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Company Report

Samsung Life Insurance [032830, KOSPI]


Analyst: Sun Woong Kim cginfo@cgcg.or.kr
CENTER FOR GOOD CORPORATE GOVERNANCE

Dec. 21, 2010

Characteristics of Corporate Governance


1. The Company is a financial affiliate of Samsung Group which is the largest business group in South Korea. As such, it has both merits and demerits; corporate value can be enhanced by transactions with affiliates, but corporate governance can be damaged by the Groups strategies or the controlling shareholders interest. The value of the Companys shareholdings in affiliates amounts to 8.18% of its total assets, but these are idle shares held for control purposes. The Company may adopt a holding company structure in the future, but it will depend on whether the controlling shareholder can acquire a sufficient number of shares in the holding company. It is doubtful whether the Companys stock price will further increase, since it was overvalued at the time of the IPO. In addition, there are several factors that may affect the Company, such as change in the ownership structure, reinforced influence of the controlling shareholder and transfer of control to the next generation.

2. 3.

4.

1. Corporate Governance Overview


Ownership Structure The largest shareholder of Samsung Life Insurance (Samsung Life) is Chairman Kun-Hee Lee who holds a 20% stake as of the end of September 2010. Other affiliates and foundations of Samsung Group, which are under Lees control, collectively own 51.76% of the Company. Apart from Samsung Groups affiliates, Shinsegae Co., Ltd. is the second largest shareholder of Samsung Life, holding a 11.07% stake in it. In the past, Shinsegae was an affiliate which belonged to Samsung Group. As a recently listed company, Samsung Life has relatively fewer foreign shareholders (with a 5.18% stake), and the Companys employee shareholders also hold a 5.85% stake. Other domestic shareholders own 26.14% of the Company. Before the IPO, Samsung Lifes shareholders were comprised of Kun-Hee Lee, Samsung Groups affiliates, the Companys officers and employees and Samsung Motors creditors. However, the creditor group made a tender offer for their shares at the time of the IPO in May 2010.
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SAMSUNG LIFE INSURANCE

(unit: %) Controlling Shareholder & Related Parties 51.76 Shinsegae 11.07 Employee Shareholders 5.85 Domestic Shareholders 26.14 Foreign Shareholders 5.18

Board Composition The Board of Directors (BOD) of Samsung Life consists of nine directors (four internal directors and five outside directors) as of September 2010. Under the Insurance Business Act, outside directors should constitute the majority of the Companys BOD, and the number of directors should not exceed nine. The term of directors is three years, but the second term of reelected outside directors is only one year. An outside director may hold the directorship for five years in total. In addition, the Company has a staggered board, where one-fifth of the outside directors come up for election annually. As subcommittees under the BOD, the Company has established three mandatory committees (the Audit Committee, the Outside Director Nomination Committee and the Risk Management Committee) as well as three non-mandatory ones (the Related Party Transaction Committee, the Steering Committee and the Evaluation & Compensation Committee). Under the Insurance Business Act, the Company has set up the Audit Committee that consists of one internal director and two outside directors. One of the outside directors sits as the Chair.
Number of Internal Directors 4 Number of Outside Directors 5 Number of Audit Committee Members 1 internal director & 2 outside directors Number of Directors Seats Vacant on BOD 1

Major Provisions of Articles of Incorporation & Statutory Regulations The Articles of Incorporation (AOI) of Samsung Life stipulate that the Company may issue new shares to third parties for business purposes, but may not issue stock-related bonds (convertible bonds or bonds with warrants). The AOI allow proxy voting at the General Shareholders Meeting, but cumulative voting and voting-by-mail are not permitted. In addition, the Company may not pay interim dividend, but may cancel shares upon the BODs approval.

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Samsung Groups Affiliates Samsung Life is a financial affiliate of Samsung Group, which has been designated as a large business group by the Fair Trade Commission. As of October 2010, Samsung Group ranks the 1st among South Korean large business groups in terms of asset size, and has 67 affiliates in the business fields of electronics, construction, trade, heavy industry, insurance, securities, investment trust, chemicals, textiles, security services, hotel management, etc. Shareholder Return Samsung Life was not listed until 2009, and its dividend payout ratio had been below 10% until 2007. At the end of 2009, however, the Company raised its dividend by 562%, from 200 KRW to 1,125 KRW per share, immediately before it went public. Yet, it is doubtful whether the Company will maintain the same dividend payout ratio after the IPO.

