Business - The Korea Times

Insurers sell real estate ahead of new accounting rules

By Kim Bo-eunShinhan Life Insurance's headquarters in central Seoul / Captured from websiteInsurers are rushing to sell their buildings ahead of the introduction of new accounting standards. The Korean-Insurance Capital Standards (K-ICS), set to go into force in 2023, applies stricter standards on the financial health of insurers, which calls for them to increase their capital base. Insurers need to secure additional capital for the real estate they own for the case where the price of the real estate falls. Under the new standards, insurers will need to hold 2.5 billion won for a real estate property worth 10 billion won, up from the 900 million won they are currently required to have.Shinhan Life Insurance is looking to sell “L Tower,” the building where its headquarters are located in central Seoul. A Shinhan Life official said Monday the company is not in a position to comment, but expectations in the industry are that Shinhan Financial Group's affiliate investing in real estate, Shinhan Reits Management, is set to take over the building.This comes after Hyundai Marine

Aug 10, 2020By Kim Bo-eun

Insurers sell real estate ahead of new accounting rules

China Taiping faces lawsuit from Shinhan, Arumdree

The logo of China Taiping InsuranceBy Park Jae-hyukChina Taiping Insurance is facing a legal battle with Shinhan Bank and Arumdree Asset Management over its refusal to pay a 24 billion won ($20 million) insurance claim submitted by the latter, according to industry officials, Monday.The Chinese insurer was supposed to fully cover Arumdree for possible losses on two private equity funds (PEFs) worth 24 billion won and 23 billion won, respectively. These funds had been invested in accounts receivable that Singaporean commodity trader Agritrade International was supposed to receive from its buyers.Arumdree was in charge of the management of the funds, while Shinhan “sold” contracts that attracted 90 wealthy customers including 10 corporations, after promising them a 3.7 percent annual return. Each customer invested at least 300 million won in the funds.The 24 billion won fund matured in May, but no redemption was given as Agritrade had declared a moratorium in February. The moratorium came after many of the company's buyers raised questions over the authenticity of the accou

Aug 10, 2020By Park Jae-hyuk

China Taiping faces lawsuit from Shinhan, Arumdree

Will Korean Re dominate in co-insurance?

By Kim Bo-eunKorean Re CEO Won Jong-gyuAttention is growing over whether local reinsurer Korean Re will be able to dominate in the new business of co-insurance, after it set up a partnership with the U.S. investment firm Carlyle Group. Carlyle is one of the world's largest investment firms with $221 billion in assets under management.Korean Re dominates the local reinsurance market, taking up about 60 percent of market share, with foreign entities taking up the rest.However, Korean Re has no experience in co-insurance as the business was only enabled recently after the authorities revised regulations as a means to alleviate the problems facing life insurers.Life insurers here that hold the bulk of high, fixed interest rate policies face reverse margins as the key rate has been lowered to close to 0 percent. Under the system of co-insurance, insurers are able to transfer risks associated with their insurance policies, including interest rate risks, to reinsurers.This is a dire task because insurers face the introduction of international financial reporting standards (IFRS) 17 in 2023.

Aug 9, 2020By Kim Bo-eun

Will Korean Re dominate in co-insurance?

Shinhan strengthens ties with SK

Shinhan Financial Group Chairman Cho Yong-byoung, left, and SK Group Chairman Chey Tae-won / Courtesy of each company By Park Jae-hyukShinhan Financial Group and SK Group are enhancing their ties in various fields, after Shinhan Chairman Cho Yong-byoung and SK Chairman Chey Tae-won met each other in November 2018 and decided to raise a 20 billion won ($16 million) private equity fund to invest in social enterprises.According to industry officials, Friday, Cho will attend the Social Value Connect (SOVAC) event that SK will host in September to discuss how businesses can create social value. At the SOVAC event, the two chairmen are expected to talk about their thoughts on corporate social responsibility online.Chey has been recognized for his efforts to create social value. Cho has also emphasized management regarding environmental, societal and governance (ESG) factors that are mentioned in the 2019 Shinhan Financial Group Social Responsibility Report published in Ju

Aug 8, 2020By Park Jae-hyuk

NH Investment mulls over how to compensate Optimus fund investors

Headquarters of NH Investment & Securities / Courtesy of NH Investment & SecuritiesBy Anna J. ParkNH Investment & Securities seems to be in a quandary over how to compensate scandal-ridden Optimus fund investors. CEO Chung Young-chae and other officials at the company held hours-long talks with representatives of the fund investors at the firm's headquarters Thursday, but could not reach a deal.An official of the firm explained that as key decisions must be approved by the company board, Thursday's meeting was aimed at fully listening to investors' opinions on compensation. An extra board meeting is slated to be held Aug. 27. “There have been weekly meetings between investors and company officials since Optimus Asset Management failed to redeem the funds,” the official said. “The firm is trying its best to minimize the damage to affected investors. As it could take a few more months to completely confirm the size of the funds' losses, the firm is considering ways to provide emergency liquidity to investors,” the official added. The brokerage attrac

