Bank Mandiri, AXA to set up a joint venture

Arya Abhiseka The Jakarta Post Jakarta

Giant state-owned Bank Mandiri and insurance group AXA Asia Pacific Holdings signed on Thursday a memorandum of understanding to establish a joint venture that would allow the latter to market its insurance products via the former's banking network here.

The new joint venture, to be called AXA-Mandiri Life, will be ready to operate by the end of July this year.

Mark Wilson, an executive of AXA Asia Pacific, said, during a media conference here, that Indonesia provided huge scope for the insurance industry to grow, particularly with its large population of about 220 million.

"The insurance industry (in the region) is growing at about 33 percent per annum and Indonesia still has a low penetration of only three percent," he said.

In comparison, Hong Kong has an insurance penetration rate of about 65 percent, while in Taiwan it is 96 percent.

Some US$10 million will be invested in the new joint venture over the next three years.

AXA will control about 51 percent of the new company, while the remainder will be held by Bank Mandiri.

Wilson explained that the new company would offer various insurance products such as life insurance, accident and health insurance, education plans and endowments.

He was optimistic that Bank Mandiri's extensive network here would bode well for the new venture.

Bank Mandiri, the country's largest bank, has about 6.7 million customers and some 682 branch offices across the country.

Bank Mandiri president E.C.W. Neloe said that the bank's unaudited net profit in 2002 was Rp 3.4 trillion, up 26 percent from Rp 2.7 trillion a year earlier.

The bank had Rp 34 trillion in new loans during the year, compared with Rp 12 trillion in 2001.

He also said that Bank Mandiri planned to sell a 30 percent stake via an initial public offering (IPO) in March or April this year.

The bank was supposed to complete the IPO late last year, but it was delayed for a variety of reasons, including the Oct. 12 Bali bombings that killed over 190 people, mostly foreign tourists.