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Mitsui Sumitomo Insurance Announces Strategic Alliance with Leading Life Insurer in Indonesia
Mitsui Sumitomo Insurance Co., Ltd.
Mitsui Sumitomo Insurance Co., Ltd. (President: Yasuyoshi Karasawa, hereafter “MSI”), has reached an agreement to form a strategic alliance with PT Asuransi Jiwa Sinarmas (“Sinarmas Life”), a leading Indonesian life insurer under one of the largest Indonesian business groups, Sinar Mas. MSI will subscribe to new shares issued by Sinarmas Life in a third-party allotment and enter into the life insurance business in the Indonesian market as a 50% shareholder of Sinarmas Life, subject to approval of Indonesian Ministry of Finance (Indonesian life insurance authorities).
Through this strategic alliance, MSI aims to further expand its business platform in rapidly growing Asian markets.
1.Overview of the Strategic Alliance
MSI will solely subscribe to new shares of Sinarmas Life (a private company) through a third-party allotment. The amount to be invested is 7 trillion Indonesian Rupiah (approximately 67.2 billion Japanese yen). Following the transaction, Sinar Mas Multiartha (a financial holding company of Sinar Mas Group) and MSI will each have a 50% stake. After the strategic alliance, Sinarmas Life is scheduled to change its corporate name to PT Asuransi Jiwa Sinarmas MSIG (“Sinarmas MSIG Life”).
MSI will send board members and staff after completion of its investment and actively be involved in the management. Contributing a variety of expertise MSI has developed in Japan and overseas, MSI sets out to further strengthen Sinarmas Life’s insurance distribution capabilities of protection products to tap the massive middle-class market, in addition to sales of saving products to its existing high net worth customers.
2.Purpose of the Strategic Alliance
- (1) Foray into the Indonesian Life Insurance Market
While Indonesia has a population of about 230 million (4th globally), the ratio of life insurance premiums to GDP has remained 1 to 2% (cf. 7.2% in the Japanese market). The country’s real GDP has been growing steadily at over 5% in past five years, and the middle class representing 40% of population is expected to further require life insurance products, therefore the Indonesian life insurance market is expected to grow rapidly going forward.
Indonesia also has the largest Muslim population in the world and is expected to be a promising market for Takaful insurance (quasi insurance system based on mutual help in the Islamic world).
Considering these market environments, MSI had thorough discussions to make an entry into the Indonesian market as early as possible and finally has reached the strategic alliance agreement.
- (2) Further Expansion of Business Platform in Asia
MSI has strategically focused on the fast-growing Asian market as a target of life insurance business investment. In addition to access to the Chinese and Malaysian life insurance markets accomplished by investing in the respective leading local life insurers last year, the investment in Sinarmas Life, a leading life insurance player in Indonesia (ranked 3rd), will enable MSI to significantly enhance its presence in the life insurance business in Asia.
- (3) Expansion of Overall Group Earnings
Through this strategic alliance, MSI aims to further develop Sinarmas Life’s business model by sharing MSI’s products and sales expertise with Sinarmas Life. By generating synergies from combining the brand strengths and the business platforms of MSI and Sinar Mas Group, MSI strives to expand the business platform and improve profitability of Sinarmas Life, as well as enhance the enterprise value of MS&AD Insurance Group.
Overview of the strategic alliance including the investment chart
1.Scheme of Investment in Sinarmas Life
2.Overview of Sinar Mas Group and Sinarmas Life
Sinar Mas Group is one of the largest conglomerates in Indonesia, operating financial, insurance, paper/pulp, agricultural, food and real estate businesses.
The life insurance business is positioned as the group's core business affiliated to its financial holding company (Sinar Mas Multiartha), together with its non-life insurance and banking businesses. Sinarmas Life, ranking third out of 45 life insurers in Indonesia in terms of premiums written distinguishes itself as one of the leading companies in the industry.
Sinarmas Life has achieved strong profitability and continuous growth of its top line due to its dominant brand and differentiated business model. It generated net income of 5.2 billion Japanese yen out of premiums written of 89.1 billion Japanese yen in FY2010, achieving 36% ROE.
The life insurer has accomplished strong growth and profitability by distributing a wide range of products that meet customer needs, through its main distribution channels of agency and bancassurance, and additionally through diverse distribution channels such as direct marketing.
(Reference) Overview of Sinarmas Life
|Life insurance premiums written||Approx. JPY 89.1 billion (FY2010)|
|Net income||Approx. JPY 5.2 billion (FY2010)|
|Total assets||Approx. JPY 109.9 billion (FY2010)|
|Net assets||Approx. JPY 14.4 billion (FY2010)|
|Employees||707 * as of March 2010|
- *Japanese Yen amounts assuming an exchange rate of 1 Indonesian Rupiah = 0.0096 Japanese Yen
3.MSI's Asia Strategy
As one of MSI's strategies to achieve sustainable growth, MSI aims to actively invest in overseas non-life and life insurance businesses. Looking back on past investment in life insurance sector, MSI has been strategically focusing on the fast-growing Asian market and has achieved steady expansion by acquiring a stake in Sinatay Life Insurance Co., Ltd., a life insurer in China in April 2010 and investing in Hong Leong Assurance Berhad, a life insurance company in Malaysia in October 2010. In April 2011, MSI completed its investment in a company operating Takaful business under Hong Leong Group and entered the Takaful insurance market. MSI will accelerate measures to strengthen its business platform going forward.
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