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Sale of ING Life Insurance May Take Long
Selling Hurdles
Sale of ING Life Insurance May Take Long
  • By Jung Suk-yee
  • July 11, 2016, 01:15
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For the sale of ING Life, there are a number of variables to consider, such as its time, price and the eligibility of major shareholder.

According to the investment bank industry on July 10, Chinese private equity firm JD Capital and Ping An Insurance Company of China are among the most aggressive preliminary bidders in performing due diligence on the sale of ING Life Korea, which began in early June.

The Financial Services Commission (FSC) issues a final approval for the change in ownership of a company when the prospective major stakeholder is found to be qualified in terms of morality and management capability. It checks whether the prospective major stakeholder has the intention of reselling the company in anytime soon. As there is not much information available about foreign companies in particular, it is difficult to judge whether foreign companies are qualified.

In 2015, the FSC spent about six months, three to four months longer than expected, in examining whether Anbang Insurance was qualified to be a new major stakeholder of Tongyang Life Insurance. As the management capability of Anbang, which was founded in China in 2004, was not much known at the time, a controversy was raised both inside and outside the financial industry over the issue of selling off the big domestic insurance company to the Chinese firm. According to industry insiders, it was also not easy to get help from China's regulatory authorities

Considering protection of clients, insurance payouts, employee treatment and job security, it is also undesirable that a private equity firm, which focuses on short-term profits, takes over a large domestic insurance company.

“If a Chinese bidder is selected as the priority negotiator for the acquisition of ING Life Korea, all of the three domestic insurance companies, which have been consecutively put up for sale, would be acquired by Chinese firms,” said a high official from the FSC, adding that it is inevitable to consider the balance and fairness of the local insurance market

“Due to changes in International Financial Reporting Standards (IFRS) and low growth, the life insurance industry will be depressed within two to three years. If a private equity firm acquires ING Life Korea, no one knows whether the firm will assume its responsibility when the problem of payouts occurs,” said an expert in the investment bank industry.

Some analysts say that the sale of ING Life Korea may take long as the seller seeks to sell the company at a higher price than its actual value.

MBK Partners bought up 100 percent stake of ING Life Korea for 1.8 trillion won (US$1.74 billion) in December 2013. The company is now looking to sell the stake for 3 trillion won (US$2.5 billion) or more to reap profits from the sell-off. Meanwhile, local industry insiders say that an acquisition price of three to four trillion won (US$2.5 to 3.3 billion) is too high given an imminent depression in the local life insurance market and a new measure that requires life insurance companies to increase their capital.

Analysts say that MBK Partners can adopt a new strategy including the adjustment of the sell off time. “MBK, which have suffered big losses from the ongoing sales of other companies, has a strong stance to sell ING Life insurance for no less than three trillion won,” said another official in the investment bank industry, adding that if MBK does not reduce the selling price, the sale of ING Life insurance could take long.