A rescue plan for Indonesian life insurer AJB Bumiputera (AJBB) has collapsed after it failed to agree with Evergreen Invesco -- its proposed white knight -- over the size of a capital injection, reported Reuters.
Evergreen had been due to acquire a holding company for AJBB, which has more liabilities than assets and operates under the control of Indonesia’s Financial Services Authority (OJK), by raising billions of dollars through a rights issue.
Evergreen had wanted to inject capital in stages into the planned holding company for century-old insurer over a 14 year period, Adhie Massardi, an AJBB manager, told Reuters, adding that the life insurer had instead wanted a sizeable amount of funding immediately.
Financial authorities have been keen to resolve AJBB’s woes without government funds, scarred in part by the public furor that erupted over a taxpayer bailout of lender Bank Century in 2008.
Evergreen, which has a market value of just US$110 million, had one stage wanted to raise up to IDR40 trillion (US$2.9 billion) through the rights issue although it later changed that figure to IDR10.3 trillion. The deal would have resulted in a backdoor listing for AJBB.
AJBB is a mutual insurance company owned by its 6.7 million policyholders, who are mainly Indonesian civil servants. Its assets were worth IDR11 trillion at the end of 2017. More than half of the total assets were in the form of property, while liabilities stood at IDR28 trillion.
Resumption of insurance sales
Meanwhile, the Financial Services Authority (OJK) has given permission to AJBB to resume selling its insurance products after a suspension of around 18 months. The suspension was imposed while the rescue plan was being worked out.
"Based on the report of AJBB Statutory Management and OJK examination results, we view AJBB is ready again to market its insurance products," said OJK Chairman Wimboh Santoso in a statement. The lifting of the suspension took effect on 23 March.