The merger and acquisition (M&A) market in the insurance industry is heating up again. As major insurers such as Lotte Non-Life Insurance, YeByeol Non-Life Insurance, and KDB Life Insurance come up for sale one after another, major financial holding companies and insurers are jumping into the bidding war.
According to the financial sector on the 29th, Shinhan Financial Group is said to be in unofficial talks with JKL Partners, the largest shareholder of Lotte Non-Life Insurance, for an acquisition ahead of the planned public sale in Aug. Shinhan Financial Group previously acquired Orange Life, then merged it with Shinhan Life to launch Shinhan Life, propelling it into the upper ranks of the industry. If it acquires Lotte Non-Life, which has about 14 trillion won in asset, it is expected to break into the top seven in the non-life insurance industry.
Korea Investment Holdings has also joined the race to acquire Lotte Non-Life. It has already submitted a letter of intent (LOI) and is preparing for the public sale process. Korea Investment is said to have completed due diligence in Aug. last year but had not issued an official position. However, after news emerged that Shinhan Financial Group was reviewing an acquisition, it formalized its pursuit via a disclosure. With the two holding companies joining, the competition for Lotte Non-Life is showing signs of overheating.
The sale of YeByeol Non-Life, which fell through once, is being revived. YeByeol Non-Life is a bridge insurer established to resolve MG Non-Life Insurance, and it holds about 3.5 trillion won in asset and 1.22 million insurance contracts. In the main bid in April, Korea Investment participated alone, and the deal failed. Under the National Contract Act, at least two bids are required for a valid contract. A re-bid is underway, and acquisition proposals will be accepted through the 30th. Korea Investment, Kyobo Life Insurance, Heungkuk Fire&Marine Insurance, and OK Financial Group are being mentioned as potential bidders. A preferred bidder could be selected as early as July.
In the life insurance sector, the sale of KDB Life Insurance drew strong interest. KDB Life Insurance is a mid-sized life insurer with 16 trillion won in asset. The preliminary bidding, which closed on the 1st, reportedly drew participation from Korea Investment Holdings, Heungkuk Life Insurance, Samsung Life Insurance, Hanwha Life Insurance, and Kyobo Life Insurance. The Korea Development Bank plans to select qualified bidders soon and hold the main bid in Aug.
High entry regulations are cited as the backdrop for the simultaneous pickup in insurer M&A. With the establishment of new insurers virtually impossible, acquiring an existing company is seen as a practical alternative that secures a business base and license at once.
Meanwhile, sellers are improving deal terms, drawing more bidders. JKL Partners is said to have lowered its desired sale price for Lotte Non-Life from 2 trillion won to around 1 trillion won, and YeByeol Non-Life is also reviewing a capital increase plan of up to 1.2 trillion won. The Korea Development Bank has also eased the acquisition burden by leaving the door open to a rights offering ahead of the sale of KDB Life Insurance.
An insurance industry official said, "Because the insurance business has high barriers to entry, M&A is perceived as virtually the only entry route," and added, "With sale prices becoming more realistic and capital support aligning, buyers who had been on the sidelines are moving actively."