Will Tongyang Life Insurance's Wholly Owned Subsidiary Transition Make It the Core of Woori Financial Group’s Non-Banking Sector?

Comprehensive Share Swap Underway… New Shares to Be Listed on the 31st

Capital and Business Strategies to Be Integrated at the Group Level

Will the Inclusion of Tongyang Life Insurance Help Resolve Woori’s Undervaluation?

Following the transition of Tongyang Life Insurance to a wholly owned subsidiary of Woori Financial Group, the company is expected to enter a new turning point in its status and business strategy within the group. Capital management and business restructuring at the group level will become smoother, and Tongyang Life Insurance’s role as a core non-banking affiliate is also anticipated to increase. Attention is now focused on whether Tongyang Life Insurance will be able to enhance its profitability and contribute to the group’s overall earnings and corporate value.

According to the financial sector on August 11, a comprehensive share swap will take place on this day, resulting in all issued shares of Tongyang Life Insurance being transferred to Woori Financial Group. On August 31, new shares of Woori Financial Group, issued as a result of the share swap, are scheduled to be listed.

Previously, the two companies stipulated in their agreement in April that the contract could be terminated if the amount paid for the exercise of appraisal rights exceeded 200 billion won. Subsequently, the final amount reached approximately 204.5 billion won, slightly surpassing the threshold, but Tongyang Life Insurance did not exercise its right to terminate the agreement. The reason is that the excess amount was not significant enough to warrant reconsideration of the transaction itself, and that halting the share swap could lead to confusion among shareholders who had anticipated receiving the payment and also create greater market uncertainty due to changes in the disclosed transaction schedule.

In particular, this share swap is seen by Woori Financial Group as an effort to broaden its non-banking income base and enhance the efficiency of group-wide capital management. Yongjin Seol, a research analyst at iM Investment & Securities, explained, “As competitors have secured significant fee income via their securities subsidiaries, the gap with Woori is widening. Active strengthening of the non-banking sector is necessary to improve profitability. Making Tongyang Life Insurance a wholly owned subsidiary is an attempt to increase the efficiency of capital allocation.”

Once Tongyang Life Insurance becomes a wholly owned subsidiary, the integration between its management direction and Woori Financial Group’s strategy will be further strengthened. While under the structure of a listed subsidiary, major decision-making processes relating to capital increases, dividends, and business restructuring require consideration of the interests of external minority shareholders, conversion to a wholly owned subsidiary eases this burden, allowing group strategy-driven decisions to proceed more smoothly.

However, making Tongyang Life Insurance a wholly owned subsidiary does not itself guarantee stronger non-banking competitiveness. Once the transaction is completed, the challenge will be to not only improve structural efficiency through full ownership, but also to enhance the insurance company’s independent profit-generating capacity. During a recent earnings conference call, Woori Financial Group emphasized, “Our fundamental goal with the acquisition of Tongyang Life Insurance is to increase the group’s net profit contribution by strengthening its profitability. We plan to maximize earnings by reinforcing our business capabilities, focusing on stabilizing the new Korea Insurance Capital Standard (K-ICS) ratio and rebuilding exclusive sales channels.”

Furthermore, there is attention on whether increased profits from the non-banking segment after Tongyang Life Insurance becomes a wholly owned subsidiary could help reduce the corporate value discount of Woori Financial Group. This year, Woori Financial Group’s stock price has risen by around 10%, lagging behind the 35–40% increase seen by major competing financial holding companies, and its price-to-book ratio (PBR) remains at about 0.6 times. Baeseung Jeon, a research analyst at LS Securities, noted, “The inclusion of Tongyang Life Insurance is expected to strengthen the non-interest income base. After completing the holding company structure, we may see undervaluation alleviated through improved recurring profitability and expanded shareholder returns.”

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