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Munich Re in Talks to Buy Korean Daum's Auto Insurer

Munich Re, the world's second-biggest reinsurer, is in talks to buy a majority of a South Korean online auto insurance unit from Daum Communications, the country's top Internet portal said on Tuesday.

Daum, which controls 16% of South Korea's fast-growing online auto insurance market via Daum Direct, has been considering selling its 50.1% stake in the loss-making unit.

It put the book value of the stake at 11 billion won ($12 million) in its half-year results filed in August.

"It is true that Munich Re is one of our negotiating partners," a Daum spokesman said, confirming local media reports about a possible stake sale to the German insurance firm. "But nothing has been decided. Apart from selling a stake, we are also looking over several other ideas."

The Korea Economic Daily on Tuesday quoted Ludger Arnoldussen, who leads the Asian business of the German reinsurer, as telling reporters in Seoul that the negotiations were expected to conclude in the near future.

The report sent shares in Daum Communications 4.7% higher to 75,900 won by 0138 GMT, with the main KOSPI edging up 0.3%.

Unlisted Daum Direct, set up in 2003 as a joint venture between the portal and LIG Non-Life Insurance, reported a 8.2 billion won net loss in the fiscal year 2006 ended in March.

Small non-life insurer LIG said it had no plans to sell its 38.2% stake in the car insurance venture because it wants to earn dividend income from the shareholding. The remaining Daum Direct stake is held by LIG affiliates and individual companies.

Munich Re has been gearing up for its expansion into the world's seventh-biggest insurance market.

It had applied for licenses to deal with lawsuit cost-coverage insurance in September and health-care insurance business earlier this month, Korea Economic Daily said.

South Korea's auto insurance market was valued at $9.3 billion in 2006, of which online sales accounted for just 4.5%, but the Internet is becoming a popular retail outlet for financial products.

In March, Europe's No. 2 insurer AXA bought 75% of online auto insurer Kyobo Auto in March from unlisted Kyobo Life Insurance, one of top three South Korean life insurance companies.

The deal was estimated at up to $106 million by Korean media, but AXA and Kyobo declined to disclose the sum.