Allianz korea, Suspicion of selling stocks-Customer’s asset ‘ Variable growth fund’ for the corporation tax reduction

PSPD pointed that if it is true to put the profits from separate accounts into general accounts for the reduction of corporate tax, it could be the tax evasion. Insurance company has to separate the accounts of variable insurances and not to reflect the investment gains of it on financial statements. Insurance companies did not reflect the investment gains of ‘separate accounts’ of variable funds on financial statements at ordinary times but only at tax times, they adjusted the ‘appraisal profits of stocks & bonds’ in separate accounts and reduced the corporate tax. This tax administration could be considered that insurance companies were using variable products for tax evasion. So, the National Tax Service made a additional charges of insurance companies’ tax administration in variable products on February 2008 (Pressian, 2008.4.16).

Insurance Business Law provides that insurance company keeps an account of variable funds separately from general accounts. 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’. But “Allianz sold the stocks of VUL growth fund in separate accounts not for the customers profit but for the company's tax profit on March 2007 and caused the customers loss of opportunity profit” said PSPD. “ Selling the customers’ asset for the company’s profits and damaging the expected profits of customers are the violation of the due diligence of Insurance Business Law.” (“Moral hazard”)
Actually it was suspicious of Allianz from July 2006. In company’s internal meeting minute, ‘reducing the corporate tax plan’ has been progressed carefully not by staff but by the management board. The company’s ‘project of tax reduction’ is summarized as follows. (Sunday Current Affairs, 2008.4.22)
On July 2006, Mr. A, the Financial Director of Allianz, ordered to estimate & review the several scenarios to minimize the appraisal profit and loss. “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.”
On Sep. 6th 2006, Allianz had a meeting about tax loss carrying forward utilization plan. At that meeting, ”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 suggested the plan regarded 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.”