Seoul Guarantee Insurance is set to list on South Korea’s benchmark Kospi next month, pitching itself as a stable dividend play to long-term investors.

“Through this listing, we aim to strengthen our position as the sole comprehensive guarantee insurer in the country and establish ourselves as a leading dividend stock with a more proactive shareholder return policy in partnership with market investors,” SGI President and CEO Lee Myung-soon said during a press meeting in Seoul on Wednesday.

Founded in 1969 as Korea Fidelity & Surety, SGI holds a dominant position in the local market, offering a wide range of guarantee and surety products for both corporate and individual clients. It also has a presence overseas, with a branch in Vietnam and an office in Indonesia.

Selecting major non-life insurers such as Samsung Fire & Marine and Hyundai Marine & Fire as its peer group, SGI has established a target price range of 26,000 won to 31,800 won ($18 to $22) per share for its upcoming IPO, which places the company's valuation at up to 2.22 trillion won.

This represents a substantial decrease from the over 3 trillion won market value it aimed for during its initial bid in October 2023, which was shelved due to overpricing and overhang concerns.

A key driver for the listing is the planned exit of Korea Deposit Insurance Corp., which owns 93.85 percent of SGI and has about 5.6 trillion won invested in SGI that is yet to be recouped.

As in its previous IPO attempt, SGI will not issue new shares, with all 6,982,160 shares on public offer coming from KDIC’s holdings -- meaning the proceeds will go directly to the major shareholder.

Seeking to appeal to investors as a reliable dividend stock, SGI underpinned its dominant market position. It has paid dividends for 13 consecutive years, with an average payout ratio of 53 percent -- higher than the 19 percent average of listed Korean nonlife insurers and close to market leader Samsung Fire’s 55 percent.

To bolster shareholder returns, SGI unveiled a three-year value enhancement plan in January, targeting an annual payout of 2 trillion won through 2027, which equates to a dividend yield of around 10 percent at the proposed IPO price. The company plans to distribute a 2 trillion won year-end dividend for 2024 in April, ensuring IPO investors who hold shares until then qualify for the payout.

The firm mainly targets institutional investors, particularly long-term funds favoring dividend stocks. Industry insiders expect a strong push toward Asian pension funds, following the company’s recent overseas roadshows in Singapore and Hong Kong.

A senior SGI official noted that foreign investors' responses have been significantly more positive this time, primarily due to the firm's resolution of the overhang issue related to the KDIC stake, with KDIC extending its lock-up period from six months to one year.

"KDIC has committed to maintaining constant communication with the market to ensure that its exit does not adversely affect SGI or its share price," the official said, adding that both companies are closely cooperating on this matter.

The official anticipated that SGI's separation from KDIC ownership will take at least a decade following the listing, citing the case of Woori Bank, which took 26 years to fully repay KDIC's public funds.

Starting Thursday, the company will initiate a weeklong book building process for institutional investors, with public subscription scheduled for March 5-6.

By Choi Ji-won (jwc@heraldcorp.com)