KB Financial buys Prudential Life Insurance of Korea

Prudential Life’s Korean headquarters in Gangnam District, southern Seoul. [PRUDENTIAL LIFE INSURANCE OF KOREA]

KB Financial Group is a step closer to becoming the most profitable financial group in Korea with the acquisition of an insurer.

The company signed an agreement Friday to buy Prudential Life Insurance of Korea, a subsidiary of the Newark-based Prudential Financial, for 2.34 trillion won ($1.9 billion).

Under the terms of the deal, it will pay 2.26 trillion won based on Prudential Life Insurance of Korea’s net value on Dec. 31, 2019. It will pay the other 75 billion won when the transaction is complete.

No closing date has been set, but the company expects the deal to be completed within three or four months, once the financial regulators have signed off.

KB Financial Group has been in a neck-and-neck competition with Shinhan Financial Group for the top spot in Korea’s finance industry as measured by net profit.

Last year, KB’s net was 3.3 trillion won, while Shinhan’s was 3.4 trillion won.

Shinhan Financial Group acquired Orange Life Insurance, formerly known as ING Life, in 2018. KB Financial had hoped to acquire ING Life at the time.

KB Financial Group has its own life insurance unit - KB Life Insurance - but it is relatively small within the financier’s portfolio. KB Life has 9.8 trillion won in net assets and reported 16 billion won in net profit last year.

Last year, Prudential Life Insurance of Korea posted 140 billion won in net profit. That is enough for KB to overtake Shinhan.

The Korean arm of the U.S. life insurer has been coveted by various candidates here especially due to its healthy finances. As of last year, its operating profit margin was 6.43 percent, and it had a risk-based capital ratio of 424 percent.

The risk-based capital ratio is considered a key index when assessing an insurer’s financial condition. Samsung Life Insurance, the industry’s No. 1, posted a risk-based capital ratio last year of 339.5 percent.

Woori Financial Group bid for Prudential Life Insurance of Korea in partnership with IMM PE, a hedge fund. Hahn & Company and MBK Partners, major equity funds here, were among the participating bidders as well.

“Despite uncertainty in the life insurance business in the long term due to the low base rate, Prudential Life’s strong financial prowess will help KB Financial diversify its business portfolio in a positive and profitable way,” said Jeong In-mook, an analyst at Korea Investment & Securities.

KB Financial plans to merge Prudential Life into its group structure in an organic way, and it has made a vow against restructuring and has pledged to respect Prudential Life Insurance of Korea’s staff.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]