By Anna J. Park | The Korea Times | April 15, 2022
Woori Financial Group shows interest in taking over MG Non-Life Insurance
As MG Non-Life Insurance was declared insolvent this week, its ripple effects could now adversely influence the pre-arranged sale of KDB Life to JC Partners, a major shareholder of MG Non-Life.
During its regular meeting on Wednesday, the Financial Services Commission (FSC) decided to designate MG Non-Life as an insolvent financial institution, given that its debt exceeded its capital by 113.9 billion won ($92.9 million). This severe level of the debt-to-capital ratio meets the criteria for designation as an insolvent financial institution, as stated in the Act on the Structural Improvement of the Financial Industry.
It is the first time in eight years that the financial authority has labeled a financial company as insolvent. The last such case was the 2014 insolvency of Golden Bridge Savings Bank.
With this designation, the insurance company now must find a new owner. Green Non-Life Insurance ― the previous name of the company ― was also declared insolvent by the FSC and was acquired by MG Community Credit Cooperative in 2013.
Woori Financial Group is said to have shown interest in purchasing the company, according to sources in the investment banking industry, Thursday.
So far, the financial regulator has been asking the firm to execute various measures to normalize its management. Yet, considering the firm’s failure to follow through with the measures, the financial regulator viewed the insolvency designation as unavoidable.
While the financial regulator and the company are seeking a new owner via the selling process, MG Non-Life said its customers can continue their normal operations with the company regarding their insurance plans, as a move to minimize customer anxiety.
With MG Non-Life’s insolvency status, JC Partners’ acquisition plan for KDB Life is likely to be gravely hurt, market watchers say. The local private equity firm signed a deal with Korea Development Bank (KDB) in late 2020 to purchase the state-owned lender’s life insurance subsidiary as the only preferred bidder for the deal.
However, the private equity firm hasn’t still passed the FSC’s assessment process that aims to evaluate whether it is qualified to take over KDB Life. The failure on the part of JC Partners to follow through on its announced plans to secure the necessary capital to take over KDB Life was one of the main reasons behind the prolonged evaluation regarding its qualification for the takeover.
Given that being the major shareholder of an insolvent financial company is one of the major disqualifying grounds for such assessments, JC Partners might not be viewed as qualified to take over the insurance firm.
JC Partners, meanwhile, is strongly defiant of the FSC’s designation, vowing to seek an injunction on the FSC decision. Market watchers view that the completion of the deal is now impossible, although KDB officials say it’s still too early to reach any conclusions.