Company Information. January 29, 2012

Transcription

1 Company Information January 29, 2012

2 BUSINESS 1 Overview We are a financial services conglomerate in Indonesia, providing a broad range of life and general insurance products, securities, banking, multifinance and other services to individual and institutional customers through our subsidiaries and joint ventures. We believe this broad range of products and services makes us one of the most diversified financial services groups in Indonesia. We provide products and services in the following five principal areas of business: Life insurance Our life insurance business is conducted principally through our joint venture, PT Asuransi Jiwa Sinarmas MSIG ( Sinarmas MSIG Life ), formerly known as PT Asuransi Jiwa Sinarmas, in which we have a 50% ownership interest. Sinarmas MSIG Life is the second largest life insurance provider in Indonesia with a 12.4% market share measured by total gross premiums for the life insurance industry in Indonesia in 2010 as published by Bapepam-LK in its Indonesia Insurance 2010 Report. Sinarmas MSIG Life had premium income of Rp.9,805.9 billion (US$1,111.4 million) for the nine months ended September 30, 2011 and premium income growth at a CAGR of 34.9% from 2008 to It has a strong multi-channel distribution network, with one head office, 57 sales offices, approximately 12,000 agents and bancassurance relationships with 43 banks, including Bank Sinarmas, as of September 30, As of September 30, 2011, Sinarmas MSIG Life had a solvency ratio of 1,002.8%. We also have a joint venture with Mega Life, in which we hold a non-controlling 50% stake. Mega Life is the third largest life insurance provider in Indonesia with a 9.0% market share measured by total gross premiums for the life insurance industry in Indonesia in 2010 as published by Bapepam-LK in its Indonesia Insurance 2010 Report. Non-life insurance Our general, or non-life, insurance business is conducted primarily through our subsidiary, PT Asuransi Sinar Mas ( Asuransi Sinar Mas ). Asuransi Sinar Mas is the largest non-life insurance provider in Indonesia with 11.1% market share measured by total gross premiums for the non-life insurance industry in Indonesia in 2010 as published by Bapepam-LK in its Indonesia Insurance 2010 Report. Asuransi Sinar Mas had premium income of Rp.2,988.2 billion (US$338.7 million) for the nine months ended September 30, 2011 and net premium income growth at a CAGR of 25.2% from 2008 to Its distribution channels comprise approximately 7,000 agents, 63 brokers, 77 finance companies, one head office and 92 sales offices and bancassurance relationships with approximately 44 banks, including Bank Sinarmas, as of September 30, As of September 30, 2011, Asuransi Sinar Mas had a solvency ratio of 304.2%. Banking Our banking business is conducted through our subsidiary, PT Bank Sinarmas Tbk ( Bank Sinarmas ), which shares are listed on the Indonesian Stock Exchange, with market capitalization of Rp.2,451.3 billion (US$277.8 million) as of December 30, Bank Sinarmas focuses on commercial and consumer finance, including lending to SMEs and micro businesses. As of September 30, 2011, Bank Sinarmas had a total of 139 offices, consisting of 56 branches, 72 sub-branches, one Sharia branch, nine cash outlets and one Sharia cash outlet with total assets of Rp.15,668.1 billion (US$1,775.8 million) and customer deposits of Rp.13,831.0 billion (US$1,567.6 million) as of such date. As of September 30, 2011, Bank Sinarmas had a capital adequacy ratio and core Tier 1 ratio of 14.2% and 13.4%, respectively. Securities Our securities business is conducted through our subsidiary, PT Sinarmas Sekuritas ( Sinarmas Sekuritas ). Sinarmas Sekuritas is a mid-size securities firm offering a range of 1 Solely for the convenience of the reader, unless otherwise indicated, certain Rupiah amounts in this document have been translated to U.S. Dollar based on the middle exchange rate announced by Bank Indonesia as of September 30, 2011, which was Rp.8,823 = US$1.00.

