All three major life insurers join KDB Life preliminary bid; new buyers emerge for Yebyeol and Lotte non-life insurers; financial groups seek to broaden non-banking portfolios
The sale of KDB Life Insurance is drawing strong early interest, with all three of South Korea's major life insurers joining the bidding process. New buyers are also emerging for Yebyeol Non-Life Insurance and Lotte Non-Life Insurance, signaling a revival in the country's insurance mergers and acquisitions market after a sluggish start to the year.
According to investment banking industry sources Friday, Samsung Life, Hanwha Life and Kyobo Life all submitted preliminary bids for KDB Life on Monday, joining Korea Investment Holdings and Taekwang Group. Taekwang Group is pursuing the acquisition through its affiliate Heungkuk Life Insurance.
KDB Life has long been an unresolved burden for state-run Korea Development Bank. Its predecessor, Kumho Life, was acquired by KDB's private equity fund in 2010, and six subsequent attempts to sell the insurer between 2014 and recently all fell through. In 2019, private equity fund JC Partners advanced as far as signing a share purchase agreement, but the deal ultimately collapsed after the firm failed to meet the financial regulator's requirements for approval of a major shareholder change. The current process marks the seventh attempt.
The sale of Yebyeol Non-Life Insurance, which is heading toward a final bid this month, is also regaining momentum. An April final bid drew only Korea Investment Holdings, falling short of the minimum competition threshold, but Taekwang Group — through affiliate Heungkuk Fire & Marine Insurance — and Kyobo Life have recently begun reviewing potential acquisitions. OK Financial Group is also internally examining a possible bid for Yebyeol.
Taekwang Group has been weighing a move since the early stages of the Yebyeol sale process, with an eye on potential synergies with Heungkuk Fire & Marine. Kyobo Life has also consistently explored the need to acquire a non-life insurer as part of its push to convert into a financial holding company. Adding a non-life arm to its life insurance-centered portfolio would let it expand both its scale and business mix as a comprehensive financial group.
The sale of Lotte Non-Life Insurance is also picking up pace. The Financial Services Commission granted conditional approval of Lotte Non-Life's management improvement plan, formally setting the sale process in motion. Lotte Non-Life has appointed Samjong KPMG as lead manager for the sale and has begun distributing teaser letters to potential buyers.
The renewed activity in insurance M&A reflects a broader push by financial groups to strengthen their non-banking portfolios. Bank- and securities-focused financial groups can diversify their revenue base by acquiring insurers, while existing insurers can pursue economies of scale and expand their market share.
Interest from multiple buyers has also been fueled by expectations that Korea Deposit Insurance Corp., which oversees Yebyeol, and Korea Development Bank, which owns KDB Life, will inject substantial capital to facilitate the sales. Under the Depositor Protection Act, a company that acquires a troubled financial institution may request financial support from KDIC. Such support is paid in the form of a paid-in capital increase, producing the same effect as a direct cash injection to strengthen the insurer's capital base. KDB is also considering a further capital increase after completing an earlier 515 billion won (about $337 million) rights offering.
Significant uncertainties remain before any deals can close. For KDB Life, Yebyeol and Lotte Non-Life alike, the scale of additional capital injections required after due diligence and the burden of improving financial soundness are expected to be central sticking points. With multiple insurance assets on the market simultaneously, each potential buyer's priorities and price expectations will also be key factors shaping the outcome.
"For all three — KDB Life, Yebyeol and Lotte Non-Life — potential buyers will inevitably wrestle with the cost of additional capital injections and the question of synergies after due diligence," an investment banking industry official said. "A range of acquisition scenarios are likely to be considered depending on each financial firm's needs and capital capacity."
park.jiyeong@heraldcorp.com
