Measuring the Financial Health Performance of Life Insurance Company in Indonesia: Case Study During the Period of Before and After the Implementation of Peraturan Otoritas Jasa Keuangan, Nomor 71/POJK.05/2016

*Corresponding Author E-mail: wawan.rahardianto@ipmi.ac.id © 2019 IJBS, All rights reserved. Copyright © 2019 Authors. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. International Journal of Business Studies Vol. 3 No. 2 ( June 2019) INTRODUCTION The Financial Services Authority (Otoritas Jasa Keuangan – OJK) is an independent institution that has the functions, duties and authority to regulate, supervise, inspect and investigate the inancial industry in Indonesia advised customer to choose a good insurance company. The main consideration are: 1) Make sure the insurance company to be selected has been registered with the OJK and the Indonesian Life Insurance Association (Asosiasi Asuransi Jiwa Indonesia – AAJI). 2) Pay attention to the inancial strength of an insurance company, which can simply be seen through a minimum Risk Based Capital amount of 120%, healthy asset condition and liabilities (refer to inancial balance reports published in the media). In 23 December 2016, OJK issued an OJK regulation Peraturan Otoritas Jasa Keuangan POJK No. 71/POJK.05/2016 on measuring the level of inancial health of the life insurance and reinsurance in Indonesia. Article 2 paragraph 2 is mentioning measurement as pects: 1. Solvability Level is Solvency level is the difference between the amount of Allowable Assets reduced by the number of Liabilities. The target of internal solvency level as referred to in paragraph (2) is set at a minimum of 120% of MMBR (Modal Minim Berbasis Risiko) by taking into account the risk pro ile of each company and considering the results of a stress simulation scenario. 2. Technical Reserve are one of the important factors to calculate liabilities which consist of: A. Premium reserves: a) For products with a maturity of more than 1 (one) year with terms and conditions the policy cannot be renewed (non-renewable) on each policy anniversary. b) For products with a maturity of more than 1 (one) year, the terms and conditions of the policy can be renewed (renewable) and provide other bene its after a certain period. c) Reserves for premiums that do not yet constitute income for products with a period of up to 1 (one) year or a period of more than 1 (one) year whose terms and conditions can be renewed (renewable) on each policy anniversary. B. Reserve Claims are: a) Reserve claims in the settlement process b) Backup claims that have occurred however not yet reported (incurred but not reported or IBNR) c) Reserves of claims for agreed claims and payment of bene its is not at once. C. Reserves on PAYDI (Produk Asuransi Yang Dikaitkan Dengan Investasi) is insurance products that provide at least protection against the risk of death and provide bene its that refer to investment returns from a collection of funds speci ically formed for insurance products whether expressed in units or not units. D. Catastrophic Reserve is calculated based on retention insurance bene its alone by taking into account the possibility of risk disaster. 3. Investment Adequacy is accumulation of assets in the form of investments, non-investment (cash and banks) with minimum adequacy amount of the company technical reserves, liabilities to pay the company claims and other liabilities to policy holders or insured. 4. Equity is equity based on the inancial accounting standards that apply in Indonesia. 5. Guarantee Fund is an insurance company asset that functions as the last guarantee in order to protect the interests of policyholders, insured, or participants, in the event that the insurance company is liquidated, with the largest provisions between: A. Establish a guarantee fund of at least 20% of the minimum Equity, or B. Establish a guarantee fund of 2% of reserves for PAYDI plus 5% of premium reserves for products other than PAYDI plus reserves of premiums that have not yet constituted income To de ine the sample, this research is referring to Investor Magazine Indonesia, 10 top life insurance 65 in Indonesia based on net pro it as seen below: According to net pro it performance 2015, 2016 and 2017, only 2 companies consistently achieved net pro it ≥ IDR 1,010 billion which were PT Prudential Life Assurance (PLA) and PT AIA Financial (AIA). In this research, PLA has recorded the highest net pro it of IDR 6,219 billion for 2017 (increase 7% compared to net pro it 2016) and AIA has recorded high net pro it of IDR 1,050 billion for 2017 (however 2016 performance is 44% better than net pro it in 2017). Company Pro ile of PT Prudential Life Assurance Established in 1995 as a leading provider of life insurance services in Indonesia and is part of Prudential plc, a leading group of inancial services companies in the United Kingdom. As part of the Group with more than 168 years of experience in the life insurance industry, Prudential Indonesia is committed to developing its business in Indonesia. Since launching a life insurance product linked to its irst unit link in 1999, Prudential Indonesia is the market leader for these products in Indonesia. Prudential Indonesia has established a sharia business unit since 2007 and is believed to be the leader of the sharia life insurance market in Indonesia since its founding. Prudential Indonesia is headquartered in Jakarta with marketing of ices in Medan, Surabaya, Bandung, Denpasar, Batam and Semarang. As of December 31, 2016, Prudential Indonesia served more than 2.4 million customers through nearly 260,000 licensed marketers in 393 Mandiri Marketing Of ices (KPM) throughout the archipelago (including in Jakarta, Surabaya, Medan, Bandung, Yogyakarta, Batam and Bali). The composition of PLA shareholders consists of Prudential Corporation Holding Limited hold 94.6% of ownership, and PT Sasana Dwi Paramitra hold 5.4% percent of ownership. 66 RANK LIFE INSURANCE COMPANY 2017 2016 % RANK LIFE INSURANCE COMPANY 2017 2016 % PT Prudential Life Assurance PT AIA Financial PT AXA Mandiri Financial Service PT Asuransi Jiwa Sequis Life PT Asuransi Jiwa Sinarmas MSIG PT Commonwealth Life PT Asuransi Jiwa Manulife Indonesia PT Panin Dai-Ichi Life PT Asuransi Jiwasraya (Persero) PT BNI Life Insurance 6,219


