Korea Investment & Securities selected DB Insurance as the top pick in the insurance sector. Expectations are that the acquisition of a U.S. insurer could lead to expanded shareholder returns. The firm kept its target price at 165,000 won and gave a buy rating.
According to Korea Investment & Securities on the 29th, DB Insurance disclosed on the 26th that it decided to acquire shares in the U.S. insurer Fortegra. It plans to acquire 100% equity for $1.65 billion (about 2.31 trillion won), with the transaction scheduled to close in the first half of next year.
Fortegra is a specialty insurer that covers risks generally not covered by standard insurance, and it posted adjusted net income of $120 million (about 170 billion won) last year.
Hong Yeran, an analyst at Korea Investment & Securities, said, "DB Insurance plans to operate Fortegra as a separate, independent subsidiary even after the acquisition is completed, but it is expected to secure a stable revenue base in the United States."
DB Insurance currently sells a variety of products in the United States, including dwellings fire, auto, and package insurance. If Fortegra's premiums (4.18 trillion won) last year are simply added, the overseas share rises to 23.5%.
Hong said, "Given the high penetration of the domestic insurance market, expanding into overseas markets is a reasonable option," adding, "After the acquisition is completed, the financial statements that serve as the basis for shareholder returns will be changed to consolidation, and if the current high profitability is maintained, further expansion of shareholder returns can be expected."