Woori Financial Group is estimated to gain approximately 600 billion won in accounting profits due to the low-cost acquisition of Tongyang and ABL Life Insurance. Woori Financial plans to conduct a large-scale capital increase to bolster the capital of the two insurers, thereby reducing its expense burden through accounting profits.
On the 3rd, according to financial sources, Woori Financial has agreed to acquire 75.34% of the equity of TONGYANG Life Insurance from China Multinational Insurance Group for 1.284 trillion won, and 100% of the equity of ABL Life Insurance for 265.4 billion won. With the financial authorities conditionally approving Woori Financial's insurance company acquisition the previous day, the merger and acquisition (M&A) is expected to be completed soon.
As of the end of last year, the total capital of Tongyang and ABL Life Insurance that Woori Financial is acquiring is 2.178 trillion won. Due to the difference between the acquisition price and the total capital, Woori Financial will gain accounting goodwill. Goodwill arises when the price paid for the acquisition is lower than the net worth of the target corporation, and it is reflected in the current net income.
In 2020, KB Financial Group made a profit of 145.1 billion won in goodwill when it acquired Prudential Life Insurance. At that time, KB Financial acquired Prudential Life Insurance for approximately 2.2995 trillion won, while the book value of Prudential Life Insurance's net worth at the end of the previous year was 2.9135 trillion won.
Woori Financial also appears to have expectations regarding goodwill. Lee Sung-wook, Vice President (CFO) of Woori Financial Group, noted during a recent conference call for the first quarter results that "the range of capital ratios recognized in goodwill has increased, and as of the end of 2025, the impact on capital ratios from the acquisition of the insurance companies is estimated to be negligible." However, it is expected that the goodwill will decline somewhat during the process of calculating the fair value of the net worth of Tongyang and ABL Life Insurance.
Woori Financial is expected to use the capital gained from goodwill to improve the capital soundness of Tongyang and ABL Life Insurance. Woori Financial has reportedly informed the financial authorities of plans to enhance the capital soundness of the two insurers through capital increases during the acquisition review process.
Currently, the asset soundness of the two insurance companies is in a precarious situation. For the insurance company's core capital soundness indicator, the solvency ratio (K-ICS), TONGYANG Life Insurance stood at 155.7% and ABL Life Insurance at 153.6% as of the end of last year. This barely exceeds the financial authorities' recommended level of 150%. The significant decline in the solvency ratios of the two insurance companies compared to the previous year is also a concern.
If Woori Financial injects the accounting profits into the capital increase of Tongyang and ABL Life Insurance, the capital ratios of the two insurers are expected to significantly improve. The market currently estimates that Woori Financial will need to enhance approximately 680 billion won in capital after acquiring the two insurers. Assuming the goodwill is 600 billion won, Woori Financial would only need to bear about 80 billion won.
Some in the financial sector speculate that Woori Financial may resell ABL Life Insurance due to the burden of capital expansion. However, Woori Financial has reportedly informed the financial authorities about the integration plan for the two insurers during the acquisition review process. A Woori Financial official stated, "Currently, the option of selling ABL Life Insurance separately is not being considered at all."