One Week Left for MG Sonbo under 'Management Improvement'... Will a 'Management Improvement Order' Be Issued?

Financial Services Commission Chairman Ko Seung-beom attended the National Assembly's inspection of the Financial Services Commission held by the National Assembly's Political Affairs Committee on the 21st and is receiving a report from an official during the inspection. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Oh Hyung-gil] "It is difficult to predict, but if MG Insurance's resubmitted management improvement plan is also disapproved, we will issue a management improvement request."

MG Insurance, which must resubmit its management improvement plan by next week, stands at a crossroads for business normalization. With Financial Services Commission Chairman Ko Seung-beom expressing his intention to take timely action, attention is focused on whether MG Insurance will be designated for a management improvement order involving compulsory measures.

According to the insurance industry on the 23rd, Chairman Ko stated at the National Assembly's Political Affairs Committee audit on the 21st, in response to a question from Lee Jung-moon of the Democratic Party about why MG Insurance's management improvement plan was not approved, "We recently disapproved the management improvement plan after comprehensively assessing the capital expansion plan."

As of the end of June, MG Insurance's Risk-Based Capital (RBC) ratio stood at 97%, down 11.8 percentage points from the previous quarter.

This not only fell short of the Financial Supervisory Authority's recommended level of 150%, but also placed the company in a position to receive management improvement recommendations and requests from financial authorities under the Insurance Business Act if the RBC ratio falls below 100%.

A management improvement order is the highest level of warning issued by financial authorities to financial companies whose financial soundness has deteriorated, raising concerns about consumer harm.

The financial authorities plan to carefully review the management improvement plan submitted by MG Insurance without imposing additional sanctions immediately.

MG Insurance received a 'management improvement request' from financial authorities due to deteriorating financial soundness and submitted the relevant plan last month.

JC Partners, the major shareholder of MG Insurance, is currently pursuing a paid-in capital increase of approximately 150 billion KRW. After announcing plans to proceed with the capital increase in the second quarter of June, the schedule was delayed due to securing investors and finalizing details, pushing the target deadline to the end of September.

However, as the capital increase did not proceed as planned, financial authorities disapproved the management improvement plan and requested a resubmission by the end of this month.

Ultimately, if the plan submitted this month also fails to gain approval from financial authorities, the likelihood of receiving a management improvement request will increase significantly.

MG Insurance previously received a management improvement recommendation from the Financial Services Commission in 2018 when its RBC ratio fell to the 80% range. Subsequently, it was subject to a management improvement request in October 2018 and a management improvement order in June 2019.

MG Insurance expects its major shareholder to carry out the planned capital increase as scheduled.