Activist fund Align Partners presses DB Insurance on governance, shareholder returns
From left are Align Partners Capital Management CEO Lee Chang-hwan and DB Insurance CEO Jeong Jong-pyo / Courtesy of each company
Align Partners Capital Management has ramped up pressure on DB Insurance over shareholder value concerns by sending a second open letter to the insurer’s board, the activist fund said Friday.
In the letter, issued Thursday in response to DB Insurance’s first shareholder communication on March 5, Align Partners urged the company to take stronger measures to enhance shareholder value and presented additional views on corporate governance reforms and shareholder return policies.
The activist investor called for several changes, including adopting a management strategy based on return on required capital, strengthening shareholder return policies, improving internal transactions with group IT affiliate DB Inc., shifting to a joint trademark ownership structure, overhauling the executive compensation system, and reinforcing board independence.
Align also raised new concerns regarding DB Insurance’s acquisition of U.S. insurer Fortegra. In September last year, DB Insurance signed a $1.65 billion deal to acquire Fortegra, the largest overseas takeover by a Korean insurer to date.
DB Insurance headquarters in Seoul / Korea Times file
The fund questioned the consistency of the company’s position, pointing out that while DB Insurance has taken a cautious stance on expanding shareholder payouts citing credit rating stability, it is simultaneously pursuing a large-scale acquisition despite Standard & Poor’s indicating that the deal could weigh on its credit rating.
As part of its inquiry, Align requested detailed explanations about aspects of the Fortegra transaction, including the valuation basis and expected internal rate of return.
Align acknowledged the insurer’s willingness to engage with shareholders, noting that management and the board had reviewed the proposals individually and responded within the designated timeframe, a move the fund said demonstrates a degree of openness to shareholder dialogue.
Regarding Align’s letters, a DB Insurance official said the firm’s risk management framework is designed around efficiency and functions similarly to a return on required capital model.
“We also recently decided to cancel 5.6 percent of our treasury shares acquired to boost shareholder value. We plan to continue reviewing and implementing further shareholder return measures, including complying with new treasury share cancellation requirements under the revised Commercial Act,” the official said.
In an earlier letter to shareholders, DB Insurance CEO Jeong Jong-pyo stated, “The insurance industry must balance public responsibility, long-term risk management and the pursuit of shareholder value. We aim to strengthen shareholder trust through profitability-centered growth and more transparent corporate governance.”