Meritz Abandons Acquisition of 'MG Insurance'... Financial Authorities Respond "According to Law and Principles" (Comprehensive)

Meritz Fire & Marine Insurance Abandons MG Insurance Acquisition After Three Months
Deal Falls Through Due to Union Opposition
Possibility of Liquidation Procedures for MG Insurance

Financial authorities stated on the 13th that they are taking the situation seriously regarding Meritz Fire & Marine Insurance's decision to abandon the acquisition of MG Insurance and will respond according to laws and principles.

The Financial Services Commission, Financial Supervisory Service, and Korea Deposit Insurance Corporation issued a joint statement that morning, saying, "As the sale process has been delayed, MG Insurance's soundness indicators and management environment have continuously deteriorated," and "Concerns about MG Insurance's independent survival are growing in the market, and the government is taking this very seriously." They added that they plan to respond in accordance with laws and principles.

Meritz Financial Group announced on the same day that "although it was selected as the preferred negotiation partner for the asset and liability transfer (P&A) transaction, including MG Insurance's insurance contracts, by the Korea Deposit Insurance Corporation, it has decided to relinquish its status due to differences in positions among institutions." Meritz Financial Group conveyed this position to the KDIC through a board resolution on the same day.

Since being selected as the preferred negotiation partner in December last year, Meritz Fire & Marine Insurance faced strong opposition from the MG Insurance labor union, which delayed negotiations. The MG Insurance branch of the National Office and Financial Services Labor Union has consistently demanded that Meritz Fire & Marine Insurance abandon the acquisition, arguing that employment succession is not guaranteed. The union also did not cooperate with Meritz Fire & Marine Insurance's due diligence. Last month, the KDIC responded by filing a preliminary injunction with the court against the union to prohibit interference with business operations.

On the 10th, the KDIC and the MG Insurance labor union appeared to make progress in negotiations by agreeing to due diligence on the condition that the 115 documents requested by Meritz Fire & Marine Insurance be reduced to 55. Meritz Fire & Marine Insurance also proposed a negotiation plan through the KDIC that included employment succession for 10% of all employees and payment of 25 billion KRW in non-employment consolation money. However, as the union did not accept Meritz Fire & Marine Insurance's proposal and negotiations were delayed again, Meritz Fire & Marine Insurance ultimately seems to have decided to abandon the acquisition.

With the collapse of the MG Insurance sale, there is a possibility that MG Insurance will undergo liquidation procedures. If liquidation proceeds, 1,242,600 customers (with 1.56 million contracts) will be compensated up to 50 million KRW under the Depositor Protection Act, and insurance contracts will be forcibly terminated. Amounts exceeding 50 million KRW are expected to result in customer losses. The KDIC is reviewing three options: additional public sale, liquidation/bankruptcy, and insurance contract transfer to another insurer.

The predecessor of MG Insurance was the former Green Insurance. In 2012, due to deteriorating management, it was designated as a financially distressed institution by the Financial Services Commission, prompting a sale. In 2013, the National Credit Union Federation of Korea acquired it and changed its name to the current one, but financial difficulties persisted. Subsequently, the FSC entrusted the sale to the KDIC in 2023, and five acquisition attempts, including Meritz Fire & Marine Insurance, were made but ultimately failed.