The Crisis of Insurance... The Stock Market Tells the Story

Insurance Industry Holding Company

[Asia Economy Reporter Oh Hyung-gil] As the insurance industry falls into a slump, insurance stocks are also struggling in the capital market.

Amid concerns that the insurance business will suffer significant damage due to the novel coronavirus disease (COVID-19) outbreak, the recent interest rate cuts in the U.S. have added to the outlook that the low-interest-rate trend will continue for a long time, making the situation literally 'no answer.'

According to the insurance industry on the 7th, the stock prices of life insurance companies such as Samsung Life Insurance, Hanwha Life Insurance, Tongyang Life Insurance, and Mirae Asset Life Insurance remain at their lowest levels since their listings.

Samsung Life Insurance's stock price closed at 55,200 won on the 6th, marking a 52-week low. Despite the announcement to raise the dividend payout ratio to over 50% for the next two years, the stock price continues to decline without showing signs of bottoming out.

Hanwha Life Insurance's stock price has also plummeted by more than 60% compared to a year ago, falling to the 1,500 won range. Concerns are emerging that a performance rebound will be difficult for the time being, as last year's net profit dropped 68.1% year-on-year to 114.6 billion won.

Non-life insurance stocks such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, Meritz Fire & Marine Insurance, Hanwha General Insurance, and Lotte Insurance have also been on a downward trend since the beginning of the year. The combined impact of rising loss ratios in automobile insurance and indemnity medical insurance along with COVID-19 is making it difficult for them to recover.

As a result, the insurance industry index has fallen to its lowest level in over 14 years since February 2006.

There appear to be no positive factors for insurance stocks to rebound in the near term. On the contrary, pressure for interest rate cuts is increasing.

With expectations that global central banks will respond to the COVID-19 outbreak, there is growing weight to the forecast that the Bank of Korea will also cut interest rates at the Monetary Policy Committee meeting in April.

Global credit rating agency Moody's predicted that market volatility caused by the COVID-19 outbreak could impact global insurance companies.

Moody's stated, "If the economy slows down, the business scale of insurers will shrink, and investment returns will weaken, the impact could be particularly severe," adding, "Global insurers and reinsurers may be directly affected by the possibility of insurance claims due to the COVID-19 outbreak."

It also pointed out, "For life insurers to see a significant increase in insurance payouts, mortality rates must rise substantially," and "Although insurers worldwide have increased the proportion of life and health insurance in China, it still accounts for only a part of their overall portfolio."

Domestic insurers are also expected to see deteriorating first-quarter earnings as sales activities have been significantly curtailed due to recommendations to insurance planners to refrain from face-to-face sales to prevent the spread of COVID-19.

An insurance industry official said, "It is true that the external performance and business environment are unfavorable, and the results are reflected in the stock prices," adding, "The biggest goal this year is to stabilize management through a management strategy focused on internal soundness."

This content was produced with the assistance of AI translation services.