Hana Financial Group's abandonment of the acquisition of KDB Life Insurance shows signs that the insurance company's M&A market will continue to shrink.
As large financial holding companies such as Hana Financial Group and Shinhan and Woori Financial Group took a "cautious mode" related to the acquisition, a red light was also turned on for the sale of items that had raised expectations for M&A.
According to the financial sector and the KDB Development Bank on the 19th, the previous day, KDB Cassus Value PEF received an intention to give up the acquisition of KDB Life Insurance from Hana Financial, a preferred bidder.
In November 2022, the Korea Development Bank selected Samil Accounting Corp. as the organizer of the sale and announced a bid, and in July, Hana Financial, which was solely bid, was selected as the preferred bidder for the acquisition. Since then, Hana Financial has conducted a two-month due diligence to determine whether it will take over.
Initially, the market predicted that Hana Financial Group, which desperately needs to expand its non-bank portfolio, is more likely to sell than ever as it jumped into the acquisition battle.
Hana Financial Group has long since completed its comprehensive financial portfolio, including securities, life insurance, non-life insurers, cards, capital, and savings banks, but the presence of non-bank subsidiaries was weak. In addition, Chairman Ham Young-joo's emphasis on "strengthening non-banking" since the beginning of the year also strengthened this outlook.
However, as Hana Financial Group eventually withdrew from the acquisition of KDB Life Insurance, the Korea Development Bank's sale of KDB Life Insurance returned to square one again.
Hana Financial Group's final abandonment of the acquisition of KDB Life Insurance is considered to be the main reason for the huge post-acquisition cost. Although the Korea Development Bank lowered the sale price of KDB Life Insurance's old shares, which it owns with Kansus Asset Management, from 200 billion won to early 100 billion won, it is expected that it would have had a considerable burden on the input cost after the huge acquisition.
Since acquiring KDB Life Insurance in 2010, the Korea Development Bank has tried to sell it twice in 2014 and once each in 2016 and 2020, but failed to make it happen. As the sale went bankrupt again this time, it suffered a total of five failures.
Woori Financial Group and Shinhan Financial Group have also publicly expressed their intention not to jump into the acquisition of insurance companies, and the M&A movement in the insurance company market is shrinking.
Jin Ok-dong, chairman of Shinhan Financial Group, recently mentioned at an investor event jointly held with the Financial Supervisory Service in the UK that "there is no proper sale of non-life insurers."
Chairman Jin also said, "The price of insurance companies currently on sale is too high," adding, "It is difficult to recognize the profits increased by the change in the accounting system, and we need to wait and see." Woori Financial Group Chairman Lim Jong-ryong also drew a line, saying he has no immediate plans to acquire credit card companies and insurance companies.
Some interpret it as a sign that they are wary of the remarks of CEOs of financial holding companies and raising the ransom of related sales. In general, it is an expression of intention taken out of concern that insurance companies' ransom could be "bumped" rather than their appropriate value.
Meanwhile, not only KDB Life Insurance, which failed to acquire this time, but also Lotte Insurance and ABL Life Insurance are under sale. MG Insurance is also in the process of selling, centering on the Korea Deposit Insurance Corporation, and rumors are also rising that Dongyang Life Insurance, which has been a potential sale.
However, it is difficult to find an appropriate buyer. The market believes that there is room for the sale price to be inflated at a time when it is not easy to estimate reasonable profits from the introduction of the new accounting system (IFRS17). This is why the process is not smooth even though financial holding companies are mentioned as priority acquisition targets in the market.
An official from the financial sector said, "Financial holding companies consider strengthening non-banking business as their top priority as a future growth strategy, but the price for sale is excessively charged in the process of seeking acquisition," adding, "Financial holding companies are likely to take a wait-and-see stance at a time when the burden of acquisition prices has increased."