Woori Financial Group will take the final steps to incorporate the Tongyang and ABL Life Insurance subsidiaries on July 1. After the merger of securities firms last year and the acquisition of an insurance company this year, Woori Financial will embody a comprehensive financial group. The profits generated during the insurance acquisition process and the increase in non-banking net income are expected to elevate Woori Financial's short-term performance and become assets that create long-term group synergy. Woori Financial plans to improve the soundness of the newly incorporated insurance company while also reviewing brand unification strategies.
According to the financial sector on the 30th, Woori Financial will complete the incorporation of Tongyang and ABL Life Insurance into the group on July 1. On that day, Woori Financial will pay the remaining balance for the acquisition of the insurance company to China's Multinational Insurance Group and acquire equity. Additionally, Tongyang and ABL Life Insurance will hold their respective general meetings that day to appoint new management. Tongyang Life Insurance will appoint Seong Dae-kyu, head of the acquisition team at Woori Financial Group, as the new representative, while ABL Life Insurance will appoint Kwak Hee-pil, former representative of Shinhan Financial Plus. With this, Woori Financial will finalize the expansion of its group portfolio promoted under the leadership of Yim Jong-ryong, chairman of Woori Financial Group.
The acquisition of Tongyang and ABL Life Insurance will have an immediate impact on Woori Financial's performance starting in the second half of this year. It will not only increase the size of net income but also enlarge the share of non-banking performance within the group. Last year's total net income for the group was 3.086 trillion won, with Woori Bank's net income at 3.047 trillion won and the net income of five non-banking entities (securities, asset management, cards, savings banks, and capital) totaling 208 billion won. The combined net income of Tongyang Life Insurance and ABL Life Insurance last year was 415.3 billion won, which means Woori Financial's non-banking performance will approximately triple just from the integration of the two insurance companies.
Experts evaluate that having a well-rounded set of non-banking affiliates within a financial group and having them perform well will activate synergy for the entire group. Lena Kwak, a senior analyst at Bloomberg Intelligence, noted, "This acquisition of the insurance company will help Woori Financial achieve non-banking growth by leveraging the insurance sector as a springboard and narrow the revenue gap with competing financial groups in the medium to long term."
The accounting profit generated after the acquisition of the insurance companies is also a factor that will boost Woori Financial's performance. Woori Financial purchased Tongyang and ABL Life Insurance for approximately 1.5 trillion won. The net worth of the two insurance companies at the end of last year was approximately 2.2 trillion won. Woori Financial will acquire about 700 billion won of bargain purchase gain, which will be immediately reflected in the current profit and loss. The market interprets this acquisition of the insurance company as a signal for the group's performance growth. KB Securities and SK Securities raised their target stock price in a report analyzing Woori Financial Group in June.
However, the weak soundness of the newly acquired insurance companies is a challenge Woori Financial must address. Looking at the solvency ratio, which is an indicator of the soundness of the insurance companies, as of the end of March, the K-ICS ratio for Tongyang Life Insurance was 127.2%, and for ABL Life Insurance, it was 104.6%. Both insurance companies' K-ICS ratios fall below the financial authorities' lowered benchmark of 130%. To meet the standards set by the financial authorities, capital injection is unavoidable.
Woori Financial plans to focus on improving the soundness of the insurance companies and aligning the characteristics of the Woori Financial brand with those of the two insurance company brands. A Woori Financial official said, "We will manage the insurance companies with a focus on sound capital management in accordance with insurance accounting standards." They added, "The changes to the insurance companies' names or mergers will likely be reviewed after the incorporation process is completed."