2. Corporate Governance Analysis


De Facto Holding Company of Samsung Group Samsung Life is the pillar of Samsung Group, an entity controlled by Chairman Kun-Hee Lee, and acts as a de facto holding company using its ample financial resources to control other affiliates. As a de facto financial holding company, Samsung Life is the largest shareholder of the Groups financial affiliates, which include Samsung Fire & Marine Insurance, Samsung Card, Samsung Securities and Samsung Asset Management. Moreover, Samsung Life is also the largest shareholder of the Groups non-financial affiliates, such as Samsung Electronics and Samsung C&T. Ostensibly, Samsung Everland appears to be the Groups holding company because it controls Samsung Life. In fact, however, it is Samsung Life that is the largest shareholder of the Groups major affiliates. The Company has continuously invested its profits in Samsung Electronics and other affiliates. On the other hand, Samsung Lifes shareholdings in affiliates are an impediment to its conversion into a holding company. The conversion will be easier if the Company unloads its entire stake in Samsung Electronics, or if the Company acquires more than a 20% stake in it. In the case of the former, however, the Company will lose control of Samsung Electronics. In the case of the latter, the Company will be restricted by the regulations under the Insurance Business Act and the Capital Markets Consolidation Act, and also by the Companys limited
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financial capacity. In sum, it is not easy for Samsung Life to adopt a holding company structure under current circumstances. In the end, Samsung Group will adopt a holding company structure only when Kun-Hee Lee and his family can reinforce their control of the Groups major affiliates, or when Samsung Life comes up with a solution for the problem of its shareholdings in Samsung Electronics. [Samsung Group]
Kun-Hee Lee Jae-Yong Lee

3.72 25.6 19.3

42.32 1.5

Everland Samsung Card

26.4 2.4

20.8

Samsung Life

35.3 7.5 2.9 Samsung 4.0 1.4


Electronics

Samsung Corp

5.1

10.4

Samsung F& M

20.4

Samsung SDI

7.4
S1 Samsung fine

11.4 Samsung Securities 5.5 41.0


Samsung Asset Samsung future

11.0

5.3 5.6 38.7 14.1

11.5 Chemical 8.4 10.7 Samsung General 3.9 Chemical 7.42 5.1 17.6 23.7 50.0 17.2 21.7 14.1
Hotel Silla Samsung Heavy I market Korea

65.3 51.0

7.3 3.4 9.7 13.4

2.4 50.0

Samsung elctromechanics

Samsung LED Samsung SDS

18.3 33.2 Petrochemical 27.3 13.0 21.4


Cheil Industries Samsung

40.86

Credu

46.0 35.7 25.5 2.6 88.3

Seoul commtech Samsung Techwin

13.1

4.3

Samsung Engineering

Cheil Worldwide

12.6

Sansung Electronics Service

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Financial Supervision on Management Quality & Transparency Pursuant to the Insurance Business Act, Samsung Life is regulated by the Financial Supervisory Service (FSS) with regard to management quality and corporate governance. Ostensibly, transparency in management is higher in Samsung Life than in other listed companies, since its management and financial soundness are officially supervised. In 2007, however, the so-called Samsung slush fund scandal revealed that Samsung Lifes shares had been held in false-name accounts, and also that Samsungs controlling family had been involved in other irregular activities. Despite these facts, Samsung Life is still relatively free from sanctions or restrictions due to the Groups overwhelming influence.
[Restrictions under Insurance Business Act] Qualifications of Fit and proper test in terms of the financial soundness / Subject to approval Major Shareholders from the FSS Restriction on Insurers Concurrent Operation of Life Insurance Prohibition of concurrent operation of life insurance business and non-life Business, Non-Life insurance business / Prohibition of operation of non-insurance businesses Insurance Business and Non-Insurance Businesses Disqualification of officers: Persons who have been given criminal sanction Restriction on or discharged due to violation of financial laws; Persons who served at any Qualifications of financial institution whose license and permit were cancelled; Persons who Officers and held a responsible position at any troubled financial institution. Concurrent Holding of Officers of insurance companies shall not concurrently serve at other profitOther Offices making corporations. 1. An insurer shall be prohibited from performing directly or indirectly the act falling under each of the following subparagraphs with any of its large shareholders: 1)The act of extending any credit for the purpose of assisting any large shareholder in his equity investment in other company 2)The act of transferring any asset without compensation, or the act of selling or exchanging any asset or extending credit on terms greatly disadvantageous to the relevant insurance company in light of the conventional terms of transactions 2. In case of any transactions with its large shareholders falling under each Restriction on of the following subparagraphs, the insurer shall obtain the consent of all Transactions with Large directors on the Board. Shareholders * The act of extending any credit in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion * The act of acquiring bonds or shares issued by its large shareholders in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 3. Obligation to publicly disclose transactions with its large shareholders * The act of extending any credit in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion * The act of acquiring bonds or shares issued by its large shareholders in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion

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Restriction on Equity Investment