3 financial services including asset management, brokerage, investment banking and financial advisory services. With distribution capability of approximately 500 agents, one head office, 48 branch offices, an online trading platform and touch-tone phone and mobile phone trading, it had total assets of Rp.1,038.2 billion (US$117.7 million) as of September 30, Multifinance Our multifinance business is conducted through our subsidiaries, PT Sinar Mas Multifinance ( Sinar Mas Multifinance ) and PT AB Sinar Mas Multifinance ( AB Multifinance ). Predominantly active in the new and used automobiles and motorcycles financing market and factoring, with distribution capability of one head office, 56 branches and 247 outlets as of September 30, 2011, Sinar Mas Multifinance had total assets of Rp.1,382.7 billion (US$156.7 million). AB Multifinance principally provides factoring and leasing services to our Group and the Sinar Mas Group. We also operate a number of other non-core businesses, including a share administration business through Sinartama Gunita, a water treatment business through PT Wahana Tehno ( Wahana Tehno ), automotive financing through a joint venture, PT Oto Multiartha ( Oto Multiartha ) and employment services through a joint venture, PT Jobstreet Indonesia ( JobStreet Indonesia ). Operating income from our non-core businesses collectively amounted to 0.0%, 0.4%, 0.2% and 0.0% of our total operating income for 2008, 2009 and 2010 and the nine months ended September 30, Total assets from our non-core businesses amounted to less than 1% of total assets for each of 2008, 2009, 2010 and the nine months ended September 30, In 2008, 2009 and 2010, our operating income was Rp.8,035.4 billion, Rp.11,116.5 billion and Rp.14,049.7 billion (US$1,592.4 million), respectively, which included Rp.5,964.7 billion, Rp.8,210.7 billion and Rp.10,648.8 billion (US$1,206.9 million) from insurance underwriting income, Rp billion, Rp.1,195.9 billion and Rp.1,247.1 billion (US$141.3 million) from gain on investment in units of mutual funds and Rp billion, Rp billion and Rp.1,052.4 billion (US$119.3 million) from interest income, respectively. For the nine months ended September 30, 2011, our operating income was Rp.14,584.9 billion, which included Rp.11,118.3 billion (US$1,260.1 million) from insurance underwriting income, Rp billion (US$103.4 million) from gain on investment in units of mutual funds and Rp.1,106.3 billion (US$125.4 million) from interest income, respectively. In the same periods, our net income from operations was Rp billion, Rp billion and Rp.1,367.6 billion (US$155.0 million), respectively, and our net income was Rp billion, Rp billion and Rp.1,277.8 billion (US$144.8 million), respectively. For the nine months ended September 30, 2011, our net income from operations was Rp.1,607.0 billion (US$182.1 million) and net income was Rp.1,517.2 billion (US$172.0 million). As of December 31, 2010, we had total assets of Rp.27,845.0 billion (US$3,156.0 million), which included Rp.1,980.9 billion in cash and cash equivalents, Rp.8,044.5 billion (US$911.8 million) of shortterm investments, Rp.7,032.3 billion (US$797.0 million) in funds from our unit link life insurance products and Rp.6,934.2 billion (US$785.9 million) in loans. As of September 30, 2011, we had total assets of Rp.42,980.2 billion, which included Rp.8,383.8 billion in cash and cash equivalents, Rp.15,091.9 billion of short-term investments, Rp.5,270.2 billion segregated funds from our unit link life insurance products and Rp.9,066.5 billion in loans. We listed our shares on the Indonesian Stock Exchange on July 5, As of December 30, 2011, our market capitalization was approximately Rp.26,644.1 billion (US$3,019.8 million) based on the closing price of our shares. Recent Developments In July 2011, Mitsui Sumitomo Insurance Co., Ltd. ( MSIG ), part of the MS&AD Insurance Group, a global leading non-life insurer and the largest non-life insurer in Japan by gross premiums, acquired a 50% ownership interest in PT Asuransi Jiwa Sinarmas through a subscription of new shares for Rp.7.0 trillion (US$793.4 million). Following completion of the acquisition, PT Asuransi Jiwa Sinarmas changed its name to PT Asuransi Jiwa Sinarmas MSIG. Pursuant to the terms of a shareholders agreement, MSIG and the

4 Company each has the right to nominate an equal number of individuals as members of the board of commissioners after completion of the acquisition and will actively participate in management and the business operations of Sinarmas MSIG Life. See Material Agreements for more information. Competitive strengths We believe the following strengths have contributed to our success: Integrated financial services conglomerate, offering a broad suite of products and services We are one of the few financial conglomerates in Indonesia, providing, through our subsidiaries and affiliates, a broad range of financial products and services, including life and non-life insurance, banking, securities, asset management and multifinance. We believe we are uniquely positioned in the Indonesian market in terms of the scale and scope of our operations, our strong brand and the breadth of our product and service offerings. We also believe the diversification of our Group enables us to offer a comprehensive financial services product suite to our customers. Comprehensive distribution platform that includes both physical and electronic touchpoints The success of our business is dependent on a comprehensive distribution platform that includes both physical customer touchpoints, including branches, outlets, sales offices and agents as well as electronic and virtual channels, including direct and telemarketing, online and mobile platforms. As of September 30, 2011, the agency force for Sinarmas MSIG Life and Asuransi Sinar Mas consisted of approximately 19,000 agents in the aggregate. As of September 30, 2011 Sinarmas MSIG Life had one head office and 57 sales offices and approximately 12,000 agents, Asuransi Sinar Mas had 92 sales offices and approximately 7,000 agents and Bank Sinarmas had a total of 139 offices, consisting of 56 branches, 72 sub-branches, one Sharia branch, nine cash outlets and one Sharia cash outlet. Between 2008 and September 30, 2011, the agency force for Sinarmas MSIG Life increased from approximately 4,600 to approximately 12,000 agents and the agency force for Asuransi Sinar Mas increased from approximately 2,300 to approximately 7,000 agents. Inclusive of our securities and multifinance companies, the Group had a total of 641 customer touch points, including branches or offices of different subsidiaries which are co-located, serving its total customer base of over 3,800,000. Our physical distribution network is centered around the major metropolitan areas and is increasingly expanding into regional and rural areas. Apart from our physical presence, we also provide other electronic and virtual channels to increase accessibility for our customers and business partners. This includes an integrated IT platform in our non-life insurance subsidiary which automates front and back-end processes for our customers and business partners, internet and phone banking services through Bank Sinarmas, and also a variety of internet and mobile trading services through Sinarmas Sekuritas. A comprehensive distribution network provides convenience for our existing customers and is a key foundation for the continued growth of our business. Sizeable franchise in the Indonesian life insurance market, enhanced by a strategic alliance with MSIG to deliver global best practice in life insurance Through our 50% ownership interests in both Sinarmas MSIG Life and Mega Life, Indonesia s second and third largest life insurers with market share of 12.4% and 9.0%, respectively, measured by total gross premiums for the life insurance industry in Indonesia in 2010 as published by Bapepam-LK in its Indonesia Insurance 2010 Report according to the Life Insurance Business Performance 2010 Report published by the AAJI, we are well-positioned to tap the early growth story of Indonesia s life insurance sector. With total life insurance premiums at only 1.0% of its GDP, premium penetration in Indonesia remains substantially lower than that of other major developing countries such as China with total life premiums at 2.5% of its GDP and India with total life premiums at 4.4% of its GDP. See Insurance Industry section. According to Business Monitor International, life insurance premiums in Indonesia are expected to experience an average

