Samsung Life Insurance, South Korea's biggest life insurer, plans to sell its property assets to raise capital. The insurer’s move is a response to the planned introduction of the IFRS 17 Insurance Contracts in 2021 and the financial regulator’ push to raise the risk weights for the stocks and real estate assets of non-banking financial groups’ affiliates.
According to sources in the financial industry on July 19, Samsung Life plans to announce auctions in mid-August to sell six commercial buildings in Busan, Gwanju, Suwon and Seoul within this year. Deloitte Anjin has been selected as the advisor for the sales. The total value of of the buildings is estimated roughly at 300 billion to 400 billion won (US$270 million to US$360 million).
The life insurance arm of the Samsung Group said the disposal of the buildings was simply an act of rebalancing its assets. But the move is interpreted as a step to improve asset soundness before 2021 when the IFRS17 is implemented in a full swing. When the IFRS 17 comes into effect, life insurers' debt is likely to increase sharply due to changes in valuation method, and therefore, it is inevitable for them to secure additional capital in order to maintain proper financial soundness.
Consequently, small and mid-sized insurers are expected to follow in the footsteps of the industry leader.