Insurers' Net Profit Hits Lowest in 10 Years... Drops by 2 Trillion Won

Financial Supervisory Service Insurance Company Management Performance

[Asia Economy Reporter Oh Hyung-gil] As operating losses expanded, the net profit of insurance companies last year fell to the lowest level in 10 years. In particular, it was confirmed that non-life insurance companies saw their net profit decrease by as much as 1 trillion won due to worsening loss ratios.

The insurance industry is facing a triple hardship of 'low growth, low birthrate, and low interest rates,' and with the added impact of the novel coronavirus disease (COVID-19), there are concerns that business contraction is inevitable. Furthermore, with the Bank of Korea's big cut (a 0.50 percentage point reduction) to counter the economic downturn, an entry into ultra-low interest rates is expected, which is anticipated to worsen investment returns.

According to the Financial Supervisory Service on the 17th, the provisional net profit of insurance companies last year was 5.3367 trillion won, down 1.9496 trillion won or 26.8% from the previous year. This is the lowest level in 10 years since the net profit of 3.9963 trillion won recorded in 2009.

Life insurance companies recorded a net profit of 3.114 trillion won, down 22.8% from the previous year, while non-life insurance companies recorded 2.2227 trillion won, a 31.7% decrease compared to the previous year.

Life insurers saw an expansion in operating losses due to an increase in guarantee reserves caused by falling interest rates, and investment operating profits also declined due to base effects such as Samsung Life Insurance's disposal gains from Samsung Electronics shares in 2018. Non-life insurers saw an increase in investment operating profits, but operating losses significantly increased due to rising long-term insurance business expenses and worsening loss ratios in automobile insurance.

Last year, the premiums received from customers amounted to 212.7604 trillion won, an increase of 5.4% compared to the previous year. Life insurance premiums grew by 5.8% to 117.2624 trillion won, and non-life insurance premiums increased by 4.9% to 95.498 trillion won.

The total assets of insurance companies stood at 1,238.9169 trillion won as of the end of last year, up 7.2% from the end of the previous year. Equity capital increased by 15.9% year-on-year to 129.9865 trillion won due to an increase in valuation gains on available-for-sale securities caused by falling interest rates and an increase in retained earnings.

The return on assets (ROA) and return on equity (ROE), which indicate the profitability of insurance companies, were 0.45% and 4.41%, respectively, down 0.19 percentage points and 2.25 percentage points from the previous year.

A financial regulatory official said, "We plan to focus supervisory and inspection capabilities to ensure that insurance companies refrain from overheated competition aimed solely at expanding their scale and pursue sound management to enhance soundness."

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