Samsung Life Insurance Act Remains a 'Hot Potato' in the 21st National Assembly... Controversy Over 'Samsung Dismantling Act' (Comprehensive)

Calculation of Market Value for Affiliate Stock Holding Limits in the 'Insurance Business Act Amendment'
"Samsung Electronics Transferred Crisis... Asset Regulation Fairness Must Be Ensured"
"Suddenly Forced to Sell Legally Owned Stocks?" Confusion Ensues

[Asia Economy Reporter Oh Hyung-gil] As the first regular session of the 21st National Assembly begins, controversy over the so-called 'Samsung Life Insurance Act,' which could shake not only the insurance industry but also the capital market, is resurfacing.

Ruling party lawmakers belonging to the National Assembly's Political Affairs Committee have expressed their intention to make up for their failure in the previous session by accelerating legislation this time. If this bill passes, Samsung Life Insurance and Samsung Fire & Marine Insurance will have to sell their shares in Samsung Electronics, inevitably shaking the governance structure that links 'Samsung C&T → Samsung Life Insurance → Samsung Electronics.'

This is why the worst-case scenario of turning into a 'company without an owner' is being raised. While the purpose is stated as aligning regulatory fairness among financial industries, there is also considerable criticism that it excessively restricts a specific company.

◆ "Only insurance companies get special treatment... The principle of fairness must be upheld" = According to political and insurance industry sources on the 2nd, Democratic Party lawmakers Park Yong-jin and Lee Yong-woo have proposed a partial amendment to the Insurance Business Act, known as the 'Samsung Life Insurance Act.'

[Image source=Yonhap News]

The amendment aims to change the evaluation standard for the proportion of stocks held by insurance companies in other companies under Article 106 of the Insurance Business Act from acquisition cost to market price. Under the current law, the scale of affiliate stock holdings by insurance companies cannot exceed '3% of total assets.' If the amendment passes, the only insurance companies required to dispose of their holdings would be Samsung Life Insurance and Samsung Fire & Marine Insurance. This is seen as targeting Samsung.

Samsung Life Insurance currently holds 508.16 million shares of Samsung Electronics (8.51% stake). Based on the acquisition cost in 1980, the value was about 544 billion KRW at around 1,000 KRW per share. Samsung Life Insurance's assets total 309 trillion KRW, so this holding accounts for about 0.1% of total assets, well below the '3%' limit.

However, if evaluated at market price, Samsung Electronics' stock price was 54,200 KRW (as of September 1). Applying this, the value of Samsung Electronics shares held by Samsung Life Insurance exceeds 27 trillion KRW, amounting to about 9% of Samsung Life Insurance's assets. Following the amendment, Samsung Life Insurance would be forced to sell over 20 trillion KRW worth of Samsung Electronics shares.

Proponents of the amendment argue that the current Insurance Business Act applies different standards from other financial industries, violating fairness.

Banks, savings banks, and financial investment companies calculate asset management ratios based on book values in financial statements that reflect market prices for total assets and equity, whereas only insurance companies receive special treatment.

Insurance companies must match the maturity of insurance claim payments with the maturity of managed assets, and if stock holdings are evaluated at acquisition cost, a gap between market price and valuation can occur. Lawmaker Park Yong-jin criticized at the Political Affairs Committee meeting in July, saying, "Depending on the fluctuation of Samsung Electronics' stock price, the impact on Samsung Life Insurance is 20 times greater than on other companies."

The financial authorities largely agree with these points but say there is no way to force Samsung Life Insurance to sell its shares. Son Byung-du, Vice Chairman of the Financial Services Commission, said at the National Assembly Budget and Accounts Special Committee on the 31st, "Under current laws and principles, we cannot force (Samsung Life Insurance) to sell shares, and there is no other way but to request voluntary cooperation from the company."

◆ "Stocks held legally for a long time, suddenly forced to sell" = There are also concerns that the amendment, called the 'Samsung Life Insurance Act,' could excessively infringe on the management of a specific company. If the amendment's purpose is to prevent unfair support to affiliates, the regulation should apply based on the acquisition cost at the time of share acquisition.

Moreover, only South Korea and Japan regulate investment limits separately for major shareholders or affiliates worldwide. When Japan introduced market price evaluation in 2001, it evaluated subsidiary and related company stocks at acquisition cost, and other securities at the lower of acquisition cost or market price.

Additionally, evaluating holdings at market price could cause greater confusion due to stock price volatility. An insurance industry official said, "If the company's stock price falls, the support limit for that company increases, which is the opposite result," adding, "Depending on stock price fluctuations, additional purchases or sales of shares may occur, destabilizing asset management standards."

There are also voices that it is difficult to see a decline in the stability or efficiency of insurance companies' asset management simply because the value rises after share acquisition. Samsung Life Insurance earned 710 billion KRW in dividend income from Samsung Electronics last year, and it is difficult to find alternative investments to replace this in a low-interest-rate environment.

Jung Joon-seop, a researcher at NH Investment & Securities, evaluated, "Samsung Life Insurance can secure capital soundness by disposing of Samsung Electronics shares as intended by the bill, but it faces the challenge of replacing Samsung Electronics' stable dividend yield in a low-interest-rate environment."

Furthermore, there are concerns that forced share sales could affect not only Samsung Life Insurance's shareholders but also the domestic stock market, raising issues of property rights infringement.

Laws restricting fundamental rights must have general targets and scope, but this amendment clearly targets only Samsung Life Insurance and Samsung Fire & Marine Insurance, raising questions about legal legitimacy due to discrimination.

A business community official pointed out, "Other affiliates should secure Samsung Electronics shares, but this ultimately pressures Samsung to pay taxes," adding, "The impact on the economy as well as the financial sector must be considered from multiple angles."

This content was produced with the assistance of AI translation services.