BRI seeks to acquire Jiwasraya

JAKARTA. State-owned lender Bank Rakyat Indonesia (BRI) is reportedly on its way to acquiring state-owned life insurer Jiwasraya in an attempt to expand its business.

Sources familiar with the issue said that BRI was “very interested” in making Jiwasraya a part of its group because the bank did not have its own life insurance unit, unlike fellow state lenders Bank Mandiri and Bank Negara Indonesia (BNI).

According to the sources, initial talks have already begun on the planned acquisition, which is also part of a consolidation blueprint prepared by the State-Owned Enterprises Ministry.

Under the blueprint, various state-owned enterprises in similar businesses will be merged or joined together in one holding to boost competitiveness and efficiency.

One successful example is the creation of Semen Indonesia, a cement holding company that supervises state-owned cement manufacturers; Semen Gresik, Semen Tonasa and Semen Padang.

In the financial sector, the ministry is preparing several mergers and acquisitions including the integration of Jiwasraya into BRI.

BRI president director Sofyan Basyir previously acknowledged that the lender, which holds the largest share in the domestic micro and small loan markets, was currently involved in a takeover of a large, local life insurer.

At the moment, the top-10 largest life insurance firms are dominated by international joint ventures and Jiwasraya is the only local company on the list.

Sofyan said that the acquired insurer would then be merged with BRIngin Life, a BRI-affiliated company. BRIngin, currently controlled by BRI’s pension fund, is also an acquisition target.

“We want to merge the two to create a big life insurance company,” Sofyan said.

Talks on BRIngin’s acquisition are ongoing. BRI has allocated around Rp 3 trillion (US$254.32 million) for various acquisition purposes in its banking business plan. Besides insurance, the bank is also looking to have its own securities firm.

As of now, BRI has only three subsidiaries, namely sharia lender BRISyariah, agriculture-focused lender BRI Agro and remittance company BRI Remittance Co. Ltd. in Hong Kong.

On a previous occasion, Gatot Trihargo, the ministry’s deputy for business services, said that Jiwasraya would be a good complement to BRI’s operations. “Their businesses are compatible and both have large customer bases,” he said.

Meanwhile, State-Owned Enterprises Minister Dahlan Iskan confirmed on Thursday that the ministry was currently formulating a new plan for Jiwasraya. He also lauded the firm for its latest financial achievement.

“It managed to pay off Rp 7.6 trillion in debt without government help,” he said. Jiwasraya was entangled in debt to its policy holders from the Indonesia financial crisis of 1997-1998.

As improvements were made, Jiwasraya was able to post Rp 17 trillion in total assets in 2013 and booked Rp 5.77 trillion in premiums throughout the year.

Contacted separately, Airlangga Hartarto, chairman of the House of Representatives’ Commission VI, said that the State-Owned Enterprises Ministry would have to gain approval from the House before realizing the consolidation plan.

Approval is needed because both BRI and Jiwasraya are owned by the government and a consolidation will result in the divestment of the government’s shares in Jiwasraya.

“The [consolidation between BRI and Jiwasraya] idea is good and there is synergy between them,” he said. (Khoirul Amin and Tassia Sipahutar)