It’s MandA time for insurance firms
ING, Ergo, Daum, Green put up for sale
By Kang Seung-woo
The takeover of insurers is likely to headline the local insurance market this year, as a slew of major entities are expected to be auctioned off.
According to sources in the insurance industry Monday, Tong Yang Life Insurance, ING Life Korea, ERGO Daum Direct General Insurance and Green Non-life Insurance have been put up for sale or will be sold in the first half of this year.
Observers say that that since insurance businesses are government-authorized, they can help parent companies deal more easily with liquidity and thus the insurers are certain to lure a large number of suitors.
Tong Yang’s largest shareholder Vogo Fund owns a 60.7 percent stake in the life insurer and the private equity firm is expected to unload controlling shares worth about 937 billion won ($814.25 million) in the first six months of the year.
While Vogo is scheduled to receive a letter of intent (LOI) from preliminary bidders soon, potential buyers include Korea Life Insurance; Prudential Financial, the U.S.-based second-largest life insurance firm; Manulife, Canada’s largest insurer; and General Re, a unit of Warren Buffett’s Berkshire Hathaway.
Korea Life, the nation’s third-largest life insurer, is the most aggressive bidder as the acquisition of Tong Yang Life will pave the way for the insurance unit of Hanwha Group to become the No. 2 player with 75 trillion won in assets, past Kyobo Life Insurance whose assets are 62 trillion won.
“Hanwha Group Chairman Kim Seung-youn has reportedly paid close attention to taking over Tong Yang Life. Tong Yang has put up a solid performance in bancassurance, so the merger with Korea Life will create a strong synergy,” said an official of the insurance sector.
ING Life Korea is also on the mergers and acquisitions (M&A) radar.
Amid a bleak economic outlook and global uncertainties, the Netherlands-based ING Group recently announced a plan to sell its Asian insurance and investment operations rather than listing them.
Like Tong Yang Life, ING Life is also drawing interest from a large number of bidders, as it is the fourth biggest life insurer in the market and the leading foreign player.
Along with Samsung Life Insurance and KB Life Insurance, the nation’s top four financial services groups and National Agricultural Cooperative Federation, or Nonghyup, are showing interest in buying ING Life as well
As for ERGO Daum Direct, the Korean Federation of Community Credit Cooperatives (KFCC), which failed to take over the Korean unit of Germany-based ERGO Group last year, is emerging as a potential buyer, as it plans to expand new businesses.
Nonghyup and other entities are considering acquiring Green Non-life Insurance which recently completed a capital increase of 60 billion won to improve its management.
“As Nonghyup is scheduled to make its debut in the life insurance sector in March, rival companies are set to expand their operations to survive the cut-throat competition,” said an official of a local insurance company.
“In addition, the participation of major financial groups is making auctions over-heated.”