이 기사는 2019년 12월 04일 08:00 thebell 에 표출된 기사입니다.

The sale of Prudential Life Insurance Company of Korea, U.S.-based Prudential Financial’s Korean unit, draws attention, but it appears to be hard to hope for higher valuation amid falling life insurers' stock prices.

According to mergers and acquisitions (M&A) industry sources on November 29, U.S.-based 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.

After Shinhan Financial Group’s takeover of Orange Life Insurance (formerly known as ING Life Insurance) last year, market has paid attention to a price tag of foreign life insurers that are up for sale. Orange Life Insurance was reportedly sold at price to book value ratio (PBR) of around 1.1. PCA Life Insurance, which was acquired by Mirae Asset Life Insurance a year before, was sold at PBR of around 0.5.

It is said the sell-side of Prudential Life Insurance Company of Korea wants PBR of around one. Still, market watchers are broadly pessimistic about this level amid falling stock prices of life insurance companies.

Shares of Orange Life Insurance surged to around 60 thousand won early last year, before they retreated to 20 thousand won level. Its PBR is at around 0.63. Shares of Samsung life Insurance, one of the major insurers in the country, traded around 100 thousand won early last year, but recently they have traded between a range of 60 thousand to 70 thousand won with a PBR of 0.46. Shares of Hanwha Life Insurance, Mirae Asset Life Insurance and Tongyang Life Insurance are also trending downward. PBR of the three life insurer are at 0.17, 0.33 and 0.28, respectively. The PBR gap between the sell-side of Prudential Life Insurance Company of Korea and its peer group is quite wide.

“Life insurance companies’ profitability is weighed down as they have to pay high yields on policies that were already sold amid low interest rates, and dividend payment is limited for financial soundness. Shares of life insurance companies are expected to continue to see weakness in the future while PBR are likely to remain at current levels,” said a life insurance industry analyst.

“Current PBR of life insurance companies are a bit undervalued. The figure varies from company to company, but even the most favored stock’s PBR looks hard to exceed 0.7,” said a second analyst.

Some market watchers say the potential buyers may lead the Prudential Life Insurance Company of Korea deal because there are no reasonable grounds for such high valuations. M&A industry watchers say the power may be naturally tilted towards potential buyers.

“Based on recent stock movement of life insurance companies and the limited growth potential, buyer’s bargaining power may be in a superior position in the Prudential Life Insurance Company of Korea deal. Of course there are possibilities that the deal can unfold differently. However, while several life insurance companies are already put up for sale, low awareness of the company in the domestic market may place a burden on the seller,” said an M&A industry source.

(By reporters Kim Byung-yoon and Kim Hye-ran)