Diversified conglomerate PT Astra International (ASII) is expanding its business base to life insurance, after inking a joint venture accord with UK-based insurer Aviva plc on Friday.

Astra International president director Prijono Sugiarto and Aviva'€™s group chief executive officer, Mark Wilson, signed the agreement to establish the insurance firm, Astra Aviva Life.

According to a written statement, Astra and Aviva will hold equal possession of the new company, which will focus on marketing life insurance in Indonesia.

The joint venture was expected to start commercial operations later this year, the statement read without providing further details.

Pending approval from the Financial Services Authority (OJK,) the new firm will be the preferred provider of a range of life insurance products to Astra and its subsidiaries, and it will also market its products to the wider market through various channels, including Astra'€™s firms such as Bank Permata.

Prijono said the new insurer was Astra'€™s strategy to diversify its business and to explore Indonesia'€™s emerging insurance market, which offers substantial opportunities for new insurance companies.

'€œAstra Aviva Life has the potential to compete in Indonesia'€™s insurance market. With Astra'€™s competence in insurance, Astra Aviva Life is expected to offer added value to our customers, employees and stakeholders,'€ Prijono said in the statement.

Wilson said that partnering with Astra was a good choice to realize the opportunities in the domestic market.

'€œAstra is a hugely respected household name in Indonesia and the ideal partner for Aviva in one of the world'€™s fastest-growing insurance markets. This joint venture creates a compelling growth opportunity, underlines our commitment to Asia and supports our strategy of cash flow plus growth,'€ he said.

The statement also said the establishment of the joint venture had been triggered by the low level of insurance penetration and rapidly expanding middle class in the country.

Global re-insurer Swiss Re estimates that insurance penetration in Indonesia only amounts to 1.77 percent of gross domestic product (GDP); far below Singapore'€™s 6.03 percent and Malaysia'€™s 4.8 percent.

Industry statistics recorded 10 percent growth for gross premiums for both life and general insurance in the first half of 2013. During the 2002-2012 period, life insurance premiums grew at a compound annual growth rate of 25 percent.

Astra currently operates one general insurance company, PT Asuransi Astra Buana, which primarily focuses on automotive insurance.

Astra'€™s latest financial report showed that the firm booked Rp 13.5 trillion (US$1.18 billion) in total net profits from all segments between January and September 2013, down 8 percent from the same period in 2012. The fall in net profits was attributed to a slowdown in the firm'€™s automotive sector due to constraints in its competition, and global economic conditions.

Aviva '€” which was established more than 300 years ago '€” provides life, general and health insurance and asset management services to 34 million customers worldwide. It has £311 billion ($494 billion) worth of assets under management and operates in 17 markets internationally.

Aviva'€™s portfolio of businesses '€” according to the statement '€” is grouped into three areas, which comprise cash flow generators from the UK, France and Canada; turnaround businesses in Italy, Spain and Ireland, and future cash flow generators in Poland, Turkey, Singapore, Indonesia and China.

Astra'€™s shares, traded under the code ASII on the Indonesia Stock Exchange (IDX), closed at Rp 6,925 apiece on Friday, down 5.14 percent from the previous day.

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