Great Eastern will be looking at new strategies to grow its life insurance business in Indonesia, with a focus on new bancassurance opportunities and alternative distribution channels, said its Group CEO Khor Hock Seng yesterday.
Mr Khor, who was speaking at the insurer’s 1H2017 results briefing in Singapore, said that the group's life business in Indonesia was growing quite well, albeit from a smaller base. “It’s not profitable yet though growing in sales…but our focus there is not profit generation, but new business growth and embedded value,” he said, noting that it is a high potential market.
In Indonesia, Great Eastern operates in the life insurance market via its subsidiary PT Great Eastern Life Indonesia with bancassurance as the sole distribution channel, working with Bank OCBC NISP, which is owned and managed by Singapore's OCBC Bank.
The insurer’s emerging markets segment, which consists of its Indonesia, Vietnam and Brunei business, made up about S$4.8 million (US$3.53 million) of new sales in 2Q2017—merely 2% of the S$255.7 million total, of which Singapore (S$167.1 million) and Malaysia (S$83.8 million) predominate.
“We will be looking at new bank tie-ups in Indonesia. At the same time we will be exploring more channels such as affinity sales,” he said, referring to the practice of selling insurance through groups such as business or professional associations. He clarified however, that there are currently no plans to diversify bancassurance from OCBC, which owns a majority stake in Great Eastern, in other markets.
To increase penetration with the affinity base, he added that Great Eastern would consider a direct sales force channel. “And to complement that, we will be looking at some other direct or digital channels,” he said.
Great Eastern is the largest insurance group in Singapore and Malaysia in terms of assets and market share. Its S$279.5 million in net profit for 1H2017 was more than double last year's S$102.2 million over the same period.
No mention was made yesterday about Great Eastern's shareholdings in its Malaysian unit, that is, whether the group would be reducing its stake from 100% currently to 70% at most.
Foreign shareholders of local insurers have until the end of June 2018 to reduce their holdings in local firms to at most 70%. Reuters reported that Bank Negara sent letters to wholly owned insurers last month requesting their foreign parents to reduce their stakes in line with regulations for domestically incorporated insurers.
The 70% foreign ownership of Malaysian insurers was set in 2009. Higher ownership levels could be allowed on a case-by-case basis for companies that can facilitate consolidation and rationalisation of the insurance industry, according to a statement at the time. However, Bank Negara Governor Muhammad Ibrahim warned last year that foreign insurers “need to contribute more to justify their presence” in the Malaysian market.