JAKARTA UK insurer Aviva Plc's (AV.L) tie-up with Indonesian conglomerate PT Astra International (ASII.JK) is the latest push by foreign companies to capture an under-penetrated market with high premium growth rates.
Aviva and Astra said on Friday they are forming a 50-50 joint venture called Astra Aviva Life to sell and distribute life insurance products in Southeast Asia's biggest economy. It is expected to be launched later this year, subject to regulatory approval.
"Every insurer wants to be in Indonesia," said Maynard Arif, head of research at DBS Vickers in Indonesia. "They are attracted to the demographics and the rising middle class here. More Indonesians will be able to afford protection for the future."
Japanese companies are also making inroads into Indonesia's insurance sector. Sumitomo Life Insurance SMTLI.UL bought a 40 percent stake in the life insurance unit of PT Bank Negara Indonesia (BBNI.JK), while Dai-ichi Life Insurance (8750.T) acquired 40 percent of Panin Life.
"The life insurance penetration in Indonesia is still low at around 5 percent of the population, whereas Japan and Korea are already mature," Hendrisman Rahim, chairman of Indonesian Life Insurance Association, told Reuters on Friday.
Life insurance premiums in the country of 240 million people grew at a compound annual growth rate of around 25 percent from 2002-2012, according to some estimates, underscoring its attractiveness to foreign companies like Aviva.
"This joint venture creates a compelling growth opportunity, underlines our commitment to Asia and supports our strategy of cash flow plus growth," Mark Wilson, chief executive of Aviva, said in a statement.
Astra, whose market value is around $25 billion, has businesses spanning cars, financial services, heavy equipment and mining, agribusiness, infrastructure and logistics, as well as information technology.
(Reporting by Eveline Danubrata and Fathiyah Dahrul; Editing by Matt Driskill)