Woori Financial Group (Woori FG) has signed a stock purchase agreement to acquire Tongyang Life Insurance and ABL Life Insurance for a total sum of KRW1.55tn ($1.15bn).
Woori FG will acquire a 75.34% stake in Tongyang Life for KRW1.28tn and a 100% stake in ABL Life for KRW265.4bn.
The acquisitions, however, are subject to regulatory approval and may face obstacles from recent issues at the bank, says CreditSights, a unit of Fitch Group.
The two insurers are currently owned by China’s Dajia Insurance, which was known as Anbang Insurance before its name change and takeover by the Chinese authorities. Tongyang Life Insurance is the sixth-largest life insurer by premiums among 22 life insurers in Korea, while ABL Life ranked ninth.
Woori FG has accelerated its expansion in the non-bank sector this year to become a more comprehensive financial group like its main peers. It re-launched a securities entity in early August by acquiring Korea Foss Securities and merging it with Woori Investment. With this life insurance acquisition deal in progress, its business will cover banking, credit card, AM, securities, trust, and insurance, comparable to Shinhan, KB and Hana FGs (although Hana's insurance arms are small in scale).
Improper loans
Woori Bank was found by the Financial Supervisory Service (FSS) to have provided loans of KRW61.6bn to relatives of its former Woori Financial Group Chairman Sohn Tae-seung from April 2020 to January of this year. The FSS alleges that KRW35bn out of the KRW61.6bn loans were improperly granted, without following standard guidelines and procedures. The bank later confirmed that KRW19.8bn of these loans have either been overdue or classified as NPLs, which could cost the bank KRW8.2-15.8bn in losses. The bank has imposed strict penalties against employees and executives involved following an internal investigation and reported them to law enforcement authorities.
This is not the only loan scandal that the bank is involved with this year. Earlier in June, the FSS on-site investigation also found that a bank employee had forged loan application documents to embezzle funds worth about KRW10bn for cryptocurrencies and overseas futures investments.
It is unclear at present whether these issues will impact its insurer acquisitions. According to the Act on Corporate Governance of Financial Companies, a financial company seeking to become the largest shareholder of another financial company must not have received an institutional warning in the past year or higher sanctions than an order for corrective action or suspension of business in the past three years. Woori Bank was issued a warning by FSS and had a penalty of KRW878m imposed on it in 2022 after an employee was found to have embezzled KRW70bn.