5 annual growth rate of 24.6% between 2011 and MSIG, part of the MS&AD Insurance Group, a global leading non-life insurer and the largest non-life insurer in Japan by gross premiums, has significant global reach and experience with operations in 40 countries and over 14,900 employees. In Asia, MSIG has also made strategic investments in existing local life insurance companies in Malaysia, China and Thailand. We believe MSIG brings numerous strengths to the alliance with us, including strengthening Sinarmas MSIG Life s ability to diversify its product range to focus on regular and traditional products, development of agency scale, training and productivity, risk management and technology. Following the completion of the strategic alliance on July 1, 2011, we believe Sinarmas MSIG Life is well capitalized and positioned to leverage MSIG s insurance capabilities to grow both the scale and profitability of our business in Indonesia. Leading non-life insurer in Indonesia enjoying market share of 11.1% by gross written premiums in 2010 Asuransi Sinar Mas is the leading non-life insurer in Indonesia based on gross premiums and enjoying market share of 11.1% measured by total gross premiums for the non-life insurance industry in Indonesia in 2010 as published by Bapepam-LK in its Indonesia Insurance 2010 Report. We expect Asuransi Sinar Mas to benefit strongly from the potential growth of the Indonesian non-life insurance industry. When compared to other major developing countries such as China with total non-life premiums at 1.3% of its GDP (see Insurance Industry section), Indonesia remains relatively underpenetrated with total non-life insurance premiums at approximately 0.5% of GDP. According to Business Monitor International, non-life insurance premiums in Indonesia are expected to experience an average annual growth rate of 22.1% between 2011 and Asuransi Sinar Mas plans to maintain its leadership position and expand its market share through a combination of its (1) information technology system, (2) efficient claims management capabilities and (3) strong distribution network. Its information technology system has features which include a portal connecting the central system with business partners such as leasing companies, banks and brokers, enabling effective and efficient communication and service experience. Asuransi Sinar Mas growing distribution network consists of approximately 7,000 exclusive agents, one head office, 92 sales offices across Indonesia, 63 brokers, 77 finance companies and bancassurance relationships with approximately 44 banks as of September 30, In addition, net premium income has also achieved strong growth, with CAGR of 25.2% between 2008 and Bank Sinarmas strong and profitable growth with strategically positioned network of 139 offices Bank Sinarmas is a mid-sized bank in Indonesia with a high growth profile. The Bank leverages the strong branding of the SMMA Group and targets growth in the SME and consumer segments. Its loan portfolio has grown at a CAGR of 28.1% between 2008 and 2010 and deposits at a CAGR of 36.4% over the same period. Bank Sinarmas network of 139 offices is located strategically in metropolitan and regional areas of Indonesia, providing an effective channel for the distribution of other group products through the bank channel. While continuing to grow its business, Bank Sinarmas has maintained high credit standards resulting in consistently low NPL ratios of 2.0%, 2.2%, 1.3% and 1.0% on the basis of gross NPLs as of December 31, 2008, 2009 and 2010 and September 30, 2011, respectively. Strong cooperation among subsidiaries resulting in significant cross-selling and synergies across the Group Our complementary insurance, banking, securities and multifinance businesses generate significant cross-selling opportunities and synergies across our Group operations. These include: One-stop location for multiple product offerings. Many of our subsidiaries branches and outlets are located on a shared location. It is common to have our bank branch, insurance operations, investment advisory services and multifinance operations in the same building. This offers convenience for customers while allowing the various subsidiaries to cross-sell and refer

