Lotte Insurance Union: "Administrative Lawsuit After Next Week's Extraordinary Board Meeting... Considering Protests at National Assembly and Presidential Office"

Protesting Prompt Corrective Action, Union Demonstrates at Financial Supervisory Service on the 6th
Further Protest Planned at Financial Services Commission on the 7th, Considering National Assembly and Presidential Office

The Lotte Insurance labor union claimed on the 6th that the company plans to hold an extraordinary board meeting on the 11th to decide on filing an administrative lawsuit against the financial authorities. The union and employees protested in front of the Financial Supervisory Service on this day and plan to hold another protest in front of the Financial Services Commission the following day. Depending on the actions taken by the company and the financial authorities, they are also considering protests at the National Assembly and the Presidential Office if necessary.

Kim Jeungsu, chairman of the Lotte Insurance Labor Union, is speaking while protesting in front of the Financial Supervisory Service headquarters in Yeouido, Seoul, on the 6th. Photo by Moon Chaeseok

In response to the authorities' prompt corrective action, about 230 union members and employees of Lotte Insurance held a protest in front of the Financial Supervisory Service headquarters in Yeouido, Seoul, on the afternoon of the 6th. The previous day, the Financial Services Commission held a regular meeting and imposed a management improvement recommendation, the lowest level of prompt corrective action, on Lotte Insurance. Prompt corrective action is an administrative measure by which financial authorities require financial firms with deteriorating soundness to improve their management. When a financial company receives a management improvement recommendation, it must take measures such as disposing of non-performing assets, increasing capital, or restricting business expenses.

In May, the Financial Supervisory Service conducted a management status assessment (RAAS) of Lotte Insurance, assigning an overall rating of Grade 3 (average) and a provisional capital adequacy rating of Grade 4 (vulnerable). This was the first time in 20 years, since Ssangyong Fire & Marine Insurance in 2005, that prompt corrective action was taken based on a non-quantitative assessment in the capital adequacy evaluation process, sparking controversy. As of the end of June last year, Lotte Insurance's quantitative capital adequacy rating was Grade 3, but the Financial Supervisory Service gave it a Grade 4 in the non-quantitative assessment, which also lowered the overall capital adequacy rating to Grade 4.

Both the management and the union of Lotte Insurance protested, arguing that their soundness had improved, as evidenced by a third-quarter risk-based capital ratio (K-ICS) of 141.6%, exceeding the financial authorities' recommended level of 130%. They also pointed out that cumulative net profit for the third quarter reached 99 billion won, a 42% increase compared to the same period last year, and insisted that it was unacceptable to be subject to prompt corrective action under these circumstances.

Lotte Insurance union and employees are protesting in front of the Financial Supervisory Service headquarters in Yeouido, Seoul on the 6th. Photo by Chae-Seok Moon

The union explained that the prompt corrective action by the authorities had triggered a liquidity crisis, and that they would have to process about 3 trillion won in retirement pension renewals next month alone.

Kim Jeungsu, chairman of the Lotte Insurance labor union, said, "If prompt corrective action is imposed, it will deal a direct blow to our retirement pension business, which amounts to about 6.5 trillion won," adding, "Next month alone, the renewal amount is over 3 trillion won, and 85 to 90 percent of that comes from Lotte Group and its affiliates. If there are disruptions in the renewals, we will have to secure 3 trillion won."

Kim stated that the company would hold an extraordinary board meeting next week to decide on filing an administrative lawsuit. He said, "I understand that the company will hold an extraordinary board meeting next Tuesday (the 11th) to decide on the administrative lawsuit," adding, "Tomorrow, we will protest in front of the Financial Services Commission, and depending on how the situation unfolds, we will continue our protests at the National Assembly and Yongsan (the Presidential Office)."