KDB Life Overcomes Fine Concerns Over '10-Year Private Equity Ownership'... Acquisition Battle Resumes

[Asia Economy Reporter Oh Hyung-gil] The sale process of KDB Life Insurance has gained renewed momentum. This is due to the recent alleviation of concerns over fines imposed on KDB Life Insurance ownership by private equity funds (PEF) by the largest shareholder, KDB Industrial Bank. Although KDB Industrial Bank has decided to accelerate the sale process, the success of the sale is expected to depend on the outcome of the ongoing bidding for Prudential Life Insurance.

According to financial authorities and the insurance industry on the 30th, the Financial Services Commission and KDB recently concluded that PEF ownership of KDB Life Insurance does not violate the Financial Holding Companies Act.

KDB Industrial Bank acquired Kumho Life Insurance (now KDB Life Insurance) together with Kansas Asset Management in 2010 during the restructuring of the Kumho Asiana Group. At that time, a PEF worth 650 billion KRW was created to acquire KDB Life Insurance, and a total of about 850 billion KRW was invested through paid-in capital increases and other means.

Currently, KDB Life Insurance is owned by a special purpose company (SPC), KDB Kansas Value LLC (65.80%), and KDB Kansas Value Private Equity Investment Company (26.93%). KDB Kansas Value is a 100% subsidiary of the PEF KDB Kansas Value Private Equity, and the largest shareholder of KDB Kansas Value Private Equity is KDB Industrial Bank (68.20%).

According to the Financial Holding Companies Act, under the principle of separation between financial capital and industrial capital (financial-industrial separation), PEFs that are not financial holding companies can only hold companies or financial firms for up to 10 years. If KDB Industrial Bank fails to complete the sale by the end of this month, marking 10 years since acquiring KDB Life Insurance, it would have to either convert to a holding company structure or pay fines.

However, the Financial Services Commission interpreted the law and judged that there is no issue in the case of KDB Life Insurance. A Financial Services Commission official explained, "A financial holding company status applies only if total assets exceed 500 billion KRW, but KDB Life Insurance does not meet this requirement, so the law does not apply."

With KDB Industrial Bank relieved of legal risks related to KDB Life Insurance, it is expected to put more effort into the sale process. The Industrial Bank had attempted to sell KDB Life Insurance three times from 2014 to 2016 but failed each time.

The market expects that the success of the sale will depend on the outcome of the bidding for Prudential Life Insurance, where the preferred bidder selection process is underway. Currently, KB Financial Group has emerged as a strong candidate to acquire Prudential Life Insurance, drawing attention to whether other private equity funds and Woori Financial Group will join the bidding.

However, since there remains a significant gap between the price KDB Industrial Bank hopes for and the market price, there is still a possibility that the sale process will be prolonged. An insurance industry official said, "Unless a financial holding company that can make a bold bet participates, the acquisition price is expected to be as low as possible given the deteriorating insurance market conditions," adding, "The key is what position KDB Industrial Bank takes."

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