6 customers within a one-stop shop. Marketing collaboration. Apart from cross-selling and customer referrals across the Group s employees and agents, we launched the One Million Partners campaign aimed to recruit customers, entrepreneurs and business owners of retail stores and suppliers to be agents for our life and non-life insurance and banking products. By leveraging on their local relationships, we believe this word-of-mouth marketing strategy will significantly expand our customer reach. Bancassurance. Bank Sinarmas is the key bancassurance partner for our insurance subsidiaries, Sinarmas MSIG Life and Asuransi Sinar Mas. This is an effective partnership driven by a long history of close collaboration between management and employees of the insurance and bank subsidiaries. Bank branch officers are provided with appropriate training and licensed to offer bancassurance products. Most of Sinarmas MSIG Life s premiums are derived from this bancassurance relationship. Loan origination. Sinar Mas Multifinance plays a key role in originating loans for Bank Sinarmas. Approximately 20.0% of Bank Sinarmas loan book is channeled by Sinar Mas Multifinance. This channeling arrangement utilizes Bank Sinarmas competitive financing rate while leveraging on Sinar Mas Multifinance s extensive customer and distribution reach. Others. Generally, members of the Group refer business to other members of the Group. For example, Sinar Mas Multifinance s customers are encouraged to have car or motorcycle insurance with Asuransi Sinar Mas. Additionally, vendors of Asuransi Sinar Mas are generally encouraged to have accounts with Bank Sinarmas to receive payment and Sinarmas MSIG Life and Asuransi Sinar Mas execute a portion of their securities transactions through Sinarmas Sekuritas. Experienced management team with in-depth understanding of local markets We have a management team of experienced individuals with in-depth industry and local knowledge, and extensive managerial experience in life insurance, non-life insurance, securities, banking and other financial services through the respective management teams of our life, non-life, banking, securities and multifinance subsidiaries and joint ventures. Our President Commissioner, Indra Widjaja, has served as commissioner of the SMMA Group since 1982, and coordinates the investment and business strategies of the Group through weekly meetings with management of our principal subsidiaries. Our President Director, Doddy Susanto, has served the SMMA Group in various capacities since The team is focused on formulating innovative business initiatives and capturing business opportunities by drawing on its expertise in diverse areas. We believe our management team can develop and execute our business strategies effectively, while quickly responding to the rapid changes in our business environment. Strategies Our objectives are to achieve sustainable growth of our businesses and to create long-term shareholder value. To achieve these objectives, we intend to pursue the following strategies. Enhance the productivity of our core distribution channels and expand our multi-channel distribution network We believe there are significant opportunities to grow our business in all segments by continuing to enhance and expand our distribution channels and multi-channel distribution network to reach a broad range of customers. This includes increasing our presence within existing markets and expanding our geographic coverage to new areas in Indonesia. For instance, Bank Sinarmas intends to enhance its customer reach through an aggressive expansion of branches and other offices, growing its network from 110 as of December 31, 2010 to approximately 220 as of December 31, 2011 and plans to further grow its network to

7 approximately 515 offices by year end 2012, subject to regulatory approval. Likewise, Sinarmas MSIG Life, with the benefit of the experience of the global MS&AD Insurance Group, intends to significantly grow the scale and productivity of its agency force, develop a corporate agency channel to target group insurance business and further leverage its current strength in bancassurance to focus on regular and traditional products. We also believe we can enhance the productivity of our multi-channel distribution network by continuing to focus on cross-selling and cross-marketing of our various financial services and products across business segments. Implement our One Million Partners campaign In early 2011, we launched a campaign entitled One Million Partners to recruit our customers, entrepreneurs and business owners of retail stores and suppliers to be our agents for our life and non-life insurance and banking products, with a view to develop relationships with them as SMMA ambassadors. As of September 30, 2011, the Group had more than 50,000 registrants for the program. We believe that this target market will provide significant opportunities to further grow our customer base across all business segments by leveraging their existing relationships to further expand our network and reach. Expand the range of products and services available to customers We believe that we are well-positioned to capitalize on the continued growth in the life and non-life insurance, securities, traditional and Islamic banking and financing, and multifinance sectors that is expected to result from Indonesia s expanding middle class and rising levels of household income. In each of our core business segments, we expect to continue to build up our product and service offerings, and in particular, increasing the diversification of our life insurance products in partnership with MSIG to focus on regular and traditional products including premium unit link products and protection riders. The financial, insurance, banking and non-bank products and services offered in Indonesia continue to evolve as the needs of customers change. We intend to be at the forefront of these developments by offering innovative and competitive products to our customers. Increase our cross-selling and cross-marketing efforts among the various subsidiaries of the SMMA Group Due to our large customer base and our integrated financial services model, cross-selling represents a significant opportunity to grow our business. We encourage consumers to take advantage of products and other services through product bundling and cross-marketing products and services. We facilitate this through our one-stop shop model, with co-location of banking, insurance and securities outlets at a single location. We will continue to utilize our insurance business as a springboard to cross-sell an increasingly broader suite of products and services to individual and corporate customers. We also remain focused on developing closer synergies between our subsidiaries through staff training, knowledge sharing, bundled product offerings and collaborative marketing. Build on our reputation as a trusted provider of comprehensive financial services solutions Since SMMA was established in 1982 under the name PT Internas Arta Leasing Company, SMMA, as part of the Sinarmas brand, has since grown to become one of the most widely recognized brand names in Indonesia. We believe our extensive nationwide distribution network reinforces this brand awareness. We will continue to build on our reputation as a trusted provider of comprehensive and competitive financial services solutions both through our branches and marketing campaigns. In this way we hope to attract a wider group of customers to our existing customer base. Increase employee and agent productivity and competitiveness Developing a strong sales and service culture at each of our companies is key to our future success. We seek to attract and retain the most talented individuals in the industry and improve their skills, productivity and career development opportunities through advanced human resources management and

8 training. We aim to build a system in which our management and employees can grow with us and share in our success, which we believe will result in increased employee productivity and competitiveness to meet our strategic goals. Various members of the Group regularly hold internal and external seminars, training and certification programs for employees and management to further their skills and knowledge, assist them in

