M&A Heat Rises with 'Big Fish' Prudential's Entry... Insurance Industry Faces Major Shake-up (Comprehensive)

'KB' vs 'Woori' Financial Group Competition Structure

Dongyang ABL Likely to Change Major Shareholder

KDB Life Insurance May Resume Sale

[Asia Economy Reporter Oh Hyung-gil] A major upheaval is forecasted in the insurance industry from the beginning of the year.

Starting with Prudential Life, mergers and acquisitions (M&A) of insurance companies put up for sale are gaining momentum, and integration of insurance companies within financial groups is also expected. Foreign insurance companies are also set to change their major shareholders, which could lead to further shifts in asset rankings depending on the outcomes of alliances and mergers.

According to the insurance industry on the 16th, the U.S.-based Prudential Financial held a preliminary bidding for the sale of Prudential Life on the same day. Having received the investment memorandum (IM) through the sale advisor Goldman Sachs, Prudential Financial plans to announce a shortlist of qualified bidders within this month.

Prudential Financial appears to have chosen to sell Prudential Life instead of making additional investments due to increased capital burdens caused by stricter U.S. insurance accounting standards. Additionally, the prolonged low-growth and low-interest-rate environment in the Korean market, which is worsening the business environment, is cited as another reason for the sale.

Prudential Life is the largest insurance company on the M&A market this year. With total assets of approximately 20 trillion won, it ranks 11th among all life insurance companies. It achieved a cumulative net income of 146.4 billion won in the third quarter of last year, and its solvency ratio, a key soundness indicator, is close to 505%, demonstrating both profitability and soundness. The market expects the sale price to be around 2 trillion won.

The acquisition battle for Prudential Life is expected to involve several private equity funds, including KB Financial Group and Woori Financial Group.

The most likely candidate is KB Financial Group. Although KB Financial has KB Life as a subsidiary, its total assets amount to only 10 trillion won, and its share within the group is minimal. For KB Financial Group, this is a golden opportunity to grow its insurance sector through synergy with KB Life.

KB Financial Group Chairman Yoon Jong-kyu has publicly identified life insurers as a portfolio segment needing reinforcement within the group for several years, showing strong M&A intent. The contest for reclaiming the title of 'leading financial group' against Shinhan Financial Group also hinges on whether they acquire a life insurer.

In particular, KB Financial's strong capital base is an advantage. With treasury shares worth 1.3 trillion won and a double leverage ratio of 126% as of the end of September last year, its financial capacity is expected to exceed 2 trillion won.

Woori Financial also shows a willingness to strengthen its non-financial sectors despite limited capital. Woori Financial Group Chairman Sohn Tae-seung has announced plans to pursue strategic M&A this year. However, to compensate for insufficient funds, forming a consortium with financial investors (FIs) is also considered a possible scenario.

Hana Financial Group has completed due diligence for acquiring The-K Non-Life Insurance and is currently negotiating the purchase price, indicating interest in entering the life insurance acquisition race as well.

Private equity funds are also eyeing opportunities. MBK Partners, which made a profit of about 2 trillion won by reselling Orange Life (formerly ING Life) to Shinhan Financial Group, as well as IMM Private Equity (PE) and Hahn & Company, which have previously participated in financial company acquisitions, are considered strong candidates.

Next month, the entrusted operation by Chinese Dajia Insurance Group, the major shareholder of Tongyang Life and ABL Life, is set to end. The China Insurance Regulatory Commission has announced plans to privatize Dajia Insurance Group and is currently conducting the sale process.

It is naturally expected that the major shareholders of Tongyang Life and ABL Life will change. A Tongyang Life official said, "We are closely monitoring any decisions made by Chinese authorities," adding, "There will be no significant changes to domestic operations."

There are also places where covert sales and integration efforts are anticipated. The sale process for KDB Life, which was effectively halted at the end of last year, could resume at any time, and once Orange Life becomes a wholly owned subsidiary of Shinhan Financial next month, preparations for integration with Shinhan Life are expected to begin.

An insurance industry insider said, "As the industry downturn continues, many potential sale candidates may appear in the M&A market, leading to even harsher changes ahead," adding, "It is a crisis situation where no one can feel secure."