Prudential taps growing Islamic insurance market in Indonesia
Prudential taps growing Islamic insurance market in Indonesia | Insurance Business Asia
Life & Health
Prudential taps growing Islamic insurance market in Indonesia
Country deemed key growth market for insurance giant
Life & Health
By
Roxanne Libatique
Prudential plc has entered into a long-term partnership with Bank Syariah Indonesia (BSI), aiming to strengthen its presence in the growing Islamic finance market in Indonesia.
The collaboration involves Prudential’s subsidiary, PT Prudential Sharia Life Assurance, becoming BSI’s Syariah life insurance provider starting in early 2025.
BSI is Indonesia’s largest Syariah bank and the sixth-largest bank overall in terms of assets. With over 20 million customers and a network of more than 1,000 branches across the country, BSI provides Prudential with substantial market access.
Indonesia, where around 84% of the population identifies as Muslim, represents one of the largest markets for Islamic financial services in the world.
Prudential’s expansion plans
The partnership is viewed as a key step for Prudential in diversifying its Indonesian operations, which have largely depended on agency distribution channels. It is expected to strengthen the company’s position in the rapidly growing bancassurance market while also tapping into the under-served Syariah insurance sector.
Solmaz Altin, managing director of Prudential’s strategic business group, said the collaboration with Indonesia’s leading Syariah bank allows the company to further its growth plans in a critical market.
“Indonesia is a key growth market for Prudential in ASEAN and this partnership will accelerate our growth ambitions. We look forward to working closely with BSI to support their customers in achieving their savings and protection goals,” he said.
Anil Wadhwani, CEO of Prudential plc, said that the deal aligns with the company’s broader strategy to deepen its footprint in key markets. He noted that the partnership with BSI will allow Prudential to use its expertise in bancassurance to better serve the Indonesian market, enhancing its offerings while continuing its transformation in the region.
“We will deploy our operating experience and product capabilities for our new banking relationship with BSI, further advancing our extensive transformation of our Indonesian business,” he said.
He said that Prudential was focused on sustainable, long-term value creation for customers, partners, and shareholders.
“Our focus is on creating a platform of long-term sustainable value for our customers, our partners, and our shareholders. This in-country transaction aligns with our strategic and financial objectives,” Wadhwani said.
Mixed H1 2024 results for Prudential
The partnership was announced after Prudential released its financial report for the first half of 2024 (H1 2024), showing varying results across different performance indicators.
Adjusted operating profit for the same period was up 9%, reaching $1.54 billion. In addition, the company raised its interim dividend by 9% to 6.84 cents per share.
The insurer has also progressed with its ongoing $2 billion share buyback program, having repurchased 22 million shares by Aug. 22, 2024, for approximately £150 million ($192 million).
However, Prudential’s free surplus ratio saw a decline, dropping to 232% as of June 30, 2024, from 242% at the end of December 2023. The company’s global wealth solutions shareholder capital surplus over GPCR (group capital requirements) was reported at $15.2 billion, with a cover ratio of 282%, down from 295% at the close of the previous year.
Wadhwani reiterated Prudential’s long-term financial targets, which include a compound annual growth rate of 15% to 20% in new business profit and double-digit growth in cash generation by 2027.
He noted that Prudential’s 8% growth in new business profit during the first half of 2024 followed a substantial 47% rise for the full year 2023, which was partly driven by the reopening of Hong Kong’s border with Mainland China.
Wadhwani also highlighted the company’s focus on returning capital to shareholders, evidenced by the ongoing $2 billion share buyback, while also continuing to reinvest in key growth markets.
Prudential’s growth strategy
Prudential said it remains focused on adapting to changing economic conditions and regulatory environments across its core markets, particularly in China.
In Indonesia and Malaysia, the company has implemented repricing measures in its medical insurance segment to address local market trends.
Other markets, including Singapore, Taiwan, and India, demonstrated solid performance during the first half of the year, driven by new product launches and expanded distribution channels.
Prudential emphasised its commitment to converting new business profits into cash and improving operational efficiency.
The company acknowledged that agency new business profit has decreased, largely due to a high base effect from the previous year, but noted ongoing efforts to enhance its agency network through digital platforms like PRUForce and targeted recruitment.
Bancassurance, by contrast, delivered strong performance, with new business profit growing 28%, excluding economic impacts, particularly in Hong Kong, Malaysia, Singapore, and Thailand.
Prudential expects to sustain momentum in the second half of the year, with an outlook for new business profit growth in line with its objectives for 2022-2027.
The company said it remains confident in achieving its long-term goals in Asia and Africa, where structural demand for protection, savings, and retirement products continues to grow.
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