9 obtaining certification in their respective areas, and enhance their sense of belonging to the Group and promote a strong and universal work ethic. In addition, Sinarmas MSIG Life intends to leverage MSIG s global experience in agency training and development to enhance the productivity of the existing agency force. To promote agency force growth and enhance employee competency, Sinarmas MSIG Life has introduced the Sinarmaslife Academy to train and develop graduate professionals to become productive insurance agents and competent employees. Invest in information technology systems and infrastructure to prepare our Group for future growth We will continue to invest in information technology and infrastructure to prepare ourselves for future growth. We aim to leverage on our strong capital position to further enhance our IT system and automate our operational processes to achieve optimal efficiencies as well as enhance our ability to identify and manage risks. For example, Asuransi Sinar Mas provides a B2B application which allows its business partners to connect with Asuransi Sinar Mas and assist Asuransi Sinar Mas in managing the process of issuing policies. To support Asuransi Sinar Mas service levels in handling a claim, it employs an E-Claim application which integrates Asuransi Sinar Mas with its customers, workshops and suppliers and an E-Supplier network solution which allows suppliers to join online tenders to procure and deliver spare parts for motor vehicles needed for a claim and deliver the spare part to the respective automobile repair workshop. Asuransi Sinar Mas also employs E-Partner, a web-based portal application which enables its agents to manage their portfolio, issue insurance policies, provide quotes and process the commission payments from any location and at any time, and provides an E-Marketing application to its marketing staff which enables them to upload insurance proposals and provide quotes which are tracked through Asuransi Sinar Mas central system and back-end process to the time policies are issued. For Bank Sinarmas, we plan to build on delivering our banking products to customers via Bank Sinarmas internet banking channel. We will continue to develop and adopt advanced technological systems to achieve maximum operational efficiency in each of our areas of business, to improve our ability to identify and manage risks within our business, to improve profitability and maintain our reputation as a leading Indonesian provider of insurance and financial services in Indonesia. Our Group Structure The following diagram below shows our group structure as of December 31, (1) PT Sinar Mas Multiartha Tbk Insurance Bank Multifinance Securities Information Technology Others PT Asuransi Sinar Mas (100.00%) PT Bank Sinarmas Tbk (60.00%) (2) PT Sinar Mas Multifinance (100.00%) PT Sinarmas Sekuritas (100.00%) PT Arthamas Informatika (100.00%) PT Shinta Utama (100.00%) PT Balai Lelang Sinarmas (100.00%) PT Asuransi Jiwa Sinarmas MSIG (50.00%) PT AB Sinar Mas Multifinance (100.00%) PT Sinartama Gunita (100.00%) PT Arthamas Solusindo (100.00%) PT Simas Money Changer (100.00%) PT Jakarta Teknologi Utama Motor (99.93%) PT Asuransi Jiwa Mega Life (50.00%) PT Oto Multiartha (16.14%) PT Sinar Artha Inforindo (100.00%) PT Wapindo Jasaartha (100.00%) PT Artha Bina Usaha (100.00%) PT Arthamas Konsulindo (100.00%) PT Summit Oto Finance (0.16%) PT Sinar Artha Solusindo (100.00%) PT Super Wahana Tehno (35.19%) PT Sinar Artha Trading (100.00%) PT Sinar Artha Konsulindo (100.00%) PT Komunindo Arga Digital (100.00%) PT Panji Ratu Jakarta (21.02%) PT JobStreet Indonesia (40.00%) (1) Percentages shown are based on effective control. (2) As of December 31, 2011, we owned 56.48% of Bank Sinarmas directly and 3.52% indirectly through our 100.0% owned subsidiary, Shinta Utama.

10 The following table shows a breakdown of the total income attributable to equity holders of SMMA and total assets after elimination of SMMA and our principal subsidiaries and joint venture, including as a percentage of our total income attributable to equity holders of SMMA and total assets after elimination, respectively, as of September 30, 2011: Total Income Attributable to Equity Holders of SMMA After Elimination As of September 30, 2011 As a % of Total Income Attributable to Equity Holders of SMMA After Elimination Total Assets After Elimination As a % of Total Assets After Elimination Rp. US$ % Rp. US$ % (Rp. in billions, US$ in millions, except percentages) SMMA , Sinarmas MSIG Life , , Asuransi Sinar Mas , Bank Sinarmas , , Sinarmas Sekuritas Sinar Mas Multifinance , Others Total , , , Our History We began commercial operations in Indonesia in 1983 under the name PT Internas Artha Leasing Company, engaging in finance leasing and obtained approval from the Ministry of Finance to operate a multifinance company in Our insurance companies, Sinarmas MSIG Life (initially founded as PT Asuransi Jiwa Purnamala Internasional Indonesia) and Asuransi Sinar Mas were founded in 1984 and In 1988, our securities and asset management subsidiary, Sinarmas Sekuritas was established. In 1995 we listed our shares on the IDX and changed our name to PT Sinar Mas Multiartha Tbk. In 1996, the shareholders of the Company changed the Company s main business activities to become a financial holding company for the Sinar Mas Group. In 1996, we issued 663 million shares at an offer price of Rp.750 per Share, and in the same year we established our consumer finance and leasing business, Sinar Mas Multifinance by acquiring 5,000 Shares of PT Sinar Supra Finance, which was subsequently renamed Sinar Mas Multifinance. In 2003, we issued a further 2.1 billion shares at an offer price of Rp.100 per Share. In the same year, we effected a reverse stock split, and added a second series of shares. In 2005, we issued million shares at an offer price of Rp.125 per Share. In 2005, we also acquired the entire shareholding of Sinarmas MSIG Life. We also acquired the majority stake in our banking subsidiary, Bank Sinarmas, from PT Shinta Indonesia. In 2008, we completed a fourth rights issue of million shares at an offer price of Rp.100 per Share. We also injected capital into some of our subsidiaries, including Rp billion into Sinar Mas Multifinance and Rp.25.0 billion into certain other subsidiaries during the nine months ended September 30, On December 7, 2011, SMMA injected capital of Rp billion into Sinar Mas Multifinance for Sinar Mas Multifinance to expand its branches and outlets. Bank Sinarmas initial public offering in 2010 at Rp.150 per Share raised Rp billion (US$27.2 million).

