[Exclusive] KDB Industrial Bank Injects 300 Billion Won into KDB Life Insurance... New Owner Search Remains Uncertain

Maximum Investment of 307 Billion KRW
Participation in KDB Life Capital Increase via KDB PEF
Supported 100 Billion KRW Last September
Total Investment Reaches 1.5 Trillion KRW So Far
Expected to Resell After Enhancing Value

KDB Industrial Bank has stepped in to inject funds to strengthen the capital of KDB Life Insurance, whose sale process has been halted. Last September, the Industrial Bank made a similar investment, and analysts expect it to improve KDB Life Insurance's financial structure and attempt resale. However, given that the sale has already failed six times, it remains uncertain whether a new owner can be found.

According to financial circles on the 18th, the Industrial Bank will invest 299 billion KRW in KDB Kansas Value Private Equity Fund (KDB PEF) on the same day. Additionally, there is a condition to invest up to 8 billion KRW more for covering expenses. On the 30th of last month, the Industrial Bank's board of directors approved this agenda.

The Industrial Bank is expected to participate in KDB Life Insurance's paid-in capital increase using the funds invested in KDB PEF. The major shareholders of KDB Life Insurance are the Industrial Bank and Kansas Asset Management. Through KDB PEF, established jointly by the Industrial Bank and Kansas Asset Management, they hold 95.7% of KDB Life Insurance's shares. The Industrial Bank owns 70.56% of KDB PEF, while Kansas Asset Management holds the remaining 2.29%. In April, KDB Life Insurance announced it would raise 315 billion KRW through a rights offering. The funds will be used for operating expenses (216 billion KRW) and repayments (99 billion KRW).

Seoul Yeouido Industrial Bank Headquarters. Photo by Younghan Heo younghan@

This type of 'capital injection' also occurred last September. At that time, the Industrial Bank, KDB PEF, and KDB Kansas Value LLC (a special purpose company wholly owned by KDB PEF) participated in KDB Life Insurance's paid-in capital increase, injecting 100 billion KRW, raising their stake from 92.7% to 95.7%. With this new capital increase, the total funds the Industrial Bank has invested in KDB Life Insurance will increase from 1.2 trillion KRW to approximately 1.5 trillion KRW.

Since the Industrial Bank is considering incorporating KDB Life Insurance as a subsidiary, opinions suggest that it will improve the financial structure through this investment and then proceed with resale. KDB Life Insurance has failed to be sold six times by this year. The Industrial Bank acquired Kumho Life Insurance (now KDB Life Insurance) during the Kumho Group restructuring in 2010 and has been attempting to sell it since 2014. Last year, Hana Financial Group, selected as the preferred bidder, withdrew after due diligence. Earlier this year, a sale to MBK Partners was also unsuccessful. An Industrial Bank official stated, "We are reviewing various options, including subsidiary incorporation and extending the maturity of KDB PEF." On the 11th, Kang Seok-hoon, chairman of the Industrial Bank, said, "KDB Life Insurance is a painful issue. We have done our best to sell it, but since there are no buyers, we are currently reviewing ways to enhance KDB Life Insurance's value and make a final decision accordingly."

Repeated failures in the sale have worsened KDB Life Insurance's capital soundness day by day. As of the end of December last year, KDB Life Insurance's solvency ratio (K-ICS) was 117.54%. This falls short of the financial authorities' recommended level of 150% and is lower than the 134.05% recorded in the third quarter of last year. K-ICS is an indicator showing whether an insurer can pay insurance claims promptly to policyholders. The liquidity assets that can be converted to cash within three months were 9.370932 trillion KRW in 2022, 8.18085 trillion KRW last year, and showed a declining trend to 7.936163 trillion KRW in the first quarter of this year.