Meritz Fire & Marine Insurance has given up on acquiring MG Non-Life Insurance due to opposition from the MG Non-Life Insurance union.
Meritz Fire & Marine Insurance said on the 13th, "We were selected as the preferred negotiation partner for the asset-liability transfer (P&A) transaction of MG Non-Life Insurance insurance contracts by the Korea Deposit Insurance Corporation, but decided to return the position due to differences in positions among the institutions."
Since being selected as the preferred negotiation partner for MG Non-Life Insurance in December last year, Meritz Fire & Marine Insurance has initiated due diligence for acquisition. However, the union strongly protested, blocking officials attempting to conduct the due diligence using force. The union insisted on canceling the asset-liability transfer (P&A) acquisition, which does not entail an obligation for employment succession, and argued for a merger and acquisition (M&A) that includes both assets and liabilities.
Meritz Fire & Marine Insurance proposed to employ 10% of the entire workforce and to pay 25 billion won in severance to non-employment staff, but failed to narrow the differences. Since being selected as the preferred negotiation partner, Meritz Fire & Marine Insurance has not even been able to conduct proper due diligence.
On the 19th of last month, Meritz Fire & Marine Insurance requested the Korea Deposit Insurance Corporation to submit an agreement containing the union's substantial and complete cooperation for due diligence and post-due diligence procedures, along with employment conditions. It stated that it would abandon the acquisition if no action was taken by the 28th of last month.
The Korea Deposit Insurance Corporation delivered the agreement to Meritz Fire & Marine Insurance and requested a meeting with the union for discussions on employment levels. However, the union did not attend the meeting that was scheduled for the 12th, and Meritz Fire & Marine Insurance announced that it would relinquish its status as the preferred negotiation partner.
Financial authorities and the Korea Deposit Insurance Corporation noted, "We plan to respond to this matter according to laws and principles." The Financial Services Commission and others stated, "As the sale process has been delayed, the financial soundness indicators of MG Non-Life Insurance have continued to deteriorate, and there are growing concerns in the market about the independent survival of MG Non-Life Insurance."
If MG Non-Life Insurance is liquidated or bankrupt, 1.24 million policyholders (with 1.56 million contracts) will inevitably suffer. The Korea Deposit Insurance Corporation also stated in January, "In the event of liquidation or bankruptcy, there is a possibility of direct damage to policyholders."
If liquidation or bankruptcy is decided, 1.24 million will receive compensation of up to 50 million won according to the Depositor Protection Act, and the insurance contracts maintained thus far will be forcibly terminated.
However, financial authorities may promote the transfer of contracts to protect policyholders. The transfer refers to the division of contracts held by MG Non-Life Insurance among several insurance companies. In 2001, Regent Insurance, designated as a failing financial institution, failed to sell and subsequently transferred contracts to five insurance companies, including Samsung Fire & Marine Insurance and Hyundai Marine & Fire Insurance, and was declared bankrupt by court ruling in 2003.