[Exclusive] Kakao Pay Insurance to Launch 100 Billion Won Paid-in Capital Increase

Kakao Pay Fully Funds Issuance of 20 Million New Shares
Second Paid-in Capital Increase Following 2023
"Securing Adequate Capital for Sales Growth"

Kakao Pay Insurance is conducting a paid-in capital increase of 100 billion won to strengthen its capital adequacy and secure long-term growth drivers.

According to coverage by Asia Economy on September 2, Kakao Pay Insurance plans to raise a total of 100 billion won in capital by issuing 20 million new shares through a rights offering allocated to existing shareholders.

Kakao Pay, which owns 100% of Kakao Pay Insurance, will fully fund this paid-in capital increase. As a result, the capital of Kakao Pay Insurance will rise from 200 billion won to 300 billion won.

Interior of the Kakao Insurance building located in Pangyo, Seongnam City, Gyeonggi Province. Kakao Pay Insurance

This capital increase is being pursued to respond to strengthened capital management requirements, such as the risk-based capital ratio (K-ICS), and to secure financial soundness for sustainable growth. The company aims to alleviate market concerns about capital adequacy and strengthen business competitiveness based on a more stable capital structure. As of the second quarter, Kakao Pay Insurance's K-ICS stood at 214%, exceeding the Financial Supervisory Service's recommended standard of 130%. By securing additional capital through this paid-in capital increase, the company intends to dispel concerns about capital adequacy that have been raised across the digital insurance industry.

Recently, digital insurance companies, including Kakao Pay Insurance, have continued to post losses for several years, resulting in less-than-ideal financial conditions. In the first half of this year, Kakao Pay Insurance recorded a net loss of 24.8 billion won. Other digital insurers also posted losses in the first half of the year: Carrot Insurance (-24.5 billion won), Hana Insurance (-19.4 billion won), Kyobo Lifeplanet Life Insurance (-7.9 billion won), and Shinhan EZ Insurance (-15.7 billion won).

Since their launch, digital insurance companies suffering from chronic deficits have been receiving capital injections through paid-in capital increases from their parent companies. In 2023, Kakao Pay Insurance received a paid-in capital increase of 100 billion won from Kakao Pay. Shinhan EZ Insurance also received a 100 billion won capital increase from Shinhan Financial Group in March this year. Carrot Insurance has raised a total of 405.5 billion won through three rounds of paid-in capital increases. Since its launch in 2013, Kyobo Lifeplanet Life Insurance has received about 370 billion won from Kyobo Life Insurance through seven capital increases, and Hana Insurance has received about 400 billion won from Hana Financial Group.

A representative from Kakao Pay Insurance explained, "This paid-in capital increase is a measure to secure adequate capital to respond to rapidly growing sales driven by the popularity of overseas travel insurance and the successive launch of new products," adding, "We have also established a foundation to secure competitiveness through product diversification and differentiated services, as well as to strengthen additional growth momentum."

Launched in October 2022, Kakao Pay Insurance has been aggressively expanding its portfolio, starting with Financial Safety Insurance in December of the same year, followed by overseas travel insurance, mobile phone insurance, driver insurance, infant insurance, and rental deposit insurance, and most recently launching long-term health insurance. Based on the KakaoTalk and Kakao Pay applications, the company recorded sales of 38.6 billion won last year, a fivefold increase compared to the same period the previous year. In just under two years since its launch, the cumulative number of subscribers has surpassed 5 million.