Kyobo Life files accounting complaint

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Kyobo Life files accounting complaint

Kyobo Life, a third largest life insurance company by asset in Korea, said Tuesday it has filed a complaint with regulators against accounting firm Deloitte Anjin, claiming it failed to determine a fair market value for its stock prices, triggering conflict among its shareholders.

The complaint was filed with the United States Public Company Accounting Oversight Board, which establishes standards for registered public accounting firms.

“Deloitte Anjin is seen to have violated the evaluation standard when assessing the fair market value,” the company said in a regulatory filing. “As a result, conflict among shareholders has increased and the company’s reputation for sound management has been hurt. We reported the issue after concluding it causes both tangible and intangible damage to the company’s operation.”

Kyobo Life’s claim dates back to 2012, when a consortium of four investors purchased the Korean insurance company’s stocks under an agreement that included a put option. Put options allows a buyer to sell back the shares later on, at a fixed price or through an agreed-upon assessment process.

The consortium purchased 24 percent of Kyobo Life’s shares at 245,000 won ($200) per share, with a put option to allow the investors to sell the stocks back in the event the company’s chairman, Shin Chang-jae, failed to list the company publicly by September 2015. Shin is the insurance company’s biggest shareholder, holding 34 percent of Kyobo Life.

The initial public offering didn’t go through, and the investors claimed their put option in October 2018.

Deloitte Anjin, a financial consultant, assessed the market value of the shares for the put option at 409,912 won per share.

Kyobo Life claims the shares were overpriced because Deloitte Anjin evaluated the value based on peer companies’ stock prices between June 2017 and June 2018, even before the put option was activated. At the end of 2017, the share prices of its peers, including Samsung Life, Hanwha Life and Orange Life, had soared on expectations of a base rate cut and subsequent boon for the industry.

Chairman Shin didn’t accept the put option claimed by the financial investors. The two sides are still in the process of arbitration at the International Chamber of Commerce.

Kyobo Securities said it also plans to file a lawsuit in the New York Supreme Court against Deloitte Anjin’s parent company Deloitte Global.

“It is hardly likely that ICC will fully accept the claim by the consortium, but if it concludes that the biggest shareholder [Chairman Shin] has to buy back the shares at 409,912 won per share and he cannot finance it, there should be a change in the governance structure,” Kyobo Life said in the regulatory filing.

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