The mergers and acquisitions (M&A) market in South Korea's financial area, especially in insurance, is expected to heat up this year as financial groups escalate their efforts to get ahead of the competition, heralding aggressive shopping.
At the same time, the insurance market has a number of firms available for acquisition, reported The Korea Times.
Among them is ING Life Korea. Its largest shareholder is private equity fund MBK Partners with a 59.15% stake in the insurer. MBK failed to exit ING through a sale to Chinese bidders in recent years.
However, KB Financial has already showed its interest in ING Life Korea through an unsuccessful attempt to acquire the insurer in 2012 when MBK Partners purchased the insurer.
Another insurer up for sale is KDB Life. Its largest stakeholder, Korea Development Bank (KDB), has expressed its intention to sell the life unit through its sales attempts in recent years. Last month, KDB increased the attractiveness of KDB Life by issuing rights shares worth KRW300 billion to strengthen its capital.
Among non-life insurers, Lotte Insurance is set to be placed on the block. The Lotte Group has pledged to list Hotel Lotte, the largest stakeholder of Lotte Insurance. The group plans to place the hotel under its new holding company, Lotte Corp. This requires Hotel Lotte to sell its stake in Lotte Insurance within four years because of the country's law prohibiting a non-financial holding firm from owning a financial firm.
Financial groups' plans
Among the financial groups, KB Financial Group merged with Hyundai Securities, and nonlife insurer KB Insurance merged with LIG Insurance in 2016. KB Financial has overtaken Shinhan Financial to become the largest player in Korea thanks largely to these moves to strengthen its stake in insurers and securities houses.
Last November, KB Financial Group Chairman Yoon Jong-kyoo said that "there have been voices that our life insurance unit is weak and we have every intention to strengthen it".
At the end of the third quarter last year, KB Life Insurance's assets under management stood at KRW9.07 trillion (US$8.5 billion), 17th largest among 25 life insurers in the country. In terms of net profit, it logged KRW23.3 billion for the first nine months of 2017, which accounted for a mere 0.84% of the group's net profit of KRW2.76 trillion during the same period.
M&As are also the strategy for Shinhan Financial. Shinhan has set non-banking M&As as one of its growth strategies for this year.
Though the group has not said which non-banking sector it is eyeing, industry officials say brokerage and non-life insurance are likely because its brokerage unit, Shinhan Investment Corp, is relatively small compared to the group's size and it has no non-life insurance units in its portfolio.
Hana Financial Group is another expected player in the M&A market. Its Chairman Kim Jung-tai has pledged to raise the share of non-banking profits in the group from 5% to 30%, dropping hints of expanding its securities unit or the existing life insurance unit of Hana Life.