Activist fund Align Partners raised the pressure by sending a second open letter to shareholders to DB Insurance. Align Partners said it was positive that DB Insurance voluntarily resolved to reestablish its internal transactions committee and began some improvements, but noted that most of the key requests in the first shareholder letter were insufficiently addressed.
On the 13th, Align Partners said that, based on DB Insurance's reply on the 5th to the first open shareholder letter, the company's answers were inadequate regarding the core demands.
Specifically, it again requested: ▲ establishing a management strategy based on the required return on risk (ROR) ▲ rationalizing K-ICS (new risk-based capital regime) target levels and upgrading shareholder return policy ▲ resolving internal transaction practices with DB Inc. (DB FIS) ▲ shifting to a joint trademark ownership model ▲ overhauling the compensation system ▲ improving board independence.
Align Partners stressed that DB Insurance's shareholder return policy is lower than those of major domestic insurers. DB Insurance aims for a 35% standalone shareholder return rate, but competitors such as Meritz Financial Group and Samsung Fire & Marine Insurance are presenting shareholder return targets of about 50%.
Align Partners demanded that DB Insurance go beyond merely maintaining the K-ICS ratio to manage the required capital growth rate and set capital policies by K-ICS bands, presenting a shareholder return target of at least 50%. It also said the company should prepare a systematic capital allocation strategy that compares internal investment returns with the returns from share repurchases and cancellations.
It also questioned the price and strategic rationale of DB Insurance's ongoing acquisition of U.S. insurer Fortegra. In the past, Fortegra attempted an initial public offering (IPO) twice but failed due to lack of demand, and DB Insurance decided to acquire it at a price higher than the then indicated IPO range. Align Partners argued that management needs to explain whether this decision was reasonable.
It pointed out that there is a need to reexamine whether the structure of continuously conducting large-scale transactions with DB FIS, the IT services subsidiary, is economically reasonable. It also raised the need to improve the gift certificate usage structure.
Lee Chang-hwan, head of Align Partners, said, "At the regular shareholders meeting scheduled for Mar. 20, we ask the board to state its position publicly, and for matters that are difficult to answer, we request a public written response by May 7 after in-depth review and discussion by the newly formed board."
He added, "We look forward to working together so that DB Insurance can rebuild trust in the capital market."