Samsung insurers let go of asset management

Samsung Life and Samsung Fire & Marine to spin off in-house fund management to an affiliated investment trust company.

Samsung Life Insurance and Samsung Fire & Marine Insurance are planning to spin off management of their assets from in-house teams to affiliate Samsung Investment Trust Management Co (Samsung ITMC). Next month, Um Tae-jong, now head of international investment at Samsung Fire & Marine, is expected to move to Samsung ITMC to run the combined investment.

The purpose is to develop a fund management culture at Samsung ITMC that rewards fund managers along the lines found in Western fund houses. Currently fund managers at Korean insurance companies are stuck in an insurance environment, which doesnÆt encourage them to take the right kind of risks. With interest rates now around 6%, insurers are struggling to hit higher returns, because policy benefits are usually guaranteed around 7.5%.

Not all of the Samsung insurance group assets will move to ITMC. Samsung Life is handing over domestic fixed-income and equities investment but retaining its international in-house team. That transition is expected this month. Fire & Marine, in contrast, will surrender only its internationally invested assets. It will also take longer because it is a public company and has extra regulatory hurdles; Um says it should finish the transition by the end of May.

Moreover, both insurers will hold onto special account money, in which assets must be matched to liabilities. They are only shifting to Samsung ITMC general account funds, which includes the firms' own equity and short-term liabilities.

Furthermore, technically speaking the money is not being outsourced to Samsung ITMC because Korea's Financial Supervisory Service is said to oppose the plan. The FSS was created in an atmosphere of fighting chaebol intra-group financial dealings, and is wary of seeing a group amass too many assets into one place. So for now, while Samsung Life and Samsung Fire & Marine staff are being moved to the ITMC, and the ITMC will have de-facto control over the assets, technically it is only acting as an investment advisor. Legally the assets remain those of the two insurers.

To date only one other insurer in Korea has managed to hive off asset management: HanaAllianz. But it is a relatively small player and has part foreign ownership with GermanyÆs Allianz Group. If Samsung makes this transition work it will be truly significant. Kyobo Life, the country's number-two life insurer, is also planning to spin off asset management.