Korea Development Bank makes fifth attempt to sell life insurance unit

KDB Life Insurance Co. headquarters [Courtesy of KDB]

Korea Development Bank (KDB) has put KDB Life Insurance Co. up for sale once again, with several private equity funds submitting letters of intent (LOIs) for the deal, after failing four times in the past without success as life insurance business has become less attractive due to an aging population.

To facilitate the fifth sale, KDB, which has held the life insurance unit since 2010, is taking steps to reduce the financial burden for potential bidders by reducing the capital of KDB Life Insurance.

According to industry sources on Thursday, Samil PwC, the lead adviser for the sale, has received LOIs from at least two new private equity funds. The adviser will receive LOIs from other candidates until the main bidding, scheduled for early to mid-June.

The sale involves 92.7 percent of the total stake in KDB Life Insurance, jointly owned by KDB and Consus Asset Management. Although the selling party has not disclosed the deal price, market observers estimate it to be below 200 billion won ($150 million). The previous price in a share purchase agreement reached before the failed acquisition by JC Partners in 2020 was 200 billion won. A source from an investment banking industry said that this previous agreement is likely to serve as a reference.

KDB Life Insurance, previously known as Kumho Life Insurance, was acquired by KDB in 2010 through the establishment of a fund with Consus Asset Management. However, attempts to sell the company in 2014, 2016 and 2020 failed. In 2020, JC Partners was selected as the preferred negotiating partner for the acquisition, but the deal fell through due to issues regarding the qualification of the controlling shareholder.

KDB Life Insurance is exploring various options to alleviate the financial burden for potential acquirers. A shareholders’ meeting is scheduled for June 8, where KDB Life Insurance plans to gain approval for a capital reduction plan. Recent disclosures by KDB Life Insurance show that the capital reduction ratio is set at 75 percent, resulting in a reduced capital to 118.6 billion won from 474.3 billion won, thereby improving the firm’s financial structure.

Some believe that closing the deal may not be straightforward. The current higher borrowing costs pose challenges for potential buyer to raise acquisition funds, and the declining appeal of life insurance business due to low birth rates and an aging population adds further complexity to the sale process.