The Jakarta Post
As a major global company, London-based insurer Aviva plc has continuously sought new markets to develop its business. In Indonesia, the company recently joined forces with diversified conglomerate PT Astra International and launched PT Astra Aviva Life ' a joint venture with equal ownership ' to penetrate the local insurance market.
The Jakarta Post's Tassia Sipahutar sat with Aviva group CEO Mark Wilson ' accompanied by Astra Life president director Philip Willcock and Astra Life vice president director Auddie A. Wiranata ' to discuss its business strategy amid the current economic slowdown and the insurer's role in infrastructure development. Below are the edited excerpts of the interview.
Question: Let's talk about Asia. It is the third-biggest market for you, right?
Answer: Yes, it is the third biggest. There are four big growth markets, sort of emerging markets, for us; Indonesia, China, Turkey and Poland. All of those markets have similar characteristics. They have low insurance penetration. So Asia is a key focus for us. I put my global head of life base in Asia. That was a deliberate signal.
But the economy is slowing down, including in Asia. How do you cope with that and what's your strategy?
That's true, but insurance is not like most markets. When people undergo a little bit of economic crisis, they realize they have to save more, protect their family. So in a lot of these markets, we actually go up.
Secondly, from where we are, it's easier for us to pick up market share. Last year in China, we grew 100 percent. A year before that, we grew 100 percent as well. So we picked up a lot of market share.
And this joint venture has only just started. This year alone, we're looking at 300 percent growth, but from a small base. We want to keep on doing that and we think we can. This is the market where we want to invest our money.
How will you boost growth in your Indonesian joint venture with Astra?
First of all, this is an ideal market. It's got low insurance penetration and an emerging middle class. So the demographics of the market suit.
Second, we have a fabulous joint venture partner. If you had to pick a joint venture partner, you might as well pick the biggest company in the country. They picked the largest UK insurance group.
When we first met, it just sort of worked. The values are the same. The companies seem to work together well and that isn't always the case.
You've got distribution from Bank Permata and you've got all the other distribution they [Astra] have with the automotive companies and finance companies. They've got a huge client base and huge staff base.
So you've got all of that. There's massive growth you can get before you even start doing anything else. We want to be among the top-five insurance providers here.
What do you need to watch out for in Indonesia?
I think a deterioration in commodity prices would economically be more difficult, for sure, but that doesn't hurt our business so much because it's counter-cyclical. I don't think our growth trajectory is going to be impacted too much.
I can handle volatility economically. That volatility to me is fine. We had economic volatility in Turkey this year. No problem. When there's economic volatility, I can handle that. What I want is stability in government and policy broadly.
I think broadly Indonesia is going the right way. There's only minor volatility. If you look back in another five years, you wouldn't even think now is volatile.
At the same time, I started talking to these guys and said, 'I want to invest in Indonesia.' I've always been a big fan of Indonesia. It's almost impossible for Indonesia not to work.
I know Asia well. I said to my team today, 'You don't realize how lucky you are.' If you're complaining because of oil prices and commodity prices and palm oil, I get that. There's been devaluation in the currency, I get that as well, but you'll get through that.
I do think your infrastructure needs to improve, but that will happen. It will create investment and create jobs. I'm more bullish than most Indonesian people are. I'm more positive about Indonesia economically.
Does that mean Aviva sees infrastructure as a huge investment?
If you ever look around the world, a lot of the infrastructure is funded by insurance companies. A number of ways to do that is that either you invest in infrastructure or in the government's long-term bonds. We've often done that around the world.
We've set up a joint venture with a partner that builds infrastructure. It is Astra's core competency as well.
I would see us in the future as being part of that, for sure, as well as other companies. Typically insurance companies are better at it than banks. The reason being banks' liabilities are too short, while ours are typically longer.