Kyobo Life Insurance has decided not to absorb and merge its 100% subsidiary Kyobo Lifeplanet (Kyobo L-Plan) and to maintain the current structure. As Kyobo L-Plan only recently reshaped its business toward protection-type insurance and has shown signs of improving results, the decision is seen as taking time to watch developments.
According to the insurance industry on the 30th, Kyobo Life Insurance is not reviewing an absorption merger of Kyobo L-Plan. Kyobo L-Plan, launched in 2013 as Korea's first digital life insurance company, has posted losses every year since its launch. In the domestic insurance industry, it is a symbol of "digital innovation," but for Kyobo Life Insurance it is also a sore point, as it has been cited as a case showing that the digitalization of insurance is impossible.
Because of this, speculation about an absorption merger of Kyobo L-Plan has emerged every year. If Kyobo L-Plan's performance worsens, Kyobo Life Insurance would have to inject additional capital, leading to arguments that an absorption merger would be preferable. Kyobo Life Insurance has invested in Kyobo L-Plan by conducting paid-in capital increases six times so far, totaling 337 billion won. Moreover, as another digital insurer, Carrot General Insurance, was absorbed and merged into HANWHA GENERAL INSURANCE, speculation about Kyobo L-Plan's absorption merger also gained momentum.
However, Kyobo Life Insurance is said to have never conducted meaningful discussions or reviews regarding an absorption merger. In particular, it reportedly judged that, since Kyobo L-Plan only recently reshaped its business toward protection-type insurance, it should take time to watch the situation. It has also been less than two years since Kim Young-seok, the first outside appointee, took office as CEO at Kyobo L-Plan.
Earlier this year, despite being a life insurance company, Kyobo L-Plan began a "reboot" strategy to shift its portfolio to products with higher premiums per contract, such as cancer, dementia, and health insurance. With the introduction of the new accounting standard (IFRS 17), the company aims to raise the share of protection-type insurance, which can increase sales (direct premiums), rather than whole life policies, savings-type policies, or mini-insurance.
Inside Kyobo L-Plan, there are views that it can operate independently. In fact, its profitability and soundness are assessed to be on an improving track. In the second quarter of this year, Kyobo L-Plan's net income was -41 million won, a sharp narrowing of the loss from the same period a year earlier (-1.589 billion won). Moreover, it posted a 234 million won surplus in the past month.
Kyobo L-Plan's risk-based capital ratio (K-ICS), a soundness indicator, was 250.7% last month, far exceeding the financial authorities' recommended 130%. K-ICS has risen sharply month by month from 168.1% in 4th. For Kyobo Life Insurance, the immediate burden of injecting additional capital into Kyobo L-Plan has effectively disappeared.
A Kyobo Life Insurance official said, "There is nothing at all under way regarding an absorption merger." A Kyobo L-Plan official said, "We are pursuing multiple business models to craft an independent survival plan." An insurance industry official said, "As Carrot General Insurance was absorbed and merged into HANWHA GENERAL INSURANCE, it seems projections and chatter emerged that Kyobo L-Plan, whose results had been weak, might also be absorbed into Kyobo Life Insurance."