A Huge Fund for Social Causes

Life insurance firms to set up 1.5 trillion won fund to finance various social services

Korea Life Insurance Association said its member life insurance firms would donate 1.5 trillion won in public contribution funds during the next 20 years, Chairman Namkoong Hoon of the association announced at a press conference on April 6.
He said each member of the association would donate some percentage of their before tax profits not exceeding 5 percent every year. Samsung Life would give 1.5 percent of its before tax profit annually to the fund, while Kyobo Life would donate from 0.75 to 1.5 percent of its pre-tax profit to the fund. The rest of the members would provide 0.25 percent of their pre-tax profits to the fund before they are listed on the stock exchange but the contribution will rise to 0.5 percent after they are listed on the stock market, the chairman said. However, those member firms who can't afford to pay for the fund will be exempted from the fund collection. There currently are 22 member firms in the country.
If the fund collection falls short of the targeted amount in 20 years, the collection period will be extended for 10 years. The chairman said he expects the entire member of the association would be able to contribute to the fund including foreign life insurance companies.
He said the fund will be used for various social causes including the support to homeless people, the needy families, by building a self-help support center. The fund will also go to the development of new life insurance products such as those intended for increasing birth rates and others for public interests. The fund will also be used to build facilities to help prevent suicides and promote the love for life. A foundation will be set up to oversee those activities and programs.
The decision to collect the fund is intended to pave the way for the listing of life insurance firms on the stock exchange, which has been delayed for over 18 years due to the objections by various civil organizations.
The statement by Chairman Yoon Jeung-hyun of the Financial Supervisory Commission that he respects the interpretation by the Listing Consultation Committee that life insurance firms will not be obliged to share with their policy holders the profit they gain from listing their stocks on the stock exchange has convinced the life insurance industry this year is an appropriate year for them to go public. They decided that they will set up a public interest fund to assuage civil organizations and citizens groups that have been calling for them to share profits from listings with life insurance policy holders.
The industry estimates that Samsung Life and Kyobo Life would be able to donate some 1 trillion won during the period Samsung 700 billion won and Kyobo 300 billion won. The reason for the two insurers to contribute that much money to the fund is that they were found to have large surplus funds retained in the accounting on the two giant life insurance companies while ago. The Listing Consultation Committee issued an advice that the surplus funds retained should be given to policy holders as they are debts to them.
An official of the FSC confirmed that the FSC has been in consultations with the KRX over the issue of revising the stock futures regulations to allow the listing of life insurance firm on the exchange, adding that the draft of amendment of the regulations will be ready within the month. Life insurance firms would be able to list their stocks as soon as the draft amendment is approved. Considering that it takes from five to six months to clear various steps to go public including the selection of lead managers, the approval by the board of directors, the screenings on their applications to go public and other matters. In general, the life insurance firms will be able to list them on the exchange by the end of the year.
A number of them would be ready to list them on the exchange including Samsung Life, Kyobo Life, Hungkook Life, and Donbu Life and Kyobo and Dingbu are eager to be listed with the exchange at some point this year.
Dongyang, Kumho, Mirae Asset, and Green Cross are expected to go public next year or in 2009 at the latest, the association said. nw

Chairman Namkoong Hoon of Korea Life Insurance Association.