This (income tax) appears high but is due to the significant write-back from unrealized losses in our investment portfolio, and impact to our investment-linked reserve given declining equity prices," said Kevin Holmgren, president director at PT Prudential, in an interview. Overall, the life insurer reported a 27.5% rise in total premiums to 7.02 trillion rupiahs, and new business premiums jumped 15.8% to 4.14 trillion rupiahs in 2008. Holmgren said the company's positive performance was a result of new customers supported by "strong" agency force.
Takaful premiums reached 844 billion rupiahs in 2008, of which 821 billion rupiahs came from new business. "The Sharia business marked another exceptional year which has contributed to the overall financial performance of Prudential Indonesia," said Holmgren.
Launched in September 2007, takaful business accounted for nearly 25% of PT Prudential's total business in Indonesia based on annualized premium equivalent by the end of 2008. Takaful premiums contributed about 20% of PT Prudential's new business premiums last year.
"We believe these numbers place us as the largest takaful provider in Indonesia. And with Indonesia's significant Muslim population, largest in the world, we are optimistic about the potential future growth of Sharia products within our business," Holmgren said.
In Indonesia, PT Prudential offers regular and single premium investment-linked products which feature three Sharia-based underlying investment funds. "We continue to develop and innovate Sharia products to meet our customers' needs," said Holmgren.
For product development, the life insurer said it will focus on long-term regular premium protection products which encompass conventional and Sharia unit-linked range of products, and on developing health and crisis cover riders.
Investment-linked products, which accounts for 95% of PT Prudential's total sales, are most popular in Indonesia, particularly a regular premium product.
Indonesia's low insurance penetration rate makes potential future growth remain "sizable," said Holmgren.
Last year, PT Prudential saw 52.6% growth in its customer base to more than 720,000, supported by large agency distribution. The insurer's agency force grew 43% to 57,000 agents and it is now the company's second-largest force in Asia after India.
In spite of the impact of the global financial crisis on bancassurance sales in many Asian countries, PT Prudential reported a 320% jump in bancassurance premium to 253 billion rupiahs in 2008.
Currently, Holmgren said PT Prudential's bancassurance operations are "small but are growing as we continue to expand and focus on this channel." Bancassurance accounted for 5% of total sales, with the remaining 95% from agency distribution.
In partnership with Citibank, UOB Buana, Standard Chartered, Bank Rakyat Indonesia and Danamon, PT Prudential is using a multichannel distribution strategy to gain market presence in Indonesia.
PT Prudential said in a statement Indonesia was the "strongest" market among Prudential's business units in Asia and it was also one of the "biggest contributors" to the group's business in the region last year.
Established in 1995, PT Prudential had seven sales offices and 161 agency offices across Indonesia by the end of 2008. The company's risk-based capital solvency stood at 206% in 2008.
--Tradingmarkets.com
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