Kyobo Life Steps Up to Improve Governance... Blocking Risks Under the Financial Group Supervision Act

Acquisition of 67% Stake in Subsidiary KCA Service
Improvement in Voting Rights Issues of Non-Financial Affiliates

Kyobo Lifeplanet Followed by Kyobo Securities Capital Increase
Move to Quell M&A Rumors

[Asia Economy Reporter Oh Hyung-gil] Kyobo Life Insurance is undergoing a restructuring of its governance by consecutively participating in capital increases of its affiliates and acquiring shares of its subsidiary companies. This is interpreted as an effort to preemptively address risk factors ahead of the enforcement of the "Financial Group Supervision Act" in the second half of the year.

According to the insurance industry on the 22nd, Kyobo Life Insurance decided at the board meeting held on the 16th to acquire 400,000 shares (66.67%) of KCA Service for 10.5 billion KRW. The acquisition is expected to proceed around next month after the Financial Services Commission approves the subsidiary ownership notification.

Established in 2016, KCA Service operates a call center and provides telemarketing services. It is a 100% subsidiary of KCA Claims Service (formerly Kyobo Insurance Review), which is a wholly owned subsidiary of Kyobo Life Insurance. The company stated that this share acquisition aims to improve governance. It is a measure to address issues related to illegal exercise of voting rights in non-financial affiliates of insurance (financial) companies.

At the end of last year, Kyobo Life Insurance received a warning from the Fair Trade Commission due to the exercise of voting rights by KCA Claims Service over KCA Service. It was confirmed that KCA Claims Service exercised voting rights seven times at the general meetings of KCA Service, a non-financial affiliate, which is prohibited under the Fair Trade Act.

Under the current voting rights restriction system for financial insurance companies, financial insurance companies belonging to large business groups are prohibited from exercising voting rights over shares of affiliates. However, exceptions are made for cases related to insurance business operations. It is analyzed that if Kyobo Life Insurance exercises voting rights directly over KCA Claims Service, it may receive an exception.

A Kyobo Life Insurance official explained, "At the time of establishing KCA Service as a subsidiary of KCA Claims Service, it was not a mutual investment-restricted business group," adding, "With the recent incorporation as a subsidiary, governance has improved and it now aligns with the Fair Trade Commission's policies."

Additionally, Kyobo Life Insurance is currently promoting a capital increase for Kyobo Securities following Kyobo Lifeplanet Life Insurance in April. On the 16th, Kyobo Securities decided on a third-party allotment capital increase worth 200 billion KRW. Kyobo Life Insurance will be allocated approximately 28.65 million common shares at 6,980 KRW per share, increasing its stake from the previous 51.63% to 73.06%.

The industry interprets this capital injection as an effort to quell rumors related to mergers and acquisitions (M&A). For several years, there have been rumors in the M&A market that Kyobo Life Insurance would sell Kyobo Securities to a financial holding company to raise capital.

Kyobo Life Insurance also completed a capital increase of 100 billion KRW for the internet life insurance company Kyobo Lifeplanet last month. This is the seventh capital increase since Lifeplanet's launch in 2013. In July last year, Kyobo Life Insurance purchased a 50% stake held by Samsung Life Insurance in Kyobo Asset Trust (formerly Life Insurance Real Estate Trust) for 110 billion KRW to make it a wholly owned subsidiary.

Meanwhile, with the enforcement of the Financial Group Supervision Act, Kyobo Life Insurance's role in managing its subsidiaries is expected to grow further. Financial groups with financial assets exceeding 5 trillion KRW must establish internal control councils and risk management councils at the representative company level and build internal control and risk management systems.

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