South Korea’s leading life insurer Samsung Life Insurance Co. shed almost half of its stake in DGB Financial Group to bolster capital ahead of the introduction of IFRS17, new accounting standards for insurers that will take effect in 2021.
Samsung Life sold off a 3.6 percent stake in DGB Financial Group in a block trade at 7,830 won apiece at relatively hefty discount rate of 4.04 percent against DGB Financial’s closing price of 8,160 won on Tuesday. The sale would help the life insurer secure as much as 47.7 billion won ($40.8 million). Its stake holding in DGB was cut from a 6.95 percent to 3.35 percent.
Shares of DGB Financial Group rose 0.51 percent to close Thursday at 7,910 won after falling 3.6 percent on the news in the previous day. Samsung Life fell 1.21 percent to 81,800 won.
The company assigned Samsung Securities to tap demand for its holdings of 6,093,219 shares in DGB Financial after the market closed on Tuesday. The discount rate was set at the lowest end of the proposed rate of 4.04 percent to 6.99 percent thanks to ample demand.
It was the first large-scale stake sale by Samsung Life in the Daegu-based regional financial holding firm after it had bought a stake in DGB Financial, former Daegu Bank, 40 years ago. It has maintained a stake-holding of 7 to 8 percent as one of the major shareholders of Daegu Bank with the National Pension Service and Saudi Arabian Monetary Agency that is under the central bank of Saudi Arabia.
Shinhan Investment Corp. said the block sale was unexpected given the special relationship between Samsung Life and DGB. Samsung Life purchased stakes in DGB at recommendation from the Daegu Chamber of Commerce & Industry 40 years ago. It said its investment purpose was management participation, but it has not involved in the management of DGB Financial after the stake purchase.
Market experts believed that Samsung Life shed the stake to adjust investment portfolio in preparation for IFRS17 rules. Due to the relatively high discount rate, there would be a temporary correction in stock price of DGB Financial, Shinhan Investment said.
By Kang Woo-seok and Choi Mira
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