Allianz strike

receipt : the politics department & the local news section of all press
send : Economy Committee of People’s Solidarity for Participatory Democracy
http://www.peoplepower21.org/
( A manager: Lee Sang-Min, A secretary: Park Won-Suk, 02-723-5052
stpark@pspd.org)
title : Request for FSS to investigate Allianz Life Insurance Company about a violation of the
Insurance Law (April 16, 2008 total 3pages)

Releas Copy

Allianz Life Insurance, Suspicion of selling
stocks-Customer’s asset ‘ Variable growth fund’ for the
corporation tax reduction
PSPD requested FSS to investigate about a violation of due diligence
in Insurance Law
It can be denounced to damage the customer’s profits
for the Company profits

1. PSPD Economy Commitee (Head; Dr. Kim Jin-Bang) submitted the written request for investigation to FSS on 16th Apr, there is a suspicion that Allianz Life Insurance sold the stocks in Variable growth fund on Mar, 2007 in favor of the company's profits with intent to reduce the corporation tax by getting the best out of TLCF (Tax Loss Carrying Forward) that expiration was close.

2. Allianz Life Insurnace, German corporatoin has started the business in Korea, taking over Fist Life insurance on 1999, can use TLCF for 5 years because it had a lot of deficit in past. When calculating the standard of assessment for the corporation tax, deficit occurred in last 5 years is possible to be deducted from the yearly income. This is 'Tax Loss Carrying Forward'. According to the internal meterial informed by anoymous informer, Allianz sold the stocks of Variable growth fund in separate accounts on Mar, 2007 in favor of the company's profits intended to reduce the corporation tax by getting the best out of TLCF (Tax Loss Carrying Forward) that expiration is coming, and reduced the company's securities appraisal profit and loss, increased securities disposal profit .

3. According to the Allianz internal material informed to the Economy Committee, Park Kyoung-Won, Financial Director of Allianz, ordered by e-mail to estimate & review the sevral scenarios to minimize the appraisal profit and loss on July, 2006.
On the mail, Mr. Park wrote " Discussion about the uncollected income and appraisal profit & loss in VUL is important. Prepare two scenarios; general case and the case of minimizing the VUL valued loss." (attached 'evidence documents' page 1)
On Sep. 6th 2006, Allianz had a meeting about tax loss carrying forward utilization plan. At that meeting, the background was explained as "If Allianz doesn't have a special plan to use TLCF, the company will get a big tax loss because the deficit of expected profit on FY2006 & FY2007 are expired. It is needed to discuss about the tax profit by adjusting the investment portfolio before the TLCF expiration", and then suggested the strategy plan regard to bond portfolio as "To reduce the uncollected income, Convert the compounded interest bonds to quarterly-coupon bonds", and suggest the plan regards to stock portfolio of separate account, “change the items to covert appraisal profit to disposal profit, and reduce the appraisal profit below 5 billion KRW for adjust tax code till Mar, 2007." (refer the attached 'evidence documents page 11' & 'English document page 3')
Especially, according to the internal e-mail sent by Park, Kyoung-Won, financial director on Sep. 18th, 2006, "CEO, CFO, CIO approved our strategic tax plan. It's still confidential, specially be careful to adjust the appraisal profit in separate account for preventing the legal, financial problems." (refer the attahced English document page 13, translation page 5), So it's possible to suspect that this plan has been progressed confidentially not by staff but by the management board.

4. The information includes the meeting minutes that discuss the actual progress plan to use the TLCF, that internal meeting minutes on Oct, 13th 2006, suggested the basic process as "deal them in normal way till Feb, 2007, and then deal them for usage of TLCF from Mar, 2007.". Company selected the object items," Most of items are the large preferred stocks enough to be floating assets, so the actual risk of making floating assets seems to be low." (refer the attahced English document page 15, translation page 6)

5. The circumstances after later supported that Allianz had put the plan in practice. On the end of Mar, 2007, available carry-over deficit of Allianz was 236,991,551,189 KRW, the standard of assessment was 202,360,651,418 KRW after tax adjustment. Finally Allianz did not pay the corporate tax at all by getting the best out of TLCF which was expired on Mar, 2007.
In addition, Allianz planed to make 25.5 billion KRW disposal profits by selling stocks on Jan 8th, 2007, actually the real stocks disposal profit of Allianz was close to 25.5 billion KRW during March, 2007.

6. The VUL policy holders will get the profit depending on the result of Insurance company's asset management, so the Insurance company have to make the separate accounts for the VUL and manage it with due diligence. If Allianz sold the stocks of VUL growth fund in separate accounts not for the customers profit but for the company's tax profit, and if it resulted the customers loss of opportunity profit, it can be regarded that Allianz violate the due diligence of Insurance Law.
PSPD Economy Committee considers that this Allianz's suspicious activities damage the many customers profit, ethics in insurance industry, and possible to be linked up with tax evasion. So the Committee submitted the written request for special investigation to FSS (Financial Supervisory Service). End

▣Attachment▣
1. Investigation Request to FSS
2. Evidence Documents (Please down load the documents from PSPD Homepage)
3. English document translation (Please down load the documents from PSPD 
    Homepage) hptvzu7wNfXlmd99mhhQ1UaDFd3

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