Kim Dong-won holds 0.03% equity in Hanwha Life, lowest among Hanwha brothers

Kim Seung-yeon, chairman of Hanwha Group, transferred half of his 22.65% equity in Hanwha Corporation, amounting to 11.32%, to his three sons, Kim Dong-kwan, Kim Dong-won, and Kim Dong-seon, thus partially transferring management rights. The three brothers increased their equity in Hanwha Corporation, which serves as the group’s holding company, to 42.67%, allowing them to indirectly control all affiliates.

However, the influence of the second son, Kim Dong-won, president of Hanwha Life, who leads the financial affiliate, is evaluated to be lower compared to his brothers. Kim Dong-won holds only 0.03% of Hanwha Life’s equity. Currently, indirect control is only valid with the assistance of his brothers.

As a result, the market is discussing a corporate spin-off as a way for the three brothers to divide the company. The plan involves partitioning the companies, establishing separate holding companies, and then exchanging the shares held by the brothers to increase their equity stakes in the respective holding companies. Ultimately, Kim Dong-won will bear the burden of having to rely solely on indirect control via a newly established holding company to step into the forefront of managing Hanwha Life.

On the 2nd, Hanwha Group announced that chairman Kim Seung-yeon gifted 11.32% equity of Hanwha Corporation to his three sons. The eldest son, Kim Dong-kwan, received 4.86%, while presidents Kim Dong-won and Kim Dong-seon each inherited 3.23%. With this transfer, Kim Dong-kwan secured a total of 20.85% by combining his directly held 9.77% equity in Hanwha Corporation and a substantial holding through Hanwha Energy, becoming the actual largest shareholder of Hanwha Corporation. Simultaneously, Kim Dong-won and Kim Dong-seon expanded their stakes to 10.91%.

Once the transfer of management rights is complete, it is likely that Kim Dong-won will lead Hanwha Life, the pinnacle of the financial affiliate structure. Since 2015, Kim Dong-won has been receiving management training at Hanwha Life for nearly a decade. Following an organizational restructure in February 2023, Hanwha Life created a new position for a Chief Global Officer and promoted then-vice president Kim Dong-won to president. He has been accumulating achievements by leading the establishment of Carrot General Insurance and acquiring stakes in Bank Nobu in Indonesia along with Repco Group.

The financial affiliates of Hanwha Group are now reorganized in a structure of Hanwha Corporation → Hanwha Life → financial affiliates. Gaining control of Hanwha Life allows one to take control of all financial affiliates of the group. Hanwha Corporation is the largest shareholder with 43.24% equity in Hanwha Life, which is also the largest shareholder with 51.36% equity in HANWHA GENERAL INSURANCE. Furthermore, Hanwha Life holds 100% stakes in Hanwha Asset Management and Hanwha Savings Bank.

The problem is that Kim Dong-won holds a mere 0.03% of Hanwha Life’s equity directly. His effective holding in Hanwha Corporation is less than 11%. Without the assistance of his brothers, even indirect control over Hanwha Life is difficult. This raises concerns about Kim Dong-won’s ability to take a leading role in management.

Compared to his other brothers, Kim Dong-won’s influence is low. The youngest, Kim Dong-seon, secured the position of the second-largest shareholder by publicly purchasing Hanwha Galleria shares for 54.4 billion won last August. He has now established a stable management rights structure combining both indirect and direct control through Hanwha Corporation. Although Kim Dong-kwan has no directly held shares in Hanwha Aerospace and other companies, he has accumulated a 20.85% stake in Hanwha Corporation, a significant advantage considering that this is only equivalent to the total stakes of the other two brothers (10.91% each).

Ultimately, Kim Dong-won must perform a corporate spin-off to inherit and manage financial affiliates like Hanwha Life independently. It is nearly impossible for him to directly acquire a stake in Hanwha Life, which has a market capitalization of 2.3 trillion won. Based on simple calculations, acquiring 10% equity would require 230 billion won.

The corporate spin-off process entails partitioning Hanwha Corporation and establishing separate holding companies. The equity stakes in the new holding companies will be equivalent to those of the existing company (Hanwha Corporation). In exchange for transferring equity in the newly established holding company to his brothers, Kim Dong-won will secure equity in the financial holding company he will manage through a swap. This enables him to indirectly control Hanwha Life through the new holding company.

However, it is projected that Kim Dong-won will face criticism for assuming the role of the Chief Executive Officer (CEO) of Hanwha Life through only indirect control via the newly established holding company. Chairman Kim Seung-yeon has also held the position of CEO at Hanwha Life but subsequently appointed a key person as CEO and maintained a system of professional management.

The necessity to prove managerial abilities remains a challenge. Carrot General Insurance, known to be Kim Dong-won’s flagship project, started with 85 billion won in capital in 2019 but has reported losses annually up until last year. The net loss expanded from 38.1 billion won in 2020 to 76 billion won in 2023, leading to criticism that it has become a financial burden. The subsidiary, HANWHA GENERAL INSURANCE, has been continuously supporting Carrot General Insurance with a funding amounting to 300 billion won.