Questions remain over KDB Life normalization

KDB Life Insurance headquarters in Seoul / Courtesy of KDB Life Insurance

By Park Jae-hyuk

JC Partners is facing questions over its ability to normalize KDB Life Insurance, after the local private equity firm (PEF) signed a share purchase agreement with Korea Development Bank (KDB) last Thursday to buy the life insurer.

KDB said JC Partners agreed to take over a 92.7 percent stake in KDB Life for 200 billion won ($184 million) and inject 150 billion won into the insurer to issue new shares. The PEF has reportedly sought to inject an additional 200 billion won, but this was not stated in KDB's press release.

According to industry sources, JC Partners has attracted 100 billion won from Woori Bank and another 100 billion won from KDB to complete the deal.

Some market observers said the PEF will face difficulties in repaying the 200 billion won debt because its initial plan to transform KDB Life into a “co-insurance” company is unclear. Co-insurance is a type of reinsurance allowing insurers to transfer all kinds of possible outstanding risks to a reinsurer.

When JC Partners started to take part in the bid to acquire KDB Life early last year, it attempted to join hands with the Carlyle Group, which has expanded its presence in the global insurance industry by acquiring a 19.9 percent stake in DSA Reinsurance Company from AIG in 2018.

After the Korean Reinsurance Company (Korean Re) preemptively formed a partnership with Carlyle to take the lead in the domestic co-insurance sector, however, concern has arisen that JC Partners' post-acquisition scenario would face setbacks, although the local PEF has emphasized there remains room for it to cooperate with the world's leading PEF.

If JC Partners fails to distinguish KDB Life from its rivals, the insurer may not be able to improve its sluggish earnings.

JC Partners has already failed to normalize the earnings of MG Non-Life Insurance which it acquired in April last year. The insurer turned a loss in the third quarter of last year, posting a 56.5 billion won net loss.

The poor earnings of MG Non-Life caused the KDB Life union's complaint about KDB's decision to sell their company to the PEF. The union members are calling for job security assurances after the takeover.

Given that JC Partners has close ties with the Japan-based Orix PE, the labor and management of KDB Life may come into fiercer conflict, if the union shows concerns about Tokyo's possible interference in management.

JC Partners CEO Lee Jong-chul, who founded the company in 2018 with his colleagues from Orix PE, is an ethnic Korean living in Japan. Although Lee left Orix PE to run his own business, his company has continued to collaborate with his former workplace, which has its Seoul office right next to the JC Partners office.