PCA Life up for sale
PCA Life Tower in Gangnam, southern Seoul is shown in this file photo. / Korea Times file
By Kim Jae-won
U.K. financial group Prudential is planning to sell its local unit, PCA Life Korea, as part of restructuring its Asian business, industry sources familiar with the matter said Monday.
They said Prudential is looking for buyers by hiring investment bank Morgan Stanley as lead manager for the sales.
“PCA Life Korea is up for sale. Insurance companies are going through tough times,” said an industry source, asking not to be named.
Market watchers forecast that the deal will cost between 200 billion won ($171.3 million) and 300 billion won based on PCA Life Korea’s capital of 276.9 billion won as of September. The company posted a net profit of 12.7 billion won in the third quarter, down 28.2 percent from a year ago, according to data from the Korea Life Insurance Association.
The sales plan came 10 months after Prudential completed the sale of its Japanese unit. The London-based financial services group said in February that it had sold PCA Life Japan for $85 million to Japanese financial company SBI Holdings.
PCA Life Korea denied this.
“It is no more than a market rumor. We have no plan to sell the company,” said a spokeswoman of PCA Life Korea.
Foreign life insurers, including PCA Life, have had difficulties in expanding their presence here due to cutthroat competition with local rivals. Three big players ― Samsung, Kyobo and Hanwha ― are dominant in the local life insurance market with more than 60 percent of market share.
Tough business circumstances, such as low interest rates and sluggish economic growth, also prevent non-Korean insurers from having a strong foothold in Korea. In December 2013, Dutch financial group ING sold its Korean unit for 1.8 trillion won to MBK Partners, a local private equity company, as part of the group’s global business strategy to pull out of underperforming markets.
Korean insurers are also seeking to find new revenue sources to diversify their businesses. Earlier this year, Hanwha Life Insurance joined a consortium led by KT to run an online-only bank. The lender, titled K-Bank, won a preliminary license from the financial regulator last month.
“We plan to increase the portion of our non-insurance business up to 50 percent in the long term,” said an executive of a local insurance company. “It is difficult to run an insurance business in the age of low interest rates because we promised customers big returns in the past when interest rates were high.”
The central bank has frozen its key interest rate at a record low of 1.5 percent since June.