Latest news with #K-ICS
Korea Herald
26-05-2025
- Business
- Korea Herald
Moody's lifts Hanwha Life to A1
Hanwha Life Insurance has been upgraded by global credit ratings agency Moody's, which cited the South Korean insurer's solid brand strength, strategic distribution network and improved profitability. The rating was raised to A1 from A2 with a stable outlook, the Seoul-based company said Monday. 'Hanwha Life is generating high contractual service margins through increased sales of guarantee products, backed by its strong brand franchise and sales capability,' Moody's said. The agency also noted the company's shift toward higher-margin products via its general agency arm, Hanwha Life Financial Service. The insurer's capital strength and sound asset-liability management were also key factors in the upgrade. Moody's said it expects Hanwha Life to maintain a stable K-ICS risk-based capital ratio, even amid interest rate volatility, by minimizing its duration gap through stable new business inflows and increased investment in long-term bonds. The move follows a similar upgrade by Fitch Ratings earlier this month, which raised Hanwha Life's rating to A+ from A, also with a stable outlook, further bolstering the global credibility of Korea's second-largest life insurer. 'Recognition from two of the world's top three credit rating agencies affirms Hanwha Life's competitiveness in global markets,' a company official said. 'We will continue to build trust with customers and investors as a leading Korean insurer.'
Korea Herald
09-05-2025
- Business
- Korea Herald
PEF-backed Lotte Insurance faces regulatory heat over bond redemption
Lotte Insurance, backed by private equity firm JKL Partners, is under intensified regulatory scrutiny after South Korea's financial watchdog blocked its attempt to redeem 90 billion won ($64.2 million) in subordinated bonds ahead of maturity. Financial Supervisory Service Governor Lee Bok-hyun on Thursday issued a sharp rebuke, saying he was 'gravely concerned' about the company's push to exercise the call option despite falling short of financial stability requirements. 'The company's K-ICS risk-based capital ratio has deteriorated and does not meet the conditions for early redemption,' Lee said during a financial stability meeting. 'We will take necessary actions in strict compliance with regulations.' The warning followed Lotte Insurance's formal statement earlier that day confirming it had triggered the call option and initiated the redemption process. 'We have secured sufficient funds for redemption and formally exercised the call option on Thursday,' the company said, adding that the move was aimed at protecting investors and maintaining capital market stability. That stance puts the insurer at odds with regulators, who have repeatedly blocked its efforts to issue new subordinated debt and proceed with the early redemption, citing inadequate solvency. Capital concerns stall payout attempt Under Korean insurance regulations, companies must maintain a post-redemption K-ICS ratio above 150 percent to qualify for a call. Lotte Insurance's ratio stood at 155 percent at the end of 2024, but is expected to fall below the threshold if the bonds are redeemed. In February, Lotte Insurance sought to issue 100 billion won in subordinated bonds, completing investor demand forecasting and book-building. The offering was pulled after the FSS intervened. The stalemate has left Lotte Insurance cornered, under pressure from bondholders seeking redemption. The 90 billion won in subordinated bonds, issued in May 2020 with a 10-year maturity, are typically redeemed after five years with investor consent and regulatory approval. The redemption process is overseen by the Korea Securities Depository and requires FSS approval. A company official denied the move was meant to defy regulators, characterizing it as an effort to uphold investor trust. 'At this point, we have no other choice. The call date was triggered on Thursday, and from that moment, significant interest begins to accrue. The risk of not repaying is too great,' the official told The Korea Herald, adding that the firm is in talks with regulators to find a solution. The FSS is pressing Lotte Insurance to shore up its capital base before proceeding. Insurers with a K-ICS ratio below 150 percent may still redeem debt early, but only by improving solvency through methods such as recapitalization or refinancing. Yet, those options appear limited for Lotte Insurance. Raising capital takes time, and more critically, JKL — as a financial investor — has limited appetite to inject fresh funds. The dispute also complicates JKL's exit strategy. The Seoul-based firm acquired a 53 percent stake in Lotte Insurance from Lotte Group for 370 billion won in 2019, followed by a 360 billion won capital infusion, boosting its holding to 77 percent. JKL has been actively pursuing a sale. After a failed deal with Woori Financial Group, it switched to a rolling sale structure in July 2024, leaving the company open for acquisition without a deadline or preferred bidder. Valuation remains a major hurdle. JKL is reportedly seeking 2 trillion won, but market expectations hover closer to 1 trillion won or lower, reflecting the insurer's weak fundamentals. Lotte Insurance's K-ICS ratio is among the industry's lowest and turns negative when measured against common equity. The only other Korean insurer with negative capital adequacy is MG Non-Life Insurance, now facing insolvency after repeated failed sale attempts. While the industry expects Lotte Insurance will likely push ahead with the call option, the regulatory standoff is likely to complicate fundraising for other insurers and dampen activity in Korea's M&A market. Observers say the scrutiny has intensified because the firm is PE-owned — a structure often criticized for prioritizing short-term exits over long-term stability. The controversy also comes amid public backlash over MBK Partners' troubled stewardship of Homeplus, which entered court-led rehabilitation after a ratings collapse under MBK's watch. The FSS has signaled it will examine whether Lotte Insurance's ownership structure played a role in its decision-making. 'Unlike other insurers, Lotte Insurance's majority shareholder is a financial investor whose focus is on maximizing short-term returns rather than ensuring long-term stability,' said FSS Senior Deputy Governor Lee Se-hoon. 'Given the recent controversy surrounding MBK, the broader issue of private equity ownership will also be part of our review.'