* The act of exercising voting right of the stocks issued by its large shareholders 4. Prohibition of large shareholders exertion of unfair influence * The act of requiring the insurance company to provide him with undisclosed material or information for the purpose of exerting unfair influence * The act of exerting unfair influence on the personnel administration or management of the insurance company in collusion with other shareholders or equity investors on the condition that he provides them with economic interests and other benefits * The act of receiving credits from the insurance company or the act of urging the insurance company to hold stocks or bonds issued by its large shareholders in excess of the ratio prescribed by the law * The act of extending credit to its large shareholders competitors on unfavorable terms 5. Measures to be taken when its large shareholders (their companies) are financially distressed * Prohibition of extending additional credit to its large shareholders * Prohibition of acquiring marketable securities issued by its large shareholders * Limitation of transactions with its large shareholders in the nature of financial supports An insurer shall not acquire shares of any other company in excess of 15% of the total outstanding shares of such company; provided, however, that subject to the approval of the FSS, it may acquire shares of its subsidiaries without limitation.

Groups Influence & Risks in Corporate Governance Being an affiliate of Samsung Group, Samsung Life has both merits in business and risks in corporate governance. The Company earns profits by selling insurance products and leasing real estate to other affiliates of the Group. In particular, the ratio of inter-affiliate sales is exceptionally higher in Samsung Life than in its competitors. These related-party transactions contribute to the enhancement of the Companys value.
[Comparison of Top Insurers Sales] Insurer Sales from Affiliates Samsung 1,851,840 Life Insurance Korea 47,456 Life Insurance Tong Yang 23,983 Life Insurance (unit: million KRW, %) Ratio 7.15 0.39 0.72

Total Sales 25,889,944 12,096,999 3,309,352

Moreover, Samsung Life sells insurance products to the Groups employees, which is not included in the official records. This also helps Samsung Life gain an advantage against competitors. Despite the aforementioned merits, however, transactions with affiliates and specially related persons can also create the risk of capital outflow.

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SAMSUNG LIFE INSURANCE

The biggest risk in Samsung Lifes corporate governance is that the Group and its controlling family can use the Company for their own interests. The Company has already invested a large amount of money in Samsung Motors, Samsung Card and other affiliates. It should be noted that Chairman Kun-Hee Lee, who resigned from office after the Samsung slush fund scandal in 2007, made a comeback in 2010. He also restored the Groups Strategic Planning Office that had been dismantled in the wake of the scandal. Now, Kun-Hee Lee and the Strategic Planning Office control the Groups operations even more strongly. Their presence is an important factor in Samsung Lifes decision-making process, which compromises the independence of the Companys BOD and increases risks in the Companys governance structure.

1) Financial Support to Samsung Card When Samsung Card went insolvent in 2003, Samsung Life and Samsung Electronics participated in Samsung Cards rights issue to acquire a 20% stake in it. They also provided more credits to Samsung Card. 2) Financial Support to Samsung Economic Research Institute During a three-year period from 2006 to 2008, Samsung Life paid 8 billion KRW to Samsung Economic Research Institute for a service which was not provided so that the Institute could cover its deficit resulting from various government-run research projects. This was revealed during a general inspection conducted by the FSS, for which the Company was sanctioned by the FSS. 3) Debt Guarantees to Samsung Motors In 1999, Samsung Group Chairman Kun-Hee Lee and Samsung Motors creditors signed an agreement on the liquidation of Samsung Motors debt. As the Groups major affiliate, Samsung Life agreed to provide debt guarantees to Samsung Motors. The Company still bears the contingent liabilities. Doubt over Stock Value When Samsung Life went public in May 2010, its stock price was considered to be overvalued. The Companys IPO was related to the liquidation of Samsung Motors debt. As Samsung Motors went insolvent in 1999, Chairman Kun-Hee Lee gave two million shares of Samsung Life to Samsung Motors creditors as collateral for the debt on condition that he would repay 2.4 trillion KRW by 2001, which was based on the premise that Samsung Lifes stock value would be 700,000 KRW per share. Then, Samsung Life and other affiliates entered into an agreement with the creditors that, if the value of Samsung Life shares provided by Kun-Hee Lee should fall short of principal and interest repayments, they would collectively

