Market Listing for Insurance Firms
The Advisory Committee on the listing of life insurance companies ruled that life insurance companies could list themselves on the stock market. With this decision, life insurance companies are likely to list themselves on the stock market starting from the second half of this year.
The Advisory Committee on Listing Life Insurance Companies, which is affiliated to the Korea Exchange, announced this decision on Sunday.
The debate, spurred during the asset evaluation of Kyobo Life Insurance in 1989, is finally over after 18 years.
The final blueprint for the listing of life insurance companies will be applied when a life insurance company first lists itself on the stock market after amendments of the enlisting regulations of Korea Exchange and receiving authorization from the Financial Supervisory Commission in February.
Life insurance companies get the go-ahead-
The four issues that could have kept insurance companies from enlisting were the characteristics of life insurance companies, whether the insurance holders should receive stock dividends, how to deal with retained earnings, and separate account management.
The committee ruled that life insurance companies have the characteristics of a public company, limiting policyholders to receive only dividends and not stocks. It pointed out that past insurance holders received enough dividends and that they do not need to receive any more dividends.
On the 154 billion won that Samsung Life Insurance and Kyobo Life Insurance earned after appraising their assets to prepare for past enlisting attempts, the committee ruled that the companies can spend the retained earnings as stock dividends within five years after enlisting.
The committee ruled that life insurance companies are free to decide what to do with the profits Samsung Life Insurance (30-100 billion won) and Kyobo Life Insurance (5-60 billion won) earned by investing retained earnings since 1998 and did not pay out as insurance dividends. It also concluded that the companies do not need to introduce separate management of accounts (a method that requires insurance companies to hold two separate accounts for insurance holders with dividend-paying insurance contracts and those with no dividends) before listing.
Samsung Life Insurance is not planning to list this year-
Life insurance companies like Kyobo, Dongbu, Samsung, Hungkuk, and Shinhan are the companies who are eligible to list before the closing of accounts in March. Of these companies, Kyobo Life Insurance and Dongbu Life Insurance are preparing to enlist in the second half of this year.
Kyobo Life Insurance performed well as of March 2006 and had a retained earnings rate of 1,661 percent, which far exceeds the required minimum for listing (25 percent) as of last September.
Dongbu Life Insurance is expected to have a retained earnings rate of 28 percent when it settles its accounts in March and it is planning to list by sometime between the second half of this year and the first quarter of next year.
Samsung Life Insurance is planning to withhold from listing until next year because of the many issues it faces, including a trial on an appeal case concerning convertible bonds issue of Samsung Everland, and the first public hearing concerning debts of Samsung Motors.
Korea Deposit Insurance Corporation, which owns 49 percent of Korea Life Insurance, looks favorably at listing to pay back its debts. Korea Life Insurance, however, is not eligible to list yet.
Listing of life insurance companies to spark controversy-
The barriers to listing have been removed, there are still untangled issues left, such as opposition from some civic groups, public fund donations by life insurance companies, and listing of Samsung Life Insurance and subsequent governance structural reform of Samsung Group.
Several civic groups, including Peoples Solidarity for Participatory Democracy, Citizens Coalition for Economic Justice, Solidarity for Economic Reform, and Korea Insurance Consumer Federation, announced on Sunday that they would hold a press conference and object to the listing of the companies. Some other civic groups are in favor of the decision. Discussions are also underway about the life insurance companies contributing to a public fund to gather the support of the public, but there may be controversy over how it should be organized and how much should be collected.
Samsung Life Insurances enlistment would make a subsidiary that holds shares of Samsung Life Insurance a financial holding company. This may bring about an eventual change to the circular cross-unit equity investment structure Samsung Group currently enjoys. The listing may spark more controversy surrounding the issue of separation of banking and commerce.
legman@donga.com
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