Former clients of PT Asuransi Jiwa Bakrie Life have threatened to file a bankruptcy lawsuit if the company continues to delay the return of investments worth Rp 270 billion. (US$28.18 million).
Representatives from the Bakrie Life Crisis Center, an association set up by the company’s ex-clients, met with Bakrie Life management and the Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) at the Bapepam-LK office in Jakarta on Wednesday.
The meeting was the 18th they had attended since the agency initiated talks last February, Freddy Kusharyanto of the crisis center said. “But we have not seen any improvement in the situation so far,” he added.
The case erupted in 2008 when Bakrie Life, part of the Bakrie Group business empire, failed to return around Rp 360 billion invested by about 250 clients in its insurance-based product, Diamond Investa. The company blamed the global economic crisis as the main factor behind the failure.
According to Freddy, Bakrie Life had initially said it would allocate 90 percent of the investment funds in bonds, while the rest would be earmarked in deposits and stocks of 5 percent each.
However, he said, the company allocated 70 percent of the funds in stocks, with more than half of them channeled into stocks belonging to Bakrie Group firms. “That breached the company’s portfolio,” he said.
As of 2011, Bakrie Life had only paid 15 percent of the principal installments to its ex-clients.
Bakrie Life’s president director, Timoer Soetanto, said the former clients had every right to file the bankruptcy suit against his company. He added, however, that he was certain the plan did not represent all the ex-clients’ wishes.
Timoer said the company had prepared some of its land assets as part of its repayment program, but declined to reveal their values as it was currently conducting assessments. They are expected to be completed next month.
Bakrie Life currently has more than Rp 400 billion in liabilities, including the Rp 270 billion it owes to the Diamond Investa clients, according to Timoer. Being part of the Bakrie Group, he said it was impossible for his company to neglect its responsibilities.
“Yes, it has been four years and we have not paid off our debts, but it is not unusual to have liquidity problems in business. At least we are showing our willingness to resolve the matter,” he added.
The bankruptcy suit, if filed by Bakrie Life’s ex-clients, will come as yet another blow to the Bakrie Group, which has recently come under scrutiny following financial issues within its companies.
Of the group’s 10 companies listed on the Indonesia Stock Exchange (IDX), only three firms were on firm ground last week. The group’s mounting debts and falling commodity prices have contributed to a drop in share price.
Contacted separately, Bapepam-LK insurance bureau head Isa Rachmatarwata said Bakrie Life would not be the first insurance company to be brought to the commercial court if the former clients proceeded with their plan.
He pointed out the cases of Canadian life insurance firm PT Asuransi Jiwa Manulife and British-based PT Prudential Life Insurance.
Manulife and Prudential were declared bankrupt by the Jakarta Commercial Court in 2002 and 2004, respectively, following legal disputes. The Supreme Court later reversed both decisions.
To protect insurance clients’ funds in the future, Bapepam would be developing a plan to establish a deposit insurance agency, similar to the one existing in the banking sector, Isa said. (tas)