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repay the balance. Yet, Samsung Life remained unlisted for a considerable time, with its stock value undetermined. Finally, the creditor group brought the matter into court in 2006, alleging that the affiliates involved, including Samsung Life, should repay 4.7 trillion KRW. Then, the court sharply reduced the amount of interest, and the creditors appealed against the decision. While the case was pending in the Court of Appeals, Samsung Life went public at 1,100,000 KRW per share in May 2010. Due to the IPO of Samsung Life, the Group can now repay 2.3 trillion KRW, which was decided at the first trial, without additional payment by the affiliates involved. Still, they may have to repay a maximum of two trillion KRW according to the ruling of the Court of Appeals, since the creditors still claim the repayment of 4.7 trillion KRW. In conclusion, the IPO of Samsung Life was closely related to the liquidation of Samsung Motors debt, and the stock price at the time of the IPO was overvalued so that the Group could repay the debt. On the other hand, Kun-Hee Lee still retains a 20% stake in Samsung Life, which is expected to be inherited in the future. If the Companys stock price goes down, it will reduce the tax burden of Lees inheritors, unless they want to pay the inheritance tax with shares. Transfer of Control Samsung Groups controlling family has never directly participated in Samsung Lifes management. The CEO of Samsung Life is usually an executive officer from the Groups Secretary Office. Jae-Yong Lee, who is Chairman Kun-Hee Lees son, has been recently promoted to Director of Samsung Electronics, but is not likely to sit on the BOD of Samsung Life. On the other hand, it is speculated that the Groups Strategic Planning Office will influence the Company more strongly.

3. Measures for Corporate Governance Improvement


Enhancement of BODs Independence Samsung Life needs to make decisions independently of the Groups Strategic Planning Office or Chairman Kun-Hee Lees family, since their influence creates risks in the Companys corporate governance. For this, the BOD should be comprised of new outside directors who can represent the interest of ordinary shareholders, instead of those who are nominated by the controlling shareholder and management.

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Management of Shareholdings in Affiliates Currently, Samsung Life is holding too many shares in affiliates for control purposes. As of the end of March 2010, the value of the Companys shareholdings in listed affiliates amounts to 10 trillion 891.4 billion KRW, which comes up to 8.18% of its total assets. The Company needs to manage these idle shares adequately, for example, by effectively unloading part of the shares. Minority Shareholders Have No Leverage to Improve Corporate Governance Minority shareholders can exercise their rights by soliciting the exercise of voting rights as proxy (0.01%~0.03% of the total outstanding shares) in order to hold directors accountable for damaging the Companys interest by illegal activities or mismanagement. Their rights include the right to bring shareholders derivative actions, the right to inspect accounting books, the right to make shareholder proposals and the right to nominate outside directors. Samsung Life is controlled by the powerful Samsung Group, and even financial supervisory authorities take a back seat in the case of Samsung Life. Thus, it is not easy for minority shareholders to improve the Companys corporate governance by exercising their ordinary rights. In the election of audit committee members, the voting rights of the largest shareholder are restricted by the three-percent rule. The Group controls 27% of the total voting stock in electing audit committee members who also sit as outside directors and 6.95% in electing audit committee members who also sit as internal directors. However, since only incumbent directors can be candidates for the Audit Committee, it is virtually impossible for minority shareholders to nominate audit committee members. Still, minority shareholders can exercise their veto. In conclusion, in cases where Samsung Life has serious problems related to corporate governance, minority shareholders need to consider the possibility of criminal charges in order to pressure the Companys management or controlling shareholder.

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Samsung Life Insurance [032830, KOSPI]

1. Ownership Structure and Voting Rights


(As of September 30, 2010) Shareholdings
Number of Shares Stake Ratio Ordinary Items

(Unit: number of shares, %) Voting Rights


Restricted by 3% Rule Individual* Collective**

Controlling Shareholder & Persons with Special Interest Kun-Hee Lee Samsung Everland Samsung Culture Foundation Samsung Life Foundation Samsung Gwangju Electronics Samsung Electro-Mechanics Samsung Fine Chemical Samsung SDS Cheil Worldwide Sub-Total Other Shareholders Shinsegye Foreign Shareholders ESOP Domestic Shareholders Sub-Total Treasury Stock Total 22,144,000 10,357,360 11,694,188 52,276,452 96,472,000 200,000,000 11.07 5.18 5.85 26.14 48.24 100.00 11.07 5.18 5.85 26.14 48.24 100.00 5.51 9.51 10.74 47.99 73.74 100.00 6.95 12.00 13.55 60.56 93.05 100.00 41,519,180 38,688,000 9,360,000 9,360,000 1,315,880 1,206,380 944,090 708,910 425,560 103,528,000 20.76 19.34 4.68 4.68 0.66 0.60 0.47 0.35 0.21 51.76 20.76 19.34 4.68 4.68 0.66 0.60 0.47 0.35 0.21 51.76 5.51 5.51 5.51 5.51 1.21 1.11 0.87 0.65 0.39 26.26 6.95

* Individual Restriction by 3% Rule: With respect to the election of an auditor who also sits as an outside director and an amendment to the Articles of Incorporation for the introduction/exclusion of the cumulative voting system, each shareholder holding more than 3% of the total voting stock cannot exercise the voting rights for the stock in excess of 3%. ** Collective Restriction by 3% Rule: With respect to the election of an auditor or an auditor who also sits as an internal director, the combined voting rights of the majority shareholder and the related parties cannot exceed 3% of the total voting stock. Besides, a shareholder holding more than 3% of the total voting stock cannot individually exercise the voting rights in excess of 3%.

