Shares of Samsung Life Insurance Co. have been on a roller coaster ride on Thursday and Friday as the insurance giant may have to sell a large part of holdings in Samsung Electronics Co. if a bill revision proposed by ruling Democratic Party lawmakers in June passes the National Assembly.
Samsung Life Insurance closed Thursday at 71,900 won ($60.63), up 21.04 percent from the previous session on 45 percent jump in second quarter bottom line and anticipation of stretch in cash flow from divesture in shares in Samsung Electronics. The stock gain over the past four trading days amounted to 46 percent. As of 11:50 a.m. on Friday, the shares lost 7.65 percent to 66,400 won.
Samsung Fire & Marine Insurance Co. also jumped 4.76 percent to 187,000 won. Its shares rose 0.27 percent to 187,500 won in Friday morning.
The current insurance business act requires insurers to own less than 3 percent of stake in their affiliates. The insurance business supervision act stipulates an insurer’s total assets and capital should be measured by market value but stocks and bonds by acquisition cost.
But ruling party lawmakers Park Yong-jin and Lee Yong-woo proposed a revision of the bill in June, arguing it is unfair that only insurers’ shareholding in their affiliates is calculated based on book value while other financial firms are regulated by market value. They also argued that Samsung Life’s ownership in Samsung Electronics is too high, which could be a risk factor in the financial market.
The life insurer holds an 8.51 percent stake in Samsung Electronics, which is valued at least 24 trillion won ($20.2 billion) to 30 trillion won. If the revision passes and the stake ownership is calculated by market value, the insurer would be able to hold just 7 trillion won worth equity holdings in Samsung Electronics.
Samsung Fire & Marine Insurance Co. that owns 5.3 trillion won worth stake in Samsung Electronics would also have to dispose of around 3 trillion won worth stocks in the home appliance making unit if the bill passes.
Samsung Life Insurance on Thursday disclosed its operating profit on a consolidated basis in the second quarter ended June amounted to 550 billion won, up 35.6 percent from the same period a year ago. Sales fell 8.2 percent on year to 7.64 trillion won, but net profit rose 44.8 percent to 448.6 billion won.
Its chief financial officer Yoo Ho-seok said during a conference call that nothing has been determined about stock ownership in Samsung Electronics as it needs to wait for the lawmaking results.
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