Philip Willcock, president of Astra Aviva Life, speaks during a press conference in Jakarta, on Nov.27. Aal life insurance.
JAKARTA -- Indonesian trading company Astra International has launched a life insurance business with U.K. insurance company Aviva International in a bid to strengthen financial services in the face of a slowdown in its core automotive business.
Astra Aviva Life, a 50-50 joint venture, announced Thursday that it started operations after obtaining regulatory approval in August. The company will develop insurance policies for individuals and families, which will be primarily sold in Bank Permata, a subsidiary of Astra. AAL plans to become a major player in the life insurance industry by combining Aviva's expertise in product development and Astra's wide corporate network.
Astra has more than 180 companies spanning across automotive, mining, plantation, infrastructure and finance sectors. It partners with major Japanese automakers like Toyota, Daihatsu and Honda, and controls more than half of Indonesia's car and motorcycle market.
Insurance is still a relatively unknown concept in Indonesia, where the majority of its 250 million citizens earn low incomes. However, insurers are hoping the younger population and rising middle class will drive up demand.
"[Astra] will provide amazing distribution opportunities," AAL President Philip Willcock said. He declined to give specific targets.
The joint venture marks a re-entry into the life insurance market for Astra. It previously partnered with Australia's Commonwealth Bank, but sold off its shares in 2007 due to poor performance. Astra wants to strengthen its financial division as an economic slowdown is weakening demand for cars. Astra reported a 14% decline in net profit for its automotive division in the January-September period to 5.89 trillion rupiah ($470 million). On the other hand, profit for its financial services division rose 14% to 3.8 trillion rupiah.
Astra, however, will face tight competition with a flock of foreign insurers setting up in Indonesia. Sumitomo Life Insurance bought a 40% stake in the life insurance unit of Bank Negara Indonesia and Dai-ichi Life Insurance acquired 40% of Panin Life.