Allianz Korea, Failure of customer focused management

There was a suspicion of Allianz Life Insurance “using illegally” the customers hundreds of millions by People’s Solidarity for Participatory Democracy in the mid of April 2008. Key issue is that the company sold the stocks of ‘Variable growth funds’, the customers’ asset unfairly to save the large amount of corporation tax. “Allianz disturbed the customers’ profit selling the securities in separate accounts to save the corporation tax” and “Allianz sold the stocks of Variable growth fund in separate accounts on March 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” said PSPD.

It is said on December 2007 “According to big law firm, accounting company and insurance industry concerned, many insurance companies dealing with variable products from 2002 reduced taxes by replacing the appraisal profit and loss of stocks and bonds with company’s loss (tax administration) and the amount of reduced tax is estimated at 2000 billion won.” (Daily Taxation, 2007.12.12). According to the life insurance companies’ declared information in FSS of 2005,2006, amount of subtracting appraisal losses from the appraisal profits of stocks and bonds in ‘separate accounts’ in Kyobo Life was 118.055 billions won (variable product- 117.71 billions, retirement annuity- 345 millions won) the highest. Daehan Life after Kyobo Life was the second, 104.8 billions won, after that ING Life was 41.5 billions, Miraeasset Life was 39 billions won, PCA Life was 29.3 billions won, Allianz Life was 29 billions won, Shinhan Life was 20.6 billions won, Samsung Life was 19.1 billions won, Prudential Life was 11.8 billions won (Daily Taxation, 2007.12.12).

Allianz internal secret documents also contained about this. According to this documents, Allianz disposed of customers’ funds discretionarily to make the most use of 'Tax Loss Carrying Forward (TLCF)'. 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 (TLCF)'.
Allianz took over Jeil Life Insurance with considerable loss in 1999 so Allianz could use TLCF. Actually Allianz Life Korea had losses of 197.6 billions won in 2002 and of 36.1 billions in 2003. The better sales since 2004, Allianz had profits; 75.6 billions in 2005, 47.4 billions in 2006, 202.3 billions in 2007 but Allianz didn't pay the corporate tax by using TLCF for 4 years. Although deductible profits after 2004 exceeded the losses of 2002,2003, Allianz didn't pay the corporate tax continuously. A licensed tax accountant said “ It is estimated that Allianz had hundreds of billions of losses before 2002.”

The problem is a suspicion of that the company sold the stocks and bonds in separate accounts of variable funds discretionarily not to pay the corporate tax. PSPD criticized that Allianz forged company’s profits by putting the profits from separate accounts into general accounts. Allianz had the corporate tax reduction and exemption because of losses of 2002 & 2003, even in 2007 it does not need to pay taxes for 200 billions profits. “ To get the best out of this, Allianz Life made 200 billions profits artificially by selling stocks in separate accounts of variable growth funds on March 2007” said PSPD (KBS board, 2008.4.22).