After Yebyul General Insurance, Is KDB Life Insurance Next? KDB Attempts Seventh Sale

Main Auction and Preferred Bidder Selection Scheduled for Next Month

State-run Korea Development Bank (KDB) plans to select a preferred bidder for the sale of KDB Life Insurance through a main auction next month. As Korea Deposit Insurance Corporation (KDIC) recently designated a preferred bidder for the sale of Yebyul General Insurance, the long-stalled process of selling insurance companies is gaining momentum. Attention is now focused on whether KDB will succeed in finding a new owner for KDB Life Insurance after seven attempts.

According to the financial sector on July 13, acquisition candidates who participated in last month's preliminary bidding for KDB Life Insurance are currently conducting due diligence and management interviews.

An official from KDB stated, "We plan to hold the main auction next month and then select a preferred bidder," adding, "We are proceeding with the sale process while considering various possibilities, including additional capital injection."

Five companies participated in the preliminary bidding held last month: Samsung Life Insurance, Hanwha Life Insurance, Kyobo Life Insurance, Heungkuk Life Insurance, and Korea Investment & Securities. The higher-than-expected number of candidates has raised hopes for a successful deal. Samsung Life Insurance has formed a task force including executives, while Korea Investment & Securities is reportedly actively reviewing major insurance assets with the goal of acquiring a company within the year.

This marks KDB's seventh attempt to sell KDB Life Insurance. KDB acquired Kumho Life Insurance (now KDB Life Insurance) from Kumho Group in 2010 and has since tried to sell it six times since 2014, but each attempt was aborted due to concerns over financial soundness and mismatched price expectations.

Market observers note that conditions are different this time. Last year, KDB injected 500 billion won into KDB Life Insurance through a paid-in capital increase, improving its financial structure and bringing the company out of a state of complete capital impairment. The risk-based capital ratio (K-ICS), a key metric for an insurer’s financial health, also increased from 74.54% before the application of transitional regulatory measures to 186.1% after, surpassing the financial authorities' recommended level of 130%. KDB has also stated that it is open to further capital injections if desired by the acquirer, aiming to reduce the capital burden for the buyer and increase the likelihood of a successful deal. There is speculation in the market that KDB may provide additional capital support of around 500 billion won.

Expectations regarding the sale price are also becoming more realistic. While KDB previously hoped for a sale price of over 1 trillion won to recover public funds, it is now reportedly placing more emphasis on completing the transaction. Market estimates place the fair value of KDB Life Insurance at around 500 billion to 600 billion won. Due to high interest rates, the introduction of the new insurance accounting standard IFRS 17, and capital regulations such as K-ICS, insurance company valuations have declined overall because continued capital injections are likely to be needed even after acquisition. Accordingly, the price gap between KDB and prospective buyers may narrow compared to previous attempts.

The rarity of life insurance companies being available for sale is also cited as a reason for the strong interest from potential buyers. While non-life insurance companies have been regularly available in the market, life insurers are considered scarce. In addition, their focus on long-term protection-type products and asset management businesses means they offer high strategic value for financial groups seeking to expand their business portfolios.

However, as the preliminary bidding is only a stage to review investment potential, the key to a successful transaction will be how many candidates actually participate in the main auction. The sale price and the burden of additional capital injections after acquisition remain significant variables.

With the ongoing sales of Yebyul General Insurance, KDB Life Insurance, and Lotte Insurance progressing rapidly, the insurance merger and acquisition (M&A) market is also gaining momentum. On July 10, KDIC selected OK Next, an affiliate of OK Financial Group, as the preferred bidder for Yebyul General Insurance, and Lotte Insurance has also begun its sale process in earnest following a conditional approval of its management improvement plan by financial authorities. Currently, Shinhan Financial Group and Korea Investment & Securities have expressed interest in acquiring Lotte Insurance.

A financial industry official commented, "Recently, financial companies have strengthened their capital base on the back of strong performance, leading to increased interest in insurance M&As. While the sale price and the burden of additional capital injections remain variables, acquisition conditions have improved compared to the past, so there is reason to be optimistic about the successful sale of KDB Life Insurance this time."

This content was produced with the assistance of AI translation services.