record of experience of more than 100 years in the life insurance industry.
Simon Imanto said that the strategic partnership is a major milestone for Panin Life, and opens up new opportunities in business growth, collaboration with Dai-ichi life will strengthen the business position of Panin Life in Indonesia. In the future, Simon added, Dai-ichi Life will contribute to the extensive experience and expertise, particularly in the areas of actuary, risk management, distribution and training.
Mr. Hideto Masaki, Representative Director, Deputy President, Group Management Headquarters, added that Indonesia, as the fourth most populous nation in the world, is one of the fastest growing economies in the insurance market with total life insurance premium of less than 2% of GDP.
Entering into the Indonesia insurance market is an important part of our international growth strategy and will reinforce our presence in the emerging markets. We will apply different strategies through the products, distribution and consumer service. By combining our strength, we are confident that we will build a company with a strong competitive advantage.
According to Nikkei report, the action was done by buying new shares to be issued by the company’s insurance unit, Panin Life. Panin Life is a medium-size insurance company whose assets reached approximately 40 billion yen. Later, Dai-ichi life will turn Panin Life into an affiliate of Japanese firms to increase the company’s overall profit.
Some financial institutions that partner with Panin Life will sell Japanese insurance products in Indonesia. Total life insurance sales in Indonesia reached 760 billion Yen by the end of 2010. This sector has been growing rapidly to 20% per year.
Dai-ichi Life will expand its overseas earnings. Beside Indonesia, the company also offers its products in India, Thailand and Australia the company plans to spen 300 billion yen for company buyout, especially in foreign countries in the 2015 fiscal year. The target is to increase the ratio of overseas earnings to 30% from the current rate of 20%.
As of December 31, 2012, Panin Life has total assets of Rp3.9 trillion with total equity and gross premium income at Rp420 billion and Rp2.3 trillion. This initiative will be the foundation for a quantum leap growth of Panin Life to strengthen its presence in the life insurance industry in Indonesia. Bank of America Merrill Lynch is the sole financial advisor of Panin Financial and Panin Life in this transaction. (E)
Business News - June 07,2013