AIA & BCA Bancassurance

PT Bank Central Asia, Indonesia’s largest bank by market value, is considering renegotiating the terms of its insurance partnership with AIA Group Ltd. after seeing recent billion-dollar distribution deals in Asia, people with knowledge of the matter said.

The $24.5 billion lender is working with an adviser to find ways to get more money out of its deal with Hong Kong-based AIA, according to the people, who asked not to be identified as the talks are private. BCA wants to ensure the terms of its agreement to distribute AIA products through its branches reflect valuations of other lenders’ recent bancassurance transactions, the people said.

Southeast Asian lenders have been exploring lucrative deals giving foreign insurers exclusive rights to distribute products through their banking networks. Singapore’s DBS Group Holdings Ltd. agreed last year to sell the rights to distribute insurance through its branches to Manulife Financial Corp. for S$1.6 billion ($1.2 billion), while Citigroup picked AIA in 2013 to sell life insurance through its Asia Pacific branch network after a competitive bidding process.

BCA shares rose 0.4 percent to 13,075 rupiah at 9:51 a.m. Wednesday in Jakarta, bucking a 0.2 percent decline in Indonesia’s benchmark stock index. AIA fell 0.4 percent in Hong Kong trading.
Jakarta-based BCA, backed by clove-cigarette tycoons Budi and Michael Hartono, has a 15-year partnership with AIA that runs through 2021, President Director Jahja Setiaatmadja said in a mobile-phone text message. The lender, which has more than 1,100 branches, is reviewing its agreement with AIA “to strengthen the current partnership,” Setiaatmadja said.

Foreign insurers have been drawn to Southeast Asia as increasing household wealth leads to rising demand for life coverage. Thailand’s Siam Commercial Bank Pcl is exploring bringing in a foreign partner for its life insurance operations, which could fetch a valuation of at least $3 billion, people familiar with the matter said earlier this week.

BCA said in December it’s reining in its lending plans for this year as the economy slows and bad debt increases. The bank expects its loans to grow by less than 10 percent in 2016, slower than the 12 percent growth seen in 2015, Setiaatmadja said at the time.

AIA, set up by an American businessman in Shanghai more than 90 years ago, has a presence in 18 markets across Asia Pacific, its annual report shows. The insurer, which entered Indonesia in 1984, said it increased profitable market share there last year, according to a February company presentation.

Farindo Investments (Mauritius) Ltd., a holding company of the billionaire Hartono brothers, is BCA’s largest investor with a 47.2 percent stake, data compiled by Bloomberg show. Budi Hartono is Indonesia’s second-richest man with a net worth of $7.6 billion.