Korea Herald
01-05-2025
- Automotive
- Korea Herald
Korea's first digital insurer Carrot absorbed into parent after losses
Carrot's quiet exit underscores hard limits of online insurance in market still anchored in face-to-face sales Carrot General Insurance, once hailed as South Korea's pioneering digital insurer, is set to be folded into its parent company Hanwha General Insurance, marking a bitter close to its seven-year foray into digital-first insurance. Hanwha General announced Tuesday it had acquired 25.86 million shares in Carrot for 205.6 billion won ($144.43 million), boosting its ownership to 98.3 percent. The deal included the purchase of stakes from key investors such as Tmap Mobility, Stic Investments, Altos Ventures, Affirma Capital and Hyundai Motor Company. The acquisition is widely seen as a precursor to a full merger between the two insurers. In early April, Hanwha General stated it was considering various options for Carrot, excluding a sale. The company is expected to finalize its decision at an upcoming board meeting, with an announcement slated for May. Some of Carrot's investors are believed to have exited after incurring losses. Each investor reportedly sold their shares to Hanwha General at different prices, with the average deal valuing Carrot stock at around 8,000 won per share. That includes Affirma Capital, which invested in 2022 when shares were valued at roughly 15,000 won. Hanwha General itself is also believed to have taken a hit, considering the scale of its cumulative capital injections into Carrot over the years. Carrot was launched by Hanwha General Insurance in May 2019 as Korea's first internet-only general insurer. It gained attention with its signature pay-per-mile auto insurance, which calculates premiums based on actual driving distance — offering a sharp contrast with conventional plans that require full annual payments regardless of usage. Despite early expectations for innovation, Carrot failed to turn a profit, posting net losses for six consecutive years. Its annual loss peaked at 84 billion won in 2022, before narrowing slightly to 66.2 billion won last year. The accumulated loss is estimated to be around 330 billion won. Financial soundness also eroded, with its K-ICS capital adequacy ratio plunging from 656 percent in 2022 to 156 percent last year — barely above the 150 percent threshold recommended by local regulators. Industry watchers say Carrot failed to break through in the broader insurance market, limited by its digital-only model. The local insurance sector remains dominated by traditional firms that rely heavily on in-person sales, while digital products like auto insurance — Carrot's core offering — are typically short-term, low-premium products with thin margins. "Long-term guarantee products, key profit drivers for insurers, remain difficult for consumers to navigate online," said an official from another local insurance company. "The asymmetry in information, combined with complex terms and coverage, makes it hard for the average person to grasp without an agent's guidance. As a result, those seeking such products still turn to traditional channels over digital-only insurers.' A 2024 report from the Korea Insurance Research Institute highlighted the gap, revealing that just 0.6 percent of life insurance and 6.2 percent of general insurance products were purchased online. Carrot's merger may sound an alarm to other digital insurers here, most of which survive on repeated capital injections from parent firms as losses pile up. All five players — Carrot, Kyobo Life Planet, Shinhan EZ General Insurance, Kakao Pay Insurance and Hana General Insurance — posted net losses last year, totaling 188.6 billion won. However, the industry official cautioned against framing Carrot's merger as a complete failure. 'Digital innovation in finance is a long-term endeavor, one that companies expect to take at least a decade,' the official said. 'Even with its limitations, Carrot carved out a unique strategy that could ultimately support Hanwha's digital ambitions following the merger.' While sluggish demand from younger generations — the core target for digital insurers — has slowed progress, the official noted that momentum is building. 'Demand is rising, gradually but steadily. Digital adoption is already widespread in short-term insurance, and as technology and infrastructure evolve, digital channels will increasingly support long-term insurance products.'