Aug 7, 2020By Anna J. Park

NH Investment mulls over how to compensate Optimus fund investors

Competition intensifies between internet banks

By Kim Bo-eunCompetition is expected to heat up between the nation's two internet-only banks with K bank looking to challenge Kakao Bank's leading position through the launch of innovative products following a boost in its capital base.The gap between the two widened greatly after K bank virtually suspended operations for over a year due to a lack of capital, as it faced issues regarding its shareholder structure.K bank was launched as Korea's first internet-only bank in April 2017, followed by Kakao Bank in July the same year. The latter had an advantage as an affiliate of the IT conglomerate Kakao, a brand familiar to the public due to the dominant mobile messenger app Kakao Talk.Kakao Bank's business is growing rapidly. With over 12 million users, the lender posted a 26.8 billion won net profit in the second quarter, double its figure for the whole of 2019. The bank's net profit for the first half came to 45.3 billion won, a 372 percent surge from earnings from the same period of last year. Kakao Bank attributed this to increased interest income from the growth in loans. The lende

Aug 7, 2020By Kim Bo-eun

Competition intensifies between internet banks

Mirae Asset Daewoo Securities logs record-high quarterly net profit

Headquarters of Mirae Asset Financial Group in central Seoul / Courtesy of Mirae Asset Finnacial GroupBy Anna J. ParkMirae Asset Daewoo Securities reported its strongest-ever quarterly net profit of 304 billion won ($257 million) during the second quarter, up 38.6 percent, year-on-year.On a quarter-on-quarter basis, the country's top-tier brokerage saw a whopping 184 percent increase in terms of net profit during the given period. Mirae Asset Daewoo generated an operating profit of 387.1 billion won for the three months ended June 30, a jump of nearly 48 percent year-on-year, or 179.2 percent quarter-on-quarter.This is a historically high quarterly profit after Mirae Asset Securities acquired Daewoo Securities back in 2016 and renamed it Mirae Asset Daewoo.“Our brilliant second-quarter performance was largely thanks to increased brokerage commissions coming from massively expanded stock trading volume. A solid increase in operating financial investment products such as domestic and overseas bonds and over-the-counter (OTC) derivatives, as well as stable growth from overseas bra

Aug 6, 2020By Anna J. Park

Mirae Asset Daewoo Securities logs record-high quarterly net profit

Is Shinhan's loss provision staying at sound level?

Headquarters of Shinhan Financial Group / Courtesy of Shinhan Financial GroupBy Anna J. ParkThis year has been rough for Shinhan Financial Group, with the company still mired in investigations and lawsuits about its mis-selling of fund products, such as those of Lime and Heritage. This is in contrast to the end of last year, which Shinhan finished as the nation's most profitable financial group with an annual net profit of 3.4 trillion won ($2.8 billion), pushing KB Financial Group to second place.Due to a series of controversial fund sales involving its affiliates, the financial group had to put aside its largest provision for losses during the first half to dispel market concerns about fiscal soundness. Shinhan deposited 538.7 billion won ($454 million) worth of loss provisions during the second quarter alone, which is a 90.5 percent increase from the previous quarter. This is the largest amount of loss reserves among the five major financial groups in Korea ― 821 billion won when combined the first and second quarters. While the amount seems large, it is an aggregation of reserves

Aug 6, 2020By Anna J. Park

Is Shinhan's loss provision staying at sound level?

Samsung Life embroiled in troubled gold-related DLS

Samsung Life Insurance's headquarters in southern Seoul. / Korea Times fileBy Kim Bo-eunInsurers have remained unaffected by the latest series of scandals involving private equity funds (PEFs), as the products were distributed mainly by banks and brokerages. However, Samsung Life Insurance has come under scrutiny after it notified investors of a gold-related derivative-linked securities (DLS) product last week redemptions have been suspended. Samsung Life sold the bulk of the product that incorporated a letter of credit between firms importing and exporting gold as the underlying asset. Redemptions for products that reached maturity at the end of last month were halted after NH Investment & Securities, which drew up the product, notified the insurer of liquidity issues triggered by COVID-19. The investments were managed by the Hong Kong-based Universe Asia Management.Samsung Life notified investors last month that they would be able to redeem their investments that reach maturity at the end of July by May next year, based on the notifications from NH.The issue for Samsung Life as

Aug 6, 2020By Kim Bo-eun

Samsung Life embroiled in troubled gold-related DLS

Banks refraining from sales of risky fund products amid scandals

Members from Korean Finance & Service Workers' Union stage a protest in front of Cheong Wa Dae in Seoul on July 29, urging the presidential office to settle a series of disputes over financial scandals surrounding mis-selling of some risky private equity funds. YonhapBy Lee Min-hyungDomestic commercial banks here are suspending sales of risky financial products ― mostly private equity funds (PEFs) ― amid unceasing scandals surrounding lenders' involvement in the mis-selling of such high-risk, high-return investment funds, officials said Wednesday.Major banks have for years raked in hundreds of billions of won in commissions from sales of PEFs to individual investors. With financial authorities starting to ease regulations in 2015, lenders have been able to sell PEFs to customers at most sales offices. For them, sales of the products were seen as an optimal source of non-interest revenue amid the prolonged economic slowdown.But banks are on track to discontinue sales of the profitable income source after a number of banks found themselves mired in controversy over the so-called &l

Aug 5, 2020By Lee Min-hyung

Banking & Finance