The Financial Supervisory Service said Wednesday that it has reprimanded Allianz Life Insurance Korea for engaging in accounting irregularities.

The local unit of Munich-based Allianz Group was found to have breached the regulatory rules that mandate insurers to draw up their financial statements under guidelines set by the FSS governor or the Financial Services Commission chairman.

According to FSS officials, the company reported artificially low reserves for its insurance payments, instead investing the money in financial derivatives.

“It misstated by 11.2 billion won ($9.7 million) for fiscal year 2008 and 17 billion won for fiscal year 2009, respectively,” said an FSS official.

Allianz Life also allegedly chose not to inform insurance policyholders of some contract terms, which could be disadvantageous to the customers, he said.

In addition, the company failed to notify the customers of different terms between the past and renewed products.

For its marketing activities, the company failed to appropriately record its spending on sales promotion gifts worth 333 million won.

The financial regulator levied a 26 million won fine on the company and issued a caution against an executive of Allianz Life Insurance Korea.

In addition, 16 employees were also subject to disciplinary measures from the FSS.

By Kim Yon-se (kys@heraldcorp.com)