US in­surer MetLife mulls exit from Korea

The Korea Times - - FINANCE - By Kim Bo-eun bkim@ko­re­

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.

Cap­tured from web­site

MetLife Korea’s head­quar­ters in south­ern Seoul

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