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| KDB Life Insurance headquarters in Seoul / Courtesy of KDB Life Insurance |
Korea Development Bank (KDB) has officially kicked off the process to sell KDB Life Insurance, appointing Samil PwC to be the lead adviser for the sale.
According to the investment banking industry Friday, KDB and Consus Asset Management ―the two major shareholders of the life insurance firm ― are set to send a prospectus on the sale to potential buyers as early as the end of the this month. KDB is also planning to officially announce the sale of KDB Life, after gaining the board's approval scheduled later this month.
Late last month, KDB Chairman Kang Seog-hoon said the state lender aims to sell off KDB Life as soon as possible. KDB acquired the life insurance company in 2010, following an insolvency issue of Kumho Group, the previous parent company of the insurance firm. KDB jointly formed a private equity fund with Consus Asset to acquire the insurer, and has injected about 850 billion won ($593 million) so far. The joint private equity fund owns a 92.73 percent stake in KDB Life, and that majority stake will be up for the sale.
Given that this is be the lender's fifth attempt to sell the life insurance company, market attention is focused on whether the long-awaited sale will finally go through. The state lender first tried to sell the life insurer in 2014, followed by two more failed attempts within the next two years. In September 2020, KDB was able to sign a stock sale agreement with JC Partners on the sale of the insurance company. But the deal finally broke off early this year, as the financial authority did not approve JC Partners' qualification to acquire the life insurer.
KDB Life has logged solid growth in its revenues and operating profits during the past three years. Since it turned around in 2019, posting a positive operating profit, it recorded annual operating profits of 46.4 billion won in 2020 and 70.6 billion won in 2021. The firm's operating profit during the first half of this year stood at 76.4 billion won, suggesting its continued year-on-year growth for this year as well.
Despite the firm's recent growth, some market watchers remain skeptical of the sale due to unfavorable macroeconomic market conditions as well as the life insurance sector's slowed growth momentum. They say potential buyers need to conduct thorough due diligence to properly determine the firm's corporate value, as the life insurance industry's growth potential is slowing due to the country's historically low birthrate and aging population. The introduction of new accounting standards known as IFRS17 next year is also adding uncertainty to the firm's future growth potential.
Yet, rising interest rates are generally considered to have financially beneficial impacts on life insurers, as increased discount rates from higher interest rates lower a life insurer's future debt size. Thus, it remains to be seen whether the life insurance firm will succeed in finding a new owner this time around.
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