A private equity fund (PEF) established for the acquisition of KDB Life is approaching liquidation, making the sale of KDB Life virtually impossible. The Korea Development Bank (KDB) is considering improving the financial structure through capital increase after incorporating KDB Life as a subsidiary and then selling it again.
According to the insurance industry and others on the 6th, there were no companies interested in acquiring KDB Life until the end of last year. An industry source noted, "With the year-end approaching and the martial law situation along with the impeachment crisis, there was no atmosphere in the market for a sale."
Within and outside the insurance industry, there are projections that efforts to resell will be impossible, considering that six attempts at sale over the past decade have all failed. Moreover, the private equity fund (KDB CANSUS VALUE Private Equity Company) created for the acquisition of KDB Life is also facing liquidation. This fund was established in 2010 when the Korea Development Bank acquired Kumho Life, KDB Life's predecessor, along with CANSUS Asset Management, and has a maximum duration of 15 years, meaning it must be liquidated this year. Even if a company shows interest, there is insufficient absolute time for a sale.
It is reported that the Korea Development Bank’s plan to incorporate KDB Life and invest capital over 2 to 3 years to normalize management before reselling is likely. KDB Life will enter the market carrying the banner of a public institution subsidiary.
KDB Life, which has undergone several restructuring processes, recorded a net profit of 5.9 billion won in the third quarter of last year, breaking free from a net loss of 75.4 billion won during the same period the previous year. The cumulative net profit for the third quarter of last year was reported at 12.9 billion won. During the same period, insurance operating revenue increased from 408.4 billion won to 437.7 billion won, while operating profit rose from 2.9 billion won to 27.1 billion won.
Other management indicators are also improving. In the first half of last year, KDB Life's average monthly first-year insurance premium was 3.44 billion won, nearly doubling compared to 1.69 billion won during the same period the previous year. The proportion of sales of protection-type insurance, which is key under the new accounting system (IFRS 17), also expanded from 78.1% to 85.3% during the same period. Recently, KDB Life has been diversifying by entering the long-term care industry.
However, the solvency ratio (KIX) indicator, which measures soundness, was at 155.4% in the first half of last year, barely surpassing the financial authorities' recommended level of 150%. So far, the Korea Development Bank has injected 1.5 trillion won, but it is still assessed as having weak financial soundness. For the normalization of KDB Life, it is reported that an additional capital investment of up to 1 trillion won is needed. This is why KDB Life is seen as less attractive compared to other insurance companies available in the market.
The Korea Development Bank's concerns are deepening. This is because accepting KDB Life as a subsidiary makes an additional capital increase of around 1 trillion won essential. It seems unavoidable for a state-run bank funded by taxes to face criticism for propping up a failing financial institution with taxpayer money. A spokesperson for the Korea Development Bank noted, "We are organizing our position regarding the liquidation of the private equity fund."