Korean Insurance Market
With foreign insurers such as ING Life scheduled to be sold off one after another as early as in the first half of this year, it is expected that Chinese insurers will additionally make a foray into the Korean market. According to the insurance industry, war will be waged to take over ING Life, Allianz Life and PCA Life among foreign life insurers doing business in Korea.
Earlier, MBK Partners promised the Financial Supervisory Commission not to sell ING Life within two years when the company took over 100 percent equities in the life insurer at 1,840 billion won. The two years have already passed. MBK Partners is planning to sell off the company by putting it on the market as early as in the first half of this year.
ING Life has focused on the management of its corporate value in consideration of its resale over the past two years. Its operating income rose 18 percent to 300.3 billion won in 2014 from 253.7 billion won in 2013. The “Brave Orange Whole Life Insurance (nonparticipating)” became a big hit product last year. Thus the company’s operating income in 2015 is expected to increase further.
Allianz Life and PCA Life are expected to withdraw from the Korean market and execute processes to sell off their Korean branches. The two are failing to record strong profitability in the Korean market although they entered the Korean market more than ten years ago. Analysts say that the introduction of the second phase of the IFRS4, a new accounting standard in 2020 calls for capital increases, leading them to think that maintaining their operation in Korea may become burdens.
Germany’s Allianz Group advanced into Korea by taking over Jeil Life Insurance in 1999. It has been said that Allianz Life is an old organization as the company has an old corporate culture even though the company made a foray into the Korean life insurance 17 years ago. The value of its net assets in 2014 is estimated at one trillion won.
PCA Life began its business in Korea as the Prudential Group of the UK took over Youngpoong Life in 2001. They decided to pull out of Korea in 16 years. It is said that PCA Life began to contact potential buyers on a full scale with Morgan Stanley as a lead manager.
The Korea Development Bank (KDB) began to take steps for the resale of KDB Life as the funds will mature on February 4 in 2017. In the first place, the KDB attempted a package deal of KDB Life and KDB Daewoo Securities, private equity funds own some equities and a difference among opinions thwarted the plan.
In the insurance industry, it is said that China-based insurance companies will show their power in competition to take over these companies. It is known that Chinese capital such as Ping An Insurance of China is having an eye on taking over Allianz Life.
Of late, Chinese insurers have been actively knocking on the door to the Korean financial market with rich cash assets. Earlier, Anbang Insurance of China signaled its entry into the Korean financial market while taking over Tong Yang Life. The Korean financial market is relatively stable compared to other newly emerging markets and low interest rates keep fund raising cost low.
Many analysts said that Chinese insurance are doing so as they are confident that they will sell many savings-linked insurances and use the outcomes in asset management. In the case of Tong Yang Life, the company has reached 300 billion won by selling many single payment savings-linked insurance policies in order to expand its assets in a short period since January.
Besides, Korea is geographically close to China, which is another attractive point for Chinese insurance companies. “Many M&As are scheduled to take place this year. So some people call 2016 ‘a year of M&As’ in the insurance market,” an insurance market expert said. “Much attention is paid to the activities of Chinese insurance companies with big capital.”