Meritz ascends to become No. 3 financial group

Meritz Financial Group's headquarters in Seoul (Meritz Financial Group)

Meritz Financial Group on Tuesday completed the process of incorporating its nonlife insurance and brokerage affiliates into the group, making it the third-largest financial conglomerate in Korea.

After the consolidation, the group's market capitalization is expected to extend to over 9 trillion won ($6.73 billion). Only KB Financial Group (19.85 trillion won) and Hana Financial Group (12.31 trillion won) are estimated to have higher market capitalizations.

The group's decision to incorporate the two affiliates -- Meritz Fire & Marine Insurance and Meritz Securities -- was announced in November last year.

During the delisting process, stock owners of Meritz Fire & Marine Insurance and Meritz Securities were granted a proportional amount of Meritz Financial Group stock based on the number of shares they previously held. This was necessary because both of the subsidiaries were listed on the main benchmark Kospi prior to their incorporation into Meritz Financial Group.

The process of granting new shares to the stockholders of Meritz Fire & Marine Insurance and Meritz Securities was completed on Feb. 21 and Tuesday, respectively.

Meritz Financial Group is a holding company that was established in March 2011 after spinning off from Meritz Fire & Marine Insurance.

Since the company used to only hold partial stakes in its two subsidiaries, it often caused conflicts of interest with different demands from different companies' shareholders, the group said.

“There were many missed investment opportunities due to the conflicting interests of different affiliates,” Meritz Financial Group Vice Chairman and CEO Kim Yong-beom said when announcing the incorporation in November.

The group also expects that the incorporation will increase capital allocation efficiency and enhance the group's financial flexibility.

Following the incorporation, industry insiders anticipate that Meritz Financial Group will focus on taking steps to maximize shareholder value, including expanding its dividend payout ratio this year.

Earlier this year, the group promised to allocate 50 percent of its net profit for the medium to long term to dividends and share buybacks. This level of commitment surpasses the average shareholder return rate of the past three years for Meritz Financial Group, Meritz Fire & Marine Insurance and Meritz Securities, which were approximately 27.6 percent, 39.7 percent and 39.3 percent, respectively.

Meanwhile, Meritz Financial Group's stock prices have been on the rise, fueled by anticipated benefits from its incorporation.

On Tuesday, Meritz Financial Group's stock closed at 45,600 won, up 250 won from the previous trading day.

By Song Seung-hyun(ssh@heraldcorp.com)