KDB seeks more bids for KDB Life Insurance The Korean state-run bank has 20 days left to avoid a fine for not closing the sale in time

Translated by Ryu Ho-joung 공개 2020-02-26 08:00:25

이 기사는 2020년 02월 26일 08:00 더벨 유료페이지에 표출된 기사입니다.

Korea Development Bank (KDB) is making little progress with its sale of KDB Life Insurance, though the state-run bank has been given until March to complete the sale.

KDB has delayed the deadline for receiving bids for KDB Life Insurance to attract more potential bidders to participate in an auction process, sources with knowledge of the matter said on February 21. So far, two PE firms that joined the preliminary bidding have reportedly been included in the shortlist.

KDB should complete the sale of KDB Life Insurance before March, as the company is currently owned by a PE firm, KDB-Consus Value, co-managed by KDB and Consus Asset Management. KDB-Consus Value had acquired 66 percent of the insurance company in March 12, 2010. According to local regulations, a PE firm is allowed to have control over a financial firm for a period of no more than 10 years.

The biggest impediment is that KDB and the shortlisted bidders reportedly couldn’t come close to agreeing on the company’s value.

“Given that less than 20 days are left before the time limit, it seems almost certain that [KDB] would pay a fine,” said an industry insider, adding that there is little likelihood of an agreement on the sale for such a short time.

KDB will likely try to capitalize on an auction for Prudential Life Insurance in which, unlike the case for KDB Life Insurance, several investors have shown keen interest, industry watchers said, adding that KDB could make offers to those who failed to become an exclusive bidder for the U.S. insurance company.

Currently, three Seoul-based PE firms including MBK Partners, Hahn & Co. and IMM PE as well as two industry players – South Korea’s KB Financial Group and Taiwan's Fubon Financial Holdings – are in the process of performing due diligence for Prudential Life Insurance. Woori Bank, which has been known to focus on strengthening its non-banking business, is also considered a potential bidder.

The fact that there are almost zero chance of an agreement of the sale within due time also drives KDB to take the auction process slow. The bank would rather focus on selling the company at a right price as a fine being imposed is practically unavoidable.

“If the amount of a fine is smaller than KDB has expected, the bank will likely choose to receive more bids,” said an industry insider. “KDB is apparently expecting another Eastar Jet’s case, where Jeju Air, after failing to acquire Asiana Airlines, is now targeting the low cost carrier.”

Still, for prospective investors, KDB Life Insurance is considered less attractive than other insurance companies available – or potentially available – on the market, such as Tongyang Life Insurance and ABL Life Insurance, in terms of a risk-based capital (RBC) ratio and profitability. Its RBC ratio stood at 225 percent at the end of September 2019, putting the company 19th place among 24 life insurers in the country.

(By reporter Choi Ik-hwan)
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