By Kim Jae-won
Chinese companies are setting their eyes on Korean financial industries, especially insurance firms.
Chinese investors have been conducting due diligence on ING Life Insurance, seeking to buy the Seoul-based insurer owned by local private equity MBK Partners, sources familiar with the matter said Sunday.
The news came after the stock purchase agreement on Allianz Life Korea signed earlier this year between China's Anbang Group and Germany's Allianz.
Anbang also snapped up Tongyang Life Insurance a year ago. This means that if Chinese players complete the acquisitions of Allianz Life Korea and ING Life, three of 25 local life insurers will end up in their hands.
"It seems only Chinese companies are hoping to purchase Korean life insurance firms, which are suffering under the negative interest margin," said a Seoul-based analyst. "Things are not likely to change in the near future."
Domestic life insurers sold policies in the 1990s or early 2000s guaranteeing interest rates higher than 5 or 6 percent. Hence, the recent plunge in interest rates pose great financial threats to them ― the benchmark interest rate set by the central bank is at a historic low of 1.25 percent.
"Interest rates are very low across the world. Only Chinese companies appear to have the luxury of dealing with such high interest guarantees," the analyst said.
ING Life
Beijing-based private equity JD Capital, Shanghai-based investment firm Fosun and Hong Kong's China Taiping Insurance Group have been examining financial statements of ING Life, whose 100 percent stake is up for sale in three years since it was sold to MBK from Dutch financial services company ING Group at 1.8 trillion won ($1.6 billion), according to industry sources close to MBK and its lead manager Morgan Stanley.
Market watchers said that JD Capital is rising as a strong candidate in the deal, suggesting it will offer more than 3.5 trillion won to buy ING Life in the preliminary bidding. Analysts said that the Chinese company may have appreciated the growth potential of the local insurer, which posted a 304.8 billion won of net profit last year, up 36 percent from a year ago.
Fosun is cautious about investing in the firm while Taiping is considering the pros and cons of the takeover, according to sources involved in the deal.
Korea's Kyobo Life Insurance also joined the bidding process in the early stage, but was knocked out later as its bidding price was below 2 trillion won, failing to satisfy MBK which wants to sell the company for more.
The Chinese firms' interest in the Korean financial market come three months after Anbang signed to buy Allianz Life Insurance Korea and Allianz Global Investors, strengthening its presence in the country following its acquisition of Tongyang Life Insurance a year ago.
THAAD factor
But, ironically, Chinese companies' aggressive investments in Korean insurers may be blocked by their own regulator. Market observers said that the Chinese government can veto the deals as part of its protest against Korea, which decided to allow the U.S. to deploy its Terminal High Altitude Area Defense (THAAD) in the country.
"Rumor has it that China may not approve its companies to buy Korean insurers as part of its revenge against the Korean government over deployment of THAAD," said an industry source familiar with the matter, asking not to be named. "If that is true, it will be a big blow to the nation's life insurance industry which is eager to draw investments from Chinese companies."
South Korea and the U.S. agreed earlier this month that the U.S. military will deploy its THAAD system in Seongju, North Gyeongsang Province, next year, seeking to defend the country from North Korea's nuclear missile threats. But, China has opposed the plan, worrying that THAAD is part of U.S. strategy to contain China in Northeast Asia.
But, the Korean regulator denied this rumor, saying China may not connect the economic issue with political one.
"I don't think that China will use economic measures to counterattack Korea's decision to allow the U.S. to deploy THAAD in the country," said Seo Tae-jong, first senior deputy governor at the Financial Supervisory Service. "I believe that China is mature enough to differentiate economic issues from political ones."
Sources close to the Chinese government said that the world's second-largest economy may not implement economic measures against Korea until September when the country hosts the G20 Summit in its eastern city of Hangzhou.
"The Chinese government is waiting for the right time to counterattack," said an official of a Chinese state agency on the condition of anonymity.
Chinese companies are setting their eyes on Korean financial industries, especially insurance firms.
Chinese investors have been conducting due diligence on ING Life Insurance, seeking to buy the Seoul-based insurer owned by local private equity MBK Partners, sources familiar with the matter said Sunday.
The news came after the stock purchase agreement on Allianz Life Korea signed earlier this year between China's Anbang Group and Germany's Allianz.
Anbang also snapped up Tongyang Life Insurance a year ago. This means that if Chinese players complete the acquisitions of Allianz Life Korea and ING Life, three of 25 local life insurers will end up in their hands.
"It seems only Chinese companies are hoping to purchase Korean life insurance firms, which are suffering under the negative interest margin," said a Seoul-based analyst. "Things are not likely to change in the near future."
Domestic life insurers sold policies in the 1990s or early 2000s guaranteeing interest rates higher than 5 or 6 percent. Hence, the recent plunge in interest rates pose great financial threats to them ― the benchmark interest rate set by the central bank is at a historic low of 1.25 percent.
"Interest rates are very low across the world. Only Chinese companies appear to have the luxury of dealing with such high interest guarantees," the analyst said.
ING Life
Beijing-based private equity JD Capital, Shanghai-based investment firm Fosun and Hong Kong's China Taiping Insurance Group have been examining financial statements of ING Life, whose 100 percent stake is up for sale in three years since it was sold to MBK from Dutch financial services company ING Group at 1.8 trillion won ($1.6 billion), according to industry sources close to MBK and its lead manager Morgan Stanley.
Market watchers said that JD Capital is rising as a strong candidate in the deal, suggesting it will offer more than 3.5 trillion won to buy ING Life in the preliminary bidding. Analysts said that the Chinese company may have appreciated the growth potential of the local insurer, which posted a 304.8 billion won of net profit last year, up 36 percent from a year ago.
Fosun is cautious about investing in the firm while Taiping is considering the pros and cons of the takeover, according to sources involved in the deal.
Korea's Kyobo Life Insurance also joined the bidding process in the early stage, but was knocked out later as its bidding price was below 2 trillion won, failing to satisfy MBK which wants to sell the company for more.
The Chinese firms' interest in the Korean financial market come three months after Anbang signed to buy Allianz Life Insurance Korea and Allianz Global Investors, strengthening its presence in the country following its acquisition of Tongyang Life Insurance a year ago.
THAAD factor
But, ironically, Chinese companies' aggressive investments in Korean insurers may be blocked by their own regulator. Market observers said that the Chinese government can veto the deals as part of its protest against Korea, which decided to allow the U.S. to deploy its Terminal High Altitude Area Defense (THAAD) in the country.
"Rumor has it that China may not approve its companies to buy Korean insurers as part of its revenge against the Korean government over deployment of THAAD," said an industry source familiar with the matter, asking not to be named. "If that is true, it will be a big blow to the nation's life insurance industry which is eager to draw investments from Chinese companies."
South Korea and the U.S. agreed earlier this month that the U.S. military will deploy its THAAD system in Seongju, North Gyeongsang Province, next year, seeking to defend the country from North Korea's nuclear missile threats. But, China has opposed the plan, worrying that THAAD is part of U.S. strategy to contain China in Northeast Asia.
But, the Korean regulator denied this rumor, saying China may not connect the economic issue with political one.
"I don't think that China will use economic measures to counterattack Korea's decision to allow the U.S. to deploy THAAD in the country," said Seo Tae-jong, first senior deputy governor at the Financial Supervisory Service. "I believe that China is mature enough to differentiate economic issues from political ones."
Sources close to the Chinese government said that the world's second-largest economy may not implement economic measures against Korea until September when the country hosts the G20 Summit in its eastern city of Hangzhou.
"The Chinese government is waiting for the right time to counterattack," said an official of a Chinese state agency on the condition of anonymity.
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