11 SMMA SMMA is principally the holding company of our subsidiaries and joint ventures. In addition, it also engages in limited investments in mutual funds and sales. As of September 30, 2011, SMMA had investments in mutual funds of Rp billion (US$69.4 million). Life Insurance Sinarmas MSIG Life Overview We conduct our life insurance business primarily through our 50% stake in Sinarmas MSIG Life. MSIG also owns a 50% interest in Sinarmas MSIG Life through its share subscription in July 2011 for Rp.7.0 trillion (US$793.4 million). See Recent Developments. Established in 1984, Sinarmas MSIG Life is the second largest life insurance provider in Indonesia with 12.4% market share measured by total gross premiums for the life insurance industry in Indonesia in 2010 as published by Bapepam-LK in its Indonesia Insurance 2010 Report. Net premium income grew at a CAGR of 34.9% from 2008 to Gross premiums for the nine months ended September 30, 2011 amounted to Rp.9,805.9 billion (US$1.1 billion). In addition, we also have a 50% ownership interest in Mega Life, a joint venture with the Para group (the Para Group ). See Joint Venture Mega Life below for more information. Sinarmas MSIG Life offers individual and group life insurance products and Sharia products. It distributes its products principally through bancassurance. Its main bancassurance business is principally conducted with Bank Sinarmas, which accounted for 84.5% of gross premiums for the nine months ended September 30, Sinarmas MSIG Life also has relationships with a total of 43 banks, six of which are commercial banks and 37 of which are rural banks (Bank Perkreditan Rakyat), which are more limited in the amounts of lending and deposit taking, and whose relationship with Sinarmas MSIG Life mainly comprises the purchase of mortgage redemption and other credit protection insurance. Complimentary to its bancassurance distribution channel, Sinarmas MSIG Life also has an agency force of approximately 12,000 agents as of September 30, As of September 30, 2011, Sinarmas MSIG Life had 57 sales offices which provide direct marketing to corporates as well as administrative and sales support to agents. In addition, Sinarmas MSIG utilizes alternative distribution channels such as the internet. As of December 31, 2010 and September 30, 2011, Sinarmas MSIG Life s solvency ratio was 469.0% and 1,002.8%, respectively. See Management s Discussion and Analysis of Financial Condition and Results of Operations Capital Management Capital Adequacy. In July 2011, Sinarmas MSIG Life was assigned a financial strength rating of AA+ (idn) by Fitch Ratings. Business Initiatives We intend to further develop our life insurance business and implement our overall strategy with respect to our life insurance operations by adopting the following business initiatives: Leverage on the expertise, successful business model and global reputation of MSIG, with a focus on enhancing product development, diversifying product mix and growing higher margin regular premium and protection products across our key distribution channels. Moreover, various takaful, pension fund and family policies are also in our pipeline. Continue to develop and expand our distribution channels: Together with MSIG, we will be focusing on developing our agency channel through growing agent numbers and improving organizational structures. This is particularly important as a motivated and sophisticated sales force is the key to successful execution of our overall growth strategy.

12 Growing our bancassurance channel, leveraging on Bank Sinarmas branch expansion plans as well as increasing our number of bank and non-bank distribution partners. Promote the sale of regular premium products and riders to our extensive bancassurance customer base. Developing additional channels, such as corporates, direct marketing and multinational corporation channels, for the longer term future to diversify our marketing efforts and extend our corporate customer base. Similar to the development of the agency channel, MSIG will provide the technical assistance and expertise on this front. Improve and enhance use of technology to achieve greater cost efficiencies while enhancing customer experience. We aim to implement customer relationship management systems and develop data mining processes, implement virtual offices in stages and have a paperless office by Continue to invest in training to improve the quality of our agents, marketing personnel and back office employees as we believe that there is significant untapped potential among our agents and employees. A secondee from MSIG will be lending his expertise to plan such training programs with four training centers being set up to support this initiative. Together with MSIG, to strengthen Sinarmas MSIG Life s risk management and internal audit structures to ensure the sustainable growth of the business. Our long-term goal is to maintain and enhance Sinarmas MSIG Life s position as a premier life insurance company in Indonesia and, in line with this, we aim to be the largest life insurance company in Indonesia by gross premium, annualized premium equivalent and return on equity by 2015, maximize the returns from funds available for investments and increase shareholders value with the aim of sustaining long-term profitability and strengthening policyholder trust. Sinarmas MSIG Life intends to grow its market share by continuing to focus on product lines with higher growth potential such as micro-insurance, which, despite lower profit margins, appeal to and serve as points of entry into lower and middle class market segments, particularly in east Indonesia, thereby diversifying and broadening our customer base. We plan to ensure that its increasing market share translates into underwriting profits by continuing to maintain and improve its claims and expenses ratios. Products Sinarmas MSIG Life offers individual and group insurance products. Its individual life insurance products generally fall into the following principal categories: unit link insurance, endowment insurance, traditional term insurance, whole life insurance and accident and health insurance. There are no participating products or annuities. Currently, Sinarmas MSIG Life s only investment products are unit link and endowment products. Sinarmas MSIG Life s whole life insurance products also offer certain investment components. Sinarmas MSIG Life s unit link products are generally term insurance products. The insured pays the premium and receives the net asset value of the units, less fees such as commissions and administration fees. Sinarmas MSIG Life s group insurance products generally fall into two categories: life, accident and health insurance and mortgage redemption insurance. Gross premium income represent premiums received from policyholders based on short-term and longterm contracts and includes the full amount received under unit link and endowment policies whether or not later returned to policyholders upon surrender, redemption or maturity, as applicable.

