Posted on Nov 03, 2010 by Sergio Ulloa
Zurich Financial Services (Zurich) has completed a deal to acquire the majority stake in PT Mayapada Life of Indonesia. This will give the multinational Swiss insurer immediate access to the Indonesian life insurance market. PT Mayapada Life is a subsidiary of the Mayapada Business Group - which will retain a 20 percent interest in the Indonesian life insurer - with Zurich holding 80 percent in the new venture.
The new company will benefit from PT Mayapada expertise in respect of the local Indonesian insurance market and distribution channels for life, accidents and healthcare plans, which is combined with the Zurich's strong reputation in the insurance industry.
In addition to the transaction in Indonesia, Zurich has been active in recent months with the acquisition of Lebanese based Compangnie Libanaise D'Assurance and by increasing its stake in China based New China Life Insurance (NCI)
. Zurich also reported that it is seeking opportunities for strengthening its presence in the Middle Eastern region.
The finalization of PT Mayapada Life deal means Zurich is acquiring a major stake in a life insurer, which generated US$1.7 million in premiums in 2009.
The long term goal of Zurich is to enter into an agreement with the PT Bank Mayapada International Tbk (Mayapada Bank) in order to use their bancassurance distribution channels and maximize market exposure and competitiveness; the key competitors being PT Asuransi Jiwa Mega Life, PT Asuransi Jiwa Sinar Mas and PT Prudential Life Insurance. The UK based insurance company, Aviva, has also gained entry to the Indonesian insurance market by acquiring a 60 percent stake in Asuransi Winterthur Life.
The acquisition of PT Mayapanda Life by Zurich means that Zurich are now poised to enter an Asian insurance market which is predicting significant growth in written premiums for life and non-life insurance products; the Indonesia insurance industry is forecast to triple written insurance premiums to IDR 254.5 trillion(US$ 28.5 billion) by 2014.
Speaking in June 2010 Zurich's CEO Global Life Mario Greco, said: "The acquisition of Mayapada Life is a first step in Zurich Life's expansion plans in Indonesia. It underpins our commitment to developing the market in Indonesia and our strategy of providing protection and saving products to the rapidly growing number of the population with such needs. The Mayapada Group will be a strong local partner as we seek to build key relationships to grow our business in the Asia Pacific region."
Zurich recently announced its general interest in seeking opportunities in emerging markets and specifically the Islamic takaful insurance market
. Takaful is seen as a key long-term insurance business prospect, and, as Indonesia is home to the largest Islamic population in the world, providing Zurich with a major opportunity to take advantage of a growing takaful insurance market with which to further the company's experience prior to their plans of concentrated growth in the Middle East.
Zurich will face stiff competition from global rivals, who are already established in Indonesia and have created a strong customer base through their well developed network channels and product provision. The likes of Allianz
and Prudential have a strong foothold across the Indonesia insurance industry and will be solid competition for Zurich in the country.
Allianz Indonesia has approximately 1.7 million customers, of which 440,000 are Indonesian microinsurance policyholders. Allianz is currently the insurer at the forefront of the Indonesian microinsurance sector; Allianz Indonesia is aiming to increase the number of microinsurance policyholders to 1 million customers by 2012. Heavyweight insurer Prudential - through its subsidiary PT Prudential Life Assurance (Prudential Indonesia) - has over 1 million Indonesian customers and currently holds roughly 10 percent of the Indonesian life insurance market.
The Indonesia government is also providing strong support for the development of the insurance industry in the country, especially the provision of microinsurance for low income families and individuals. The increased competition among insurers in the life and non-life Indonesian insurance industry is seen as an incentive for the provision of better protection products and services for the Indonesian population as domestic and international insurers in the country battle to gain market share.
The Asian insurance industry has emerged from the financial tsunami in 2007-2008 as key a strategic market for global insurers, with the Indonesian life insurance market being one the fastest growing life markets in the region. Indonesia has a population of 240 million people and achieved an average economic growth rate of 5.6 percent per year between 2007 and 2009. Indonesia has been able to emerge from the economic downturn relatively unscathed enjoying prosperity similar to regional powerhouses China and India. Reforms in the regulation of the Indonesian financial services industry, expansion of insurance distribution and a broader range of protection products are forecast to have a positive effect on the Indonesia insurance sector in the coming years, and meet the demands of a population experiencing an improvement in individual wealth.
The planned reform of financial services in Indonesia will require all insurers to have a minimum of IDR 100 billion (US$11.2 million) capital to meet standards being imposed by the regulatory authority - Bapepam-LK - by 2014.
The overall value of the life insurance business in Indonesia amounted to IDR 62.3 trillion (US$6.9 billion) - in terms of premiums generated - which is predicted to increase by more than threefold to IDR 191.1 trillion(US$ 21.4 billion) by 2014. The non-life insurance activity is also forecast to grow from IDR 27.2 trillion (US$3 billion) in 2009 to IDR 63.4 trillion (US$7.1 billion) in 2014.
Insurance Companies Mentioned:
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world's largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.
Allianz Group is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.
PT Prudential Life Assurance (Prudential Indonesia) was established in 1995 and is subsidiary of Prudential plc, a leading international financial services group from the United Kingdom. Prudential Indonesia has sales offices in Jakarta, Medan, Surabaya, Bandung, Batam, Denpasar and Semarang. In 1999, Prudential Indonesia launched the unit-linked (life insurance combined with investments) product, making the insurer on of the market leaders in Indonesia.