Will Kumho Insurance Be Sold Soon?
By Yoon Ja-young
Staff Reporter
Kumho Asiana Group is in talks with some three potential buyers over the sale of Kumho Life Insurance, according to local media. The market is paying attention to whether the sale, of which there has been only talk of for several months, can be realized this time.
The group has been pushing to sell its life insurance arm since last September amid liquidity problems, and there have been multiple indications the sale was near completion.
According to market watchers, there is a huge price gap ― while Kumho Asiana Group wants to get at least one trillion won, potential buyers suggested only hundreds of billions of won. Moreover, the global financial crisis has made the sale even more difficult.
The insurer, meanwhile, has been making efforts to put itself in better financial health. It raised 105 billion won through a paid-in capital increase, though this fell short of its plan to raise 200 billion won.
``Among Kumho Group subsidiaries that hold stakes in Kumho Life Insurance, Kumho Industrial and Asiana Airlines couldn't participate in the capital increase due to the Holding Company Law. We plan to make up for it by issuing subordinate bonds,'' a Kumho Life Insurance spokesman said. Kumho Asiana Group subsidiaries, including Kumho Industrial and Asiana Airlines, hold a nearly 70 percent stake in the life insurer.
He stressed that the efforts have nothing to do with the sale, but added that the measures would pull up the solvency ratio of the life insurer to the level required by the Financial Supervisory Service.
The life insurer also sold its headquarters building and its stake in a social overhead capital (SOC) project to improve its financial health.
However, insurance industry insiders have a pessimistic view on whether it will be sold this time. ``The whole life insurance industry is in trouble. The shock from the subprime mortgage crisis hasn't ended yet,'' said an insurance industry analyst, indicating that there will be a dearth of potential buyers as many insurance businesses around the world are being put up for sale. ``One should be very cautious in acquiring a life insurer as the products are long-term and go for over a decade. There's always risk of bad assets popping up,'' he added.
Some point out that Kumho Asiana Group isn't sophisticated at negotiating. ``It 's been talking about the sale of the life insurer for nearly a year. How would its employees feel? Kumho made too many strategic mistakes,'' an analyst said.
Life insurance companies are suffering under the economic recession. According to the financial regulator, life insurers' net income stood at 761 billion won as of the end of December, falling 55.5 percent from the previous year.