SAMSUNG Life Insurance Co., Ltd. (SLI), Korea’s largest life insurance company with a 25.9% market share and 125 trillion won of total assets as of June 2009, announced on November 16, 2009 its plan to be listed early next year. It will be the second listing for a life insurer since Tong Yang Life Insurance Co., Ltd. was listed on October 8, 2009. A spokesperson from SLI said, “We decided to enhance corporate transparency and secure capital through listing to become one of the world’s 15 best life insurers by 2015.” The company also hopes to increase capital to cope with strengthened regulations on capital soundness and international accounting standards. The announcement caused a surprise and increased the stock price by more than 50% in the overthe- counter market from about 400,000 won earlier this month to 860,000 won. On November 25, 10 out of 18 companies which received an RFP from SLI gave a presentation for selection as underwriters and Mirae Asset Securities and Goldman Sachs are expected to be the forerunners in the competition. SLI is planning to ask the Korea Exchange for preliminary reviews for listing around January 2010 to achieve listing by June 2010.
SLI has been reserved regarding speculation about the listing and this rather sudden announcement has invited several points to be considered. Some argue that it relates to debts of Samsung Motors and the governance structure of Samsung Group. Lee Kun-hee, former Chairman of Samsung Group, provided 3.5 million shares of SLI to creditors as they lost 2.45 trillion won due to court receivership of Samsung Motors in June 1999. The provision of shares was based on the company’s expected listing.
However, as the listing was delayed, creditors filed a suit against Lee Kun-hee and Samsung’s affiliates to pay the debt and interest amounting to 5.2 trillion won in December 2005. The court asked for the interest rate to be lowered and both lodged an appeal. The Seoul High Court arbitrated after the appeal and Samsung might have found listing necessary to solve the problem with creditors. This leads some analysts to estimate that a 1.05 million won IPO price is needed to meet 2.45 trillion won via 2.33 million shares. However, the valuation of life insurance companies is not easy and the market capacity to derive numerical value of life insurers is questioned as this involves the long-term security of insurance money from subscribers in addition to current assets.
Furthermore, other life insurers such as Korea Life Insurance and Mirae Asset Life Insurance are also preparing for listing. These factors as well as SLI’s size itself as the largest life insurer make the market forecast varied. However, if they all rush into the market in the first half of 2010 as planned, the size the life insurance stock market is expected to form about 1.7% of the whole Korean stock market.
Although the listing of SLI invites more political discussion of the transfer of Samsung Group’s management from Lee Kun-hee to Lee Jae-yong, his son, as well as corporate governance structure, both market and public opinions for more positive outcomes of the listing are highlighted. SLI is said to be the only unlisted company among 27 life insurers in the Fortune 500. The listing is seen to be in line with the trend to globalize life insurers, while the overall influence of the listing toward higher corporate values, global awareness, and more transparency on the life insurance industry is called for.