Ergo sells Korean online insurer, Aviva and ING put units up for sale


A string of foreign insurers are withdrawing from Korea.

Britain’s second-largest insurer Aviva Group is putting its Korean and Sri Lankan businesses on the auction block, according to Reuters last month. It plans to sell underperforming businesses globally to raise money to protect against its eurozone exposure, the media reported.

Aviva set up a consortium with Woori Financial Holdings in 2008 to buy LIG Insurance and established Woori Aviva Life Insurance. Aviva holds about 47.31 percent of the joint venture while Woori Financial Holdings holds about 51.58 percent.

Other than Aviva, Germany-based Ergo Insurance Group last month sold 100 percent of its online insurer ERGO Daum Direct General Insurance to AXA Insurance for about 50 billion won ($43.05 million). ING Life Insurance based in the Netherlands is also undergoing talks to sell off its Korean arm.

Experts see that many global insurers are selling their relatively healthy affiliates to overcome the worsening performance and management risks rooted in the current eurozone crisis.

Similar to the exodus from Taiwan of foreign insurers including ING Group, Ergo Group, AXA Group and Met Life after the 2008 financial crisis, insiders see that firms are also retreating from Korea to help stabilize their parent companies.

Aviva Group, for example, raised a net profit of only 60 million pounds ($93.5 million) last year, which is a 97 percent decrease compared to that of 1.89 billion pounds in 2010. Reuters reported that the group, which generated 40 percent of its operating profit in mainland Europe last year, has been hit harder than its British rivals by eurozone woes.

Experts also point out that the heated competition here is suffocating foreign insurers that are already having a hard time localizing. For instance, with the rise of retirement pension rates for new businesses in Korea’s insurance market, the market is much more advantageous for local conglomerate-affiliated insurers.

Foreign insurance firms saw their peak profitability in the late 1980s when they first entered what was a rapidly growing market. By introducing new products then unseen in Korea, the firms easily gained over 20 percent of the market share.

Since the late 2000s, however, the foreign firms’ market share has decreased with 23 insurers now in competition.

While nine foreign companies including ING Life Insurance, Met Life and AIA took up a market share in 2011 of 19.2 percent in terms of premium income, the top three local life insurers ― Samsung Life Insurance, Korea Life Insurance and Kyobo Life Insurance ― recorded a market share of 52.3 percent.

By Park Min-young  (claire@heraldcorp.com)