KDB halts KDB Life sale process to take full control

The state-run Korea Development Bank (KDB) has suspended the protracted sale process of KDB Life Insurance Co. to take full control of the insurer before putting it back on the market at a higher valuation, according to people with knowledge of the matter on Wednesday.

KDB and Seoul-based Consus Asset Management jointly control 95.66% of the life insurance firm via KDB Consus Value Private Equity.

The private equity fund was set up in 2010 to acquire KDB Life, formerly Kumho Life Insurance, from the then-beleaguered Kumho Group.

However, following their failed attempts to divest of the insurer, KDB has decided to liquidate the 14-year-old fund and assume direct control of KDB Life to bolster its financial structure, the sources said.

Industry observers estimated that KDB may need to inject an additional 1 trillion won ($740 million) into the insurance company to restore its financial health.

Including the acquisition price, KDB has already poured about 1.2 trillion won into the insurer, including the injection of 100 billion won for rights issues in 2023.

The fund’s liquidation needs to be approved by its limited partners, including the National Pension Service (NPS) and Korean Reinsurance Co. Consus Asset is understood to have accepted KDB’s offer.

After the fund's liquidation, KDB will hold an 85.7% stake in KDB Life. The NPS, Korean Re and Consus Asset will be left with stakes of 7.7%, 1.8% and 0.5%, respectively.

The three minority shareholders will be granted tag-along rights to unload their shares with the same terms and conditions as when KDB divests the insurance firm.

ATTEMPTS TO SELL KDB LIFE

KDB has had the life insurer up for sale since 2014. Last year, it named Hana Financial Group, South Korea’s No. 3 banking group, as a preferred negotiator for KDB Life, but Hana dropped out after due diligence.

Early this year, it tapped MBK Partners to sell KDB Life but to no avail.

Taking KDB Life under its wing, the state-run lender will focus on improving the insurer’s bottom line to lift its valuation.

The insurance firm's solvency, measured as the Korean-Insurance Capital Standards (K-ICS) ratio, has deteriorated. Its K-ICS ratio stood at 134.05% as of the end of September of last year, below the 150% guideline set by financial authorities.

Since introducing mark-to-market accounting rules under the IFRS 17 in 2023, KDB has been the only domestic insurer to fail to meet the guideline.

The sources said KDB has concluded it was in no rush to sell off KDB Life in the current market situation, where several other insurance companies are up for grabs.

ABL Life Insurance Co. owned by China’s Anbang Insurance Group, MG Non-Life Insurance Co. and Lotte Non-Life Insurance Co. have been put on the market.

Tongyang Life Insurance Co. is speculated to be up for sale as well. 

Write to Jong-Kwan Park at pjk@hankyung.com

Yeonhee Kim edited this article.