Kyobo Life plans to absorb and integrate Kyobo Life Planet (Kyobo Lapl), its digital life insurance subsidiary that has recorded losses continuously since its launch, by the end of this year. The integration with the parent company ultimately became necessary due to Kyobo Lapl's profitability limits and the burden of capital regulations.
According to the insurance industry on the 8th, Kyobo Life is considering a plan to absorb and integrate Kyobo Lapl. While specific details regarding the integration method and timing have not yet been finalized, internal discussions are reportedly focused on completing the integration by year-end. Since Kyobo Life holds 100% of the shares, there appear to be no major obstacles to the integration itself.
Kyobo Lapl was established in 2013 as South Korea's first fully digital life insurance company launched by Kyobo Life. It gained attention as a new growth model for the insurance industry, launching as a digital insurer that sells insurance products primarily through online channels without sales agents or face-to-face sales organizations.
However, since its launch, it has recorded net losses every year and has been labeled as Kyobo Life's 'problem child.' While early on it highlighted advantages such as reduced sales and management costs by utilizing the online channel, it faced difficulties in securing profitability due to sustained marketing expenses required for initial customer acquisition and the burden of information technology (IT) investments needed for system construction and maintenance.
Kyobo Life has conducted seven capital increases totaling approximately 365 billion won to bolster Kyobo Lapl's capital over the years. The most recent capital increase took place in March 2024 (125 billion won).
Despite Kyobo Life's continuous financial injections, Kyobo Lapl has failed to establish a stable profit base, forcing the parent company to continue shouldering the capital burden. Consequently, Kyobo Life has been considering options to enhance efficiency in capital and management operations by integrating with the parent company rather than making additional capital increases for Kyobo Lapl. In particular, the strengthening of basic capital regulations set to take effect next year is cited as a major factor behind the review of integration by year-end. Indeed, last October, Carrot Insurance, a digital insurer in a similar situation to Kyobo Lapl, was absorbed and merged into Hanwha Insurance.
Within the insurance industry, concerns have been raised that for small-scale online insurers like Kyobo Lapl, even minor fluctuations in profits or capital can significantly impact solvency indicators such as solvency margin. As a result, Kyobo Lapl, along with Shinhan EZ Insurance, requested regulatory authorities last June to ease capital regulations considering the unique characteristics of online insurers. The rationale was that online-based insurers lack face-to-face sales organizations, resulting in business models and cost structures different from traditional insurers; thus, applying current capital regulations uniformly would impose a relatively heavier burden. However, it is reported that financial regulators have not yet provided any specific response.
A Kyobo Life official stated, "We have made efforts to ensure Kyobo Lapl's independent survival through measures such as capital increases," adding, "While we are also considering absorption and merger, no specific decisions have been finalized so far."
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