Shinhan Financial acquires Lotte Non-Life Insurance

Shinhan Financial is acquiring Lotte Non-Life Insurance. The two sides had been locked in a prolonged standoff over price, but Shinhan Financial ultimately made an aggressive move to strengthen its non-life insurance business.

According to investment banking industry sources, Shinhan Financial held a board meeting Tuesday and approved a resolution to sign a share purchase agreement for the acquisition of Lotte Non-Life Insurance. JKL Partners, which holds a 77.04 percent stake in Lotte Non-Life Insurance, is the company's largest shareholder.

Shinhan Financial had been building up its war chest for the deal. It raised a total of 800 billion won ($599 million) by issuing 400 billion won worth of hybrid capital securities each in March and September.

JKL Partners acquired management control of Lotte Non-Life Insurance from Lotte Group in 2019 for 373.4 billion won, then carried out a 360 billion won rights offering, bringing its total investment to 730 billion won. It raised its stake to 77.04 percent and pushed for a full operational overhaul, but financial pressure mounted as its exit dragged on.

The sale process was far from smooth. JKL appointed JPMorgan as lead manager in 2023, but that effort fell through, and the firm switched to Samjong KPMG this year. Substantive price and terms negotiations with Shinhan Financial Group then got under way, only to stall over a gap in price expectations. JKL Partners sought around several trillion won, while Shinhan Financial Group wanted to close the deal in the 800 billion to 900 billion won range.

The seller even prepared to shift to an open auction process, but negotiations with Shinhan Financial continued until recently, keeping the deal dynamics complicated.

Shinhan Financial entered the non-life insurance sector in 2021 when it acquired BNP Paribas Cardif Non-Life Insurance, now known as EZ Non-Life Insurance. While the acquisition was intended to complete its portfolio as a comprehensive financial group, EZ Non-Life Insurance continued to post losses after joining the group, heightening the need for additional mergers and acquisitions to build competitiveness. Shinhan Financial had accordingly been reviewing various acquisition targets, including Lotte Non-Life Insurance.