Acquisition Sun Life, CIMB team up to form joint venture

The Jakarta Post, JAKARTA | Tue, 03/17/2009 10:49 AM  

PT Sun Life Financial Indonesia, the local unit of Canadian insurance giant Sun Life, will spend US$22.5 million acquiring a 49 percent stake in the local unit of Malaysian conglomerate CIMB Group to further tap into Indonesia’s highly potential insurance sector. 

Under the transaction agreement, the two giants will then turn CIMB unit PT Commerce International into a new joint venture called CIMB Sun Life. 

“In terms of bancassurance potential in Indonesia, we believe it’s huge; bancassurance penetration has gone from a very low figure six years ago to a very significant portion of the market today, and we believe that will continue to grow,” Sun Life Indonesia president director Chris Lossin said Monday. 

He added that over the period of five years, CIMB Sun Life would generate new premiums of around Rp 1 trillion ($84 million) and take about 5 percent of the country’s market share. 

“The key point is that the vast majority of Indonesian insurance consumers still do not have insurance coverage, and many of them prefer to buy insurance through banks; we find it a very interesting opportunity,” he said. 

He added CIMB Sun Life would focus on distributing insurance products through CIMB Niaga customers. CIMB Niaga has 650 branches equipped and around 4,000 employees. 

CIMB Sun Life will operate separately from Sun Life Financial Indonesia, which will continue to focus on delivering lifetime financial security for its customers. 

Dato’ Sri Nazir Razak, CIMB Group chief executive, said the acquisition was worth $22.5 million.

“In the ownership structure of CIMB Sun Life after the transaction, 49 percent will be owned by Sun Life Financial, 3.76 percent will be owned by CIMB Niaga, and 47.2 will be owned by CIMB Group,” he said. 

He added that once the agreement was completed, there would be commitment from both parties to increase the capital of the joint venture to grow the business. 

Razak also said CIMB Sun Life was planned to be formally launched later this year. 

CIMB Niaga president director Arwin Rasyid said that under the agreement, Sun Life Financial would act as the insurance product manufacturer, while CIMB Niaga would sell the products. 

He added the marketing strategy for the new products would be achieved through cross-selling and bundling with CIMB Niaga’s existing products. 

“Insurance prospects are still good this year. Indonesia has an average 50 percent growth in the insurance market and will keep growing.” 

The Swiss Re Sigma Report shows the Indonesian insurance market recorded total premiums of $4.7 billion in 2007, or growth of 67 percent — the fastest in Asia. 

But Indonesia’s current insurance premiums only account for 1 percent of the country’s GDP.

CIMB Group is owned by Bumiputra-Commerce Holdings Bhd, which is listed on Bursa Malaysia with a market capitalization of some $6 billion. 

CIMB Group holds a controlling share ownership of 77.75 percent of Bank CIMB Niaga. 

CIMB Niaga stems from the merger between Bank Niaga and Bank Lippo, owned indirectly by Malaysia-based Khazanah Nasional Berhad, which owns most shares of CIMB Group. (fmb)