Bo-eun leads the digital content team. She has covered foreign affairs, North Korea, tech, economy and gender issues at The Korea Times. She did a short stint at the South China Morning Post in Hong Kong, where she obtained a new perspective on news production and life. Small sources of joy for her are lounging in the sun, having a good latte and swimming.
Is foreign insurer exodus accelerating?
By Kim Bo-eun
Lina Korea's office in central Seoul / Captured from Lina Korea website
By Kim Bo-eun
Talk in the investment banking sector about Lina Korea's sale is leading to speculation that an exodus of foreign insurers will accelerate in the latter half of the year.
A report by the Korea Economic Daily, Thursday, stated the U.S. insurance group Cigna, which owns Lina Korea, is in the process of selecting a lead manager for the sale of its Korean unit.
Lina Korea, which entered the local market in 1987, has had a stellar performance. Lina ranks 21 out of 24 life insurers here in terms of total assets, but is third in terms of net profit, which stood at 350 billion won last year.
Regarding the report, a Lina Korea official stated Friday "The (U.S.) group could have plans but we do not know of them."
The plan for the sale appears likely against the backdrop of the U.S. financial group Prudential's sale of its life insurance unit in Korea to KB Financial Group in April. The purchase price was 2.3 trillion won, which was higher than that Prudential had expected.
Prudential ranked 11th in terms of total assets and its net profit was 140 billion won last year. It led the industry in financial soundness, with its risk-based capital ratio at 425 percent as of December 2019.
Yet Prudential pulled out of the market, considering the local circumstances. Views are that foreign life insurers have begun moving fast after seeing Prudential's sale.
"For foreign entities, the decision basically comes down to: Will the sale be lucrative as of this moment?" an official at a life insurer said.
"Circumstances of the Korean market are not favorable, considering the persisting low interest rate and the introduction of new accounting standards that call for a boost in capital bases."
New accounting rules under the international financial reporting standards (IFRS) are set to come into force in 2023, which calculates insurance contract liabilities according to market value instead of book value. This requires insurers to secure a greater amount of capital for their financial health.
Analysts say that other foreign entities including ABL Life Insurance, Tongyang Life Insurance, as well as MetLife Korea, may follow suit. U.S. life insurer MetLife's Hong Kong unit was sold to the Pan-Asian life insurer FWD Group earlier this month, spanning speculation that MetLife is pulling out of developed markets in Asia.
The Dutch financial group ING sold ING Life Korea in 2013, the German financial services provider Allianz sold Allianz Global Investors Korea in 2016 and the U.K. financial services company Prudential plc sold PCA Life Korea in 2018.