[Concall] Meritz Kim Yong-beom "Will Stop MG Insurance Acquisition If It Does Not Help Shareholder Value"

Response to 'First Half Conference Call' on the 14th
Q&A Session with Institutional Investors and Shareholders

Kim Yong-beom, Vice Chairman and CEO of Meritz Financial Group

Kim Yong-beom, Vice Chairman of Meritz Financial Group, stated on the 14th during the 'First Half Conference Call' regarding their participation in the bid to acquire MG Insurance, "We will complete the process if it helps enhance shareholder value; otherwise, we will stop."

"Interested in Economies of Scale... Avoiding Simple Size Competition"

Vice Chairman Kim said during the conference call following Meritz Financial Group's Q2 and first half earnings announcement, "Meritz is interested in economies of scale and growth that lead to increased earnings per share, and we avoid simple size competition."

He explained, "We will carefully examine whether the price is appropriate, whether we can secure talent, and whether the scale and nature of risks are manageable."

Last week, Meritz Fire & Marine Insurance made a surprise participation in the bid for MG Insurance conducted by the Korea Deposit Insurance Corporation. With a domestic financial holding company backed by capital entering the acquisition battle alongside private equity funds, it was evaluated that the search for a new owner of MG Insurance has entered a new phase.

Continued Share Buybacks and Cancellation

When asked about the scale of share buybacks in the second half and the possibility of exceeding a total shareholder return ratio of 50%, Vice Chairman Kim responded, "If the forward price-to-earnings ratio (fwd PER) remains below 10 as it is now, we will proceed with share buybacks at a scale and pace similar to the first half," adding, "In fiscal years 2024 and 2025, we plan to allocate more than 50% of consolidated net income to share buybacks and dividends according to our medium-term shareholder return policy."

He also clarified that the long-term goal of share buybacks and cancellations is to enhance shareholder value. Meritz Financial started buying back shares worth 150 billion KRW in 2021 and 300 billion KRW in 2022. Last year, they achieved a shareholder return ratio of 51.2% through share buybacks worth 640 billion KRW and cash dividends of 448.3 billion KRW. In particular, shares purchased through a share acquisition trust contract are canceled after the trust ends, a principle that has been consistently followed.

Vice Chairman Kim emphasized, "Meritz's share buybacks have no purpose other than long-term shareholder value enhancement," and added, "We decide on buybacks solely based on whether it is favorable for long-term shareholder value, and we will continue to do so."

Regarding concerns about restrictions on foreign investment due to a decrease in floating shares from continued share cancellations, he rebutted, "The efficiency of the shareholder return policy takes precedence over supply and demand effects caused by foreign indices," and stated, "Adjusting the pace of share buybacks out of concern for supply-demand changes caused by the mechanical calculation methods of foreign indices would reduce the efficiency of our top priority, which is long-term shareholder value enhancement."

Insurance Becomes a Profit Driver with 'Surprise Performance' in the First Half

Meanwhile, Meritz Financial announced that it recorded net income exceeding 1.3 trillion KRW in the first half of this year, achieving the highest half-year performance ever. The net income of 1.3275 trillion KRW represents a 12.5% increase compared to the previous record set in the first half of last year (1.1803 trillion KRW). The Q2 net income also reached a record high of 736.2 billion KRW, a 27.7% increase year-on-year.

Meritz Financial Group explained, "Despite recognizing provisions for real estate project financing (PF), insurance profits have steadily increased, and interest income has improved, leading to simultaneous improvements in fire and securities performance."

Looking at major affiliates, Meritz Fire & Marine Insurance's net income for the first half of this year was 997.7 billion KRW, a 22.3% increase compared to the same period last year, breaking its record. The Q2 net income was 56.8 billion KRW, surpassing 500 billion KRW in quarterly net income for the first time. Meritz Securities' first half net income was 369.9 billion KRW, a 2.4% increase year-on-year.