South Korea: Stalling of insurance M&A deals attributed to IFRS17
Source: Asia Insurance Review | Dec 2023
The newly introduced accounting standard, IFRS17, plays a significant part in stalling the sales of insurance firms this year, according to market watchers.
One insurer which has failed to find a new owner is ABL Life Insurance, whose largest shareholder currently is China-based Dajia Insurance Group.
The prospective deal fell through after private equity firms that were pursuing the acquisition of the life insurer all pulled out, reported The Korea Times.
Besides ABL Life, several other life and non-life insurance companies, including KDB Life, MG Non-life Insurance and Lotte Non-life Insurance, are also being put up for sale.
Earlier this year, insurance companies faced allegations of exaggerating their performances by arbitrarily applying the contractual service margin, a component of the new accounting standard, to estimate future profits.
In response, financial authorities introduced unified guidelines for insurers to calculate their earnings in the third quarter of this year. Life insurance companies’ third-quarter earnings nosedived subsequently. Some major non-life insurers’ performances during the third quarter are also estimated to have weakened.
The sharp declines in insurance companies’ profits are likely to further stall acquisition deals, as the valuations of the companies that are up for sale will be negatively readjusted due to the poor earnings figures. A