South Korean insurer Kyobo Life Insurance assured its investors that it is committed in holding an initial public offering (IPO), which it has been putting off for three years.
According to a report by Pulse News, the insurer once again dangled the promise of an IPO to its investors, in order to prevent them from exercising options that could cost the market’s third-largest player close to KRW1 trillion won (US$886 million). Such a loss would be hugely detrimental to the insurer, which, along with other players, is scrambling to bolster its capital base to meet new accounting rules in 2022.
The insurer received investments from various entities both in Korea and overseas in 2012, under the condition that it went public by September 2015. Affinity Equity Partners owns 9.05%, Ontario Teachers’ Pension Plan 7.62%, SC Private Equity 5.33%, IMM Private Equity 5.23%, Baring Private Equity Asia 5.23%, and Government of Singapore Investment Corp. (GIC) 4.50%.
Four of the six mentioned investors have said that they would exercise their option and sell their shares in the insurer. The fifth, SC Private Equity, is also considering joining them. The five investors’ holdings combined represent 29.34% of Kyobo Life. If Ontario Teachers’ Pension Plan decides to join, this would bump up the total holdings to 36.96%.
If no-one buys the shares, Kyobo will be forced to reimburse the investors an estimated KRW1 trillion. This will hurt the company’s efforts to comply with the incoming IFRS 17 standard. It still needs to raise between KRW2 trillion to KRW5 trillion in capital to meet the requirements.
However, the report said that holding an IPO will be tough due to poor sentiment in the domestic stock market and a bleak outlook for the insurance industry due to weakening local demand. Orange Life, formerly known as ING Life Insurance Korea, recently cancelled its IPO due to weak investor demand.