13 The following table below sets out gross premium income for Sinarmas MSIG Life s principal life insurance product categories for the periods indicated. For the Year Ended December 31, For the Nine Months Ended September 30, (Rp. in billions) Individual: Combined endowment (1) , , ,619.5 Death term life Whole life Personal accident Health Unit link (2) , , , ,037.5 Sub total , , , , ,674.4 Group: Endowment Death term life Health Personal accident Unit link Sub total Total , , , , ,805.9 (1) Combined endowment is an insurance providing life protection, as well as savings. (2) Unit link includes investment-linked products. For 2008, 2009 and 2010 and the nine months ended September 30, 2011, Sinarmas MSIG Life s highest revenue generating products in terms of premium income were unit link products, which contributed approximately 11.8%, 50.1%, 92.2% and 51.4%, of gross premium income, and endowment products, which comprised 84.2%, 47.8%, 6.2% and 47.1%, respectively, of gross premium income, respectively, followed by other products categories, which in the aggregate comprised approximately 4.0%, 2.1%, 1.6% and 1.5%, of gross premium income, respectively. From 2008 through early 2011, Sinarmas MSIG Life encouraged existing policyholders in endowment products, such as its Power Save products, to reinvest into unit link policies, such as its Stable Link products, by offering more attractive potential investment returns on these products. This has been the driver of the decline in endowment and increase in unit link policies in the same periods. This strategy was adopted by the company to enhance capital efficiency of the business, given the lower capital requirement associated with unit link policies. Due to the higher solvency ratios following completion of the MSIG share subscription in Sinarmas MSIG Life, Sinarmas MSIG Life has been increasing its sales of its endowment products during the second half of Sales of endowment products have continued to increase, following a decision in November 2011 to focus sales of endowment products through bancassurance and sales of unit link products through its agency force. Unit Link Products Sinarmas MSIG Life offers a range of unit link investment products where the benefits value of the policy is linked to the value of underlying investments or fluctuations in the value of underlying investments. The investment risk associated with such products is borne by the policyholder. The policy terms offered vary, and can range in length of term or can be whole life, can be denominated in Rupiah or U.S. dollars and can be a single premium policy, for which the customer pays a single, substantial, initial payment, or regular premium policy, for which the customer makes periodic premium payments over the

14 term of the policy. Insurance coverage, investment and administration services are provided for which the charges are deducted from the investment fund assets. Benefits payable will depend on the price of the units prevailing at the time of surrender, death or the maturity of the policy, subject to surrender charges for surrenders prior to maturity. Sinarmas MSIG Life s unit link products are typically designed such that accident and health and other protection riders may be attached to the basic policy. Its unit link investments are predominantly single-premium products. Premiums are reflected in total investments and are paid as surrender benefits, subject to applicable surrender charges before maturity. Investments of fund assets are managed by Sinarmas MSIG Life and policyholders of its unit link products do not choose the specific investments funds in which their funds are invested. Sinarmas MSIG Life s best selling unit link product is its Stable Link insurance product. For the years ended December 31, 2008, 2009, and 2010 and for the nine months ended September 30, 2011, Sinarmas MSIG Life s Stable Link products accounted for 7.0%, 47.4%, 89.8% and 49.7% of gross premiums, respectively. The Stable Link insurance product is a single premium investment-linked whole life product. The product is designed to offer a savings opportunity in a similar way to fixed deposit products normally offered by a bank, and can be denominated in Rupiah or U.S. dollars. It contains a death protection benefit of 125% of premiums paid and capped at Rp.25.0 million for Rupiah policies or US$2,500.0 for U.S. dollar policies. The policyholder selects an investment term of three, six, 12, 24 or 36 months, and a target investment return is set for each selected investment term, although the return is not guaranteed. The Stable Link assets and other unit link assets are invested and managed by Sinarmas MSIG Life in accordance with its investment policy and strategies. See Investments. Under the Stable Link products, the policy will be credited with the actual investment return subject to a cap equal to the target investment return. If actual investment return exceeds target investment return, then for policies with investment terms greater than 12 months, 10% of the excess return over the target investment return will also be credited to the policyholder as a bonus. Target investment returns are adjusted by Sinarmas MSIG Life periodically in response to movements in market interest rates and returns on investments. At the end of the investment term or roll over date, the policyholder selects the next investment term, surrenders the policy or can choose to treat return of the remaining account value as a policy loan from MSIG Life for the remainder of the policy term to minimize the application of withholding tax and surrender charges which may apply. Under Indonesian regulations, policyholders are subject to 20% withholding income tax on aggregate benefits on policies net of premiums paid that are surrendered within three years. A surrender benefit equal to the rolled over amount is payable in the event of a policy being surrendered and a surrender benefit equal to the rolled over amount without interest is payable if the surrender occurs during the investment term. An additional surrender charge, subject to a cap of 20%, may be applied upon surrenders prior to maturity at the discretion of Sinarmas MSIG Life, which is designed to deter large-scale withdrawals in the event of market instability. Commission to distribution channels is payable at each roll over date. Sinarmas MSIG Life also sells whole life unit link products, such as its Excel Link 80 Plus product and Cerdas/Excellent Link product. Excel Link 80 Plus is an investment-linked whole life product, which accepts both single premium and regular premiums and may be denominated in Rupiah or U.S. dollars, and allows the policyholder to select investments and provides life coverage equal to the sum insured plus account value in the event of death. Cerdas/Excellent Link is a regular premium investment-linked whole life product, which may be denominated in Rupiah or U.S. dollars, and allows the policyholder to select investments and provides life coverage equal to the sum insured plus account value in the event of death. These products continue to be the major contributor to Sinarmas MSIG Life s gross premium income. In 2008, 2009, 2010 and the nine months ended September 30, 2011, gross premiums from its unit link investment products accounted for 11.8%, 50.1%, 92.2% and 51.5% of its gross premiums and 10.3%, 48.7%, 90.8% and 50.3% of its new business premiums, respectively.

