KDB and DGB Life Unable to Smile Despite Turning a Profit

KDB Life Net Profit 34.4 Billion Last Year
Major Challenge: Sale Process Stalled

DGB Life Net Profit 8.7 Billion
Office Sale, Branch Closures, Voluntary Retirement

[Asia Economy Reporter Oh Hyung-gil] In the life insurance industry, where even large companies are seeing profits decline due to low interest rates and sluggish business conditions, KDB Life Insurance and DGB Life Insurance have succeeded in turning a profit. However, they cannot simply celebrate. Both companies are undergoing either a sale process or intensive restructuring.

According to the insurance industry on the 10th, KDB Life Insurance recorded a provisional net profit of 34.423 billion KRW last year, turning profitable. This represents an increase of as much as 3200% compared to the previous year's net loss of 1 billion KRW.

The company explained that investment gains such as dividend income improved as loans and alternative investments were increased in a limited manner, and that corporate tax income was generated due to deferred tax effects from tax loss carryforwards.

A company official said, "As a result of conducting an appraisal of the Gwangju headquarters, its value increased," adding, "The results reflect efforts to streamline the profit structure and business expenses through restructuring."

Despite the improvement in performance, the atmosphere inside and outside KDB Life Insurance is unsettled. This is because the sale process being promoted by the major shareholder, KDB Industrial Bank, has not progressed and has been indefinitely delayed.

It is reported that two private equity funds participated in the preliminary bidding conducted by the bank in November last year, but subsequent work has come to a complete stop. The industry estimates that this is due to an inability to narrow differences over the sale price. After four failed attempts at selling, KDB Life Insurance’s valuation has plummeted from the 600 billion KRW range to the 400 billion KRW range. However, finding a buyer remains as difficult as catching a star in the sky.

Another issue is legal risk. According to the Financial Holding Company Act, private equity funds (PEFs) that are not financial holding companies can only control financial companies for up to 10 years. KDB Life Insurance was acquired by the PEF KDB Kansas Value Private Equity Fund in March 2010, and this month will exceed the 10-year limit. If the bank does not sell KDB Life Insurance or convert it into a holding company within this month, it will violate the Financial Holding Company Act and face sanctions from financial authorities.

Currently, the bank is conducting a legal review with financial authorities regarding the possibility of violating the Holding Company Act. Since there is no precedent, there is analysis that fines may be postponed or not be significant considering the circumstances that the sale process is ongoing.

An insurance industry official said, "If the burden of fines is eased, the bank is expected to continue efforts to find a buyer," adding, "It will not be easy to sell at a low price immediately, so the process may be prolonged."

DGB Life Insurance, which recorded a net loss of 2.8 billion KRW in 2018, also returned to profitability last year with a net profit of 8.736 billion KRW, an increase of 401.8% compared to the previous year. Investment gains also increased due to the sale of securities.

Last March, a gain from the sale of the Busan headquarters building was added, but this is a painful result of intensive restructuring. DGB Life Insurance sold its Busan headquarters building to Hana Investment Trust last year. It also pushed forward a consolidation process that closed more than 80% of its existing 38 branches. In October, it also carried out voluntary retirement for employees.

This content was produced with the assistance of AI translation services.