REFILE-UPDATE 1-Dongbu Group units tumble on rights issue plans

(Refiles to add "Update 1" in headline)

SEOUL, Sept 2 (Reuters) - Shares in Dongbu Group units, including Dongbu Insurance (005830.KS) and Dongbu Steel (016380.KS) dived on Tuesday as the company confirmed rumours that Dongbu Life will make a rights issue.

A spokesman for Dongbu Life, the unlisted life insurance arm of the Dongbu group, told Reuters the company was "proceeding with rights issuance plans."

"Our solvency margins have fallen to around 120 percent and we are forgoing with rights issue for the sake of sounder financial health," the group's spokeswoman said.

By industry standards, solvency margins of insurers higher than 100 percent is deemed negative.

Shares in Dongbu Steel, one of the major shareholders in unlisted Dongbu Life, fell 10.48 percent to 9,310 won, and Dongbu Insurance, the majority stakeholder, dropped 14.71 percent to 24,350 won as of 0243 GMT.

"Since Dongbu Steel is one of the majority shareholders in Dongbu Life, they will also be affected by this rights issue," said Kim Hyun-tae, an analyst at Goodmorning Shinhan Securities.

"Raising addition capital comes as an added financing burden for Dongbu Steel," Kim added.

The benchmark KOSPI was up 0.36 percent as of 0243 GMT.

(Reporting by Park Ju-min, Park Jung-youn; Editing by Ken Wills)