M&A in Life Insurance

Chinese life insurance companies like Anbang Insurance are predicted to accelerate the competition in the South Korean life insurance industry.
Chinese life insurance companies like Anbang Insurance are predicted to accelerate the competition in the South Korean life insurance industry.

 

The Korea Insurance Research Institute (KIRI) said on July 24 that Chinese insurers and financial holding companies affiliated with banks are likely to become more and more aggressive in the M&A of South Korean life insurance companies and they are expected to act as capital suppliers in the South Korean life insurance industry in need of recapitalization.

“Nowadays, Chinese financial companies are expanding to various countries such as the United States and European ones in the interest of income source diversification and risk reduction,” the institute explained, “In this context, Chinese insurers’ business expansion in South Korea should be considered as an attempt for portfolio enrichment rather than an attempt to absorb South Korean insurance companies’ management know-how.”

The KIRI went on to say, “Chinese life insurance companies are predicted to accelerate the competition in the South Korean life insurance industry by means of asset management and products based on Chinese and global networks and business expansion based on fintech and their main difference from Western life insurance companies lies in the fact that they are capable of specialized investment in Chinese assets exceeding South Korean ones in terms of expected return.” The institute mentioned Tong Yang Life Insurance as an example. Acquired by Anbang Insurance in September last year, Tong Yang Life Insurance successfully sold a savings product with a guaranteed minimum interest rate of as high as 2.85% in the first quarter of this year via banks and general agents.

The KIRI also commented that banks are likely to keep increasing their presence in the domestic life insurance market by releasing different products and functioning as capital suppliers. “Most insurers affiliated with financial holding companies are relatively small in size, which means they can boost their efficiency by means of M&A, and such financial holding companies affiliated with banks are currently in need of business diversification and balanced growth for risk reduction as well as efficiency enhancement,” it added. 

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