It has been reported that the financial authorities' renewed push for the sale of MG Insurance was mediated by the Democratic Party of Korea, which partially represented the claims of the MG Insurance labor union. Assessments suggest that trust has diminished as the decisions of the financial authorities were altered due to the labor union's protests and intervention by the political sector. MG Insurance subscribers express concerns, saying, "I don't know what will happen in the future if we are dragged along by what the union wants."
On the 1st, according to the insurance industry and others, the Financial Services Commission, Korea Deposit Insurance Corporation (KDIC), and the union agreed the previous day to re-initiate the sale of MG Insurance. They plan to proceed with the originally scheduled transfer of contracts without delay but will separately seek a buyer for MG Insurance during this period.
The financial authorities plan to establish a bridge insurance company in the third quarter of this year as scheduled. A due diligence process will then proceed to transfer contracts held by MG Insurance to five different property and casualty insurance companies by the end of 2026. If a buyer for MG Insurance emerges during this process, the bridge insurance company (MG Insurance) will be sold. Conversely, if no buyer appears, the contract transfers will continue as planned. The end of 2026 is thus the deadline for the sale of MG Insurance.
The union reportedly formulated this agreement after discussions with the Democratic Party of Korea's Euljiro Committee, chaired by lawmaker Min Byeong-deok. Earlier, on the 10th of last month, Min visited the government complex where the union was on a hunger strike to convince them to end their protest. Min stated, "This situation is not merely a case of corporate failure, but structural problems stemming from the financial authorities' failures in supervision and policy judgment."
The union also communicated with lawmaker Kim Hyun-jung of the Democratic Party of Korea regarding issues related to MG Insurance. Kim previously served as the chairperson of the Korean Confederation of Trade Unions (KCTU), the union to which the MG Insurance labor union belongs. It is reported that Kim visited the union's protest site immediately after Lee Jae-myung was confirmed as the president-elect.
The union has pressured the financial authorities to prioritize job security since MG Insurance was designated as a distressed financial institution in 2022. Meritz Fire and Marine Insurance attempted to acquire MG Insurance, but obstructed due diligence on the grounds that a transfer (P&A) method without employment succession obligations was not permissible. Even Financial Services Commission Chairman Kim Byung-hwan warned that "there are no options left," but this did not resonate.
The union also protested in the streets, arguing that the financial authorities' plan for a transfer of contracts following the establishment of the bridge insurance company does not guarantee employment. They contend that even if the bridge insurance company employs some MG Insurance employees, employment will again be uncertain once the contract transfers are completed.
Despite claims from the union and political circles, the insurance industry points to mismanagement and the complacent response of major shareholders as the reasons for MG Insurance's deterioration. The private equity firm JC Partners, which was the major shareholder of MG Insurance, failed to fully implement its commitment of a capital increase of 150 billion won and issuance of new capital securities promised to the financial authorities. In the meantime, MG Insurance's liabilities exceeded its assets by more than 110 billion won according to liquidation standards. As a result, MG Insurance was designated as a distressed financial institution.
The insurance industry is evaluating the likelihood of a sale of MG Insurance as low. Given the prolonged deterioration of its financial status and the need to accept the union's demand for job succession, the situation requires significant capital input rather than presenting any synergy. Major property and casualty insurance companies have expressed hesitance even about receiving a portion of the contracts held by MG Insurance, stating it could lead to "losses."
As of the first quarter of this year, MG Insurance's total equity is -244.1 billion won, indicating a state of complete capital impairment. This means that liabilities exceed the company's total assets, equivalent to being in a state of insolvency. In particular, the solvency margin ratio, a vital health indicator, stands at -18.2% after provisional measures. To bring this up to the legal standard (100%), astronomical amounts of funding would need to be injected.
Subscribers are frustrated with the financial authorities for accommodating the union's unrealistic claims regarding the resumption of the sale of MG Insurance, given the improbability of the sale's success. A 30-something male subscriber, Mr. A, cited as a holder of comprehensive health insurance from MG Insurance, remarked, "I felt disappointed seeing the financial authorities yielding to the corporate union," adding, "I do not know whether I should terminate my contract and subscribe to another product, or if it is okay to keep waiting." In a group chat with 1,500 other MG Insurance subscribers, voices of sarcasm and self-mockery emerged, saying things like, "Do they get everything they want if they throw a tantrum?" and "If I get fired from the company, will the government take responsibility?"