MG Insurance is back on the market, but finding a new owner might not be easy

[Financial News] MG Insurance has been put back on the market for mergers and acquisitions (M&A), but it is expected to be difficult to find a new owner in the market. The attractiveness of the insurance industry is not what it used to be due to falling interest rates and a low-growth trend, and it is evaluated as less competitive compared to other insurance companies that are also up for sale. Therefore, the possibility of policy financial institutions being mobilized is also being raised.
According to the financial industry on the 13th, the Financial Services Commission recently approved the conditional insurance business license of a bridge insurance company (tentatively named Yebyeol Insurance) fully funded by the Korea Deposit Insurance Corporation. The bridge insurance company is a temporary entity established to stably maintain and manage MG Insurance's insurance contracts, focusing on managing insurance contracts for the next two years. 
At the same time, financial authorities have decided to conduct a due diligence on MG Insurance's assets and liabilities and simultaneously search for potential acquirers and confirm their acquisition intentions.
However, the financial sector has a negative view on the possibility of MG Insurance's resale. The attractiveness of insurance industry assets is declining amid the trend of interest rate cuts. After the application of transitional measures in the first quarter, the solvency ratio (K-ICS) of insurance companies fell below 200% to 197.9% for the first time in about 23 years. It is widely expected that this year's performance will also be poor.
In particular, MG Insurance is in a worse situation compared to other insurance companies currently on the M&A market. Lotte Insurance has a K-ICS of 119.9% and relatively larger asset size. MG Insurance suffers from accumulated long-term insolvency, low profitability, lack of sales channel competitiveness, and overall significantly lower competitiveness. In addition, the demand for employment succession from the labor union adds to the inevitable burden of significant additional costs after acquisition.
An insurance industry official said, "Given the current atmosphere, it is difficult to see a high possibility of MG Insurance's resale being successful," adding, "There is no place that has publicly expressed acquisition intentions, and even if there are places reviewing internally, it would be difficult to take action easily given the market conditions."
As a result, the possibility of government intervention is gaining weight. Some predict the involvement of IBK Industrial Bank. Since the new government took office, the financial authorities' stance has changed, and there may be a mood that policy financial institutions should step forward as acquirers rather than the private sector. In fact, during last year's parliamentary audit, IBK was asked about its intention to acquire MG Insurance. Also, IBK is operating mainly in pension insurance, so it needs to secure a comprehensive insurance license.
A financial industry official said, "Considering the costs, it is practically difficult to find a place with the capacity to acquire other than policy finance," he said.
coddy@fnnews.com Ye Byeong-jeong Reporter