Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Regulator's possible sanctions may hamper Hanwha acquisitions
Hanwha Life headquarters in Seoul / Courtesy of Hanwha Life
By Lee Min-hyung
By Lee Min-hyung
Hanwha Life CEO Yeo Seung-joo
Hanwha Life may suffer a major setback in its plan to engage in aggressive mergers and acquisitions (M&As) as it faces a possible warning from the Financial Supervisory Service (FSS) following a regular inspection on the life insurer.
The financial regulator plans to decide today what sanctions it will slap on the insurer for its alleged business malpractices in managing and selling insurance products. This follows the FSS' comprehensive inspection on the insurer carried out for three months from May 2019. Earlier, Hanwha Life was advised to enhance transparency in its internal transactions with other affiliates.
It remains to be seen whether or not the regulator will impose heavy sanctions on the Hanwha affiliate. But chances are the company will be given at least a warning, the fourth-strongest out of the five levels of sanctions that can be imposed based on the FSS' regular inspections.
According to the law, any companies that receive a message of warning from the inspection are barred from taking over other firms for a year.
This will deal a serious blow to the insurer at a crucial time when it needs to expand its business into new territories ― particularly in the digital sector amid toughening rivalry from existing players.
For example, the insurer has been in working-level talks recently to take over People Life, an independent life insurance general agency here. The drive is part of Hanwha Life's plan to diversify its sales channels and strengthen its sales capacity to tackle the unfavorable market environment represented by prolonged low interest rates.
Worsening profitability of Hanwha's general agencies is also cited as another reason why the insurer has pushed for the acquisition of People Life.
Hanwha Life runs two general agencies ― Hanwha Life Asset and Hanwha Financial Asset ― but both of them suffered losses in its earnings in 2019. The two firms reported net losses of 986 million won and 2.09 billion won in 2019, respectively. They also went on a losing streak in the first quarter of this year by incurring net losses of more than 1 billion won.
But Hanwha Life will not be able to gain additional momentum to take over People Life after possibly being given sanctions from the regulator.
The potential punishment will also come as a big stumbling block for the firm to achieve its short- to medium-term goal of digital transformation.
Hanwha Life CEO Yeo Seung-joo has recently underlined the need to push for agile transformation to brace for a structural slowdown in the insurance business.
“Hanwha Life's executives and staff members need to shake off what is old faster than competitors and join hands to prepare for the new world,” Yeo said earlier this month while sharing the firm's management strategy in the latter half of 2020.
Digital transformation is one of the crucial tasks the company strongly emphasizes, with the firm carrying out a major organizational reshuffle with the focus on enhancing its digital capabilities and expanding its presence in the area.