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Prudential Life draws Taiwan’s Fubon Fin, four Korean prelim bidders

Jan 17, 2020 (Gmt+09:00)

Taiwan’s Fubon Financial Holdings, KB Financial Group and three Seoul-based private equity firms have submitted letters of intent to acquire 100% of Prudential Life Insurance Co. of Korea, in an auction estimated to fetch around 2 trillion won ($1.7 billion), according to investment banking sources on Jan. 16.


US-based Prudential Financial Inc. put the South Korean insurance arm on the market in late 2019 as part of efforts to slim down overseas assets ahead of the new US accounting standard effective from 2022.


The three South Korean private equity houses that handed in preliminary bids by the deadline are MBK Partners, Hahn & Company and IMM Private Equity.


Sale manager Goldman Sachs is expected to shortlist them around next week.


Among the five bidders, Fubon Financial is the only foreign participant. It already runs a Korean insurance firm, Fubon Hyundai Life Insurance Co. Ltd. and has a minority stake in Woori Financial Group as a strategic investor.


In 2015, Fubon Life Insurance Co. Ltd. of the Taiwan group entered the Korean insurance market by taking a 48.6% stake in the then Hyundai Motor Group’s insurance unit. It increased the holding to 62% in 2018 with the purchase of new shares.


Last year Fubon Life bought a 4% stake in Woori Financial Group for 358 billion won from Woori’s banking unit. The stake sale was managed by Goldman Sachs.


For KB Financial, the life insurer may help overtake domestic rival Shinhan Financial Group, as well as bolstering non-banking operations.


Shinhan acquired Orange Life Insurance Co. Ltd., formerly known as ING Life, from MBK Partners for 2.3 trillion won in 2018.


MBK reaped more than 2 trillion won in capital gains from Orange Life, including the IPO proceeds before selling it to Shinhan.


Three other leading Korean financial services companies – Woori Financial, Hana Financial Group and Mirae Asset Financial Group – have not participated in the bid.


Mirae’s bid was rejected by Goldman on the reason that it was behind schedule to submit a non-disclosure agreement, according to the sources.


ESTIMATED P/B RATIO


With a net asset value of 3 trillion won, Prudential Life posted a 101.2 billion won operating profit in the first half of last year, compared with 220.4 billion won in full-year 2018.


Its estimated valuations vary from 0.2 to 1.1 price-to-book ratio (PBR).


For listed Orange Life with a similar amount of capital, Shinhan paid 1.1 times book value. Currently, its PBR is 0.6-0.7, above sector leader Samsung Life Insurance Co. Ltd.’s 0.4.


Hanwha Life Insurance Co. Ltd., with a capital of 11 trillion won, is traded at one-fifth of book value on the Korea Stock Exchange.


Industry watchers estimate that Prudential Life would be sold for more than half its book value, given the company’s solid financial conditions.


Applying Orange Life’s PBR of 0.6-0.7, Prudential Life is worth 1.8 trillion to 2.1 trillion won.


By Sang Eun Lee, Ji Eun Jeong and Riahn Kim


selee@hankyung.com



(Photo: Getty Images Bank)

Yeonhee Kim edited this article

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