이 기사는 2019년 12월 12일 08시00분 thebell에 표출된 기사입니다

Market is paying attention to the value of Prudential Life Insurance Company of Korea which has been put up for sale by its parent company Prudential Financial, with detailed information on the life insurer being expected to be provided in the near future.

U.S.-based Prudential Financial and its lead manager Goldman Sachs finished writing information memorandum (IM) on the Korean unit and are planning to send out IM soon to potential buyers who have signed non-disclosure agreement (NDA), according to industry sources on December 6. Although the timetable for the bidding process remains unclear, the investment banking (IB) industry expects a preliminary bidding to take place next month and a formal process of sealed bid to pick up steam early next year.

Amid the lack of trillion-won-size deals, the domestic M&A market is welcoming the big-ticket deal. Key players in the advisory space are also working hard behind the scenes to lobby potential buyers of the company.

Market is focusing on Prudential Life Insurance’s business portfolio, which is biased towards guarantee-type and variable-type insurance products. This differentiates Prudential Life Insurance from other life insurers, which suffered negative spread, raising concerns about reverse margin.

As of the end of last year, Prudential Life Insurance recorded a premium income of around 2.1 trillion won, of which guarantee-type insurance comprised 56 percent, followed by variable-type insurance (33.5 percent). Savings-type insurance comprised 10.6 percent of the total.

“Prudential Life Insurance’s growth has been led by variable-type insurance plans, which doesn’t offer a guaranteed rate of interest,” said an IB industry source, adding “The situation for KDB Life Insurance, which also is up for sale now, is different that the insurer sold products that used to promise relatively high returns, which raised concerns over reverse margin.”

Accordingly, Prudential Life Insurance’s value is drawing attention despite its market share of only 3.7 percent in the variable-type insurance market. The fact that the variable-type insurance market is gaining ground could also be a plus from an investment perspective.

“Prudential Life Insurance has solid capital adequacy and potential buyers will take this as a plus that there won’t be a lot of issues after the introduction of the new global accounting standards (IFRS 17),” said a second IB industry source, adding “The firm is expected to get attention among life insurers thanks to its differentiated business portfolio, compared to that of Samsung, Hanwha and Kyobo Life Insurance.”

The U.S.-based insurance giant established the Korean subsidiary in 1989, which it fully owns through Prudential International Insurance Holdings. Prudential Life Insurance is the 11th largest insurer in South Korea, with 19.51 trillion won in total assets as of the end of March. The life insurer’s guarantee-type insurance has a market share of three percent. As the life insurer has invested mainly in safe haven assets like cash and public bonds (87.6%), potential buyers who prefer conservative asset management are expected to show interests in the company.

(By reporter Rho Arrum)