Watsa’s Fairfax Plans to Buy Control of Indonesia Insurer’s Non-Life Unit: Sources

Article

Fairfax Financial Holdings Ltd., the Canadian investment firm led by Prem Watsa, is in advanced talks to buy control of Indonesian financial group PT Paninvest’s non-life insurance unit, people with knowledge of the matter said.

The transaction would value the Jakarta-based business at about $200 million, according to the people, who asked not to be identified as the information is private. Shares of the Paninvest unit, formally known as PT Asuransi Multi Artha Guna, jumped as much as 13.6 percent in Jakarta trading Tuesday to hit the highest level since September, giving the insurer a market value of as much as 2 trillion rupiah ($151 million).

An agreement could be announced in the next few weeks, according to one of the people. The deal being discussed comes with a so-called bancassurance agreement, which would allow insurance products to be distributed and sold through the branches of Paninvest’s lending affiliate PT Bank Pan Indonesia, the people said.

Foreign insurers have been drawn to Southeast Asia as increasing wealth leads to rising demand for coverage. A deal would add to the $5.2 billion of acquisitions in the Indonesian financial industry over the past three years, according to data compiled by Bloomberg.

“Indonesia is a market with a lot of potential for global insurance companies,” John Teja, director at PT Ciptadana Securities, said by phone from Jakarta on Tuesday. “For Indonesian companies, being associated with a good foreign name can lift their credentials and can attract more customers.”

Share Jump

Paninvest shares jumped as much as 4.8 percent in Jakarta trading Tuesday and were unchanged at the mid-day break. Bank Pan Indonesia’s biggest shareholder, PT Panin Financial, rose as much as 3.6 percent, the most intraday in almost a week.

An agreement hasn’t been reached yet, and there’s no certainty the talks will result in a transaction, according to the people. Any deal would be subject to regulatory approvals, the people said.

Fairfax President Paul Rivett didn’t immediately respond to requests for comment. A representative for Asuransi Multi Artha Guna didn’t immediately respond to an e-mail seeking comment outside regular business hours in Jakarta.

Value Investor

Fairfax’s Watsa, often compared to Berkshire Hathaway Inc.’s Warren Buffett for his contrarian and value-investing style, has purchased insurers around the world including in Ukraine, the U.S. and the Middle East. Since the start of 2014, the Toronto-based firm has bought stakes in BIDV Insurance Corp., a property and casualty insurer in Vietnam, as well as Malaysian general insurer MCIS Insurance Bhd. and Indonesia’s PT Batavia Mitratama Insurance.

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 last month. Sompo Japan Nipponkoa Holdings Inc. is nearing an agreement with CIMB Group Holdings Bhd. to distribute general insurance products through the Malaysian lender’s branches across Asia, people with knowledge of the matter said earlier.

PT Bank Rakyat Indonesia, the country’s most profitable lender, canceled the sale process for a 40 percent stake in its life insurance arm, people with knowledge of the matter said in January. BNP Paribas Cardif, an arm of France’s largest bank, had been vying with Hong Kong billionaire Richard Li’s FWD Group and South Korea’s Hanwha Life Insurance Co. for the holding, valued at $400 million to $500 million, the people said at the time.

–With assistance from Katia Dmitrieva and Harry Suhartono.