Germany’s Allianz, the world’s top insurance company, is pulling out of the Korean market after selling Allianz Life Insurance Korea to China’s Anbang Insurance Group at a cut-rate US$3 million.
Anbang announced the deal on Wednesday on Chinese messaging app WeChat.
The sales price came as a shock to industry watchers, who expected the business to fetch over W25 billion (US$1=W1,160).
Allianz Life Insurance Korea has posted losses exceeding its equity capital and its sales network has completely disintegrated, so the price dwindled to almost nothing, according to financial authorities here. Last year’s net loss alone was W87.4 billion.
Anbang needs to inject an estimated US$80 million into the business to resolve its cash flow problems.
Allianz entered Korea’s insurance market in 1999 by acquiring Jeil Life Insurance for W400 billion in the aftermath of the Asian financial crisis.
It injected more than W1.2 trillion into its Korean operations but was unable to stem the losses.
Insurance industry watcher said Allianz’s management was at fault for failing to restructure the organization comprehensively and coming up with an effective marketing strategy for Korea. They also blame the company’s militant labor union, which is among the most combative in the industry, for blocking any efforts by the German parent company to normalize operations.
The insurer tried to improve operations in 2007 but union resistance stifled each move. The union went on strike for a whopping 234 days in 2008 when management tried to introduce performance-related pay.