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Despite delay, Bumiputera may still get fresh funds
Life insurer PT Asuransi Jiwa Bumiputera (AJB) expects to get Rp 2 trillion (US$149
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ife insurer PT Asuransi Jiwa Bumiputera (AJB) expects to get Rp 2 trillion (US$149.9 million) in fresh funds soon for business development to fulfill its funding promise to Asuransi Jiwa Bersama Bumiputera (AJBB).
AJB anticipated receiving the injection in March. However, the move has not yet materialized on account of the pending administrative process at the Financial Services Authority (OJK).
AJB was established as part of a complicated series of actions to rescue Indonesia’s oldest insurer, AJBB, which ran into financial woes a few years ago as its liabilities and claim payments were much higher than its assets and premium revenues.
AJB is now part of holding company PT Bumiputera 1912, fully owned by PT Pacific Multi Investama, a subsidiary of publicly listed investment and textile company PT Evergreen Invesco, established by the statutory management that now controls AJBB in February to restructure the insurer.
Evergreen, now PT Bumiputera Investasi Indonesia (BII), plans to hold a rights issue in June to raise funds for such a capital injection, said Adhie M. Massardi, a member of the statutory management.
“The [capital injection] program by Evergreen continues,” he told The Jakarta Post over the phone Thursday. “We have asked the firm [Evergreen] to inject up to Rp 2 trillion in capital to allow AJB to develop its business more easily and therefore meet its commitment to transfer 40 percent of its gross profit to AJBB.”
Under the restructuring scheme, AJB, which acts as the claim and premium administrator of AJBB, is obliged to pay the profit sharing during a minimum 12-year period.
AJBB is in “runoff” mode, meaning that it cannot sell new policies and instead, takes payment of current policy premiums and transfers benefits of existing policies.
Adhi, however, said he was not fully aware of the value of the rights issue or details of the capital injection, such as whether it would be carried out in stages or through one-time payment.
“It seems like they [Evergreen] are preparing for the rights issue so that it can be carried out in May or June,” he said, adding that he also did not know the proposed investors.
Previously, the statutory management said a consortium led by tycoon Erick Thohir was ready to inject funds into AJB through the rights issue.
Erick, however, did not immediately respond to the Post’s attempts to seek his confirmation and comment.
Separately, AJB president director Wiroyo Karsono said the prospective investors would remain the same, pointing out the consortium.
Despite the previous delay, the capital injection will be executed, he added.
“The first stage of injection will be in June or July,” Wiroyo said. “It will be done in stages until it reaches Rp 2 trillion.”
With the fresh funds, AJB expects to increase its risk-based capital to above 2,000 percent and eventually 5,000 percent, a step that will enable it to develop its business and invest in an organizational system and infrastructure.
AJB, through inheritance from AJBB, has more than 6.5 million policy holders across the archipelago. Its new premiums amounted to Rp 1 trillion last year and was projected to grow by between 20 percent and 25 percent per year to fulfill its profit-sharing commitment.
During its first month of operations, AJB booked around Rp 50 billion in new premiums each month from between 10,000 and 12,000 new policies.
“We haven’t set a material target this year because what’s important now is [going through] the transition and building a strong [company] foundation, a system, procedures and human resources, so that we can grow faster next year,” Wiroyo said.
