Shinhan, Woori eyeing acquisition of AXA

Shinhan Financial Group Chairman Cho Yong-byoung speaks at a lecture to CEOs from the group's affiliates during its management forum at its headquarters in Seoul on July 29. Yonhap

By Lee Min-hyung

Shinhan and Woori financial groups are eyeing AXA General Insurance as a potential target for acquisition amid reports the French multinational insurance group plans to sell its Korean subsidiary in its entirety.

The two major financial holding firms do not operate non-life insurance businesses, so they have been on the lookout for a chance to buy an existing general insurer and complete building a group-wide financial business portfolio.

Neither said they have an immediate plans to purchase the Korean branch of AXA or any other firms doing similar business. But they left open the possibility that they would tap into the business sometime in the future.

Woori Financial Group Chairman Son Tae-seung

“We are conducting an internal review over whether to start a non-life insurance business but we currently cannot confirm any details over our potential acquisition of any such existing general insurance player here,” a Shinhan spokesman said Thursday.

But the group is keeping a close eye on the insurance market with a view to diversifying its financial business portfolio at a time when its biggest rival, KB Financial Group, operates a non-life insurance subsidiary.

In 2014, KB decided to take over LIG Insurance, launching the group's official non-life subsidiary by changing its name to KB Insurance the following year.

Despite the overall view from the market, Shinhan said it was “too early to determine” whether it would tap into the non-insurance business, as the general insurance market is experiencing falling profitability due to a structural slowdown in the industry.

AXA General Insurance is also no exception. The company reported a 36.9 billion won loss in 2019 due to an unfavorable market environment and toughening competition from domestic insurers.

The firm's earnings slightly bounced back in the first quarter when it reported 459 million won in net profit. But this was mostly due to the coronavirus effect, as people here refrained from outdoor activities amid fears over the virus spread. As a result, fewer people drove their cars and made fewer claims during the first half of the year, which helped non-life insurers save money.

“We do not have to be in a rush to acquire AXA General Insurance at a time when its profitability isn't so good,” the Shinhan official said.

AXA General Insurance was unavailable for comment. But the company is known to have denied that the French headquarters was moving to sell the Korean unit, saying nothing had been decided.

According to a report, AXA is seeking to sell its Korean affiliate after recently naming Samjong KPMG as the lead manager. The insurance industry estimates the subsidiary's value at between 160 billion won and 240 billion won.

If AXA is confirmed to be pushing the plan, other potential buyers include a local private equity fund (PEF) company. But that scenario appears less feasible, as the non-life insurance business has a dismal growth outlook in the near term. PEFs generally seek to gain revenue quickly, rather than waiting for the industry to bounce back for stable, longer-term profits.

Woori Financial Group is also considered a potential bidder, as the firm has reiterated its position to continue diversifying revenue sources in the non-banking sector, such as insurance and securities. Woori does not have life or non-life insurance units.

Earlier, Woori Financial Group Chairman Son Tae-seung expressed determination to push for aggressive mergers and acquisitions in the securities and insurance sectors.

Woori is in desperate need of a new cash cow after losing its status as the nation's fourth-largest financial holding firm ― in terms of net profit ― to NH Financial Group in the first half of this year.

Woori's major rival, Hana Financial Group, launched its non-life insurer, Hana Insurance, in June after taking over The-K Non-life Insurance.