MG Sonbo, Facing Submission of Management Improvement Plan, Needs Capital Increase Most Urgently Now

150 Billion Won Scale... Depends on JC Partners' Decision

[Asia Economy Reporter Oh Hyung-gil] MG Insurance, which must submit a management improvement plan to financial authorities by the 31st, is awaiting a decision from its largest shareholder, the private equity fund (PEF) JC Partners. This is because the company's normalization depends on a 150 billion KRW rights offering being promoted with JC Partners.

According to the insurance industry on the 26th, MG Insurance is currently accelerating the preparation of the management improvement plan. A representative from MG Insurance said, "We plan to submit the plan by the deadline without any issues," adding, "We are also making efforts to ensure that the capital increase work proceeds as scheduled after the plan submission."

The financial authorities conducted a management evaluation of MG Insurance at the end of last year, resulting in a comprehensive rating of grade 4 (vulnerable), with insurance risk, interest rate risk, capital adequacy, and profitability all rated as grade 4. On July 22, they requested a management improvement plan. In particular, MG Insurance's solvency margin ratio (RBC ratio) fell to 108.79% as of the end of the first quarter, below the financial authorities' recommended level of 150%.

The key lies in the rights offering being promoted through JC Partners. MG Insurance decided in April to conduct a rights offering and bond issuance worth 150 billion KRW targeting JC Partners. The capital increase work was originally planned to be completed in the first half of the year but has been postponed to July and then again to September.

Since it is raising additional capital just one year after raising 200 billion KRW in April last year, there is a sense of unease. There is also a sentiment that if the existing major shareholder MG Saemaeul Geumgo or new investors cannot be recruited, even that may be difficult.

From JC Partners' perspective, which is expanding its business in the insurance sector by acquiring MG Insurance, KDB Life, and the insurance agency Rich & Co, the normalization of MG Insurance is important.

JC Partners, which plans to purchase 93% of KDB Life's shares, is currently undergoing a major shareholder qualification review by financial authorities. If MG Insurance's management improvement fails, it could be a significant negative factor in the qualification review. There are also lingering concerns such as the controversy over the low price at the time of KDB Life's sale and the condition that the Korea Development Bank participates as an investor.

MG Insurance, formerly Green Insurance, was designated as a financially distressed institution but was acquired by Saemaeul Geumgo in 2012 for a fresh start. However, after failing to improve performance, it received a management improvement order from financial authorities in 2019.

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