Democratic Party of Korea lawmaker Park Yong-jin on Nov. 7 asked the National Assembly’s National Policy Committee to help revise the Insurance Business Act. Lawmakers from the ruling and opposition parties in the committee are discussing whether to consider the matter at their meeting scheduled for next week.
With this problem reappearing in five years, Samsung Electronics faces another crisis. If the law is revised and passed by the National Assembly, Samsung Life Insurance and Samsung Fire & Marine Insurance will have to sell shares in Samsung Electronics worth 25 trillion won, which could seriously affect Samsung Electronics’ governance structure.
The overhaul is to calculate insurers’ stock and bond holdings based on market value rather than acquisition cost. Under current law, an insurer’s principal shareholder and subsidiary may not exceed 3 percent of its total assets. Samsung Life Insurance’s total assets are approximately 310 trillion won, which means its designated holding cannot exceed approximately 9 trillion won.
On an acquisition cost basis, Samsung Life Insurance’s ownership percentage of Samsung Electronics is less than 3 percent. The reference year for the calculation in this case is 1980, when Samsung Electronics’ share price was 1,072 won per share. If this price is applied, Samsung Life Insurance’s current ownership interest in Samsung Electronics is approximately 544.4 billion won.
However, on a market value basis, the volume and ownership rate are approximately 30 trillion won, or more than 8.5 percent. In this case, the insurance company has to sell more than 21 trillion won in Samsung Electronics shares. The amount increases to about 25 trillion won when Samsung Fire & Marine Insurance, which owns 1.49 percent of Samsung Electronics, is included in the calculation.
This large-scale stock sale is likely to have a serious impact on the governance structure, in which Chairman Lee Jae-yong, as the largest shareholder, owns 17.97 percent of Samsung C&T, his family’s stake in Samsung C&T is 31.31 percent, and Samsung C&T Samsung rules life insurance and Samsung life insurance rules Samsung Electronics. If the ownership of the two insurance companies in Samsung Electronics decreases from the current 10 percent to 3 percent, that of the largest shareholder and related parties will decrease from 20.75 percent to about 13 percent.
“Samsung Group may decide to spin off Samsung Electronics to respond to the crime and retain control of Samsung Electronics,” said an industry source, adding, “One possible scenario is that the investment company of Post-spin-off Samsung Electronics will acquire 10.22 percent of the Samsung Electronics operating company from Samsung Life Insurance and Samsung Fire & Marine Insurance, and Samsung C&T will acquire the insurance companies’ shares in the investment company, so that Samsung C&T will govern the operating company’s investment company by contribution in kind. ”
According to experts, a conversion of Samsung C&T into a holding company is unlikely. “In order for Samsung C&T to become a holding company, Samsung Electronics’ stake must be raised to at least 30 percent, which requires 68 trillion won,” one of them explained, adding, “The company must sell shares in construction divisions or Samsung Biologics with this money.” to prepare, and that is unlikely.”