Forecast "MG Sonbo Sale Fails, Bankruptcy and Rehabilitation Considered"

"Legal Action Considered Against MG Insurance Union
for Obstructing Due Diligence"

The Korea Deposit Insurance Corporation (KDIC) announced that if Meritz Fire & Marine Insurance, selected as the preferred bidder for MG Insurance, gives up the acquisition, it is also considering liquidation and bankruptcy.

On the 16th, KDIC stated in the 'MG Insurance Sale Related Briefing Materials' that "If the final due diligence is not conducted and Meritz Fire & Marine Insurance decides to withdraw from the acquisition, we plan to review restructuring alternatives in consultation with relevant agencies," adding, "If the market situation is unfavorable and the sale becomes difficult, it is not possible to rule out the possibility of paying deposit insurance to policyholders and resolving the company through liquidation or bankruptcy."

Since MG Insurance was designated as a financially distressed institution in 2022, KDIC has pursued three rounds of public sales. During the sale attempts converted to private contracts, two companies participated, resulting in Meritz Fire & Marine Insurance being selected as the preferred bidder in December last year.

However, the MG Insurance labor union has refused due diligence, demanding job security, preventing Meritz Fire & Marine Insurance from proceeding with the due diligence process.

Accordingly, KDIC is reviewing restructuring alternatives such as a fourth public sale and transferring existing insurance contracts if Meritz Fire & Marine Insurance withdraws from this sale. Among these, in the case of paying deposit insurance followed by liquidation or bankruptcy, it is explained that direct damage could occur to 1.24 million MG Insurance policyholders.

Policyholders can receive deposit insurance payments up to 50 million KRW under the Depositor Protection Act, but losses are inevitable for amounts exceeding this. In such cases, policyholders receive less than the surrender value as bankruptcy dividends upon contract termination, and the original risk protection function of the insurance disappears. For insurance such as indemnity insurance, re-enrollment with other companies under the same conditions as the existing insurance may be difficult.

KDIC stated regarding the MG Insurance labor union, which is refusing due diligence, "Despite the union's obstruction, we are seeking due diligence measures in consultation with the MG Insurance administrator and are also considering legal actions against the union."

This content was produced with the assistance of AI translation services.