MG Non-Life Insurance's headquarters in Seoul / Yonhap

Meritz Fire & Marine Insurance abandoned its acquisition of MG Non-Life Insurance on Thursday, after facing strong opposition from the latter's labor union, industry officials said.

MG Non-Life Insurance was designated as a financially troubled institution by the Financial Services Commission (FSC) in April 2022 and put up for sale by the state-run Korea Deposit Insurance Corp. (KDIC). This marks the fifth failed attempt to sell the company.

Officials noted the latest acquisition failure increases the likelihood of MG Non-Life Insurance facing liquidation or bankruptcy.

Meritz said in a statement it was selected as the preferred bidder for a purchase and assumption (P&A) of MG Non-Life Insurance by the KDIC on Dec. 9, but decided to forfeit its status "due to differences in stance[s] between the parties involved."

After being selected as the preferred bidder, the non-life insurance arm of Meritz Financial Group attempted to conduct due diligence for the acquisition, but MG's union strongly opposed the process, physically blocking officials from entering its headquarters.

The union demanded the withdrawal of the P&A process, which does not include employment succession obligations, and instead called for a merger and acquisition approach that would take over both assets and liabilities.

On March 4, Meritz proposed its final terms, including a 10 percent job guarantee for employees and a total of 25 billion won ($17 million) in severance compensation for nonretained workers.

As the union rejected the offer, Meritz decided to forfeit its status as the preferred bidder.

Following Meritz's withdrawal, the FSC, the Financial Supervisory Service and the KDIC issued a joint statement, noting the prolonged sales process had led to a continued deterioration in MG Non-Life Insurance's financial soundness and overall business environment.

"Concerns are growing in the market over MG Non-Life Insurance's ability to survive independently, and the government is taking them seriously," the statement read. "We will respond to this matter in accordance with laws and principles."

The KDIC plans to first conduct a market survey to identify potential buyers. However, given that five previous sales attempts have already failed, many believe that finding a new bidder will be challenging.

This increases the risk of MG Non-Life Insurance's liquidation or bankruptcy, heightening concerns among its 1.24 million policyholders.

If this happens, policyholders will be able to receive refunds within the limits of deposit protection but will incur losses beyond that coverage. Meanwhile, all MG Non-Life Insurance employees will lose their jobs.