Samsung restructures financial units

Financial affiliates of Samsung Group are undergoing restructuring as their performances have been poor in recent years amid the economic slump.

While they earlier decided to freeze workers’ salaries this year, the life insurance and brokerage units have launched reorganization plans and are accepting voluntary retirement applications.

The restructuring follows in the footsteps of the group’s manufacturing affiliates, and some predict other financial subsidiaries may follow suit.

Samsung Securities said Friday it would cut its number of branches and workers.

“Amid an unfavorable market environment, the brokerage industry has faced low growth and low profits,” Kim Suk, CEO of the brokerage house, was quoted as saying by the company. He told this to his staff through an internal announcement.

“Online and mobile financial transactions are also expanding, so we need a new business strategy in branch and manpower management,” he said.

Kim said the company might face not only losses but critical decisions that could threaten its existence if the current situation continues. “As an inevitable choice for the company’s future, I’ll carry out slimming-down measures.”

In the overhaul, the brokerage house will cut the number of executives from 32 to 26. It will also accept applications for voluntary retirement from workers who have been with the company for more than three years. As many as 500 people are expected to apply.

The company will reduce the number of branches by about one quarter by merging adjacent ones. It now has some 100 across the country.

To reduce costs, it will also force executives to save, such as requiring them to take economy-class seats for overseas travel.

The company already cut the number of staffers in July by sending some 100 people to other Samsung affiliates, and dozens of others at the end of last year. The size of the staff dropped from 3,280 in 2011 to 2,772 in 2013.

It had 24 billion won in net earnings between April and December of 2013, a huge drop from the 180.7 billion won earned between April 2012 and March 2013, even considering the three-month difference in comparative periods.

“The stock transaction volume has continued falling and the market situation is worsening. Not only Samsung, but all of the brokerage industry has been conducting downsizing,” an official of Samsung Securities said.

Samsung Life Insurance also launched restructuring.

The insurer will force 17 executives out of a total of 80 to leave the company, the largest number since the Asian Financial Crisis in 1997. They will either retire or be sent to other subsidiaries. Remaining executives will have their salaries frozen and other expenses cut.

Samsung Life will also reduce the number of workers by 1,000-1,500 out of current 6,500. It will begin receiving voluntary retirement applications next month. It is also considering closing or downsizing overseas offices, including one in Tokyo.

“The insurance industry is sluggish and the profitability is unlikely to pick up soon. So we decided on a preemptive downsizing,” an official of the insurer said.

The company’s net earnings for April-December 2012 were 586.3 billion won, the smallest since 2008 when the global financial crisis hit.

Samsung’s other financial affiliates, Samsung Fire & Marine Insurance and Samsung Card, said they do not have restructuring plans for now.

“It is true that our profitability is not good in the low-interest era. But our situation is not bad enough to warrant an overhaul,” a Samsung Fire & Marine official said.

Officials at Samsung Card also said some workers voluntarily retired last year, although they did not mention the exact number. They said the firm is not planning an additional voluntary retirement program.

However, market watchers forecast the restructuring of Samsung Life, the biggest financial unit of the group, may have a ripple effect on other units, as well as on the entire insurance and brokerage industries. By Kim Rahn, The Korea Times