Samsung Life Insurance Co., South Korea's largest life insurer, said on Feb. 4 that it will purchase Samsung Electronics Co.'s entire stake in its affiliate Samsung Card as part of the conglomerate's efforts to streamline ownership.
In a regulatory filing, the insurer announced its decision to purchase the 37.45-percent stake the tech giant has in the credit card firm for 1.54 trillion won ($1.3 billion) to be its largest shareholder.
Currently, Samsung Life Insurance owns 34.41 percent of shares in Samsung Card.
"The stake purchase is designed to boost synergies between insurance and card businesses," Samsung Life Insurance said.
Industry watchers say the move would be the initial step for the life insurer to turn itself into a financial holding company. There has long been speculation that Samsung Group would consolidate control of its financial arms under its life insurer. The life insurance firm might buy its own shares to speed up its strategy to become a financial holding company in Samsung Group to secure more power over the group¡¯s financial affiliates.
Samsung has been reshuffling its business portfolio to speed up the group's leadership change from de facto head Lee Kun-hee to his son, Jay-yong, in a way to tighten the owner family's grip on the conglomerate.
Upon the news, shares of Samsung Life Insurance spiked 11.51 percent to finish at 109,500 won, and Samsung Card surged 10.41 percent to 35,000 won.
Meanwhile, Samsung Life Insurance said that its net income stood at 1.23 trillion won in 2015, down 8.4 percent from the previous year.
The insurer also said it will buy back 3 million shares worth 294.6 billion won, or 1.5 percent of its outstanding shares.
Samsung Life Insurance is continuing real estate investment abroad in order to diversify its asset management portfolio amid low interest rates.
The company announced on Feb. 25 that it has started construction on a 63-story office building in Chaoyang, a key commercial district in Beijing. Samsung Life Insurance President Kim Chang-soo, personnel from the Beijing city government, and contractors participated in the groundbreaking ceremony.
A total of 750 billion won ($703.4 million) is being invested in the project, including 430 billion won spent on the land purchase. The construction is scheduled to be completed in late 2016. Samsung Life Insurance is expecting that it will be able to enjoy lease earnings worth at least 5 percent a year. The percentage is about double the interest rate of a 10-year treasury bond.
Samsung Life Insurance and Samsung C&T own 90 percent and 10 percent of the shares in the building, respectively. The structure is 260m high and has 57 floors above ground and six underground. The total floor area amounts to 167,500 m2.
In July 2013, the company had purchased the London 30 Gresham building in Britain for the purpose of portfolio expansion.
Samsung Life Insurance offers pension policies, private health insurance, corporate welfare policies, and other products; retirement pension products; loan products, including mortgage and credit loans to companies and families; and funds and trust management products. The company is also involved in real estate leasing business. It operates seven representative offices and three investment firms in the United States, the United Kingdom, China, Japan, India, and Vietnam.
The company was formerly known as Dongbang Life Insurance.
Samsung Life Insurance Co., Ltd. was founded in 1957 and is based in Seoul.
A view of the Samsung Life Insurance Building on Taepyong-ro, near South Gate in Seoul. (Photos:Samsung Life)