Local insurance firms perform better than foreign ones

Local insurance companies perform better than many foreign-owned companies in Indonesia, a study released by a research company on Thursday in Jakarta shows.

The study, prepared by the Insurance Media Research Institute (LRMA), was made based on the financial reports of 135 companies - 88 general insurance, 43 life insurance and four reinsurance companies - excluding those that published their reports after May 15, those with risk-based capital lower than 120 percent and companies for specific purposes like PT Jamsostek and Bumiputera.

The list, except for the reinsurance group, is further divided based on the capital value into four categories by capital volume: more than Rp 250 billion, between Rp 100-250 billion, between Rp 50-100 billion and below Rp 50 billion.

Best performers in each of the capital categories in the life insurance industry are all local companies: PT Asuransi Jiwa Sinarmas, PT Asuransi Mega Life, PT Asuransi Bumi Asih and PT Multicor Life Indonesia respectively for each of the main capital categories.

Local companies also rule in the general insurance list under the same capital groupings: PT Asuransi Adira Dinamika, PT Asuransi Jaya Proteksi, PT Asuransi Umum Mega, and PT Asuransi Asoka Mas, respectively.

Frans Sahusilawane, the president director of the national reinsurer for catastrophic risks company Maipark, said the research shows that local ownership and management teams have shown superior performance compared to the foreign players, especially in the general insurance industry.

Overall, the report points out, the insurance industry has made a profit. The life insurance industry achieved an overall growth in profits of 20 percent to Rp 2.83 trillion in 2007 compared to 2006. The general insurance industry, despite making a smaller profit at Rp 60.41 billion last year, still registered a 47 percent growth in profits.

"General insurance companies have lower capital but have higher return-on-investment ratio because of the slow yielding nature of life insurance. Life insurance usually is for long term while general insurance is renewable in a year or two," Hotbonar Sinaga, the president director of the government-owned insurance company PT Jamsostek, said.

In 2008, the industry will face more challenges. Hotbonar said the life insurance industry, which has seen the rising popularity of unit-linked products in the past decade, may be pressured by higher bank interest rates and uncertainty in the stock markets.

"But these conditions should be temporary and return to normal as soon as the market stabilizes," he added.

Frans, on the other hand, predicts a growth in the general insurance market provided "the companies place proper price tags" on their products.

For smaller companies, there is an additional pressure as a newly introduced presidential decree requires all insurance companies to have minimum capital reserves of Rp 40 billion by the end of 2008 and Rp 100 billion by 2010. There are 11 general insurance and 26 life insurance companies that are underfunded in the context of the new rules.

"There is strong will among them to keep ownership local rather than go to overseas buyers. It is a good time to buy locally because these companies are pressured to sell even at lower prices to comply with the deadline," Frans said.

http://old.thejakartapost.com/detailbusiness.asp?fileid=20080613.L01&irec=0

Business Financial Services

Local insurance firms perform better than foreign ones