Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Will M&A market for insurance companies revive this year?
gettyimagesbank
By Anna J. Park
Sale of Lotte Insurance to test market sentiment
Market attention is now on whether the insurance M&A market could be able to reverse its frozen atmosphere in this year. While some market watchers expect M&A activities in the insurance sector to be revitalized as uncertainties are resolved over the application of the new IFRS 17 global accounting standards, concerns still linger regarding the long-term forecast for the domestic insurance industry, according to industry officials, Friday.
Lotte Insurance headquarters in Seoul / Courtesy of Lotte Insurance
Lotte Insurance, which will soon be officially put up for sale, is expected to gauge the market sentiment.
According to the investment banking industry on Friday, JP Morgan, the lead manager of the non-life insurer's sale, plans to distribute investment memorandums (IMs) by the end of this month to domestic financial institutions, including Shinhan, Hana and Woori financial groups and Kyobo Life. JP Morgan is also said to have made contact with potential foreign buyers one-on-one.
Lotte Insurance is regarded as the strongest player, as various other insurers, such as KDB Life, ABL and MG Insurance, are being piled up to find a new owner.
The non-life insurance company not only succeeded in posting an annual net profit of about 3.02 trillion won ($2.25 billion) last year, but also rewrote its earnings record. The investment banking industry anticipates that a deal could be sealed at a corporate valuation price ranging from 2 trillion won to 3 trillion won.
Some market watchers remain pessimistic over the future growth rate of the domestic insurance industry, questioning its sustainability.
"Realistically, it is difficult to expect the current growth trend to continue in the insurance sector. As the insurance industry is predominantly domestic with low overseas business exposure, variables such as GDP growth rate and private consumption are important factors affecting its growth. It seems the potential for growth of the insurance sector is not high at the current stage where the majority of the population is already insured," a researcher from NICE Rating pointed out.
Throughout last year, not a single deal was closed in the insurance M&A market.
The most recent failed sale was of KDB Life Insurance. Korea Development Bank (KDB), which jointly holds a 92.73 percent stake in the life insurance company with Consus Asset Management, conducted sales negotiations with MBK Partners, but the deal ultimately fell through in early January. This marks the sixth failed attempt to sell KDB Life.
ABL Life's sale also failed last year. China-headquartered Dajia Life Insurance, the major shareholder of the insurer, initiated the sale negotiations with potential buyers, but some private equity firms that previously had shown interest and BNK Financial Group ended up withdrawing their acquisition intentions midway.
Attempts to sell MG Non-Life Insurance also failed over two times last year. Additionally, BNP Paribas Cardif Life Insurance is also on the M&A market.