INTRODUCTION
The Financial Services Authority (Otoritas Jasa Keuangan -OJK) is an independent institution that has the functions, duties and authority to regulate, supervise, inspect and investigate the inancial industry in Indonesia advised customer to choose a good insurance company. The main consideration are: 1) Make sure the insurance company to be selected has been registered with the OJK and the Indonesian Life Insurance Association (Asosiasi Asuransi Jiwa Indonesia -AAJI). 2) Pay attention to the inancial strength of an insurance company, which can simply be seen through a minimum Risk Based Capital amount of 120%, healthy asset condition and liabilities (refer to inancial balance reports published in the media).
In 23 December 2016, OJK issued an OJK regulation Peraturan Otoritas Jasa Keuangan -POJK No. 71/POJK.05/2016 on measuring the level of inancial health of the life insurance and reinsurance in Indonesia. Article 2 paragraph 2 is mentioning measurement as pects: 1. Solvability Level is Solvency level is the difference between the amount of Allowable Assets reduced by the number of Liabilities. The target of internal solvency level as referred to in paragraph (2) is set at a minimum of 120% of MMBR (Modal Minim Berbasis Risiko) by taking into account the risk pro ile of each company and considering the results of a stress simulation scenario.
2. Technical Reserve are one of the important factors to calculate liabilities which consist of: A. Premium reserves: a) For products with a maturity of more than 1 (one) year with terms and conditions the policy cannot be renewed (non-renewable) on each policy anniversary. b) For products with a maturity of more than 1 (one) year, the terms and conditions of the policy can be renewed (renewable) and provide other bene its after a certain period. c) Reserves for premiums that do not yet constitute income for products with a period of up to 1 (one) year or a period of more than 1 (one) year whose terms and conditions can be renewed (renewable) on each policy anniversary. B. Reserve Claims are: a) Reserve claims in the settlement process b) Backup claims that have occurred however not yet reported (incurred but not reported or IBNR) c) Reserves of claims for agreed claims and payment of bene its is not at once. C. Reserves on PAYDI (Produk Asuransi Yang Dikaitkan Dengan Investasi) is insurance products that provide at least protection against the risk of death and provide bene its that refer to investment returns from a collection of funds speci ically formed for insurance products whether expressed in units or not units. D. Catastrophic Reserve is calculated based on retention insurance bene its alone by taking into account the possibility of risk disaster.
3. Investment Adequacy is accumulation of assets in the form of investments, non-investment (cash and banks) with minimum adequacy amount of the company technical reserves, liabilities to pay the company claims and other liabilities to policy holders or insured.
4. Equity is equity based on the inancial accounting standards that apply in Indonesia.

