Taiwan’s life insurer Fubon Life Insurance Co. is likely to become the largest shareholder of South Korea’s Hyundai Life Insurance Co., a unit of Hyundai Motor Group, by taking up the forfeited options of the life insurer’s second largest shareholder Hyundai Mobis Co. in a recapitalization scheme.

According to sources from the insurance industry on Wednesday, Hyundai Mobis board decided not to take in additional shares in Hyundai Life through the rights offering to save ammunitions amid challenging automobile business environment at home and abroad.

Korean life insurers are fighting against the clock to bolster capital base to meet new international regulations dubbed the International Financial Reporting Standards (IFRS) 17 that will take effect in 2021.

Hyundai Life is aiming to increase capital by issuing new shares worth 300 billion won ($281 million) to its existing shareholders. The majority are held by Fubon Life with 48 percent stake, Hyundai Mobis 30 percent and Hyundai Commercial Inc. 20 percent.

The other two majority shareholders Fubon Life and Hyundai Commercial would have to discuss the share of shouldering the forfeited shares.

When distributed according to exisitng stake-holding ratio, Fubon Life would hold more interest in the company than the Hyundai Motor family.

At 6:4 ratio placement, Fubon Life would hold a 53 percent stake, Hyundai Commercial 29 percent and Hyundai Mobis 17 percent.

The stake purchase requires clearance from financial regulators of both Korea and Taiwan. Recapitalization scheme is expected to be completed by the third quarter at the latest.

Hyundai Life has been losing money since founding in 2012. Its risk-based capital, the minimum capital financial institutions must hold to protect investors and clients, was at 148 percent as of the end of September, below 150-percent threshold recommended by Korean authorities.

By Kim Tae-sung and Choi Mira

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]