Insurers` IPOs seen as catalyst for change

Korea`s nearly-saturated life insurance market faces a big change as top-tier companies are lining up for initial public offerings in pursuit of further growth.

IPOs will give the companies access to new funds, whereas they would be put under investor scrutiny for the first time, experts said yesterday.

"The IPO wave is a key development that will have long- and mid-term effects on the domestic insurance sector," Oh Jin-won, an analyst at Shinyoung Securities Co., said.

Korea Life, the second largest life insurer in Korea, is set to debut on the Seoul bourse on March 17, marking the country`s second life insurance IPO following Tong Yang Life last year.

No. 1 ranked Samsung Life is planning an estimated $4 billion float during the first half of the year. Kyobo Life and Mirae Asset Life are expected to follow suit.

"Not only will the insurers get access to fresh funding, but they will have to get accustomed to the shareholder value, raising transparency, efficiency and profitability," said Park Yong-mi, an analyst at Tong Yang Securities Inc.



Shinyoung Securities` Oh noted that in Europe, Canada and elsewhere, IPOs or demutualization took place when the domestic market reached maturity. It often brought about industry-wide consolidation or other major changes in the market landscape, he added.

The stock market listings come as insurers anticipate new demand from the country`s fast-aging consumers, while they have to meet risk-based capital requirements.

The rate of Korean households with life insurance policies stood at 84.5 percent last year, according to the Korea Life Insurance Association. As of 2008, the country was the world`s eighth-largest life insurance market, with a gross premium of $66.4 billion.

Korea`s population is aging rapidly, creating demand for health-care and post-retirement insurance products. Currently, one in 10 Koreans are aged 65 or older but the ratio is expected to reach 14 percent by 2018.

With IPOs, the nation`s big three players - Samsung Life, Korea Life and Kyobo Life- will fight back against smaller and foreign rivals that have eaten away at their market dominance for the past years, said Jang Hyo-sun, analyst at Samsung Securities Co.

"The large-size life insurers, armed with fresh capital, could come out more aggressive in competition to capture the new business opportunities," he said.

(milaya@heraldm.com)



By Lee Sun-young