Sinar Mas, LG establish insurance firm

JAKARTA (JP): PT Asuransi Sinar Mas, an insurance arm of the widely diversified Sinar Mas Group, and South Korea's LG Insurance Corporation Ltd agreed yesterday to jointly operate a general insurance company.

Indra Widjaya, the chief commissioner of PT Asuransi Sinar Mas, said the insurance company, which would be named PT LG Simas General Insurance, would cover losses in property, marine and cargo services.

"The company will provide insurance services to companies operating in Korea and Korean companies operating in Indonesia," he said after the signing of the joint venture agreement.

The agreement was signed by Asuransi Sinar Mas president Kornelius Simanjuntak and LG Insurance Corporation executive Kwang Taek Kim.

Indra, who is also president of publicly listed Bank Internasional Indonesia (BII), said Asuransi Sinar Mas would own a 30 percent stake in the new insurance firm while its Korean partner would hold the remaining 70 percent.

He said the company would start its business here with paid-in capital of Rp 15 billion (US$5 million).

He said the company was now waiting for approval from the Ministry of Finance to start its operation.

PT Asuransi Sinar Mas, established in 1985, booked a premium income of Rp 154 billion and net income of Rp 17 billion in 1996.

"The company expects a total net income of Rp 30 billion this year," Indra said.

LG Insurance Corporation, established in Korea in 1959, has a global network, with branches in the U.S., Britain, China, Japan, Southeast Asia and Eastern Europe.

The company's premium income was expected to increase from US$1.83 billion in 1996 to about $2.3 billion this year.

Asked about the impact of the currency crisis in the country, Indra said that insurance companies like PT Asuransi Sinar Mas, would not have a problem with the currency turmoil because they placed their funds in banks.

"Actually the insurance companies benefit from the rupiah's depreciation," he said. He did not elaborate.

However, he said, the insurance companies which did not hedge their dollar-denominated debt would suffer from the rupiah's depreciation against the U.S. dollar.

Currency speculation, which led to the de facto devaluation of Thai baht in early July, spilled over to other Southeast Asian countries. Since then, the Indonesia rupiah has declined by over 35 percent against the dollar. (aly)