Dilutable securities

Not applicable

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Samsung Life Insurance [032830, KOSPI]


Disparity between Control & Ownership
(unit : %, multiple) Disparity Multiplier Sep. 2010 21.64 1.72 Dec. 2009 21.64 1.72 Dec. 2008 21.64 1.72 Dec. 2007 27.73 3.00 Dec. 2006 27.73 3.00

* "the disparity between ownership and control right" is defined as [{the stakes directly held by the controlling family} {the voting rights exercisable by the controlling family}] 1) the disparity between ownership - control rights: voting rights - cash flow rights 2) the voting rights multiplier: voting rights/ cash flow rights 3) the higher the disparity in (1) or the voting multiplier in (2), the greater the risk of tunneling.

2. Change of Ownership Structure


(Unit : %) Sep. 2010 Kun-Hee Lee Foundations Affiliates Directors Sub-Total Other Shareholders Other Foreign Other domestic Sub-Total S bT t l Treasury Stock Total 5.18 43.06 48.24 48 24 100.00 48.24 48 24 48.24 100.00 48.24 48 24 48.24 100.00 58.38 58 38 58.38 100.00 58.38 58 38 58.38 100.00 20.76 9.36 21.64 51.76 Dec. 2009 20.76 9.36 21.64 51.76 Dec. 2008 20.76 9.36 21.64 51.76 Dec. 2007 4.54 9.36 21.64 6.08 41.62 Dec. 2006 4.54 9.36 21.64 6.08 41.62 Controlling Shareholder & Persons with Special Interest

3. Board Structure and Auditorship


Related Provisions in AOI
Provisions Board Auditor (Committee) Term of office Board chairmanship Resolution for BOD More than 3 directors (Outside director : More than 25%) More than 3 members, More than 2/3 outside Director Director 3 years / Auditor 3 years Person who held BOD At least 50% of director must be present / more than 50% of the attending director must approve Audit Committee Outside Director Nomination Committee(ODNC) Sub-Committee Risk Management Committee Inside Trading Committee Steering Committee Compensation Committee Content 4 Internal / 5 Outside 1 Internal / 2 Outside 3 years Soo-Woong Hwang, Outside Director 1 Internal / 2 Outside 2 Internal / 2 outside 3 Internal / 2 outside 3 outside 3 Internal 1 Internal / 2 Outside

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Samsung Life Insurance [032830, KOSPI]


Board Structure
(As of September 30, 2010) Name Rep. Director Soo-Chang Lee Sang-Hang Kim Internal Director Jong-Yoon Han Tae-Gon Moon Soo-Woong Hawng Career Former Rep. Director of Samsung Fire & Marine Samsung life Direcor Samsung life Direcor Former Officer of Board of Audit & Inspection of Korea Former Officer of National Tax Service End of Term May. 2012 Jan. 2013 Jan. 2013 Jan. 2013 Position or Committee Vice Chairman President Vice President Member of Audit Committee Chairman of BOD Member of Risk Management committee Member o f Audit Committee, Compensation committee Chairman of Inside Trading Committee, Member of Compensation committee Chairman of Audit Committee, Member of Inside trading committee Member of Risk management Committee, Inside trading committee Remarks* -

May. 2012

Attandance rate 100%

Jong-Nam Lee

Chairman of Korea Future Association

Jan. 2013

Attandance rate 100%

Outside Director

Young-Jin Kim

Attorney at Law

May. 2012

Attandance rate 100%

Keun-Ok Ryu

Professor of Seoul Indusrty Univ.(Business)

May. 2012

Attandance rate 100%

Jeong-Dong Kim Total

Professor of Yonsei Univ.(Business)

May. 2012

Attandance rate 75%

9 * Remarks: the relationship with the controlling shareholder, interlocking positions in the affiliated entities, attendance rate of last year, newly elected or not

Auditor
Name Outside Director Outside Director Standing Keun-Ok Ryu Jong-Nam Lee Tae-Gon Moon Career Professor of Seoul Indusrty Univ.(Business) Chairman of Korea Future Association Former Officer of Board of Audit & Inspection of Korea End of Term May. 2012 Jan. 2013 Jan. 2013 Position or Committee Chairman Other Particulars* -

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Samsung Life Insurance [032830, KOSPI]


Compensation
(Unit : mil. KRW, shares) Year Internal Director 2009 Outside Director Auditor Internal Director 2008 Outside Director Auditor AGM approval on remuneration 20,000 20,000 Total Payment 4,511 191 122 1,290 191 127 Average Payment 64 61 1,128 430 64 64 Stock Option Fair Value Amount -