Guarantee
Fund is an insurance company asset that functions as the last guarantee in order to protect the interests of policyholders, insured, or participants, in the event that the insurance company is liquidated, with the largest provisions between: A. Establish a guarantee fund of at least 20% of the minimum Equity, or B. Establish a guarantee fund of 2% of reserves for PAYDI plus 5% of premium reserves for products other than PAYDI plus reserves of premiums that have not yet constituted income To de ine the sample, this research is referring to Investor Magazine Indonesia, 10 top life insurance in Indonesia based on net pro it as seen below: According to net pro it performance 2015, 2016 and 2017, only 2 companies consistently achieved net pro it ≥ IDR 1,010 billion which were PT Prudential Life Assurance (PLA) and PT AIA Financial (AIA). In this research, PLA has recorded the highest net pro it of IDR 6,219 billion for 2017 (increase 7% compared to net pro it 2016) and AIA has recorded high net pro it of IDR 1,050 billion for 2017 (however 2016 performance is 44% better than net pro it in 2017).

Company Pro ile of PT Prudential Life Assurance
Established in 1995 as a leading provider of life insurance services in Indonesia and is part of Prudential plc, a leading group of inancial services companies in the United Kingdom. As part of the Group with more than 168 years of experience in the life insurance industry, Prudential Indonesia is committed to developing its business in Indonesia.
Since launching a life insurance product linked to its irst unit link in 1999, Prudential Indonesia is the market leader for these products in Indonesia. Prudential Indonesia has established a sharia business unit since 2007 and is believed to be the leader of the sharia life insurance market in Indonesia since its founding. As seen in Table 2, the performance of 5 inancial health aspects for both companies are outstanding.

Research Question
The research questions examined in this inal project are: 1. Compared then ranked the companies based on 5 measurement aspects, which company is superior compared to other? 2. Is there any correlation of the 5 measurement aspects during before and after the POJK

Research Limitation
In order to reach the goals of this research, there will be some research limitations that will be described below: 1. This research is discussing based on the 5 inancial health aspects: solvability level, technical reserve, investment adequacy, equity and guarantee fund then will be veri ied using descriptive statistic and paired t-test statistical method analysis.
2. This study only uses secondary data (2013 to 2017 audited inancial statements, 2018 unaudited inancial statement, annual reports, and websites) of PLA & AIA.

METHODOLOGY
In conducting this research, there will be some processes, consist of: 1. Collect the historical data of inancial statements obtained from PLA and AIA website. 2. Conduct calculation and analysis using the 5 aspects, before & after statistical method and compare and rank the result to ind which company has the best inancial performance during before and after the POJK issuance. 3. Provide recommendation for PLA & AIA.

Conceptual Framework
Miles and Huberman de ine conceptual framework as "a visual catalogue either graphically or in narrative form which contains the main things to be studied such as the key factors, constructs or variables and the presumed relationships among them" (1994: 18). Meanwhile, according to Maxwell (2013), "conceptual framework is an actual idea and belief that hold about phenomena studied". Based on problem statement described in the previous chapter, to answer the research questions, author develops following conceptual framework.
-68 -  For solvability level, both company solvencies are above 120%, but the trend has decline since 2013 to 2018. Hence PLA is gaining solvencies level in 2018 (PLA 746% vs AIA 630%). For technical reserve, both trends are showing positive growth. Hence PLA performance is above AIA.
For investment adequacy, both companies start from different performance (PLA 250% vs AIA 163%). Then the trend shift where PLA was decreasing in 2016 until 2018 due to underperforming fund manager. While AIA investment was gaining performance since 2015 until 2017 then slightly underperform in 2018. For equity, both companies start low (PLA IDR 6.016.071 billion vs AIA IDR 4.706.691) then reach almost the same equity in 2016. But then PLA performance is decreasing start from 2016 to 2018. AIA equities were getting stronger from 2013 to 2017, then start going slower in 2018.
For guarantee fund, both companies start almost the same but Prudential performance is getting stronger every year (PLA reach the peak in 2015). AIA guarantee fund also growing, but starting 2018, AIA is not reporting the result for guarantee fund.

RECOMMENDATION
PLA has shown best performance for solvability level, equity and guarantee fund. Based on the analysis, the author would like to recommend to enhance the performance strategy for technical reserve and investment adequacy as follow: Ÿ Technical reserve: PLA need to gain more premium reserves, reserve claims, reserves on PAYDI. PLA is fairly maintaining the catastrophic reserve.
Ÿ Investment adequacy: PLA need to accumulate more assets in the form of investments, i.e. invest in a high return company like the blue chip. PLA need to add more non-investment cash saving in banks reserve with the adequacy amount higher than PLA technical reserves. PLA to maintain liabilities to pay the company claims and other liabilities to policyholders or insured.

Period Means Std. Deviation Paired Sample T-Test Decision
Before After Before After Before After Before After Before After