Meritz’s many merits
Cho Jung-ho (51) ?Chairman of Meritz Financial Group and Meritz Fire & Marine Insurance ?Bachelors in economics, University of Southern California ?MBA, International Institute for Management Development in Switzerland
Named Joseon Hwajae (Fire) insurance, the insurer started providing cover for houses, farmland and business properties against fire, flood and other unexpected disasters in the early 20th century Korea. Nearly nine decades later, the company is still alive, only with a different name and four sister companies under the group called Meritz Financial Group.
The financial group, led by the fourth son of the Hanjin Group founder, is now working hard to establish itself as a well-rounded financial organization whose operations stretch from general insurance to stock brokerage, investment banking and even asset management. The company is trying to achieve a long-anticipated goal: reinventing itself as a full-fledged financial holdings giant.
The history of Meritz group dates back to early 20th century Korea when a group of Korean businessmen and financiers got together in Seoul to build their first general insurer in competition against Japanese insurers operating in the country at the time. In 1922, they garnered a regulatory approval from Japan’s colonial authorities to open a general insurer. There were 383 shareholders. The company even started to provide car insurance, which was a novelty back then, because there were so few private cars.
Meritz Fire & Marine Insurance employees are posing with members of Holt Ilsan Center after donating fresh vegetables, fruit and rice the company bought from farmers in Yeoju, Gyeonggi in June to the center as part of its years-long campaign to revitalize the regional rural economy. Provided by the company
The subsequent Korean War (1950-1953) dealt a big blow to the insurer along with most other companies, but the firm managed to list its shares on the Seoul stock market in 1956, the first general insurer here to do so.
The following years were a series of disappointments, though, as Ewha Womans University bought the firm in 1958 but showed little interest in management and only viewed the firm as part of a financial investment.
The insurer, renamed Oriental Fire & Marine Insurance, was even taken over by Samsung Group in the 1960s when the group bought Oriental Life Insurance, which had a controlling stake in Oriental Fire.
The takeover changed everything for the insurer as Hanjin back then had just bought what would become Korea’s largest airline operator, Korean Air, and several other transportation-related subsidiaries. That meant there was more demand for all kinds of insurance policies to protect their operations and employees. Oriental Fire’s business flourished and soon became the industry number one.
Korea’s rapid economic growth in the 1970s also triggered an explosive demand for more insurance policies to cover manufacturing, exports, imports, construction projects and all other booming industrial activities.
In 1976, the firm posted annual sales of 10 billion won ($7.9 million), a first for a Korean general insurer.
The company’s market presence, however, started to shrink in the 1980s amid cutthroat competition from new players and foreign firms taking a foothold in Korea, chronic labor-management disputes and mounting losses from the auto insurance unit.
Another breakthrough came in 2005 when the firm was formally spun off from Hanjin Group’s business network. Cho Jung-ho, the fourth son of Hanjin Group founder Cho Joong-hoon, was announced to run the insurer from then on. After renaming Oriental Fire to Meritz Fire and Marine Insurance, Cho took several other financial subsidiaries under Hanjin Group with him, creating a small group of financial companies under a group nearly named Meritz, a combination of the word “merit,” and an extra letter S on the plural form; the company says this means “a lot of merits” the group can offer to customers. Now Meritz Fire is the fifth largest general insurer in the country with assets worth nearly 5 trillion won.
Meritz group also has formed a new subsidiary of its own, adding more items to its portfolio that now encompasses Meritz Fire & Marine Insurance, Meritz Securities, Meritz Investment Bank, Meritz Asset Management and Meritz Financial Information Service.
Each subsidiary is loosely linked to each other as the group, still a relatively nascent player, has not taken a solid holdings company format yet. Meritz Fire’s Chief Executive Mike Wohn indicated in 2007 that the group would make preparations to take a holding company format within four years.
The group so far has taken none of the major necessary steps for doing so. But analysts expressed an upbeat view on the group’s flagship insurance unit. Meritz Fire, which posted a net loss of nearly 100 billion won in 2008 due to the sweeping credit crunch, recently showed signs of recovery. It posted a net profit of 17.9 billion won in May, up by 157 percent from a year earlier, racking up a net profit of more than 35 billion won through April and May.
“I expected the company to reap net profit of about 34.9 billion won from April to June, but it actually achieved the goal within just two months,” said Han Seung-hee, analyst at Woori Investment & Securities. “The firm is likely to be the first general insurer here that would recover from the aftermath of the recession.”
A quick glance through the group’s executives reveals a batch of longtime industry experts with shiny credentials from foreign business schools and other financial companies, indicating the nascent group’s focus on bringing in new blood and leadership with global perspectives.
Cho Jung-ho, the chairman of the group and the flagship Meritz Fire & Marine Insurance unit, earned his M.B.A from the International Institute for Management Development in Switzerland, before assuming key roles in various financial subsidiaries under Hanjin Group, including a stock brokerage and general insurer, for two decades.
Mike Wohn, the vice chairman and chief executive of Meritz Fire & Marine Insurance, is a major figure in the local insurance industry. He worked for various financial firms here and abroad including MBNA America Bank, Harleysville Insurance Group, Hanvit Bank, Seoul Bank and Samsung Fire & Marine Insurance before joining Oriental Fire in 2005.
Kim Ki-bum, chief executive of Meritz Securities, is a longtime fixture in the local banking and stock brokerage industry. He worked for Citibank Korea and Daewoo Securities through 1980s and 90s before taking in 2001 the top seat at Korea-French Banking Corp. under Hanjin Group, which later became Meritz Securities.
Kim Dong-hun, chief executive of Meritz Investment Bank, also worked for Citibank Korea for more than two decades before joining Korea-French Banking Corp in 2001 and later took the top seat at Meritz Investment Bank in 2007.
Cho Sung. W, chief executive of Meritz Financial Information Service, is a veteran IT professional who has served in various IT-related positions in companies including Arthur Anderson, KPMG, Oracle Corp. and SAP Korea, before joining Korean Air as the executive in charge of IT strategies.
Kang Myun-wook, chief executive of Meritz Asset Management, has also worked for Shinhan BNP Paribas Asset Management and served as the chief of ABN Amro’s Seoul office before joining the Meritz group as lead asset manager.
By Jung Ha-won [hawon@joongang.co.kr]
with the Korea JoongAng Daily
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