4. Exercise of Shareholder's Right


Minimum Shareholdings Required for the Exercise of Minority Shareholders Rights
(As of September 30, 2010) Shares Held More Than Shares Held Less Than 6 Months 6 Months Minority Shareholders Rights
Minimum Number of Shares Minimum Stake (%) Minimum Number of Shares Minimum Stake (%)

Right to bring shareholders derivative actions Right to claim injunctive relief for directors illegal activities Right t demand dismissal of di t / dit Ri ht to d d di i l f director/auditor Right to inspect accounting books Right to demand appointment of inspector Right to call an extraordinary shareholders meeting Shareholder proposal right
* *

10,000 250,000 250,000 250 000 500,000 1,500,000 1,500,000 500,000 2,000,000

0.005 0.125 0 125 0.125 0.25 0.75 0.75 0.25 1

2,000,000 2,000,000 6 000 000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000

1 1 3 3 3 3 3 3

Right to demand adoption of cumulative voting* * based on shares with voting rights

Exercise of Shareholder's Right associated with AGM


Content Proxy Resolution of ordinary items Voting available through proxy Cumulative voting excluded/ Vote-by-Mail excluded

Expected Timeline and Proposals Available at the next AGM


Content AGM Date Agenda disclosure date Submission Deadline Available Proposal The BOD The Audit Function Jun. 1, 2010 May. 17, 2010 Apr. 21, 2011 No upper limit regarding the number of directors, thus additional election possible No upper limit regarding the number of auditors, thus additional election possible

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Samsung Life Insurance [032830, KOSPI] 5. Available Defensive Measures


Content Golden Parachute Supervoting stocks AOI Restrictions on the number of Directors Others Staggered BOD Operational Friendly Shareholder Treasury Stocks (%) Defense Mechanism in Relevant Laws Not applicable Not applicable None Not applicable No provision in AOI but staggered board is partially in existence None Not applicable

Allocation of New Stocks to the third party Possible but no special provision exists

6. Restrictions by Applicable Laws


Monopoly Regulation and Fair Trade Act
Relevant Law Prohibition of CrossShareholdings Prohibition of CrossDebt Guarantees Limitation of Voting Rights in Finance and Insurance Companies Restrictions A company that belongs to a large business group designated by the Fair Trade Commission ("FTC") shall not acquire shares of an affiliate that has acquired or owns its shares. A company that belongs to an FTC-designated large business group shall not provide new debt guarantees to its domestic affiliates. Finance and insurance companies affiliated to an FTC-designated large business group shall not exercise more than 15% of their voting rights on the shares owned by themselves and/or persons with special interests regarding certain items at the General Meeting of Shareholders of an affiliate in which they hold a stake.

Restriction on In case where a company that belongs to an FTC-designated large business group and/or its Establishment of Holding persons with special interest intends to establish a holding company, it must annul preexisting Company debt guarantees between the holding company and its subsidiary, or between its subsidiaries. Maintaining the debt-to-equity ratio under 200% Restriction on Practice of Publicly held subsidiaries 20%, non-publicly held subsidiaries 40% Cannot own a financial institution as a subsidiary Holding Company Cannot own stocks of entities other than the subsidiaries for the control purpose Transactions with specially related parties in excess of 10% of the company's equity capital or 10 billion KRW in the following cases; - Offering or trading funds in forms of provisional payments or loans. - Offering or trading securities, such as stocks or company bonds. - Offering or trading assets in forms of real estate or intangible property rights.

Boards Resolution, Public Disclosure

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Samsung Life Insurance [032830, KOSPI]


Commercial Act
Relevant Law Major Shareholders, Persons with Special Interest, Directors, Auditors Restrictions A company cannot enter into the following transactions with persons with special interest, directors or auditors; - Providing loans based on economic valuables, such as money, securities, real assets, intangible property rights, etc. - Providing guarantees based on real property, personal property and/or securities. - Providing debt-guarantee for these parties (Total Asset exceeding KRW 2 trillion) Transactions with the largest shareholder or other specially related parties in the following cases; - The volume of a single transaction exceeds 1% of the companys total assets or total sales. - The total value of such transactions for the relevant year exceeds 5% of the companys total assets or total sales.

Boards Resolution, Report to General Meeting of Shareholders

Act on the Structural Improvement of the Financial Industry (ASIFI)


Relevant Law Restrictions Any financial company must first acquire approval from the Financial Services Commission in any of the following cases ~ - in case the financial company, alone or with its financial affiliate, own 20% or more in other company's equity with voting rights; or - in case the financial company owns 5% or more equities (w/ voting rights) in other affiliated financial company or in a company that belongs to the same business enterprises

Restrictions on acquiring shares of other entities

Insurance Business Act


Restrictions Qualifications of Major Shareholders Fit and proper test in terms of the financial soundness; Subject to approval from the FSS

Restriction on Insurers Concurrent Operation of Life Insurance Business Prohibition of concurrent operation of life insurance business and non-life insurance business and Non-Life Insurance / Prohibition of operation of non-insurance businesses Business as well as NonInsurance Businesses Disqualification of officers: Persons who have been given criminal sanction or discharged due to violation of financial laws; Persons who served at any financial institution whose license Restriction on and permit were cancelled; Persons who held a responsible position at any troubled financial Qualifications of Officers institution and Concurrent Holding of Other Offices Officers of insurance companies shall not concurrently serve at other profit-making corporations.

