Shinhan's Lotte Insurance deal faces profitability, capital hurdles

Shinhan Financial Group is seeking to bolster its nonbank operations by acquiring Lotte Insurance, but analysts cautioned Thursday that a meaningful contribution to group earnings may take time, as the insurer could require substantial additional capital to strengthen its financial position. Concerns over the cost of the deal weighed on Shinhan shares, which plunged 4.31 percent Wednesday following Tuesday’s announcement and fell a further 0.84 percent Thursday. The group agreed Tuesday to purchase a 77.04 percent stake in Lotte Insurance from private equity firm JKL Partners for 693.3 billion won ($514.6 million). After securing regulatory approval, it plans to acquire the remaining shares and eventually merge the insurer with its existing subsidiary, Shinhan EZ General Insurance. Lotte Insurance has 14 trillion won in assets and 3.34 million customers, giving Shinhan a substantially larger foothold in non-life insurance. The financial group aims to raise annual profit from the business to at least 120 billion won within three years. But market analysts warned that the insurer’s wea