The Korea Deposit Insurance Corporation (KDIC) has reportedly entered procedures to sell 'Yebyeol Non-Life Insurance,' a bridge insurer for MG Non-Life Insurance. The KDIC is proceeding with the transfer of contracts from MG Non-Life Insurance through Yebyeol Non-Life Insurance while simultaneously searching for a buyer by the second half of next year.
According to the financial sector on the 18th, the KDIC is in the process of selecting an internal advisor for the sale of Yebyeol Non-Life Insurance. The KDIC decided to proceed with a public sale as soon as the asset and liability contracts of MG Non-Life Insurance are fully transferred to Yebyeol Non-Life Insurance. Yebyeol Non-Life Insurance will complete the contract transfer at the beginning of next month and begin operations.
In July, the KDIC established a bridge insurer to facilitate the transfer of contracts from MG Non-Life Insurance and decided to pursue the transfer of contracts and public sale concurrently with five domestic non-life insurance companies. Initially, the government aimed to liquidate MG Non-Life Insurance and only proceed with contract transfers through the bridge insurer. However, after strong opposition from the MG Non-Life Insurance union, the Democratic Party of Korea intervened, ultimately agreeing to pursue both the contract transfer and sale simultaneously.
The market views the likelihood of a successful sale as low. MG Non-Life Insurance has attempted to sell itself five times since being designated a troubled financial institution in 2022, but all attempts failed. It later switched to a negotiated contract method and selected Meritz Fire & Marine Insurance as the preferred negotiator. However, the union opposed the sale by obstructing due diligence, leading Meritz Fire & Marine Insurance to abandon the acquisition in March.
As of the first quarter of this year, MG Non-Life Insurance's total capital stands at -244.1 billion won, indicating complete capital erosion. The solvency ratio (K-ICS) is -18.2%, significantly below the legal standard of 100%. The buyer will need to inject capital ranging from hundreds of billions to up to 1 trillion won to normalize operations after acquiring Yebyeol Non-Life Insurance. When Meritz Fire & Marine Insurance sought to acquire MG Non-Life Insurance, it planned to allocate 500 billion won in government support along with an additional 500 billion won, totaling 1 trillion won, for the company's normalization.
The KDIC plans to transfer contracts to five non-life insurance companies by the end of next year after establishing Yebyeol Non-Life Insurance. If a buyer is not found during this period, the contracts will be transferred as scheduled to the five non-life insurance companies.
An investment banking (IB) industry source said, "Since the capital soundness of MG Non-Life Insurance has worsened compared to when Meritz Fire & Marine Insurance pursued the acquisition, more capital injections will be necessary," adding, "Even if a buyer steps forward, they are likely to demand large-scale government funding. No corporations will acquire it without government support."