Long-term investment funds held by
life insurance companies in Indonesia have increased
significantly, but their investment income has dropped due to falling interest
rates, prompting many of them to shift their investments to mutual funds, an
Yuwono, chairman of the Indonesian Life Insurance Association (AAJI), said on Wednesday that
despite sluggish economic growth last year, insurance
companies saw expansions and received more revenue as well as managed more
He predicted that
firms would continue to enjoy robust growth in terms of revenue and investment
money due to the largely untapped market.
Total revenue of the country's 49
life insurance firms last year increased to Rp 12.5
trillion from Rp 9.5 trillion in 2001.
Investment money managed by
insurance companies soared by 22 percent last year to Rp 20.24 trillion from Rp
16.7 trillion the previous year.
Investment revenue, however, dropped by 24 percent from
Rp 1.34 trillion to Rp 1.02 trillion due to falling interest rates.
Most of the investment money was put in fixed income
time deposits and securities.
Of the total investment money last year, 37 percent or
Rp 7.46 trillion was put in time deposits, 38 percent or Rp 7.53 trillion was in
fixed income securities, 8 percent or Rp 1.6 trillion in venture capital, 3
percent or Rp 550 million in Bank Indonesia promissory notes (SBI) and 5 percent
or Rp 1.07 percent in property.
However, the steady decline of time deposit rates,
which currently averages 12 percent, prompted many life insurance companies to shift their investment
portfolio to mutual funds from time deposits.
Soesanto, commissioner of Wana Artha Life,
predicted that investment in time deposits would be down to 25 percent this year
from 37 percent last year.
He predicated that many more firms would move to mutual
funds, which currently offer an annual return of about 13 percent to 14 percent,
and this income, unlike income from bank deposits, was not subject to tax.
Time deposits have been a favorite long-term investment
option for the insurance industry. While time deposit
interest rates decrease, interest earned is still subject to 20 percent tax.
Elsewhere, Angger predicted that with market expansion,
local life insurance firms
would continue to grow at least by 25 percent in terms of revenue.
The total revenue includes revenue from premium
collection and investment yields.
companies have been aggressively penetrating the market over the past five
years. In addition, the market is still very much open to expansion," he
The total premium revenue from the 49
life insurance companies last year rose 42 percent to Rp
11.2 million from Rp 7.9 million in 2001. The figures consist of Rp 5.7 trillion
from new business and Rp 5.46 trillion from renewals.