COMPANY REPORT CGCG

Samsung Life Insurance [032830, KOSPI]


Relevant Law Restrictions 1) An insurer shall be prohibited from performing directly or indirectly the act falling under each of the following subparagraphs with any of its large shareholders: 1. The act of extending any credit for the purpose of assisting any large shareholder in his equity investment in other company 2. The act of transferring any asset without compensation, or the act of selling or exchanging any asset or extending credit on terms greatly disadvantageous to the relevant insurance company in light of the conventional terms of transactions. 2) In case of any transactions with its large shareholders falling under each of the following subparagraphs, the insurer shall obtain the consent of all directors on the Board. * The act of extending any credit in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion * The act of acquiring bonds or shares issued by its large shareholders in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billi 3) Obligation to publicly disclose transactions with its large shareholders * The act of extending any credit in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion * The act of acquiring bonds or shares issued by its large shareholders in excess of the lesser amount between 1/1,000 of its equity capital and KRW 1 billion * The act of exercising voting right of the stocks issued by its large shareholders 4) Prohibition of large shareholders exertion of unfair influence * The act of requiring the insurance company to provide him with undisclosed material or information for the purpose of exerting unfair i fl * The act of exerting unfair influence on the personnel administration or management of the insurance company in collusion with other shareholders or equity investors on the condition that he provides them with economic interests and other benefits * The act of receiving credits from the insurance company or the act of urging the insurance company to hold stocks or bonds issued by its large shareholders in excess of the ratio prescribed by the law * The act of extending credit to its large shareholders competitors on unfavorable terms 5) Measures to be taken when its large shareholders (their companies) are financially distressed * Prohibition of extending additional credit to its large shareholders * Prohibition of acquiring marketable securities issued by its large shareholders * Limitation of transactions with its large shareholders in the nature of financial supports Restriction on Equity Investment An insurer shall not acquire shares of any other company in excess of 15% of the total outstanding shares of such company; provided, however, that subject to the approval of the FSS, it may acquire shares of its subsidiaries without limitation.

Restriction on Transactions with Large Shareholders

COMPANY REPORT CGCG

Samsung Life Insurance [032830, KOSPI] 7. Adoption of the International Financial Reporting Standards ('IFRS')
Adopted or not Status in year 2009 Not Adopted Effect (Change in Net Asset) -

8. Dividend Policy
Related Provisions in AOI
Provisions Interim Dividend Stock cancellation/redemption Allowed Upon BOD's resolution /Approval by supermajority at the AGM

Dividend - Common Stock


(unit: KRW, %) 2009 EPS Dividend Dividend Yield Ratio Dividend Payout Ratio 4,530 1125 24.83 Not applicable 2008 565 200 35.39 2007 3,573 200 5.6 2006 2,573 200 7.78 2005 3,131 200 6.39 2004 2,879 150 5.21

Treasury Stock

9. Risk Related to Affiliates


(Unit: KRW million) 2009 Securities based on Equity method Guarantees for affiliates Transactions with affiliates Sales Purchase
Acquisition Value Book Value

2008
Acquisition Value Book Value

1,299,336 -

1,516,036

1,321,991 -

1,400,901

35,850 80,914

44,570 88,784

COMPANY REPORT CGCG

Samsung Life Insurance [032830, KOSPI] 10. Group Snapshot


Ownership Structure of Group
(As of June 30, 2010)
Jae-Yong Lee

Kun-Hee Lee

3.72 19.3

42.32 1.5

Everland Samsung

26.4 2.4

20.8

25.6

Samsung Life

2.9 Samsung 4.0 1.4 20.4


Samsung SDI

35.3 7.5

Samsung

5.1

10.4

Samsung F& M

11.0

7.4
S1

Corp

11.4 Samsung Securities 5.5


Samsung Asset future

5.3 5.6 38.7 14.1

11.5 Samsung fine 8.4 Chemical 10.7 Samsung General 3.9 Chemical 7.4 14.1
Hotel Silla Samsung Heavy I market Korea

65.3 51.0

41.0 Samsung

5.1 17.6 23. 50.0 17.2 21.7

7.3 3.4 9.7 13.4

2.4

Samsung S

50.0

Samsung LED Samsung SDS

18.3 33.2Petrochemical 13.0 21.4


Cheil Industries Samsung

40.86

Credu

27.3

46.0 35.7 25.5

Seoul commtech Samsung Techwin4.3

13.1

Samsung Engineering

2.6 Cheil Worldwide 88.3


Service

12.6

Sansung Electronics

COMPANY REPORT CGCG

Samsung Life Insurance [032830, KOSPI]


