Shinhan Financial Group is buying Lotte Non-Life Insurance for 693 billion won ($480 million), a move to strengthen its non-banking operations and establish itself as South Korea's leading financial group. Market watchers read the deal as a return to a growth-by-scale strategy at Shinhan, which had not completed an acquisition since buying Asia Trust in 2019.
Shinhan Financial Group said on the 13th that it had signed a share purchase agreement with private equity firm JKL Partners to acquire a 77.04% stake in Lotte Non-Life Insurance for 693.3 billion won.
Shinhan plans to acquire the remaining 22.96% stake as well, bringing the insurer in as a wholly owned subsidiary before merging it with Shinhan EZ General Insurance. Applying the agreed price to the entire stake implies a valuation of roughly 900 billion won. The total outlay could change depending on the price paid for the remaining shares and future capital requirements.
JKL, which bought Lotte Non-Life Insurance in 2019, began looking for a buyer in 2023 to recoup its investment, but talks repeatedly stalled over price. JKL was seeking around 2.5 trillion won in earlier sale attempts, according to market sources. Woori Financial Group, seen as a leading contender in 2024, skipped the main bidding round, and negotiations with Shinhan broke down in July this year over the same disagreement. The price discussed at the time was around 1 trillion won. The agreement came together after JKL, which had been preparing an open sale, resumed talks with Shinhan.
Inside and outside Shinhan, the deal is widely seen as vindicating Chairman Jin Ok-dong's gamble. "It's like a relationship between two people — it only works if both sides are a fit," Jin told executives, instructing them not to rush. In the end, the pressure fell on JKL, which had been subject to regulatory management improvement measures, and Shinhan secured Lotte Non-Life Insurance at a reasonable price.
Industry observers say Shinhan, which has long prioritized capital efficiency metrics such as return on equity, is for the first time in years pursuing expansion through a major acquisition. The company grew its non-banking businesses with the purchases of Orange Life and Asia Trust in 2019, and is now moving to expand its general insurance operations.
The market is focused on how the acquisition will reshape the competition for the top spot in Korean finance. In the first half of this year, Shinhan led at the bank level but trailed KB Financial Group at the group level. Shinhan Bank posted net profit of 2.4585 trillion won, 233.1 billion won more than Kookmin Bank. At the group level, however, Shinhan earned 3.4427 trillion won against KB's 3.8846 trillion won, a gap of 441.9 billion won. Last year, KB earned 5.843 trillion won and Shinhan 4.9716 trillion won, a difference of 871.4 billion won.
General insurance is seen as the main business dividing the two groups' earnings. KB Insurance posted net profit of 478.8 billion won in the first half, while Shinhan EZ General Insurance recorded a loss of 18.2 billion won. Last year, KB Insurance earned 778.2 billion won while Shinhan EZ General Insurance posted a net loss of 32.3 billion won. At KB, general insurance has become a core affiliate underpinning non-banking earnings, while at Shinhan it remains a loss-making business.
That led Shinhan to buy a general insurer rather than build one, cutting the time needed to reach scale. Lotte Non-Life Insurance has 3.34 million customers and a contractual service margin of about 2.2 trillion won as of the end of the first half. The acquisition gives Shinhan that margin — a measure of profit to be recognized from policies already in force — along with an existing sales force, and opens the way to selling insurance to Shinhan's banking and card customers.
Some analysts caution that Lotte Non-Life Insurance's current earnings alone will not close much of the gap with KB. The insurer earned 51.3 billion won last year but swung to a net loss of 18.5 billion won in the first half.
Shinhan Financial Group plans to inject about 300 billion won into Lotte Non-Life Insurance once regulators approve the deal. It will use capital already earmarked for Shinhan EZ General Insurance rather than raising outside funds, minimizing any additional burden. The group also plans a capital reduction without compensation to improve the insurer's basic capital ratio against required capital by about 30 percentage points. "We will combine the group's capital and risk management with our customer and digital capabilities to secure a new growth engine in insurance," a Shinhan Financial Group official said.