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Moody's downgrades Lotte Insurance following acquisition by JKL Partners

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Moody's downgrades Lotte Insurance following acquisition by JKL Partners

Moody's downgraded South Korea-based Lotte Insurance Co. Ltd.'s insurance financial strength ratings to Baa2 from Baa1 and revised its outlook to stable.

The downgrade reflects Moody's expectation that Lotte Insurance's business and financial profiles will weaken following private equity firm JKL Partners Inc.'s recent acquisition of a 54.39% stake in the company. The action concludes the review for downgrade initiated May 31.

The rating agency said it expects the change in ownership will lead to some dilution of benefits and synergies that it shares with Lotte Group, particularly the exclusive agreements between the group and Lotte Insurance for captive sales of pension and general insurance products, which will cease to exist as a result of the ownership transfer.

Meanwhile, JKL Partners' 375 billion South Korean won capital injection into Lotte Insurance is expected to boost the insurer's risk-based capital ratio to around 200% by the end of 2019, Moody's said, adding that the move is credit positive.