Summarized Financial Statements of the Group Affiliates
(Unit: KRW million) Company Samsung SDI Samsung Corp. Samsung Life Insurance Samsung Engineering Samsung ElectroMechanics Samsung Electronics Samsung fine chemical Samsung Heavy Industries Samsung Securities Samsung Card Samsung techwin Samsung F&M I market Korea S1 Cheil Worldwid Cheil industries Hotel Silla Ace Digitech Credu Gamy plus Global Tech Living Plaza Samsung Economy Institu Samsung Gwangju Electro Samsung Linons Samsung mobile Display Samsung Venture Samsung Petro-chemical Samsung Future Samsung Everland Samsung SDS Samsung LED Samsung Asset manageme Samsung Logitech Samsung Electronics servic Samsung General Chemica Samsung Corning Fine Samsung Thales Samsung Total Samsung Life Real trust Seoul Commtech Semes Secron KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSPI KOSDAQ KOSDAQ Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited As of Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. Dec 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Sales 3,550,584 10,875,929 25,695,233 3,471,401 3,192,031 89,772,834 1,038,396 13,094,944 2,564,719 2,716,224 2,642,743 13,262,264 1,182,116 736,474 540,278 4,261,096 1,213,244 577,261 63,785 29,724 54,960 54 960 1,463,213 108,823 3,204,650 34,098 3,635,461 12,959 1,780,175 60,346 1,726,474 2,494,052 544,598 104,410 1,101,162 668,662 177,653 5,231,245 623,271 4,731,236 20,429 430,311 315,510 70,717 Operating Net Income Total Asset Net Asset 88,229 280,505 848,749 315,615 215,964 6,348,528 90,714 793,631 315,510 663,564 205,329 666,783 28,044 115,274 47,456 263,833 54,130 36,424 3,337 -144 2,819 2 819 -1,677 -1,173 36,422 15 75,387 3,250 122,812 23,339 168,582 267,562 21,692 34,257 123 519 176,979 3,190,462 26,218 503,510 7,786 21,057 22,240 888 217,992 307,542 906,095 258,896 278,476 9,649,487 86,673 669,855 245,308 603,846 172,111 524,510 21,105 96,836 91,050 126,983 31,484 16,587 5,374 -812 2,940 2 940 2,301 185 42,589 28 100,179 2,524 92,670 17,508 149,745 265,423 56,721 21,732 2,672 2,859 170,781 2,597,892 30,408 355,969 5,818 17,558 12,108 234 6,619,819 13,884,591 2,452,484 4,209,563 4,987,098 7,454,927 776,664 2,574,305

133,045,073 12,132,820

86,024,154 66,824,711 1,025,139 20,187,524 13,174,881 11,788,784 2,444,361 26,655,886 347,396 810,969 1,032,373 3,118,705 1,072,979 312,326 83,113 14,809 26,978 26 978 286,504 115,001 1,066,202 58,838 2,686,872 48,207 596,324 808,640 3,930,370 1,988,156 728,089 228,925 153,943 203,130 1,044,186 6,298,736 535,776 3,119,540 69,458 254,552 244,715 59,964 855,678 2,840,562 2,598,738 4,425,557 1,082,900 4,940,328 97,777 620,504 565,976 1,969,508 526,468 95,393 77,053 4,435 15,146 15 146 136,254 88,115 768,530 -2,429 1,525,564 44,528 210,899 100,435 2,315,875 1,409,259 344,061 176,282 49,404 61,823 1,020,915 5,646,206 324,348 1,949,319 62,717 173,605 119,966 38,846

COMPANY REPORT CGCG

10

Samsung Life Insurance [032830, KOSPI]


(Unit: KRW million) Company Steco Scui.com CV net SD flex SB remotive SLCD SEHF Korea Open tide Korea Allat E samsung International Carecamp Handuk Chemical Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited Audited As of Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Dec. 2009 Sales 247,279 40,115 72,721 5,011 0 9,888,478 340,739 86,505 28,717 0 236,525 44,982 Operating Net Income Total Asset Net Asset 2,426 2,597 2,920 -702 -64,645 1,970 15,576 -1,856 -437 -566 3,210 11,121 3,648 2,533 2,815 -2,121 -54,039 16,546 12,857 -1,293 150 16,520 2,255 9,707 90,474 37,237 38,212 10,236 302,373 5,424,336 87,383 19,016 17,420 62,472 123,885 40,666 67,093 27,261 15,577 6,514 249,263 4,105,047 52,432 7,348 9,063 59,821 14,161 35,295

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