US-based Prudential Financial Inc. is putting its Korean life insurance operations up for sale as several foreign insurance companies are planning to leave the South Korean market due to its slow growth and poor profitability.
Prudential Financial has tapped Goldman Sachs as lead underwriter of the sale of its Korean unit, which it fully owns through Prudential International Insurance Holdings, according to a report by Reuters.
The sale could fetch about 2 trillion won ($1.7bn) and is expected to win the attention of major financial groups in Korea due to the financial soundness of Prudential Life Insurance. Two major financial groups - KB Financial Group and Woori Financial Group - are considered potential bidders of Prudential Life Insurance, according to sources.
Prudential Life Insurance is the 11th largest insurer in the South Korean market, with KRW20.19 trillion ($17.1bn) in total assets as of mid-year. Furthermore, it placed fifth in terms of accumulated net profit, with KRW105 billion ($89m) in the first six months of the year.
KB Financial Group has expressed strong will to strengthen its life insurance business. Woori Financial Group has also expressed interest in acquiring an insurance company under a mid- to long-term project.
Multiple foreign insurance companies are planning to leave the South Korean market as poor profitability predicted to continue. South Korean life insurers booked a 24.3% on-year drop in their combined profit in the first nine months of this year due to mounting operating losses from waning insurance demand.
The net profit of the country's life insurance firms totaled 3.06 trillion won ($2.58bn) in the January-September period, down from 4.04 trillion won a year earlier, according to the Financial Supervisory Service (FSS) on Monday.
Likewise, foreign life insurers' net profit showed a year-on-year decline of 16.3 percent with a slow economic growth, an extremely low fertility rate and a low interest rate leading to a rapid decline in insurance profit.
Tongyang Life Insurance and ABL Life Insurance, which are under contract management by the financial authorities of China, are likely to be put on the market and KDB Life Insurance is currently in the process of sale.
The FSS urged life insurers to break out of their insurance premium-focused business model if they wanted to seek growth in an increasingly saturated market.