15 Endowment Products Sinarmas MSIG Life offers a range of non-participating endowment products, where the insured is provided various guaranteed benefits if the insured survives specified maturity dates or periods stated in the policy, and which, upon the death of the insured within the coverage period, provide to the beneficiary designated by the insured guaranteed benefits in return for the periodic payment of premiums. If no death occurs during the insurance period, the insured receives the insurance payout. Sinarmas MSIG Life s endowment products generally provide a policy term of four years, but may also be for three, five, eight or 10 years in duration, which can be renewed. Sinarmas MSIG Life offers over 100 endowment products, and payment by the insured can be in a single premium, or regular premiums in amounts linked to other insurance products. Specified coverage periods range from five to 10 years or end at specified ages. For regular premium products, premiums are typically at a level amount for the coverage period. Sinarmas MSIG Life s endowment products are typically designed such that accident and health and other protection riders may be attached to the basic policy. Sinarmas MSIG Life s best selling endowment product is its Power Save insurance product. For the years ended December 31, 2008, 2009, and 2010 and for the nine months ended September 30, 2011, Sinarmas MSIG Life s Power Save products accounted for 77.3%, 43.5%, 5.7% and 46.5% of gross premiums, respectively. The Power Save product is a four-year renewable single premium non-participating endowment product. As with its Stable Link product, the Power Save is designed to offer a savings opportunity in a similar way to fixed deposit products normally offered by a bank, with a guaranteed return in addition to an accidental death benefit equal to 100% of premiums, and can be denominated in Rupiah or U.S. dollars. At the inception of the policy, a policyholder can select the fixed rate period of three, six, 12 or 36 months, and a guaranteed return is set for each selected period. Sinarmas MSIG Life evaluates and declares guaranteed return rates applicable to new policies periodically in response to movements in market interest rates and returns on investments. The investment allocation for the policy is determined by Sinarmas MSIG Life and primarily consists of units in equity, fixed income and mixed mutual funds, corporate fixed income securities and equities, and are managed by Sinarmas MSIG Life in accordance with its investment policy and strategies. See Investments. At the end of the roll over date, the policyholder can reselect the next fixed rate period, surrender the policy or choose to treat return of the remaining account value as a policy loan from MSIG Life for the remainder of the policy term to minimize the application of withholding tax and surrender charges which may apply. In the case of surrender, a surrender benefit equal to the rolled over amount plus interest is payable in the event a policy is surrendered at the end of the investment term and a surrender benefit equal to the rolled over amount without interest is payable if the surrender occurs during the investment term. Commission to distribution channels is payable at each roll over date and no charge is taken from the policy. Under Indonesian regulations, policyholders are subject to 20% withholding income tax on aggregate benefits on policies net of premiums paid that are surrendered within three years. In 2008, 2009, 2010 and the nine months ended September 30, 2011, gross premiums from Sinarmas MSIG Life s endowment insurance products accounted for 84.2%, 47.9%, 6.2% and 47.1% of its gross premiums, respectively. The decline in gross premium income from endowment products in 2009 and 2010 was primarily due to surrenders of Sinarmas MSIG Life s Power Save products in favor of its Stable Link products as policyholders migrated to Stable Link products. Traditional Term Life and Whole Life Insurance Sinarmas MSIG Life offers traditional non-participating term and whole life insurance products. Non-participating term life insurance products provide a guaranteed benefit upon the death of the insured within a specified time period in return for periodic payment of fixed premiums. Specified coverage periods can be any length of term, depending on the product. Death benefits may be level or increase over the period. Premiums are typically at a level amount for the coverage period. Term life insurance products are sometimes referred to as pure protection products, in that there are normally little or no savings or investment elements. Unlike endowment products, term life insurance products expire without value at the end of the coverage period if the insured person is still alive.