US insurer MetLife mulls exit from Korea
MetLife is plotting a possible exit from the “unattractive” South Korean market, with the company checking its worth in recent years amid an exodus of foreign insurers in the country, a source said.
The recent sale of MetLife Hong Kong also raised suspicions that the U.S. insurer could be pulling out of developed markets in Asia.
Regarding the possibility of its Korean business dropping, an industry source said, “MetLife has been checking how much the firm is worth over the years, but this does not indicate the company is pulling out.”
The source said the sale of MetLife’s Hong Kong unit was based on its position in the market, which has become unattractive due to the dominance of other foreign life insurers there.
Following reports of U.S. insurance group Cigna’s sale of Lina Korea citing sources at investment banks, concerns are that some foreign life insurers active here may follow suit. Though Lina Korea denied the report, there are sufficient grounds for foreign insurers to be considering an exit from Korea. Korea has entered a period of low interest rates, and also faces the introduction of IFRS 17, a new set of accounting rules requiring insurers to secure a greater amount of capital to keep up with financial health standards.
MetLife Korea was established in 1989 and is a mid-tier player in the local market. The source said,
“MetLife Korea did not focus on fixed interest rate policies. U.S. MetLife has been rigorous in risk management in terms of policies.”
Another industry official said, “It appears that foreign entities have determined that now is a time when they can sell their units here at satisfactory prices.”
The U.S. financial group sold Prudential Life Insurance Company of Korea for 2.3 trillion won in April.
Prudential ranked 11th in total assets and its net profit stood at 140 billion won last year. It led the industry in financial soundness, with a risk-based capital ratio of 425 percent as of last December, according to officials and sources. But Prudential held a bulk of high fixed interest rate policies, which posed a huge burden amid low interest rates as well as the planned introduction of IFRS 17 in 2023.
The report on Lina was a surprise to many given its steady solid performance over the years. Plus, the firm has remained relatively unaffected by the low interest rates as it does not focus on savings policies.
However, the key rationale foreign insurers need to consider is whether or not there will be local entities willing to purchase the firms when they are put up for sale. Prudential was taken over by KB Financial Group, which had been seeking to strengthen its life insurance unit. Woori Financial Group, which does not have an insurer in its portfolio, has been mentioned by industry sources as a likely buyer in the event Lina is put up for sale.
MetLife Korea’s headquarters in southern Seoul