KB Life, Prudential Life to complete merger by Jan 2023

The merger of KB Life Insurance Co., an insurer under KB Financial Group Inc. of South Korea, and Prudential Life Insurance Co. of Korea will be completed by January 2023, according to KB Financial Group. The management of the group has recently approved the plan, sources said.

KB Financial acquired Prudential Life in August 2020 for 2.3 trillion won ($2 billion) and has operated its insurance business independently. In January 2021, KB Financial kicked off integrating Prudential Life’s computer system into the group system. The merger plan has been under review since last year and the group will make an official announcement soon, a senior official at KB Financial said.

The merged entity’s name will be likely either KB Star Life or KB Premium Life, the group said. The assets under management of Prudential Life and KB Life are 25 trillion won and 10 trillion won, respectively. The merged entity’s AUM will be around 35 trillion ($29 billion) won, the eighth-largest AUM in the Korean insurance industry, following Tongyang Life Insurance Co.’s 36 trillion won.  

Through the merger, KB Life aims for maximizing synergy effects in insurance product sales. KB Life has made efforts to reduce sales costs by selling insurance products via online channels and general agents instead of in-person sales teams. Prudential Life, on the other hand, has a robust organization of face-to-face insurance planners. It posted 336.2 billion won of net profits last year, while KB Life saw 46.6 billion won of net loss.

KB Life will minimize the impact by IFRS 17 through the merger, industry watchers added. IFRS 17, the new accounting standard effective from January 2023 in Korea, will require insurers to measure both assets and liabilities at market price, instead of book value. That will lead to increased value in liabilities and more spending to cover the increased risk. KB Life, which has focused on selling high-interest savings insurance plans for the company’s external growth, could face negative effects from the new accounting system.

Write to Jin-Woo Park and So-Ram Jung at jwp@hankyung.com
Jihyun Kim edited this article.