MG Non-Life Insurance sale at risk again, raises liquidation concern

    2024.10.16 10:44:57
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    The headquarters of MG Non-Life Insurance located in Gangnam-gu, Seoul.
    The headquarters of MG Non-Life Insurance located in Gangnam-gu, Seoul.

    MG Non-Life Insurance Co.’s attempt to find a new owner could be in jeopardy of failing once again due to mounting pressure from the political opposition and the company’s labor union over the sale process.

    According to financial industry sources on Tuesday, the Korea Deposit Insurance Corp. (KDIC) is reviewing the selection of a preferred bidder for MG Non-Life Insurance and could make a decision as early as this week, with Meritz Fire & Marine Insurance Co. and private equity firm Dayli Partners participating in the bidding process. KDIC has been trying to find a suitable buyer for the insurance company since 2023, but four previous attempts were unsuccessful.

    As concerns of a fifth failure and possible liquidation rise, opposition party members raised controversial issues during a recent National Assembly audit of the Financial Services Commission (FSC) and KDIC, leading to speculation that the announcement of the preferred bidder may be delayed until after the comprehensive audit, which is scheduled for next week.

    FSC Chairman Kim Byoung-hwan recently said that the company’s normalization process will proceed according to legal procedures “without any special considerations or favors.” Despite this assurance, there are concerns in the financial sector that further delays could lead to the sale’s collapse. MG Non-Life Insurance was designated a troubled financial institution in 2022, having previously faced similar issues in 2001 and 2012 under different names.

    A key factor that has hindered the KDIC’s four previous sale attempts is MG Non-Life’s prolonged management challenges, which have persisted for over two decades. The company’s Korean Insurance Capital Standard (K-ICS) ratio fell from 82.6 percent in the first quarter of 2023 to 52.1 percent in the first quarter of 2024. To bring the ratio up to the financial authorities’ recommended level of 150 percent, an additional capital investment worth hundreds of billions of won would be required on top of the acquisition costs.

    There is a general consensus within the financial industry that liquidation should be avoided as all customer policies would be terminated if MG Non-Life were to undergo the process. While policyholders would be refunded up to the deposit insurance limit of 50 million won ($36,600), patients and elderly customers could face difficulties in securing new coverage.

    By Chae Jong-won and Chang Iou-chung
    [ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]
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