MG Sonbo, Facing Submission of Management Improvement Plan, Needs Capital Increase Most Urgently (Comprehensive)

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 waiting for a decision from its largest shareholder, the private equity fund (PEF) JC Partners. This is because the company's normalization depends on the 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 without any issues by the deadline," adding, "We are also making efforts to ensure that the capital increase work proceeds as scheduled after the submission of the plan."

Following the management evaluation conducted at the end of last year, the financial authorities rated MG Insurance's insurance risk, interest rate risk, capital adequacy, and profitability as grade 4, resulting in an overall evaluation grade of 4 (vulnerable). On July 22, they demanded 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. In April, MG Insurance decided on 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, a sense of unease is also detected. There is a sentiment that if the existing major shareholder MG Saemaeul Geumgo or new investors cannot be recruited, even that may be difficult.

For JC Partners, which is expanding its business in the insurance sector by expressing its intention to acquire the insurance agency (GA) Rich & Co following MG Insurance and KDB Life Insurance, the normalization of MG Insurance is also important.

JC Partners, which plans to purchase 93% of KDB Life Insurance'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. Additionally, concerns remain over the undervaluation controversy during the sale of KDB Life Insurance and the condition that the Korea Development Bank participates as an investor.

It is known that JC Partners is recently discussing an investment of around 200 billion KRW to promote the acquisition of Rich & Co. Some have raised concerns that pursuing the acquisition of two insurance companies and a large GA simultaneously is an overextension.

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

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