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AXA General sale off to shaky start with Kyobo Life as sole bidder

Sep 18, 2020 (Gmt+09:00)

The sale process of AXA General Insurance Co. got off to a shaky start with only Kyobo Life Insurance Co. making a preliminary bid on Sept. 18. Shinhan Financial Group, although considered a strong candidate, decided not to take part at the last minute, according to the investment banking industry.

Earlier in August, French multinational insurance group AXA appointed Samjong KPMG as the sale manager to sell a 100% stake in its South Korean operation. From the beginning, Shinhan Financial was tipped as a potential buyer as it is considering adding a non-life insurance company to its portfolio.

But Shinhan Financial is no longer in the picture, and the deal's future looks murky despite Kyobo Life preventing the sale from falling through.

The sale price is expected to be in the 160 billion ($137.7 million) to 240 billion won ($206.5 million) range based on a price-to-book ratio of 0.7 to 1, according to industry sources. Generally, non-life insurance transactions are valued at a P/B ratio of 1 but have recently been scaled down given poor business conditions.

It is understood that the seller is hoping to fetch between 300 billion and 400 billion won for AXA General, almost double the amount deemed reasonable by industry players. The gap in price expectations between the seller and potential buyers is considered a factor in the lack of participation.

Another hiccup in the process could be attributed to AXA General’s portfolio being heavily tilted to car insurance alongside poor earnings.

Last year, car insurance accounted for 84.3% of the company’s portfolio based on original premiums. But the car insurance sector has performed poorly as of late due to its increased loss ratio.

In 2019, AXA General’s cumulative loss ratio for car insurance reached around 94.8%, much higher than the 76-77% range considered reasonable by the industry.

The company’s performance is also on a downhill trend, turning to a deficit in 2019 from a net profit of 16.4 billion won in 2018 and 27.5 billion won in 2017.

Next steps remain unclear as Shin Chang-jae, chairman of Kyobo Life, is embroiled in a $2 billion feud with the company’s financial investors after failing to carry out an initial public offering. Industry sources say that it will be practically impossible to finalize the deal.

If the deal goes through, Kyobo Life -- as the only bidder -- will be re-acquiring AXA General after selling it to the AXA Group in 2007.

AXA General started off as Korea Direct, an independent local insurance company, entering Korea’s online insurance market in 2000. The name changed to Kyobo Auto Insurance in 2001 when it was acquired by Kyobo Life Insurance, one of the largest life insurers in Korea. In 2007, it became Kyobo AXA Auto Insurance when AXA Group acquired a 74.7% stake in Kyobo Life.

In 2009, it became AXA General Insurance when AXA Group acquired the remaining shares.

AXA General Insurance was Korea’s first “direct auto insurance” firm, whereby an insuree could sign up for insurance directly, without an agency or a recruiter. In 2019, AXA General posted 929.4 billion won in revenue.

Write to Jun-ho Cha and Hyun-woo Lim at chacha@hankyung.com

Danbee Lee edited this article

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