[비즈한국] Korea Investment Holdings (KIH) is pursuing a merger and acquisition (M&A) of an insurance company. Within the financial sector, there are rumors that the group has already conducted due diligence to acquire Lotte Insurance000400. However, it is uncertain whether this will lead to an actual deal due to the high asking price. Some evaluate that among the insurance companies currently on the M&A market, Lotte Insurance is the only one with any real appeal. If KIH does not acquire Lotte Insurance, any future insurance company acquisition may become indefinite.
Chairman Kim Nam-goo of Korea Investment Holdings has shown interest in acquiring an insurance company since the beginning of this year. After the general shareholders' meeting in March, Chairman Kim stated, "We are carefully reviewing various alternatives to acquire an insurance company." In the financial sector, rumors have recently circulated that the group is pushing for the acquisition of Lotte Insurance. A representative from Korea Investment Holdings said, "It is difficult to comment on specific details regarding potential deals."
If KIH acquires an insurance company, it could lead to the diversification of its business portfolio. Most of the group's revenue is currently generated by Korea Investment & Securities. In the first half of this year, Korea Investment & Securities recorded a net profit of 536.2 billion won. In contrast, Korea Investment Capital's net profit was 14.4 billion won, and Korea Investment Savings Bank recorded a net loss of 8.3 billion won.
Seol Yong-jin, a researcher at SK Securities, evaluated Korea Investment Holdings' second-quarter performance, stating, "Excluding the valuation gains and losses from Toss Bank, Korea Investment Capital recorded a performance level similar to the first quarter, while companies like Korea Investment Savings Bank and Korea Investment Real Estate Trust continued to show sluggish performance due to the impact of provisions." He added, "The profit structure centered on Korea Investment & Securities, which is recording solid profits based on a favorable industry climate and capital strength, is expected to continue."
Lotte Insurance recorded a net profit of 47.5 billion won in the first half of this year. If KIH acquires Lotte Insurance, it could become the group's next largest affiliate after Korea Investment & Securities in terms of net profit. The key is the selling price. The largest shareholder of Lotte Insurance is JKL Partners, which holds a 77.04% stake. JKL Partners acquired about a 53% stake in Lotte Insurance for 373.4 billion won in 2019, and subsequently invested an additional 356.2 billion won through capital increases. Therefore, the total amount JKL Partners invested in Lotte Insurance is around 730 billion won.
As of the closing price on September 26, Lotte Insurance's stock price was 1,985 won. Based on this, the value of the stake held by JKL Partners is 474.5 billion won. Even considering a management premium, it is difficult for JKL Partners to recoup its investment at the current market price.
It is known that JKL Partners' desired selling price for Lotte Insurance is in the range of 2 trillion to 3 trillion won. For KIH, a multi-trillion won price tag might be burdensome considering Lotte Insurance's current market capitalization. Furthermore, Lotte Insurance is not delivering overwhelming performance. The insurer’s net profit shows a downward trend: 81.3 billion won in the first half of 2023, 66.3 billion won in the first half of 2024, and 47.5 billion won in the first half of 2025.
The problem is that if KIH does not acquire Lotte Insurance, the prospect of acquiring any insurance company becomes indefinite. Potential targets aside from Lotte Insurance include Yebyeol Insurance (formerly MG Insurance), KDB Life Insurance, and BNP Paribas Cardif Life Insurance. However, Yebyeol Insurance has been designated as an insolvent financial institution, and KDB Life Insurance is in a state of complete capital impairment, with a total capital of negative (-) 124.2 billion won as of the end of June, making it less attractive. BNP Paribas Cardif Life Insurance has also been recording losses for years.
It is not the case that KIH absolutely must acquire an insurance company. However, the financial sector evaluates this as a prime time for the group to engage in M&A. A financial industry official remarked, "Securities firms are sensitive to external factors, so their earnings volatility is high every year. To maintain stable performance at the group level, business diversification is necessary, and since Korea Investment & Securities is performing well, the mood is good, making this the right time."
There are ways to diversify the business by acquiring other financial companies instead of an insurer. However, the atmosphere at KIH is heavily focused on insurance. A spokesperson for the group stated, "We already have savings banks and capital affiliates, and credit card companies are a bit removed from our existing business. Banking and insurance can generate various synergies, such as cross-selling; while we have some presence in banking through KakaoBank, we lack that in insurance, which is why we are pursuing an acquisition."
Korea Investment & Securities had a record-breaking performance in the first half of this year, and the atmosphere is positive. The group's willingness to acquire an insurer and its capital strength are sufficient. However, concerns are emerging that acquiring Lotte Insurance—which is experiencing a decline in performance—at an unreasonable price could lead to a "winner's curse." The financial industry is watching closely to see if Chairman Kim Nam-goo will push forward with the acquisition despite these concerns.