Marking its foray into Southeast Asia’s largest economy, US-based Prudential Financial Inc has acquired a 49 per cent stake in CT Corp’s insurance business, Asuransi Jiwa Mega Indonesia (Mega Jiwa), in what is touted as the largest deal in this sector “in a long time.”
Financial terms of the deal were not disclosed.
“Prudential Financial’s strong products and operational capabilities combined with CT Corp’s extensive presence and deep understanding of the local market will help provide better protection to our people and in turn, strengthen the social and economic potential of Indonesia,” Chairul Tanjung, chairman and founder of CT Corp, said addressing reporters in Jakarta.
Prudential Financial, through its subsidiary Pruco Life Insurance, will own the minority stake in Mega Jiwa, while CT Corp will continue to be the majority shareholder with a 51 per cent stake. The former will dominate Mega Jiwa’s director board with three representatives, while the latter will command the commissioner board. Mega Jiwa will then develop a new brand to better represent the joint venture.
Prudential Financial’s non-affiliated rival, UK-based Prudential Plc, had been the first to enter Indonesia, and has been making a strong foothold in the local insurance market since 1995. The two companies, however, agreed to not use the same name in countries that they both operate in. Thus Prudential Financial’s new JV will be renamed.
Prudential Financial vice president Charles Lowrey said: “We are pleased to partner with CT Corp, which controls one of Indonesia’s largest and most prominent business groups, as we enter this market for the first time… The partnership advances our business growth strategy by expanding our international footprint into an attractive market with long-term growth potential, low insurance penetration and a well-developed regulatory environment.”
The New Jersey-based company manages more than $1 trillion in assets, and has presence in 40 countries, including Japan, South Korea, Taiwan and China.
Prudential Financial picked CT Corp as its first and only partner in the Southeast Asia’s largest economy due to the conglomerate’s customer reach and strong brand presence, it said. CT Corp’s strongest business has been retail and consumer, with increasing investments in other sectors such as financial services, media, lifestyle and entertainment, natural resources, and, more recently, real estate.
The group manages more than $10 billion in assets and employs over 100,000 people.
Indonesia has the third largest population in Asia and the fourth largest population globally with average annual GDP growth of 5.3 per cent over the last 15 years.
Life insurance premiums in the country are projected to grow at a compounded annual growth rate of 13 per cent until 2020. However, penetration remains relatively low at 1.3 per cent of GDP – one third the penetration in Malaysia and half the penetration in India.