Will the Insurance M&A Market Unfreeze? Rising Expectations for the Second Half of 2024

Recent developments suggest that the insurance mergers and acquisitions (M&A) market may be regaining momentum in the second half of 2024

Recent developments suggest that the insurance mergers and acquisitions (M&A) market may be regaining momentum in the second half of 2024. The combination of insurance companies' earnings surprises and financial holding companies' push to expand their non-bank portfolios is raising hopes that the current inventory of unsold assets could be resolved. This article explores the current state and future outlook of the insurance M&A market.

The insurance M&A market is starting to attract attention again. After a prolonged period of stagnation, there are indications that activity might pick up in the latter half of the year. Currently, six insurance companies are up for sale: ABL Life, Cardif Life, KDB Life, MG Non-Life, Dongyang Life, and Lotte Non-Life. The main reasons for the prolonged sale delays have been concerns about financial instability and the perceived overvaluation of these companies.

MG Non-Life Insurance’s fourth attempt at sale has failed, and Lotte Non-Life and KDB Life are still seeking new owners. KDB Life is considering a shift from sale to subsidiary integration, while MG Non-Life is planning to pursue a private contract sale. If this fails as well, the financial authorities might decide to liquidate MG Non-Life, which could negatively impact policyholders.

On a more optimistic note, Dongyang Life and ABL Life are seen as having higher chances of being acquired. Woori Financial Group is in negotiations with its major shareholder, the Chinese multinational insurer, for a package deal to acquire these two insurers. The estimated acquisition cost is between 2 trillion and 2.5 trillion won. However, any regulatory sanctions against Woori Financial by the financial supervisory authorities could disrupt the acquisition process.

Despite these challenges, the M&A market for insurance companies may start to show signs of life again in the second half of the year. Financial holding companies, with their strong financial backing and a need to reduce reliance on traditional banking while expanding into non-bank sectors, are closely watching the sector. Recent strong earnings performances by insurance companies have further intensified their interest. 

Notably, major non-life insurers such as Samsung Fire & Marine, DB Insurance, Meritz Fire & Marine, Hyundai Marine & Fire, and KB Insurance have reported a 22% increase in net profit for the first half of the year. Similarly, the big three life insurers—Samsung Life, Kyobo Life, and Hanwha Life—have also seen improved earnings. 

An industry insider comments, "Financial holding companies will need to strengthen their insurance divisions in the long term, so it is likely that the insurance M&A market will become more active after this year and into next year."

The insurance M&A market is showing signs of potential recovery. With financial holding companies focusing on expanding their non-bank portfolios and improved earnings reports from insurance firms, there is growing optimism that the current backlog of unsold assets could be addressed. Keeping a close watch on future market developments will be crucial.