Not enough cars: PT Astra International president director Prijono Sugiarto (center), accompanied by the companyâs chief of corporate communications Pongki Pamungkas (right) and head of public relations Yulian Warman (left) during a visit to The Jakarta Post on Friday
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Diversified conglomerate Astra International (ASII) expects the operation of the company's new life insurance unit, Astra Aviva Life, to support the company's efforts to increase the earning contribution from the non-automotive segment.
Astra president director Prijono Sugiarto said in Jakarta on Friday that he hoped with the new insurance division, the non-automotive segment would make a greater contribution to the company's consolidated earnings.
'Thirteen years ago, our business was 89 percent dominated by the automotive segment, but now it is more balanced with 50 percent each [automotive and non-automotive],' he said during his visit to The Jakarta Post's office on Friday.
The life insurance business in the country is promising, given the as yet low penetration rate, he said. 'We have a great opportunity in this because insurance penetration in Indonesia is still low,' he added.
As previously reported, Astra signed a partnership agreement in January with British life insurer Aviva plc to form a joint venture, Astra Aviva Life, which is equally owned by the two companies.
Astra Aviva plans to officially launch its first insurance products between the third and fourth quarters of this year. The company is waiting for approval from the Financial Services Authority (OJK).
Prijono said that Astra Aviva would benefit from Astra's wide network for its life insurance product sales. 'For example, we can market the products using FIF [Federal International Finance] and branches of PermataBank, among other options,' he said.
According to FIF's latest annual report, the company ' which is Astra's motorcycle financing subsidiary ' had 169 branches nationwide at the end of 2013, while Permata's report shows that it had 312 branch offices as of December.
Besides Astra Aviva, FIF and Permata, Astra has several other major subsidiaries in the non-automotive segment, namely heavy equipment distributor United Tractors (UNTR), palm oil producer Astra Agro Lestari (AALI) and general insurance firm Asuransi Astra Buana.
In the first quarter of 2014, Astra reported that it booked Rp 49.82 trillion (US$4.31 billion) in total revenues, up 6.7 percent from a year ago. The non-automotive segment contributed to 46.1 percent of the revenue figure, most of which was generated by its heavy equipment and mining divisions.
During the same period, Astra's bottom line increased by 9.7 percent to reach Rp 4.73 trillion. A big chunk of the profits was contributed by the automotive segment.
Meanwhile, Prijono said that Astra was looking to complete the construction of its Kertosono-Mojokerto toll road in Surabaya, East Java, before year-end. It acquired the road's concession rights in 2011 and now controls a 95 percent stake in it. When completed, the road will stretch more than 40.5 kilometers.
Similar to life insurance, toll roads were a non-automotive business segment that Astra considered attractive, according to Prijono. 'Our seriousness in developing the segment can be seen in our total consolidated capital expenditure for this year, which has risen to Rp 20 trillion from Rp 13 trillion in 2013,' he said, adding that it would look for other opportunities, including becoming an independent power producer.
Astra had Rp 222.39 trillion in total assets as of March. Its liabilities reached Rp 109.29 trillion and its equities amounted to Rp 113.1 trillion.
Data from the Indonesia Stock Exchange (IDX) shows that Astra's shares stayed at Rp 7,475 apiece on Friday, unchanged from the previous day.
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