Going Public

Samsung Life and Korea Life, ranked first and third in the Korean life insurance industry, respectively, have listed on the public stock market within months of each other. Their consecutive initial public offerings, Korea Life on March 17 followed by Samsung Life on May 12, saw the insurance giants debuting amidst much hullaballoo and the landscape of the Korean stock market seemingly changed irrevocably.

Samsung Life’s IPO ascent

Samsung life, Korea’s No. 1 life insurer, has broken all records this month with its spectacular initial public offering. As Korea’s biggest IPO ever, oversubscribed 40 times by retail investors and attracting more than 19 trillion won ($17 billion) in subscription deposits during its two-day signup window, Samsung Life shares eventually totaled $4.4 billion, and raising the life insurance industry’s share of the local stock market - by market capitalization - to 5.5 percent from 3.1 percent.

Setting its listing price at 110,000 won, or $99, back in April - near the top of its target price range - the offer consisted of a 40 percent reserve for foreign investors, 20 percent for domestic institutional investors, and 20 percent each to retail investors and to employees.

Samsung Life is only the third insurance company to be listed on the Korean stock market after Tong Yang Life Insurance and Korea Life, and follows the government’s easing of regulations to permit the public trading of life insurers in 2007. Tong Yang went public in September of last year, while Korea Life followed suit this March. The three companies boast a combined 51 percent market share of the Korean life insurance industry.

Why the excitement?

Local brokerage firms could hardly contain their astonishment at investors’ reaction to Samsung Life’s IPO which attracted a record amount of customer deposits and caused a flurry of activity among financial companies eager to to funnel surplus funds left out in the cold by the heated oversubscription of the IPO.

The fever was perhaps justified. “It has become a refuge for big investors who have been seeking an alternative investment vehicle in this low interest rate market,” said a brokerage official. Investors are hard-pressed to find worthy places to entrust their money in today’s financial climate, both globally and in Korea. Experts deem the fortuitous convergence of surplus liquidity with a matching, sizable IPO as creating the circumstances for Samsung Life’s big debut.

Notes for foreign buyers

Initial fears that the listing of Samsung Life may lead to an appreciation of the won due to foreign investors buying the full allocation reserved for them - 40 percent - and thereby causing an instantaneous inflow of $1.8 billion, came to nothing. This was attributed to foreign investor’s selling dollars in trickles, leaving the local currency market unshaken.

Although the Korean life insurance industry is hardly flourishing due to a maturing market, Samsung Life is still an attractive package for foreign investors because it is the industry leader and possesses a strong brand; it is also a prospective future holding company for the Samsung Group. According to Samsung Group’s stance last year, it is considering the induction of Samsung Life as the conglomerate’s new holding company instead of Everland, its amusement park operator.

However, such a move is still a long way away. There is still the matter of 20 trillion won in capital needed for Samsung Life to buy stakes in other Samsung companies. Furthermore, the point remains largely moot because of weak foreign demand in the wake of the European sovereign debt crisis.

Samsung Life was newly included in the list of Korea’s top 10 companies compiled by the Korea Exchange, which ranks firms by market capitalization - putting a cherry on top of the fact that Samsung Life is the current darling of the Korean stock exchange.