The-K Non-Life Insurance, Employment Stability Controversy... Final Sale Hurdle Emerges (Comprehensive)

Potential Full-Scale Union Struggle Following Acquirer 'Hana Financial's Moves
Cha Seong-su, Chairman of the Teachers' Credit Union, Announces Election Defeat Campaign
HanShin Rating Downgrades The-K Non-Life Insurance's Claims Payment Ability Evaluation

[Asia Economy Reporter Oh Hyung-gil] The Korea Teachers' Credit Union is nearing the final stages of the process to sell The-K Non-Life Insurance to Hana Financial Group, but employment security issues have emerged as a variable.

Regarding workforce restructuring due to the merger and acquisition (M&A), The-K Non-Life Insurance labor union has shown a strong willingness to launch an all-out struggle depending on the approach of the acquirer, Hana Financial Group, making employment stability a key issue in the final negotiations.

According to the insurance industry on the 28th, The-K Non-Life Insurance union is demanding that the sale process be halted, arguing that employment security for employees is not guaranteed.

The Teachers' Credit Union held an executive meeting on the same day to discuss the agenda of selling The-K Non-Life Insurance. The plan is to pass a resolution on the sale during the meeting and complete the sale process after final agreement with Hana Financial Group.

The union claims that although a verbal agreement on an employment security pact was reached with the company on the 16th, the Credit Union is nullifying the agreement after the acquirer, Hana Financial Group, opposed the terms.

A union official said, "The Credit Union has not yet signed the employment security agreement, which is the seller's obligation, and has not shown even minimal trust," adding, "The management is violating the principle of good faith in labor-management negotiations." The union also insists that Kim Jung-tae, chairman of Hana Financial Group and the prospective acquirer, should participate in the negotiations.

A representative from The-K Non-Life Insurance explained, "Reflecting on the recently sold Lotte Non-Life Insurance case, we have requested an employment security agreement for employees, but we understand that Hana Financial Group expressed reluctance at the final stage of negotiations." The union plans to launch an all-out struggle if the employment security agreement issue is not resolved or employment guarantees are not provided.

The National Office and Financial Services Union is also signaling political mobilization related to employment security at The-K Non-Life Insurance. The union plans to campaign against Cha Seong-su, former chairman of the Teachers' Credit Union who is scheduled to retire on the 31st to run in the general election.

An official from the Office and Financial Services Union said, "The Teachers' Credit Union must sign an agreement guaranteeing employment security for The-K Non-Life Insurance workers," adding, "If an agreement that ensures no worries about restructuring for all workers is not prepared, the sale must be stopped."

The-K Non-Life Insurance is a company wholly owned by the Teachers' Credit Union. It was launched as a specialized automobile insurance company and was upgraded to a comprehensive non-life insurer in 2014. The Credit Union began the sale process at the end of last year and has been negotiating with Hana Financial Group. Hana Financial Group resolved at its board meeting on the 20th to acquire 70% of The-K Non-Life Insurance shares, and negotiations are in the final stages. The acquisition price offered by Hana Financial Group is known to be around 100 billion KRW, with only the Credit Union's response remaining.

Meanwhile, Korea Credit Rating Agency downgraded The-K Non-Life Insurance's insurance payment capability credit rating from 'A' (stable) to 'A-' (stable) on the same day.

The agency pointed out, "The revenue structure is concentrated in automobile insurance, with secondary burdens in the high-interest long-term insurance sector and premium income that falls short of economies of scale, resulting in low stability of the revenue structure. During the M&A process, the major shareholder's capital increase was delayed, and with secondary losses in the savings insurance sector, rising loss ratios in automobile insurance, and large impairment losses on operating assets, deficits continued, causing the solvency margin ratio (RBC) to drop sharply."

It added, "According to the unscheduled management disclosure on December 30 last year, The-K Non-Life Insurance experienced financial accidents where credit preservation measures or credit enhancement items were omitted due to employee mismanagement in about four real estate project financing (PF) loans handled from September 2017 to November of the following year."