By Chris Vellacott and Eveline Danubrata

British insurer Aviva has embarked on expansion into Indonesia through a partnership with local conglomerate PT Astra International to sell life assurance in a largely untapped market.

Aviva is setting up a 50:50 joint venture called Astra Aviva Life to sell and distribute life products in Southeast Asia's biggest economy, the company said on Friday.

It did not disclose financial details but a source at the company said the deal would not have a material impact on the group's balance sheet, adding that Aviva had beaten off stiff competition from other international insurers.

"Every insurer wants to be in Indonesia," said Maynard Arif, head of research at stockbroker DBS Vickers in Indonesia. "They are attracted to the demographics and the rising middle class here."

Analysts interpreted the move as heralding a focus on Asia by Aviva's Chief Executive Mark Wilson, who has spent much of his career in the region and joined the company last year after running Hong Kong-listed rival AIA.

Since joining Aviva after an investor uprising that led to the departure of his predecessor, Wilson has sought to revamp the group, selling off non-core businesses and focusing on key markets.

"[This] provides a potential new growth engine for the group which is likely to be important as investor focus shifts away from balance sheet and dividend recovery and towards operational prospects over the next few years," Credit Suisse said in a research note on Friday.

Battle lines drawn

The Indonesian strategy will also open a new front in Aviva's competition with British rival Prudential which has also turned its attention to Asia.

Japanese companies are also making inroads into Indonesia's insurance sector. Sumitomo Life Insurance bought a 40 percent stake in the life insurance arm of PT Bank Negara Indonesia, while Dai-ichi Life Insurance acquired 40 percent of Panin Life.

"The life insurance penetration in Indonesia is still low at around 5 percent of the population, whereas Japan and Korea are already mature," Hendrisman Rahim, chairman of the Indonesian Life Insurance Association, told Reuters on Friday.

Life insurance premiums in the country of 240 million people grew at a compound annual rate of about 25 percent from 2002 to 2012, according to some estimates, underscoring its attractiveness to foreign companies such as Aviva.

"This joint venture creates a compelling growth opportunity, underlines our commitment to Asia and supports our strategy of cashflow plus growth," Aviva CEO Wilson said in a statement.

Astra, which has a market value of about $25 billion, has businesses spanning cars, financial services, heavy equipment and mining, agribusiness, infrastructure, IT and logistics.

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