South Korean life insurance firms could begin making long-awaited initial public offerings as early as next year but are likely to need fresh capital to expand regardless of their plans to go public, a senior official at the country's financial watchdog said.
The introduction in 2003 of bancassurance, a hybrid of banking and insurance, and home shopping channels have intensified competition that is eroding margins in the country's $60 billion insurance sector, the world's eighth-largest.
To fund expansion in the crowded market, local life insurance companies were expected to sell new shares to either foreign or domestic investors, industry sources said.
But their efforts to sell stakes and list on the stock exchange have been delayed because of a long-running dispute over how to share IPO proceeds.
In an effort to remove the hurdle to their listing plans, a panel led by the Korea Exchange said in July that life insurance firms were not required to share IPO proceeds with policy holders.
"Nearly all would need recapitalisation, and big companies would not be an exception," Yoo Kwan-woo, an assistant governor of the Financial Supervisory Service (FSS), told Reuters in an interview on August 31, referring to domestic life insurance companies.
"That has nothing to do with their listing (plans)." Third-ranked Kyobo Life Insurance Co Ltd is seeking to sell new shares to foreign strategic investors, following a number of small-sized rivals which have made rights offerings recently.
But one industry source said Kyobo's talks to sell shares to French insurer AXA and AIG had broken down amid uncertainties over its IPO.
Yoo, who oversees the insurance sector, said the overcrowded sector would face further pressure to bolster capital if new capital guidelines were adopted as early as 2008.
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