Meritz Fire & Marine Insurance has withdrawn from acquiring MG Non-Life Insurance, marking the fifth failed attempt to secure a new owner for the financially struggling insurer. The decision, announced on March 13, follows months of contentious negotiations and significant resistance from the MG Insurance union.
The main office building of MG Non-Life Insurance is located in Gangnam-gu, southern Seoul.
The primary obstacle was the union’s demand for full employment succession under the proposed asset and liability transfer (P&A) method. This condition proved incompatible with Meritz’s plans, ultimately leading to the deal’s collapse and raising serious questions about MG Insurance’s future.
Meritz Fire & Marine Insurance had been selected as the preferred bidder in December of the previous year. However, the acquisition process was immediately hampered by the union’s opposition. The union’s resistance prevented Meritz from conducting essential due diligence for three months. The core of the disagreement centered on employee retention. While Meritz aimed to retain a portion of the workforce and offer severance to the rest, the union insisted on guaranteeing jobs for all employees.
MG Insurance’s financial situation is precarious. The company’s solvency ratio, a key indicator of its capacity to meet long-term obligations, stood at a mere 43.4% as of the third quarter of last year. This is significantly below the legally mandated 100% threshold, signaling considerable financial distress. The potential liquidation of MG Insurance would be unprecedented in South Korea, representing the first instance of a domestic insurance company failing without transferring its contracts. Such a scenario leaves policyholders especially vulnerable to financial loss.
Meritz Financial Group released a statement explaining the situation. “Our subsidiary, Meritz Fire & Marine Insurance, was selected as the preferred bidder for the asset and liability transfer (P&A) deal, including MG Insurance’s contracts, but has decided to return the preferred bidder status due to differing positions among institutions,” the statement read. This decision has drawn criticism towards the MG Insurance union. Critics contend the union’s obstruction of due diligence and its rejection of last-minute proposals bear substantial responsibility for the failed acquisition.
Financial authorities have expressed concern over MG Insurance’s ability to survive independently. They stated, “We will respond according to law and principle,” and acknowledged the growing apprehension within the market. If liquidation occurs, policyholders are guaranteed up to 50 million won in surrender value under the Depositor Protection Act. However, savings-type insurance policies may face the risk of principal loss. The estimated damages from liquidation could reach 175 billion won. Elderly customers are particularly at risk, potentially facing challenges in obtaining new insurance coverage or higher premiums.
The announcement has already had a tangible impact. MG Insurance’s customer center experienced a 10% surge in inquiries, as policyholders sought clarity on the status of their existing contracts. The broader economic implications of potential liquidation are also considerable, with anticipated ripple effects throughout the financial market. Yoon Young-sil, contact: [email protected] Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution
