Lee Soo-chang
CEO of Samsung Life Insurance |
By Yoon Ja-young
Staff Reporter
Samsung Life Insurance is facing a bumpy road ahead in its effort to get listed on the main bourse as its policyholders are moving to file a lawsuit against the insurer, demanding that they receive a portion of the profit from the listing.
The Korea Insurance Consumer Federation recently announced that it plans to take the insurer to court, requesting that it share its capital gains from the listing with subscribers of participating policies.
Participating policies, or with-profits policies, refer to insurance products that pay out dividends to holders. Subscribers to such products generally pay higher insurance premiums than non-participating policy holders.
While most insurance policies were participating policies decades ago, they came to be replaced by non-participating policies over time. Currently, very few participating policies remain.
Cho Yeon-haeng, director of the Korea Insurance Consumer Federation, said life insurers that sold participating policies and have policyholders' money as retained earnings are a problem here, picking Samsung and Kyobo.
The federation is demanding that Samsung distribute 87.8 billion won as new shares to policyholders. Currently, around 8,000 Samsung policyholders have joined the lawsuit. Cho expected the figure to breach 10,000 before it files the lawsuit early next year.
Samsung Life Insurance, however, has a different idea. "We don't know why it is an issue here again. The Listing Advisory Committee for Life Insurers already concluded in 2007 that policyholders are not entitled to share the profits," a Samsung spokesman said.
"Tong Yang Life Insurance had no such problem. We believe the federation is intentionally attacking Samsung," he said.
Policyholders have been the biggest obstacle in life insurers' efforts to get listed, as some have called for profit-sharing from the listing.
The government agreed that the policyholders contributed to the life insurance companies, but took the life insurers' side in 2007 by concluding that policyholders are not entitled to share the profits.
The life insurance companies set up a 1.5-trillion-won social contribution fund, but NGOs criticized the move as an attempt silencing the policyholders' requests.
The huge gain expected from Samsung's listing has rekindled the dispute. The shares of Samsung Life Insurance, which traded at below 500,000 won in the over-the-counter market early this month, have neared 800,000 won upon the news of Samsung planned listing efforts.
Former Samsung Group Chairman Lee Kun-hee, the largest shareholder of the life insurer, is expected to see the value of his stake reach 3 trillion won. Samsung Life executives and employees are also expected to hit the jackpot thanks to the listing. They got the shares at 5,000 won per share in 1999, with each getting 180 shares on average. This means each will reap some 130 million won in profit, on average.
"The company piled up the dividend for subscribers of participating policies instead of paying out. It is, however, very complicated to give the subscribers their stake," said an insurance market analyst who declined to be named.
He pointed out that it is difficult to reach all the policyholders and determine how much each of them will get. The complications made the government come up with a compromise - for life insurers to set up a social contribution fund to return part of the profit to society.
"The policyholders' demand is not groundless, but sharing the profit with them is very difficult in reality. I think the social contribution fund was the right solution," he said.
The problem regarding profit sharing started when Samsung Life reassessed its assets, including buildings. The increase in book value left the insurance company with 292.7 billion won profit. The government determined that Samsung's policyholders hold 70 percent of the profit, while the shareholders hold 30 percent.
However, 87.8 billion won among the profit was retained within Samsung Life Insurance though it belongs to policyholders.
"Samsung did share profit from asset management with policyholders, but it didn't share the capital gain while they bought the building with the money of policyholders. We are requesting that policyholders get part of it before shareholders get it all," Cho said.
He points out that life insurance companies were managed like mutual companies ― where subscribers have ownership ― though they are categorized here as corporations.
"When loss is incurred, shareholders are supposed to fund it but insurance companies here would use the dividend of policyholders to fund it instead," he said.
chizpizza@koreatimes.co.kr
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