Astra, Aviva Set Up Insurance JV

A Toyota Astra showroom in Jakarta. (Reuters Photo/Supri)

Astra International, the largest automotive distributor in Indonesia, and Aviva, the largest insurer in the United Kingdom, signed an agreement on Friday to set up a joint venture insurer.

The joint venture, called Astra Aviva Life, will be equally owned by Aviva and Astra International.

The insurer will sell and distribute life insurance products in Indonesia, according to a statement released on Aviva’s website on Friday.

“The combination of Aviva’s insurance expertise and Astra’s brand and customer base is indeed very powerful,” Aviva Asia’s chief executive Khor Hok Seng said in a statement posted on the company’s website.

“This joint venture has the potential to be a leader in Indonesia, one of the most attractive and fastest growing insurance markets in the world. [Indonesia] has the fourth-largest population, strong economic growth and low insurance penetration.”

Insurance penetration in Indonesia is said at 5 percent of the country’s 240 million population, according to one estimate, meaning that there is room for growth.

Astra International has ventured into general insurance business through its subsidiary, Asuransi Astra Buana, but this joint venture will be Astra International’s foray into life insurance.

Astra Aviva Life will vie for a huge insurance market in Indonesia and compete with rivals such as state-owned Asuransi Jiwa Indonesia, Bank Rakyat Indonesia’s BRIngin Life, and Manulife Indonesia.

Asset of the country’s insurers rose 37.6 percent to Rp 281.2 trillion ($23.3 billion) in the first half of last year, according to data from Indonesia Life Insurance Association (AAJI).

Rating companies such as Fitch Rating has said the outlook for life and non-life insurers will remain stable this year, citing a strong expectation for mergers and acquisitions in the insurance sector as Indonesia’s low insurance penetration, improving risk awareness, and rising affluence attract foreign investors.

Aviva provides life, general and health insurance, and asset management services to 34 million customers worldwide.

Aviva entered the Indonesian market in March 2010 through a joint venture, forming Asuransi Aviva Indonesia. The insurer’s Indonesian unit is now one of the top three health insurance providers in the country.

Astra International, with a market value of $25 billion, has businesses spanning cars, financial services, heavy equipment and mining, agribusiness, infrastructure and logistics, as well as information technology.

One of Astra’s financing units, Toyota Astra Finance Services, announced its plans to raise Rp 600 billion from selling one-year and three-year bonds next month. The notes sale would be part of its massive plan to raise Rp 4 trillion within two years.

The company has set the coupon rate on its one-year bond between 8.6 percent and 9.6 percent, and its three-year bond between 9.5 percent and 10.5 percent.

Shares of Astra International fell 5.1 percent to Rp 6,925 on the Indonesia Stock Exchange on Friday.