Making No Headlines

Insurance companies like PCA Life Insurance fail to make headlines and attract potential buyers although they are continuously put up for sale in the Korean M&A market.
Insurance companies like PCA Life Insurance fail to make headlines and attract potential buyers although they are continuously put up for sale in the Korean M&A market.

 

On September 8, Mirae Asset Life Insurance took part in the main tender to acquire PCA Life Insurance, a UK-based insurer and submitted its bidding price.

Mirae Asset Life Insurance was the only Korean company that participated in the bid to take over PCA Life Insurance. Its bidding price reportedly hit about 150 billion won (US$130 million). It was known that the price was about the half of 300 billion won (US$260 million) expected by the Prudential Group, the owner of PCA Life Insurance.  

“In April, Allianz Life Insurance Korea was sold for 3.5 billion won (US$3.04 million), a giveaway price. PCA Life became highly likely to be sold for a price even lower than its expected price in the market,” said a representative of the IB industry. “This shows that domestic insurers are not as attractive as expected.”  

Although insurance companies are continuously put up for sale in the Korean M&A market, they fail to make headlines and attract potential buyers. There is growing concern not only over the attractiveness of the Korean insurance industry but also over its competitiveness.    

This is because Korea’s insurance sales system has not properly caught up with rapid changes in the financial environment.  

 

The first trouble facing the Korean insurance industry is the fact that insurers’ exclusive sales units have significantly shrunken as even non-facial channel sales on line were established with insurers’ dependence on external channels such as general agents (GAs) and bancassurance growing. Some insurance industry experts say that insurers need to prepare for a market situation where they cannot entrust exclusive loyal insurance planners with overall sales.     

Prolonged extremely low interest rates make an outlook on the insurance industry gloomy, too. Now high-interest rate products sold in the past are hamstringing insurers. Under these circumstances, it is quite a challenge for insurers to discover lucrative investment targets.      

On top of that, Phase 2 of the International Financial Reporting Standard (IFRS) is putting a big pressure on insurers as the new accounting standard demands that insurers expand their capital a great deal. Furthermore, new risks such as self-driving cars and drones have emerged as new tasks for the insurance industry. Insurers are failing to find a breakthrough with tough tasks increasing.

 

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