Rush to buy insurers begins with Tong Yang

Korea Life Insurance, one of the three major players in the domestic insurance sector, joined the preliminary bidding process to acquire Korea’s seventh-largest life insurer Tong Yang Life Insurance yesterday.

With a number of life and general insurance companies already on the M&A market or about to be put up for grabs soon, the sale of Tong Yang is expected to set the tone for what could be a wide reorganization of the sector this year.

Worth 13.5 trillion won ($11.8 billion) in assets as of September, the company is known for its strength in bancassurance, or insurance policies sold over the counter in bank branches. It was put on sale by private equity fund Vogo Fund, which holds a 60.7 percent stake, as cash-strapped Tong Yang Group agreed to effectively give up its current management control for a sale last November.

Korea Life Insurance, an affiliate of the Hanwha Group and Korea’s third-largest insurer in assets as of September, had long been noted for its interest in acquiring Tong Yang Life, as it lags in sales through bancassurance channels.

Should the acquisition be made, the resulting company would have total assets of 75 trillion won, putting it ahead of Kyobo Life’s 62 trillion won to become the second-largest entity in the sector by assets behind Samsung Life.

Other companies were also reportedly interested in entering bids for Tong Yang Life, including U.S.-based Prudential Financial, Canada-based Manulife Financial and Italy’s largest insurer Assicurazioni Generali S.p.A., but neither spokespeople for Vogo Fund nor bookrunner Credit Suisse Korea could be reached for confirmation yesterday.

Tong Yang Life represents just one of numerous prospective M&As in the sector that may be carried out this year. The big-ticket item would be the anticipated sale of ING Life Insurance, the Korean unit of Dutch multinational insurer ING Groep NV, as part of the latter’s push to sell its Asian insurance business to meet a condition for state aid approval by the European Union.

ING Life had assets worth 20.7 trillion won as of October to rank fourth among domestic life insurers, meaning its acquisition would be a huge boost for existing players such as Samsung Life, or companies facing imminent spin-offs such as the insurance arm of Nonghyup.

Both ING’s Korean unit and the larger Asia business already have buyers interested, despite what could be steep price tags. Foreign insurer AIA Group has reportedly been sniffing out the viability of buying the latter, while the head of KB Financial Group has repeatedly stated his interest in ING Life.

“We’re not interested in acquiring Tong Yang Life, but we will closely watch ING Life should it hit the market,” said KB Financial Group Chairman Euh Yoon-dae on Tuesday.

Smaller M&A prospects are expected in the general insurance sector as well. Acquisitions of struggling Green Non-life Insurance and Ergo Daum Direct General Insurance are still on the cards after aborted past attempts by financial companies including regional banking group BS Financial.

M&As in the insurance sector can draw interest as a rare chance to stake a claim with a licensed business that can only be bought with the government’s permission.

By Lee Jung-yoon [joyce@joongang.co.kr]