Triple Trouble for Insurers, Stock Prices Plummet

Business Slump Hits Big Cut and COVID-19
Samsung Life Hits Yearly Low on 19th
Industry No.2 Hanwha Life at Penny Stock Level
CEOs Buy Back Shares to Boost Stock Price

[Asia Economy Reporter Ki Ha-young] Insurance company stocks have been plummeting since the beginning of this year. This is attributed to the sluggish industry conditions caused by the three lows (low birthrate, low interest rates, and low growth), the Bank of Korea's big cut (0.5 percentage point interest rate reduction), and adverse factors such as the spread of COVID-19, which have significantly dampened investor sentiment.

According to the Korea Exchange on the 1st, as of 10:30 AM, the stock price of Samsung Life Insurance, the No. 1 life insurance company, was 42,450 KRW, down 550 KRW from the previous day. Samsung Life's stock price fell below the 50,000 KRW mark on the 12th, closing at 47,650 KRW, and then hit this year's lowest point at 31,900 KRW on the 19th. Compared to 73,100 KRW at the beginning of the year, it has halved. Market capitalization has also sharply declined. From 23 trillion KRW at the time of its IPO in May 2010, it dropped about 70% to 8.51 trillion KRW as of this date. Its market capitalization ranking also fell from 4th to 26th place.

Hanwha Life Insurance, the second largest in the life insurance industry, has fallen to penny stock levels. On the 18th, Hanwha Life's closing price dropped below 1,000 KRW to 970 KRW, and on the 23rd, it further declined by 6.58% from the previous day to close at 895 KRW. This is the first time in history it has fallen into the 800 KRW range. Considering the IPO price was 8,200 KRW in 2010, it has plummeted nearly 90% over 10 years. Compared to 2,290 KRW at the beginning of the year, the stock price has dropped more than 50%.

The entry into zero interest rates following the Bank of Korea's big cut is analyzed to have led to a sharp decline in stock prices due to the expected deterioration in the performance of large life insurers. However, despite this, the dominant analysis is that the stocks are excessively undervalued.

The non-life insurance industry also saw stock prices plunge due to the impact of COVID-19. Samsung Fire & Marine Insurance's stock price fell from 238,500 KRW at the beginning of the year to 126,000 KRW as of the closing price on the 19th of last month, about half the level. This is the lowest level this year. Hyundai Marine & Fire Insurance's stock price also dropped from 29,500 KRW at the beginning of the year to 17,700 KRW on the 19th.

The reason insurance stocks are struggling is due to weakened investment sentiment in insurance stocks. An industry insider said, "With the continuation of low interest rates and low growth trends, insurance companies are recording poor performance due to expanding negative spreads and rising loss ratios," adding, "In addition, the global economic volatility caused by the COVID-19 crisis has increased the possibility of profitability deterioration."

Accordingly, insurance company CEOs are attempting to boost stock prices by purchasing their own shares. Since his inauguration, Young-mook Jeon, CEO of Samsung Life Insurance, has purchased a total of 6,000 shares in two rounds: 4,000 shares on the 19th and 2,000 shares on the 20th. CFO Ho-seok Yoo also bought 3,000 shares. Seung-joo Yeo, President of Hanwha Life Insurance, purchased 30,000 shares on the 17th.

Young-moo Choi, President of Samsung Fire & Marine Insurance, bought a total of 797 shares, 500 shares on the 7th and 297 shares on the 12th of last month. Vice President Deok-hee Jang and Executive Director (CFO) Tae-young Bae also purchased 300 shares each last month. Sung-soo Kang, CEO of Hanwha General Insurance, bought a total of 72,000 shares in 14 transactions from the 17th to the 24th.

Companies have also purchased treasury stocks at the corporate level. Lotte Insurance bought treasury stocks worth 3 billion KRW earlier this month and donated them to the employee stock ownership association. DB Insurance also purchased treasury stocks worth 90 billion KRW.

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