Korea Deposit Insurance Corporation (KDIC) plans to sell its entire 10% stake in Hanwha Life Insurance (088350.KS), held through the Deposit Insurance Fund Bond Redemption Fund, within this year. The corporation also aims to liquidate its 33.85% stake in SGI Seoul Guarantee Insurance (058970.KS) through block deals during the same period.
KDIC has incorporated the sale of its 10% Hanwha Life stake into the 2026 budget plan for the Bond Redemption Fund. The expected sale price is 5,000 won per share, with total projected proceeds of 434.3 billion won.
The move is interpreted as KDIC's intention to begin the divestment process this year, as the Bond Redemption Fund is set to mature next year.
KDIC has held Hanwha Life shares since 1999. The corporation injected 3.55 trillion won in public funds into Daehan Life Insurance — now Hanwha Life — between 1999 and 2001 after the company fell into financial distress during the 1997 Asian financial crisis. In 2002, KDIC sold a 67% stake in Daehan Life to Hanwha Group for 1.1 trillion won, beginning the public fund recovery process. KDIC also recovered approximately 1 trillion won through Hanwha Life's initial public offering in 2010 and block deals in 2015 and 2017.
Since then, KDIC has maintained its Hanwha Life stake at 10% for roughly eight years. However, with the Bond Redemption Fund set to expire at the end of next year, the stake disposal can no longer be delayed. "The Bond Redemption Fund will be liquidated next year without extension," a senior government official said.
KDIC has also set a target to dispose of 33.85% of its SGI Seoul Guarantee Insurance stake through block deals this year. The government estimates it can recover a total of 1.3042 trillion won from the SGI Seoul Guarantee stake sale, assuming a per-share value of 55,180 won.
The initiation of SGI Seoul Guarantee block deals is also closely tied to the approaching maturity of the Bond Redemption Fund. Financial authorities merged the struggling Daehan and Hankuk Guarantee Insurance companies in 1998 to establish SGI Seoul Guarantee, then injected 10.25 trillion won in public funds through KDIC between 1999 and 2001.
After recovering 4.35 trillion won through preferred share redemptions and dividends, financial authorities announced in 2022 a plan to gradually sell down the 93.85% stake KDIC held at the time through SGI Seoul Guarantee's IPO, block deals, and a management rights sale. The plan called for selling 10% through the IPO as existing shares, disposing of 33.85% via block deals before the Bond Redemption Fund's expiration, and then transferring management control (50% plus one share) to the private sector.
SGI Seoul Guarantee's listing last year allowed KDIC to successfully liquidate a 10% stake. However, with the Bond Redemption Fund expiring next year, the government believes the 33.85% portion to be recovered through block deals should be disposed of this year if possible.
The remaining challenge is share price. As of the 24th, Hanwha Life closed at 4,845 won, up 0.94% from the previous trading day. While this is higher than the 2,000–3,000 won range seen last year, it still falls short of both KDIC's planned sale price of 5,000 won and the par value. "From Hanwha Life's perspective, a share price below par value is uncomfortable, so the company will likely implement policies to boost its stock price," a financial industry source said. Hanwha Life also noted that "shareholder return measures are a matter of significant deliberation."
Some analysts argue that maximizing public fund recovery would require delaying the Hanwha Life share sale further. Both inside and outside the government, there are views that shares would need to be sold at 10,000 won per share for a complete recovery of public funds. The Bond Redemption Fund could also transfer remaining assets to the Deposit Insurance Fund even after liquidation.
However, such a delay would invite criticism that the public fund recovery period has become excessively prolonged. "If we fixate on the 10,000 won price, we will inevitably face criticism for failing to complete the recovery even by the time the Bond Redemption Fund is liquidated," a financial industry source said.
In practice, Hanwha Life has limited capacity for dividends. Resources available for dividends have sharply declined since the company began setting aside surrender value reserves under the new accounting standard IFRS 17. Hanwha Life paid a cash dividend of 113 billion won in March 2024 and has not distributed dividends for two years since. This means recovering public funds through dividends is not a viable path.
For SGI Seoul Guarantee, observers estimate that the share price would need to exceed 90,000 won for KDIC to reach its break-even point. SGI Seoul Guarantee's share price stands at 55,100 won. Yet if the government does not begin selling its stake in stages this year, the privatization plan itself could be jeopardized.
The insurance industry views the volatile capital markets stemming from the Iran situation as a key variable. The Financial Services Commission (FSC) is also known to have reviewed market conditions regarding the SGI Seoul Guarantee block deal plan at a Public Fund Oversight Committee meeting held on the 23rd. "We discuss market conditions related to SGI Seoul Guarantee's public fund recovery at the monthly Public Fund Oversight Committee meetings," a financial regulatory official said.
