Dispute over Fair Market Value Evaluation
Kyobo Life Insurance announced on March 31 that it has filed a complaint against Deloitte Anjin Accounting Corp. in Korea with the Public Company Accounting Oversight Board (PCAOB) of the United States for violating evaluation standards in calculating its fair market value (FMV).
Kyobo Life claims that Deloitte Anjin made a mistake in setting the time of evaluation in calculating Kyobo Life’s FMV. Financial investors (FIs) exercised put options on Oct. 23, 2018, but Deloitte Anjin calculated Kyobo Life’s FMV based on the stock prices of major competitors such as Samsung Life Insurance and Orange Life for the one-year period from June 2017 to June 2018, Kyobo Life asserted. "The evaluation period Deloitte Anjin used in calculating Kyobo Life’s FMV included the period from June 2017 to June 2018 when its major competitors’ stock prices hit all-time highs," a Kyobo Life official explained.
Deloitte Anjin refuted the claims, saying that they were groundless. "We calculated the value of stocks to meet experts’ standards,” a Deloitte Anjin official said. “We have not received any petition regarding the matter yet, so we cannot clarify our position in more detail.”
The incident began in September 2012 when Kyobo Life sold a 24.01 percent stake in Daewoo International to financial investors (FIs) such as Affinity Equity Partners at approximately 1.2 trillion won. FIs signed a shareholder agreement that allowed FIs to exercise their put options against Kyobo Life chairman Shin Chang-jae unless the insurer had an IPO until September 2015. As Kyobo Life failed to have an IPO even after three years past the deadline, FIs exercised their put options at 409,912 won per share in October 2018. Chairman Shin did not accept the put options, taking issue with the validity of the contract.
Apart from this case, Kyobo Life will also file a complaint with the New York Court against Deloitte Global, the supervisor of Deloitte Anjin.