Meritz Fire & Marine Insurance Selected as Preferred Negotiation Partner for MG Insurance

Review of funding request amounts and contract performance capabilities for two companies
One other company not selected as secondary preliminary negotiation candidate due to insufficient funding plan

Meritz Fire & Marine Insurance has been selected as the new owner candidate for MG Insurance.

On the 9th, the Korea Deposit Insurance Corporation (KDIC) announced that it had chosen Meritz Fire & Marine Insurance as the preferred bidder for the acquisition of MG Insurance. KDIC stated, "After reviewing the two companies that submitted acquisition proposals based on requested funding amounts and contract execution capabilities, Meritz Fire & Marine Insurance was selected as the preferred negotiation partner. The other company was not selected as the secondary candidate due to insufficient funding plans."

In this private contract bidding, Meritz Fire & Marine Insurance participated alongside the private equity fund (PEF) Daily Partners. KDIC emphasized that, aware of controversy regarding preferential treatment in selecting Meritz Fire & Marine Insurance as the preferred bidder who effectively participated alone, "the entire private contract procedure and the selection process of the preferred negotiation partner were transparently and fairly conducted through internal control reviews and advisory meetings with internal and external experts."

Although Meritz Fire & Marine Insurance was selected as the preferred negotiation partner, it has stated that it will halt the process at any time if the due diligence reveals that MG Insurance’s risk of insolvency exceeds expectations. Kim Yong-beom, Vice Chairman of Meritz Financial Group, said during last month’s conference call regarding the acquisition of MG Insurance, "We will proceed only if it increases earnings per share and aligns with shareholder interests; otherwise, we will stop."

MG Insurance’s solvency ratio (K-ICS) dropped from 82.56% in the first quarter of last year to 44.42% in the second quarter of this year. Excluding transitional measures, MG Insurance’s solvency ratio stood at approximately 36.53% as of the second quarter. Industry experts say that to raise MG Insurance’s K-ICS ratio to the financial authorities’ recommended level of 150% or higher, additional capital must be injected beyond the acquisition cost.

KDIC stated, "We will make every effort to promptly and transparently resolve insolvent financial institutions in the most optimal way," adding, "Although an exclusive negotiation period is granted to the preferred negotiation partner, if negotiations fail, the possibility of new companies participating remains open under the principles of protecting insurance policyholders and minimizing losses to the deposit insurance fund."