Major banking groups in South Korea are revealing their appetite for what could become the largest acquisition deal in the nation’s financial industry this year: a 100 percent stake in Prudential Life Insurance of Korea valued at some 2 trillion won ($1.7 billion).
The latest to express an interest was Woori Financial Group Chairman Sohn Tae-seung on Friday. He told reporters at a New Year gathering event of financial circles in Korea that he is “willing to do an M&A” of Prudential Life Insurance of Korea.
This comes in line with pledges by leaders to attain economies of scale, in the nation where a retail branch network for sales matters to a bank-led financial group’s revenue.
At the respective annual kickoff meetings, Shinhan Financial Group Chairman Cho Yong-byoung also highlighted the need to “seek strategic M&A opportunities in both financial and nonfinancial sectors,” while Yoon Jong-kyoo, chairman of KB Financial Group, said it would “be open to various M&A possibilities to strengthen its business portfolio.” The two did not specify the potential target.
An exterior view of the headquarters of Prudential Life Insurance of Korea. (Prudential Life Insurance of Korea)
Of the banking groups, Woori and KB are likely contenders for the Prudential deal.
Woori is expected to go on a buying spree, despite a series of acquisitions last year of real estate trust firm Kukje Trust, asset management houses Tongyang Asset Management and ABL Asset Management, as well as credit card firm Lotte Card which it jointly bought with private equity house MBK Partners.
The group is seeking to diversify its nonbank portfolio as it does not own an insurance unit. Woori, which reintroduced a holding company structure in 2019 in a move to privatize itself, is awaiting regulatory approval to allow its parameters to gauge credit risk to be relieved so that the group can fully take maximum advantage of its ammunition -- 130 percent of the group’s capital.
KB has also long envisioned owning a life insurance unit in addition to KB Life Insurance, especially after its rival Shinhan’s 2.3 trillion won takeover of what was known as ING Life Insurance -- rebranded as Orange Life -- in February 2019. Shinhan is in the process of merging its two life insurance subsidiaries under its arms -- Shinhan Life Insurance and Orange Life Insurance -- to strengthen synergies in its nonbank portfolio.
Attention is also being paid to whether large-scale private equity houses -- MBK Partners, Hahn & Co. and IMM Private Equity -- would emerge as contenders, considering their past engagement in billiondollar bids last year, including in the financial sector.
MBK Partners led a consortium to buy a majority stake in Lotte Card, which Hahn & Co. was forced to walk away from due to regulatory concerns from tax evasion allegations that were later dismissed. IMM Private Equity joined a 750 billion won fundraising of Shinhan Financial Group.
The Prudential Financial’s Korean unit, founded in 1989, is now fully owned by Prudential International Insurance Holdings.
Prudential Financial in November named Goldman Sachs as lead underwriter for the forthcoming preliminary open tender by no later than February, two months after the US-based financial group’s tech bet through the acquisition of consumer solutions platform Assurance IQ for $2.4 billion.
Prudential Life Insurance of Korea has scored top capital adequacy rates. As of end-September, its risk-based capital ratio came to 515 percent, far exceeding the industry average of 301.2 percent.
Of the 24 life insurance companies within Korean jurisdiction, Prudential Life was ranked No. 11 in assets, at 20.8 trillion won, while its net profit during the January-September period came to 146.4 billion won, the seventh-largest here.
By Son Ji-hyoung (email@example.com