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| Kyobo Life Insurance Chairman Shin Chang-jae / Courtesy of Kyobo Life |
By Park Hyong-ki
Kyobo Life Insurance has decided to launch an initial public offering (IPO), the company said Tuesday, possibly in the second half of 2019.
The company held a board meeting and reached an agreement that a public stock offering was the "best option" to increase its capital base ahead of the implementation of IFRS17, a new, stronger international accounting standard.
In line with IFRS17 scheduled to take effect in 2022, the country's regulator will enforce its local version of the regulations called the K-Insurance Capital Standard (K-ICS) under which life insurers will need to increase their capital.
This is because IFRS17 and K-ICS, when implemented, will measure their liabilities stemming from the sales of insurance contracts by market value, not book value. This means companies need to have enough money to meet rising obligations for those contracts.
"The board decided to launch an IPO to prepare for the K-ICS standard and further grow in the digital age," a spokesman said.
If it goes public as planned, Kyobo will become a listed insurer 60 years after its foundation.
The company noted its reserves, measured by risk-based capital (RBC) ratio, stood at 292 percent as of September. The regulator requires insurers to keep their ratio at above 100 percent and 150 percent.
Every year, the firm has retained earnings of more than 500 billion won ($450 million) on average.
In July, it raised $500 million via issues of hybrid bonds overseas, it added.
The IPO plan is also to enable its financial investors to "exit" their investment in the company, according to Kyobo.
The company was supposed to go public by 2015 as promised to those investors, which include Affinity Equity Partners and IMM Private Equity.
In 2012, they acquired a 24 percent stake in Kyobo owned by Daewoo International on condition that the insurer went public by 2015. Or, they would exercise their options to sell their shares to Kyobo Life Insurance Chairman Shin Chang-jae.
Shin is the biggest shareholder with a 33.78 percent stake.
The company managed to postpone the IPO for three years, convincing the investors that the stock market was "too weak and volatile."
However, the investors couldn't wait any longer for their exits ― either Kyobo would go public or Shin would have to pay them more than 1 trillion won for their shares.
Kyobo then pushed for the IPO, given the high private exit cost, and there were no other investors in sight to take over the 24 percent stake.
In August, the company retained Credit Suisse and NH Investment & Securities as its IPO underwriters.
Analysts say the stock market outlook is not bright, but Kyobo will be able to attract investors, given its size.
"Given stronger accounting rules and market projections, investors will feel a burden to invest in any insurers," said Kim Jung-won, an analyst at HMC Investment Securities.
"However, since Kyobo is one of the top three with economies of scale, it will manage its IPO and attract investors."
With assets worth 108 trillion won, Kyobo is the third-largest life insurer after KOSPI-listed Samsung Life and Hanwha Life.
