Carving a financial niche
Jonathan Borofsky’s “Hammering Man” stands outside the Heungkuk Life Insurance building in Sinmunno, Jongno, central Seoul. [JoongAng Ilbo]
The acquisition was the first foray into finance after a long history of satisfied customers in the chemical and textile businesses for the company, which has no relation to the firm of the same name involved in the Park Yeon-cha bribery scandal.
Taekwang Industrial, the group’s parent company, is one of Korea’s leading manufacturers of textiles and petrochemical products. The company was founded by the late Lee Eam-yong. It now has 44 subsidiaries.
The group got its start in textiles when founder Lee opened a wool mill in Busan more than half a century ago. After graduating a technical school in Nagoya, Japan, in 1944, and working several years as a public servant, Lee started his own business in what he saw as a high-growth industry.
The company developed at a rapid pace as the “miracle on the Han” heated up in the 1960s.
Lee started out producing acrylic fiber, and soon became Korea’s first general textile manufacturer, including synthetic fibers such as spandex.
Taekwang also claimed many firsts in weaving, becoming Korea’s first producer of carbon fiber. In the 1990s, before the country was hit by the Asian financial crisis, the company had the highest stock prices of any listed firm at over 1 million won ($800).
Industry experts say Taekwang Industrial’s slow expansion into other sectors was based on the late founder’s philosophy of limited investment and avoiding loans, which helped the company stay stable through the oil shocks of the 1970s.
Last year, Taekwang Industrial had the second-highest retention ratio in Korea at 26,064 percent.
This reputation for prudence made Taekwang’s foray into the financial sector a success almost immediately.
After two years as part of the Taekwang family, in 1975, Heungkuk had made 1 trillion won in contract holdings, and in 1981 it started a nationwide online insurance service.
The life insurer expanded its contract holdings by 10 trillion won in 1988, then by 20 trillion won in 1990.
Though not as big in terms of volume as Korea’s top three insurers - Korea Life Insurance, Samsung Life Insurance and Kyobo Life Insurance - Heungkuk has pushed to fill its own unique niche.
In order to differentiate itself, Heungkuk started offering bancassurance services, a first for a local insurer, in 2003. These packages are offered to banks so that they can sell insurance and other financial products through the same channels. As the pioneer in the field, Heungkuk boasted the highest sales of bancassurance products in Korea in fiscal year 2007.
Step by step, through mergers and acquisitions, the Taekwang Industrial subsidiary developed into six finance-related sister companies under the Heungkuk Finance Group. The currenct companies are Heungkuk Securities, Heungkuk Asset Management, Heungkuk Fire & Marine Insurance, Yegaram Bank and Goryo Bank.
Heungkuk Life Insurance and Heungkuk Fire & Marine Insurance together rake in 13 billion won in insurance premiums and fees monthly with assets of 8.4 trillion won and sales of new policies worth 3.4 trillion won as of March 2008.
Recently the group announced its new vision - to become one of the country’s top three insurers by 2010. Heungkuk plans to reach assets of 17 trillion won, policy sales of 8 trillion won and monthly premium and fee income of 30 billion won. It plans to exploit synergy in its sales by introducing a one-stop service for clients who wish to register for both insurance and fund products.
“Heungkuk Life Insurance has been focusing on savings insurance and expanding new sales channels such as bancassurance and telemarketing services,” said an analyst from the Korea Ratings Corporation. “Its market share over the last five years increased 0.53 percentage points to 2.91 percent as of last year.”
The man behind the group’s finance-oriented businesses is Taekwang Industrial chairman Lee Ho-jin, the third son of Taekwang Industrial Group’s founder, who passed away in 1996. Lee Ho-jin took the position in 2004. In the intervening years, the group was chaired by the late founder’s brother-in-law, Lee Ki-hwa, and with the founder’s eldest son, Lee Seok-jin, as vice chairman. The current chairman took his position after Lee Ki-hwa resigned and his two older brothers passed away.
Very little has been revealed about Lee Ho-jin, the chairman and co-chief executive of Heungkuk’s parent company Taekwang Industrial, as the founder has avoided public appearances.
Heavy promotion wasn’t particularly needed for Taekwang when it focused on textiles, since even without marketing the chemical fiber business was flourishing back then.
Despite his aversion to publicity, the current chairman, Lee Ho-jin, who holds a bachelor’s degree in economics from Seoul National University, a master’s from Cornell University and a doctoral degree in business administration from New York University, has been “silently” expanding his business, not only into the finance sector but also into media.
Helping the chairman behind the scenes is Oh Yong-yil, president and co-CEO of Taekwang Industrial and also chief executive of Tbroad, the group’s media unit.
Oh joined Taekwang in 1975 after graduating with a bachelor’s degree in economics from Hankuk University of Foreign Studies and worked his way up, to become executive director of the group and of Heungkuk Life Insurance as well as chief executive of Heungkuk Fire & Marine Insurance. He was placed in his current post in 2007.
Another leader of Taekwang’s financial businesses is Kim Choo-yoon, the current chief executive of Heungkuk Life Insurance. After studying business administration as an undergraduate at Seoul National University, Kim started his career as a journalist at a local newspaper from 1978 to 1980. He then moved to Hanyang Securities in 1981. Before joining Heungkuk as executive director in 2008 and then becoming chief executive in July, Kim was an employee of SC First Bank.
Byun Jong-youn, chief executive of Heungkuk Fire & Marine Insurance, formerly known as Heungkuk Ssangyong Fire & Marine Insurance, served as managing director at the company prior to taking his current position. He holds a bachelor’s degree in trade from Dongguk University.
Moon Seung-dong, chief executive of Heungkuk Securities, who holds a bachelor’s in trade from Cheongju University, started his career with Taekwang Industrial in 1984. He then rotated through various investment companies including Tongyang Investment Bank, Seoul Securities and Eugene Securities to finally return to Heungkuk Securities. He was promoted to CEO last year.
Taekwang Industrial is also the owner of the country’s biggest multiple system operator, cable company Tbroad.
The process of buying Qrix, however, provoked a major political scandal when a Tbroad employee was exposed lobbying the Blue House and the Korea Communications Commission to permit the takeover.
Despite some rough patches along the way, the group received an A status from the Korea Investors Service, the nation’s first credit rating agency, in May, with its low-key yet aggressive approach to mergers and acquisitions.
The A status indicates a strong capacity for timely repayment of policy holder obligations.
“Taekwang Industrial has a sound financial structure,” said Lee Kil-ho, an analyst from KIS. “By investing in the new media sector, the group’s sales have improved overall.”
By Lee Eun-joo [angie@joongang.co.kr]
with the Korea JoongAng Daily
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