South Korea’s Samsung Life Insurance Co. has decided to buy all shares of Samsung Securities Co. owned by its financial affiliate Samsung Fire & Marine Insurance Co., a move seen to accelerate the process of the life insurer becoming the financial holding company of Samsung Group.

On Thursday, Samsung Life Insurance held a board of directors meeting on the agenda to buy 8.02 percent or 6,132,246 shares of Samsung Securities from Samsung Fire & Marine Insurance. Boards of the two companies separately passed the deal proposal. The shares were purchased at 234.3 billion won ($211.3 million) based on the brokerage company’s Thursday closing price of 38,200 won and increased Samsung Life Insurance’s stake in the securities company to 19.16 percent from 11.14 percent a year ago.

Earlier in January, Samsung Life Insurance had bought 37.45 percent or 43.39 million shares of Samsung Card Co. from Samsung Electronics Co.

The move cements the life insurer’s control over Samsung affiliates and sets in the path for turning into the holding organization for all financial operations of the country’s largest conglomerate.

To be eligible for a financial holding entity, it must own 30 percent or more in financial units, or 50 percent or more in no-listed financial companies.

When Samsung Life acquires additional 10.94 percent treasury shares owned by Samsung Securities, it would become eligible to become a holding firm of the securities firm as well as credit card unit in which it owns 71.9 percent following January purchase from Samsung Electronics.

Samsung Life also holds 98.7 percent in Samsung Asset Management Co. and 100 percent in Samsung SRA Asset Management Co.

The remaining interest of Samsung Fire & Marine Insurance could be solved by additionally purchasing 15.98 percent treasury shares owned by the non-life counterpart.

The act against cross-affiliate investment by regulating purchase of treasury shares by a certain company within the same group could pose as a stumbling block.

The ownership structure of Samsung Group is based on a web-like cross-shareholding structure that links Samsung C&T Corp. with Samsung Life Insurance, Samsung Fire & Marine Insurance, and Samsung C&T. Current law would issue a correction order to Samsung Life Insurance if it buys treasury shares of Samsung Fire & Marine Insurance without breaking the cross-shareholding structure.

An unnamed official from the Fair Trade Commission said that Samsung Fire & Marine Insurance should first sell 1.4 percent of shares it owns in Samsung C&T before Samsung Life Insurance buys the insurer’s treasury shares.

Another regulatory issue hindering Samsung Life Insurance in becoming the financial holding company of Samsung Group involves the 7.7 percent stake it owns in Samsung Electronics. Under local law, a financial holding company cannot be the largest shareholder in a non-financial entity. Samsung Life Insurance would have to become the second largest after Samsung C&T that owns 4.2 percent in the electronics giant. It would have to sell its shares in Samsung Electronics to Samsung C&T to fully qualify as a financial holding entity.

By Song Sung-hoon and Kim Gyu-sik

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