6 Insurance Companies Listed Domestically
Major Deal 'Lotte Sonbo' Sale Accelerates
Dongyang Life Rated Strong Among Life Insurers
KDB Life Attempts 7th Sale
As insurance companies consecutively announce record-breaking earnings, attention is turning to the mergers and acquisitions (M&A) market. With the non-bank sector, led by insurance companies, posting last year's results that threaten the banking sector, the attractiveness of insurable insurance companies is expected to increase.
Search for Buyers of Insurance Companies Intensifies... Motor Insurance Company Sales Gain Momentum
According to the financial sector on the 28th, there are currently six insurance companies listed for sale in the domestic M&A market. The motor insurance companies are Lotte Insurance and MG Insurance, while the life insurance companies include KDB Life, ABL Life, Dongyang Life, and BNP Paribas Cardif Life. Due to the contraction of the investment market caused by high interest rates, listings have been accumulating, creating a buyer's market atmosphere.
However, a different atmosphere has recently been detected. As major domestic insurance companies recorded better-than-expected net profits last year, expectations are growing that buyers may move sooner than anticipated. Financial holding companies without insurance subsidiaries or with small-sized ones may also engage in aggressive bidding.
Underwriters for insurance company sales have also started behind-the-scenes negotiations. JP Morgan, the lead underwriter for the sale of Lotte Insurance, plans to distribute investment prospectuses to financial holding companies such as Shinhan, Hana, and Woori Financial Group, as well as some insurance companies, within this week. Hana and Woori Financial Groups are still considered less competitive in the non-bank sector compared to other companies, making them major players in the insurance M&A market.
Lotte Insurance is the largest among motor insurance companies listed for sale. The largest shareholder, JKL Partners, acquired a 53.49% stake in Lotte Insurance in 2019 for 370 billion KRW and expanded its stake to 77.04% through a paid-in capital increase worth 360 billion KRW. The value of JKL's holdings was approximately 668.2 billion KRW based on the previous day's closing price. JKL is understood to value Lotte Insurance at around 2 to 3 trillion KRW. However, even with a conservative application of the control premium, which can reach 200% of the equity value, the appropriate price is likely to be set lower than this. Financial holding companies, considered major acquisition candidates, are reportedly estimating Lotte Insurance's price at around 2 trillion KRW.
The sale process of another motor insurance company, MG Insurance, is also underway. MG Insurance's largest shareholder is JC Partners, but since it was designated as a distressed financial institution in 2022, the Korea Deposit Insurance Corporation (KDIC) has been entrusted with the public sale of MG Insurance. KDIC announced a bid for legal advisory services related to MG Insurance's restructuring on the 31st of last month. The selection of accounting and legal advisors is considered a preliminary step in the sale process. It is highly likely that the third public sale of MG Insurance will begin soon. KDIC plans to complete the legal advisory by this month. The market value of MG Insurance circulating is about 300 billion KRW, relatively inexpensive. Financial holding companies or life insurers aiming to enter the motor insurance business are likely to consider acquisition.
Many Life Insurance Companies on the Market... Sorting the Wheat from the Chaff Begins
Life insurance companies are more affected by low birth rates and aging than motor insurance companies. They inevitably have less appeal. The number of listings on the market is also twice that of motor insurance companies.
Among life insurers, Dongyang Life is the largest. As of the end of the third quarter last year, Dongyang Life's total assets amounted to 30.8655 trillion KRW, surpassing KDB Life (16.6341 trillion KRW), ABL Life (16.5187 trillion KRW), and BNP Paribas Cardif Life (2.9375 trillion KRW). Dongyang Life's market share based on insurance revenue is about 7%, placing it in the mid-tier of the life insurance industry. Dongyang Life posted a separate net profit of 295.7 billion KRW last year, its highest ever since establishment. Financial soundness has also improved.
The largest shareholder of Dongyang Life is the Chinese Dajia Insurance Group, holding a 75.3% stake. Dongyang Life was the first Chinese-affiliated insurance company in Korea, sold to Anbang Insurance in September 2015 after separating from the Dongyang Group in 2013. After Anbang Insurance was absorbed by Dajia Insurance Group, Dongyang Life has been under Dajia Insurance since 2020.
Dajia Insurance Group is currently proceeding with the sale of another Chinese-affiliated life insurer, ABL Life, so the sale process of Dongyang Life has not yet started. However, Dongyang Life appointed Lee Moon-gu as the new CEO in December last year, replacing the Chinese CEO who led the company for five years. This is interpreted as a strategic move to accelerate the sale process starting this year. Dongyang Life's valuation is estimated to be between 1 trillion KRW and the mid-1 trillion KRW range.
KDB Life, a 'gizzard' like asset for KDB Industrial Bank, is expected to attempt its seventh sale this year. The sale of KDB Life has been pursued since 2014 but has been repeatedly frustrated. Last year, Hana Financial Group conducted due diligence with support from the Industrial Bank but the deal fell through. MBK Partners, which had been secretly negotiating with Hana Financial Group, gave up on the acquisition. This is believed to be due to the unexpectedly large scale of KDB Life's bad assets. The valuation of KDB Life at that time was 200 billion KRW, but an additional 500 billion KRW would be required to normalize its financial structure after acquisition.
An industry insider said, "Last year, a new type of exam called the new International Financial Reporting Standard (IFRS17) was conducted, and the performance and financial reports of insurance companies are gradually being released," adding, "As the resilience of insurance companies has been confirmed, mega deals could emerge depending on market conditions such as interest rate cuts."
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