November 22, 2024

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(MG Non-Life Insurance)

MG Non-Life Insurance's third attempt to find a new owner has failed amid concerns over its financial stability.

Samjong KPMG, the lead advisor for the insurer's sale, conducted the final bidding on Friday, but no participants showed up, according to sources in the financial sector.

Local private equity fund Dayli Partners and US-based JC Flowers were likely contenders, having participated in the preliminary bidding. However, neither showed up for the final round. Under current law, only companies that took part in the preliminary bidding can participate in the final bidding.

MG Non-Life Insurance, the country's 10th-largest non-life insurer, has local private equity firm JC Partners as its largest shareholder with a 95.5 percent stake.

However, after the Financial Services Commission designated the insurer as an insolvent financial institution in April 2022, the state-run Korea Deposit Insurance Corporation took control of the firm's public sale auction.

Last year, the KDIC held two preliminary biddings, both failing due to a lack of contenders.

Market watchers attribute the lack of interest to concerns over the insurer's deteriorating financial stability.

Financial authorities recommend that insurance companies maintain a solvency ratio of over 150 percent to ensure capital soundness. However, MG Non-Life's solvency ratio was only around 43 percent in the first quarter this year, significantly lower than the recommended level and down from 77 percent at the end of last year.

Approximately 1 trillion won ($718.6 million) is estimated to be needed to normalize the insurer after its acquisition.

Reports indicate that the KDIC was willing to support the sale with 400 billion to 500 billion won. Even with this support, the potential buyer would need around 800 billion won to purchase and normalize the troubled insurer.

The estimated sale price of the insurer is between 200 billion and 300 billion won.

With another failed attempt at a purchase, the KDIC is reportedly considering liquidating MG Non-Life Insurance.

By Choi Ji-won (jwc@heraldcorp.com)