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| The head office of the-K NON-Life Insurance in Seoul / Korea Times file |
By Lee Kyung-min
Mergers and acquisitions (M&A) in the insurance market are heating up as several life insurance firms operating here have been put up for sale.
Some financial groups are keen to buy insurers to bolster non-banking sectors, while major private equity funds, such as MBK Partners and Hahn & Co., are looking for potential targets after raising trillions of won over the past few months.
Hana Financial Group is in talks with the Korea Teachers Credit Union (KTCU) about a takeover of The-K Non-Life Insurance, following due diligence conducted by Samjong Accounting Corp. KTCU is the owner of the non-life insurer.
Hana plans to acquire the non-life insurer specializing in auto insurance if they are able to iron out differences over the takeover price, which many expect will be set at somewhere between 100 billion won ($84 million) and 150 billion won.
The-K Non-Life Insurance posted a net loss of 11.1 billion won in the first nine months of 2019 following a net loss of 10.5 billion won in 2018.
If the non-life insurer is acquired by Hana, it is expected be able to boost capital and expand Hana's business portfolio to include long-term care and other non-auto insurance products.
Hana believes that although the company is suffering net losses, the group can normalize its operation by injecting additional capital and strengthening its non-banking sector.
"The necessary processes are ongoing," a Hana official said. "The acquisition will help the group strengthen the non-banking sector, although we are not able to make anything public pertinent to the deal due to a non-disclosure agreement."
Hana's banking sector accounts for 87.8 percent of the group's total profits, well above Shinhan Financial's 64.3 percent and KB Financial's 72.2 percent.
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| The headquarters of Prudential Life Insurance Company of Korea in Seoul |
According to industry sources and media reports, Prudential recently selected Goldman Sachs as lead manager for the sale of its Korean unit. The U.S.-based insurance giant established the Korean subsidiary in 1989.
The U.S. investment bank recently sent a letter of intent to KB Financial Group, Woori Financial Group and major private equity funds here.
"We cannot confirm or deny any rumors about the ongoing development. We will maintain an open stance to look for attractive deals that could help us strengthen our business portfolio," a KB official said.
Prudential Life recorded 146.5 billion won in net profit in the first nine months of 2019, coming in sixth in the industry. The performance is notable given its asset size is only 20.8 trillion won, 11th-largest in the industry.
Its risk-based capital ratio, considered a barometer for financial soundness, stood at 505.1 percent in June, which places it at the top of the list of life insurers.
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| The main office of KDB Life Insurance in Seoul |
KDB plans to initiate necessary procedure to find a preferred bidder no later than Dec. 31, but the fourth attempt to sell its life insurance subsidiary will take longer than expected given more insurance firms will be on the market.
ABL Life and Tongyang Life, both of which are under the ownership of China's Dajia Insurance Group, are likely to be put up for sale sometime soon, as the Chinese financial group has sought to sell off the overseas assets of its subsidiaries.
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