High Price of ING Life Insurance Korea Impedes Its Sale

The high price of ING Life Insurance Korea is precluding financial companies from bidding for the life insurance company even though they are interested in acquiring the life insurer, the biggest M&A offering in the financial industry.

According to the financial industry on April 25, MBK Partners, the largest shareholder of ING Life Insurance Korea, plans to complete the sale by the end of this year, but financial holding groups such as the Shinhan Financial Group and the KB Financial Group, which were expected to participate in the auction for the life insurer, took a step back. Therefore, it is forecast that M&A work on ING Life Insurance Korea is highly likely to be prolonged.

In the first place, the KB Financial Group, which had been regarded as the strongest candidate to take over ING Life Insurance Korea, is doing nothing to acquire ING Life.

The Shinhan Financial Group, which showed a keen interest by conducting some due diligence on ING Life Insurance Korea, also faltered due to its high price. When ING Life Insurance Korea's market capitalization is close to 3.5 trillion won (US$3.1 billion), the Shinhan Financial Group thinks that the acquisition price will be less than 2.5 trillion won considering MBK Partners' stake (59%) and management right premium.

In addition, there are many uncertainties with respect to the acquisition of ING Life Insurance Korea. For instance, while ING Life Insurance Korea's RBC ratio remains the highest in the industry, additional capital would be needed in order to maintain capital adequacy under IFRS 17, a new insurance accounting system and the K-ICS.

In the financial industry, experts believe that an M&A deal on ING Life Insurance Korea will be possible when its share price falls to an appropriate level. "Currently, the selling price is too high," said a senior official of the Shinhan Financial Group. “If the total acquisition price falls below two trillion won (US$1.8 billion), we will be able to participate in the takeover of the life insurer."