Kyobo Life Insurance pushes to set up holding unit

The Kyobo Life Insurance headquarters in Jongno-gu, Seoul. (Kyobo Life Insurance)

Kyobo Life Insurance, one of Korea's leading life insurers, said Wednesday that it will convert itself into a financial holding company before the end of next year in a bid to expand its business portfolio into other financial sectors.

The company seeks to seize new business opportunities as the country’s low birth rates and aging population hamper the growth of the life insurance business.

“The idea of establishing a holding company began with the recognition that a new corporate governance structure was needed to establish and implement long-term group growth strategies by departing from the current Kyobo Life Insurance-centered structure, in a complex and uncertain environment in which risks and opportunities coexist,” the firm said in a statement.

It is the first time that the insurer officially announced the holding company scheme, which has been under discussion since 2005.

The insurer aims to launch its financial holding company in the second half of next year.

Kyobo Life Insurance expects that it will be able to secure mid- to long-term growth engines by diversifying its business portfolio, discovering new growth opportunities, and creating synergies among affiliates through its transition to a holding company.

“With life insurance as the main focus, it is expected that the foundation will be laid to build a diverse non-insurance business portfolio beyond securities and asset management,” the firm said.

Kyobo Life Insurance currently has stock trading firm Kyobo Securities, internet-exclusive insurer Kyobo Life Planet, asset management firm Kyobo AXA Investment Managers, real estate firm Kyobo Realco, real estate trust firm Kyobo Asset Trust and KCA Claim Adjustment, which provides risk assessments on insurance agreements as subsidiaries.

For the structural transformation, Kyobo Life will proceed with a personnel split. After splitting Kyobo Life’s shares and cash from subsidiaries to establish a new holding company, new shares of the holding company will be distributed to existing shareholders.

Kyobo Life Insurance will be incorporated as a subsidiary of the envisioned financial holding firm. To this end, the holding company plans to carry out a capital increase to issue new shares, and receive Kyobo Life Insurance shares in kind.

The agenda tied to the structure transformation will be raised during the regular board of directors meeting to be held Thursday. The establishment of the holding company is subject to a regulatory review and approval from the country’s Financial Services Commission.

If the structure conversion clears regulatory hurdles, it will become the first case in the life insurance industry to transform into a holding company and the second in the entire insurance industry following Meritz Fire & Marine Insurance.

Establishing a holding company was among the insurer’s list of long-awaited tasks, along with its plan for an initial public offering.

In July last year, the country’s bourse operator rejected Kyobo Life Insurance’s market debut bid upon preliminary review, amid a legal dispute between the insurer’s Chairman Shin Chang-jae and the firm’s second-largest shareholder Affinity Equity Partners.

Kyobo Life Insurance promised its listing with Affinity by September 2015, but failed to fulfill it. Affinity, which owned a 25 percent stake, exercised the put option when the insurance company missed the deadline for listing. Shin claimed that the exercise of the put option was invalid, and the two parties are undergoing legal disputes at home and abroad over the issue.

By Park Han-na(hnpark@heraldcorp.com)