Press Release (Korea Guarantee Insurance Company and

The Hankuk Fidelity & Surity Company) of September 16,1998

Merger of the Korea Guarantee Insurance Company

and the Hankuk Fidelity & Surety Company

Corporates, large and small, as well as individuals were hit hard by the stagnant domestic economy owing to the current financial turmoil. As a result, Korea Guarantee Insurance Company and Hankuk Fidelity & Surety Company have been confronted with the worst management crisis ever since the start of operations.

As a way to resolve serious management problems at the two companies and to return to normal operations in a timely manner, the two fidelity/surety insurance companies have decided to merge, aiming at the early recovery of the fidelity/surety insurance function and financial market stabilization.

These two companies have decided to join together on an equal basis on November 25, 1998 and will install a merger steering committee to draw up other details and related work plans. On September 12, 1998, Korea and Hankuk had already submitted to the Insurance Supervisory Board a revised rehabilitation plan. It indicates not only merger plan, but also details on liquidity enhancement measures and self-rescue plans that include downsizing of staff and organizational structure, wage-cuts etc.

This merger is to be pursued to accomplish the following,

o to secure sufficient level of liquidity

·uncollected claims will be sold to KAMCO, thereby providing the two companies with the opportunity to secure a sufficient level of liquidity, allowing operations to improve eventually and start recording surplus within the next two years

·in several years the merged fidelity/surety insurance company will be able to attain solvency

o to restore public confidence and to continue to provide fidelity/surety insurance services to customers

· with the recovery of public confidence, SMEs and individuals especially those lacking the ability to put up collateral will be supported as the merged company will be able to extend new policies to customers and to renew existing policies as usual.

o to maximize management efficiency

· by merging the two companies, unnecessary competition and an overlap of investment can be avoided.

· apparent adverse effects brought about by excessive competition will be resolved, whereas the company will benefit from a synergy effect by bringing together the two companies' resources and expertise.

Future Time Schedule

Merger Announcement Sept. 16, 1998

Resolution of Board of Directors Meeting/ Oct. 10 - 17, 1998

Signing of Merger Contract

Shareholders Meeting for the Approval of Merger Oct. 26 - Nov. 4, 1998

First Shareholders Meeting at Merged Company Nov. 24, 1998

Registration of Merged Company Nov. 25, 1998


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Structual Reform Planning Unit

Financial Supervisory Commission

Seoul, Korea