Zurich Insurance eyes organic and inorganic growth for Indonesian divisions - exec
03 SEP 2018
Zurich Insurance Group [SWX:ZURN], the Swiss insurance firm, is eyeing organic and inorganic strategies to enhance its business in Indonesia, CEO and Country Manager Chris Bendl said.
The strategy is planned for the group’s Jakarta-based life insurance and general insurance businesses. It will include possible acquisitions as well, he noted.
Currently, Zurich’s life and general insurance divisions rank 30 to 35 among insurance players in Indonesia based on the size of their assets. The group targets to enter the top 10 of the list in five years, Bendl said.
The executive said the group will comply with the recent regulations set by Indonesia’s Financial Service Authority (OJK), which could impact its potential acquisition plans, Bendl said, without revealing further details about the acquisition strategy.
According to the Insurance Law issued in 2014, shareholders of Indonesian insures are prohibited from owning more than one company with the same business. The OJK has encouraged shareholders of several insurance firms to consolidate their units under one roof, such as the recent merger of AXA Life Indonesia and AXA Financial Indonesia in February 2018.
Meanwhile, as part of its organic growth strategy, Zurich plans to focus more on the retail market and strengthen its digital distribution channel to increase the number of customers, Bendl said. In October 2017, Zurich launched a digital platform exclusively in Indonesia especially for its agents and customers to facilitate access to services, as reported by the local media.
Zurich Group started operating general insurance business Zurich Insurance Indonesia in 1991 through a joint venture partnership with local insurer Asuransi Bina Dana Arta [IDX:ABDA], according to the company’s website. The group’s life insurance firm Zurich Topas Life was established in 2010 following the acquisition of an 80% stake in Mayapada Life from Mayapada Group. Zurich currently owns 80% of the life insurance arm and 98.49% of the general insurance division. The new regulation does not apply retroactively, therefore, the firm is not required to sell down its stakes in the units.
Zurich Topas Life booked net revenue of IDR 125.6bn and IDR 71.9bn net loss in 1Q18, according to its latest financial report. Zurich Insurance Indonesia posted IDR 97.48bn of net premium income and IDR 47.12bn net loss in 2Q18.
Bendl noted the group plans to grow in the country, which still has very low penetration of insurance products. Zurich Group also wants to help the government develop the domestic insurance market, he added.
The life insurance market penetration in Indonesia reached 7.1% by March 2018, a local media report noted, citing Indonesia Life Insurance Association. Meanwhile, the penetration of general insurance remains low due to Indonesia’s demographic conditions and challenges arising from the slowdown of macro economic growth, as per the association’s report last year.
So far, Zurich Group has less than a 10% market share in Indonesia, for both life and general insurance, despite its long-term presence in the country, Bendl said.
In April 2018, the Indonesian government issued a regulation that limits foreign ownership in domestic insurance companies to a maximum of 80%, as reported by local media. Previously, the government allowed overseas investors to hold up to 100% in local insurers. The law was originally issued during Asia's financial crisis in 1998 as local parties were unable to inject more capital into the firms.
Indonesian insurance companies, however, still need to partner with foreign parties as they have strong financial and human resources, said Hendrisman Rahim, Chief of Indonesia Life Insurance Association, as per a media report published July 2017. The OJK accounted a total of 22 life Indonesian insurance companies with foreign shareholders and 23 general insurers with foreign shareholders, as per data released by the regulator, cited in a media report in May 2018.