KB Financial Group Acquires 'Prudential Life' for 2.3 Trillion Won... Stock Purchase Agreement Signed

Completion of a Balanced Group Portfolio through Strengthening the Non-Bank Sector
Pursuing Joint Growth by Combining KB Financial Know-How with Prudential Life's Talented Workforce and Sales Channels

[Asia Economy Reporter Kangwook Cho] KB Financial Group announced on the 10th that it held a holding company board meeting and resolved the agenda for 'Stock Purchase Agreement Signing and Subsidiary Incorporation Approval' for the acquisition of Prudential Life Insurance, and signed a stock purchase agreement for Prudential Life Insurance.

Prudential proceeded with a re-bidding process for participants following the main bid on the 19th of last month. During this period, additional data was provided and SPA negotiations were conducted simultaneously, ultimately selecting KB Financial Group as the acquirer.

The acquisition method for Korea Prudential Life Insurance is a Locked-box structure. This transaction method sets the purchase price in advance based on the corporate valuation determined at a specific point in time (Locked Box Date), and does not allow adjustment of the purchase price except in cases of value leakage.

Accordingly, the basic purchase price of the target company as of December 31 last year (KRW 2.265 trillion) plus the agreed interest corresponding to the increase in share value until the transaction closing date (KRW 75 billion) will be paid. KB Financial explained that the final purchase price will be confirmed at a lower amount on the transaction closing date, reflecting leakage such as external outflows until the closing date.

The acquisition price for 100% of Prudential Life Insurance by KB Financial Group is at a PBR of approximately 0.78 times. At the end of last year, KB Financial's BIS ratio was 14.5%, a high level compared to competitors. Having long prepared detailed plans for insurance company acquisitions, KB Financial has maintained a higher BIS ratio than others. Through thorough capital procurement plans such as issuing subordinated bonds in the first quarter and future issuance of hybrid capital securities, KB Financial expects to maintain stable double leverage and BIS ratios after the acquisition.

KB Financial Group has successfully completed large-scale M&As including the acquisition of KB Capital (formerly Woori Financial) in 2014, KB Insurance (formerly LIG Insurance) in 2015, and KB Securities (formerly Hyundai Securities) in 2016. With this acquisition of Prudential Life Insurance, the group completes a balanced portfolio encompassing both banking and non-banking sectors.

KB Financial continuously examined various insurance company assets to strengthen life insurance and non-banking portfolios within the group, including those expected to be listed on the market. As a result, they confirmed that Prudential Life Insurance, an 'excellent asset' with the industry's highest solvency ratio (RBC 425% as of December 2019), stable profit-generating ability, and top-level outstanding planners, has intrinsic value at the highest domestic level and possesses more stable life insurance capabilities compared to others despite the recent deteriorated market environment.

When calculating corporate value, not only the M&A Deal Team experienced in acquiring non-life insurance and securities companies but also experts from KB Life, KB Insurance, and external actuarial advisory firms collaborated to carefully calculate conservatively considering recent market environment changes. Furthermore, the insights of outside directors composed of experts in management, accounting, legal, and compliance fields formed the foundation for the final acquisition decision.

Yoon Jong-kyu, Chairman of KB Financial, emphasized at the shareholders' meeting held last month, "In Europe and Japan, which experienced low interest rates before us, the price-to-book ratio (PBR) of the insurance industry is higher than that of the banking industry," adding, "Those who have an umbrella when it rains can enjoy the atmosphere of the rain, and the more difficult the environment, the more opportunities there are if you have a good company with good constitution and strength."

KB Financial plans to form a working-level council including employees from KB Financial and Prudential Life Insurance to select and steadily promote key tasks such as post-acquisition organizational stability, synergy enhancement measures, and IT development.

Additionally, KB Financial intends to avoid artificial restructuring after acquiring Prudential Life Insurance, respect the capabilities of the company, employees, and LPs (Life Planners) who have secured excellent competitiveness within the life insurance industry, and promote mutual development by sharing KB Financial’s accumulated financial know-how.

Prudential Life Insurance has about 600 employees and approximately 2,000 exclusive insurance planners, possessing excellent staff and sales channels. By becoming part of the KB Financial Group family, it will be able to provide high-quality insurance services to many customers who transact with KB Financial. KB Financial plans to maximize these advantages and strengthen synergies centered on the group’s WM outbound channels to provide comprehensive financial services.

A KB Financial official said, "With the phased introduction of K-ICS (New Solvency Regime) in Korea starting in 2023, life insurers with excellent capital adequacy are likely to see an increase in corporate value compared to now," adding, "Through the chemical combination of Prudential Life Insurance, which has the best capital adequacy and excellent personnel in Korea, and KB Financial, we will become a reliable umbrella for over 35 million customers."

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