More US, Chinese life insurers may leave Korea

By Park Jae-hyuk

More attention is focusing on whether the U.S.-based MetLife and Cigna and China's Dajia will follow in the footsteps of Prudential Financial, which recently sold its Korean insurance arm to KB Financial Group for about 2.3 trillion won ($1.9 billion).

Given that several global players ― ING, Allianz, PCA and Prudential ― have already left or decided to leave Korea amid the local market's saturation, more foreign insurance giants, including MetLife and Cigna, are expected to put their Korean operations on the M&A market soon, despite their denials.

“The agenda regarding the sales of Korean units has been brought up every year at board meetings of both MetLife and Cigna over the past few years, because of the deteriorating growth potential of the Korean market,” a source familiar with this issue said on condition of anonymity.

“Considering the recent sale of Prudential Life Insurance Company of Korea, it is highly probable that additional U.S. insurers will attempt to sell their local units.”

MetLife declined to comment, while Lina Korea, the Korean unit of Cigna, said there is no possibility of an exit.

Market observers have also focused on Tongyang and ABL, both owned by China's Dajia Insurance Group, formerly Anbang Insurance Group.

Over the past few years, there has been speculation that Dajia will sell its overseas life insurance units to improve its financial soundness.

Tongyang has denied the speculation, saying in February that its governance structure would remain unchanged, after the Chinese financial regulator announced it had ended its two-year management of Dajia that was implemented to improve the group's financial health.

However, Tongyang and ABL are still regarded as potential operations that could be put on the M&A market soon.

The Hong Kong-based AIA, which was AIG, also denied any exit from Korea when it appointed Peter Chung as the new CEO of the Korean unit last December.

The company then emphasized it would accelerate its investments in insurance and healthcare in the Korean market this year.

A top executive at a domestic private equity firm (PEF), however, said investment banks are still expecting AIA and other foreign insurers to be put on the market.

“As Prudential did, more foreign insurers will leave Korea due to deteriorating profitability,” he said on condition of anonymity.

According to the Financial Supervisory Service, the combined net income of life insurers in Korea was 3.11 trillion won ($2.5 billion) in 2019, a 22.8 percent drop from a year earlier.

“Amid the low growth, birth and interest rates, it is feared that their business could contract further due to the recent COVID-19 pandemic,” the financial watchdog said.

Against this worsening industry outlook, Prudential successfully sold its Korean subsidiary to KB Financial Group.

KDB Life Insurance, which has been owned by the state-run Korea Development Bank (KDB) for the past 10 years, will also likely find a new owner soon, because the new PEF JC Partners started conducting due diligence after joining the preliminary bidding.

In 2018, Shinhan Financial Group took over Orange Life, which was ING Life, from MBK Partners.

Industry experts hinted that foreign insurance groups may take advantage of the recent trend, noting that the interests of buyers and sellers now coincide.

“Sellers want to unload their insurance units amid the deteriorating business outlook, while buyers take this as an advantage to buy insurance companies at lower prices,” said Cho Young-hyun, the director of the Korea Insurance Research Institute's department of insurance trends analysis.

“Financial holding firms have sought to diversify their business portfolios with insurance companies, and PEFs want to make profits as MBK did when it exited ING.”