Samsung Life Insurance Co., South Korea’s biggest insurer, said it sees investment opportunities in distressed assets put up for sale by U.S. and European banks.
Samsung Life resumed investing overseas in the second half of 2011 after “near-zero” investment since the 2008 global financial crisis, Koo Sung Hoon, head of investments at the insurer which has 153.9 trillion won ($138 billion) of assets, said in an interview on Feb. 8 in Seoul. It may invest $100 million to $200 million in funds that buy distressed property, equities and debt in the two regions this year, Koo said.
“Conservative asset management has left us with sufficient capital, and now we’re looking for bargains,” he said.
Declining bond yields last year, as international investors sought the perceived safety of Korean debt, have contributed to local companies looking offshore for opportunities. The Korean Teachers’ Credit Union may put 30 billion won in a U.S. non-performing asset fund this year, while Korea Asset Management Corp. is considering buying these types of assets as part of a long-term plan to expand overseas, the two organizations said in separate interviews last month.
Samsung Life won’t be “aggressively” expanding overseas though, Koo said, as he expects Europe’s debt crisis to persist throughout this year.
“We are concerned about further downside risks triggered by the crisis,” he said. The insurer gained an annualized 4.5 percent from its asset management last year though November, according to the Korea Life Insurance Association.
South Korea’s average sovereign yields dropped 44 basis points last year to 3.74 percent, according to data compiled by HSBC Holdings Plc. The rate rose three basis points, or 0.03 percentage point, to 3.75 percent on Feb. 8. Exports fell last month for the first time in more than two years while factory output expanded in December at the slowest pace since October 2009, government figures show.
Koo said he expects the Bank of Korea to hold benchmark rates this year to support growth. “Macroeconomic situations suggest there could be up to a 50 basis point cut this year but the policy makers’ concern about inflation would prevent changes.” The central bank held off raising borrowing costs for an eighth month yesterday.
The yield difference between three- and 10-year sovereign bonds will stay close for the next two to three years on increased demand for longer-dated bonds, Koo said. The spread between the two securities was 38 basis points on Feb. 8, compared with 107 basis points at the beginning of last year, according to data compiled by Bloomberg.