Jiwasraya's previous directors' reportedly put the state insurance company's assets in risky instruments, causing nearly $1 billion in potential state losses. (Antara Photo/Galih Pradipta)

AGO Launches Criminal Inquiry Into Jiwasraya


DECEMBER 19, 2019

Jakarta. The Attorney General Office is opening an inquiry into a possible corruption case at Asuransi Jiwasraya that has led Indonesia's largest state-controlled insurance company into the brink of bankruptcy. 

Attorney General S.T. Burhanuddin said on Wednesday his office suspected foul play in Jiwasraya's previous directors' decision to put the company's assets in risky instruments, causing Rp 13.7 trillion ($986.4 million) in potential state losses by August 2019. 

"That's the initial estimate. We expect the real figure to be higher," Burhanuddin said. 

"[The directors'] action violated principles of good corporate governance in the management of funds raised through insurance programs and savings plans," he said. 

Burhanuddin said Jiwasraya had violated the principle of prudence by investing in high-risk assets to pursue more profits. 

Jiwasraya held Rp 5.7 trillion, or more than 22 percent of its financial assets, in stocks. Most of the stocks, however, are third-tier stocks that have been performing poorly. Only 5 percent of Jiwasraya's stocks have produced good returns, Burhanuddin said. 

Jiwasraya also invested Rp 14.9 trillion, or 59 percent of its financial assets, in mutual funds. They performed even worse than its stock holdings. A total of 98 percent of Jiwasraya's mutual fund holdings were managed by underperforming investment managers.

The insurance company has already announced that it was unable to pay Rp 12.4 trillion in insurance claims due this month.  

The State-Owned Enterprises Ministry said it has evaluated a plan by Jiwasraya's subsidiary Jiwasraya Putra to sell Rp 9 trillion of its assets to a number of strategic investors. 

Jiwasraya controls 65 percent of the subsidiary's shares. The rest belong to other state-owned companies Telekomunikasi Seluler (Telkomsel), Pegadaian and railway operator Kereta Api Indonesia. 

Prospective investors in the sale will perform due diligence and make their bid as soon as next month. The ministry said Jiwasraya will sell 60 percent of its shares in Jiwasraya Putra and use the proceeds to pay its policyholders.