Increasing Cancellations and Investment Losses... Insurance Companies' Performance 'Wobbles'

Poor First Half Performance Due to COVID-19
Shinhan Life Insurance Premium Income Down 5.4%

KB Life Insurance Down 14.5% Year-on-Year
Net Profit Also Decreased by 28.5%

Hana Life Insurance Strong Results from One-Time Factors
Increase in Policy Cancellations Mainly in Life Insurance

[Asia Economy Reporter Oh Hyung-gil] The poor performance of insurance companies due to the COVID-19 pandemic is becoming a reality. As livelihoods became difficult, cases of reducing or canceling insurance subscriptions increased, leading to a sharp decline in premium income. In addition, losses occurred in the investment sector due to falling interest rates and stock prices.

According to the insurance industry on the 27th, financial group-affiliated insurers such as Shinhan Life, Orange Life, KB Insurance, KB Life, and Hana Life posted poor results in the first half of the year.

Shinhan Life, affiliated with Shinhan Financial Group, recorded a net profit of 91.6 billion KRW in the first half, a 17.5% increase from 78 billion KRW in the same period last year, but premium income decreased by 5.4% year-on-year to 2.0645 trillion KRW.

The annualized premium equivalent (APE), an indicator of business growth, increased by 15.8% year-on-year for protection products, while savings and pension APE decreased by 47.9%. Although the company succeeded in improving its structure by reducing the proportion of savings insurance products and expanding protection insurance, the increase in surrender refunds due to the COVID-19 impact resulted in poor insurance business performance.

Orange Life, which is scheduled to merge with Shinhan Life in one year, also saw both premium income and net profit decline in the first half. Premium income dropped 13.6% from 2.1426 trillion KRW last year to 1.8504 trillion KRW this year.

In particular, APE sharply fell by 32.8% from 348.5 billion KRW last year to 234.2 billion KRW. Net profit also decreased by 6.6% year-on-year to 137.5 billion KRW. Investment yield fell from 3.71% in the first half of last year to 3.48% this year due to the low interest rate environment.

Shinhan and KB Insurance Affiliates’ First Half Performance Worse Than Expected

The downturn in the life insurance market triggered by the contraction of the whole life insurance market also affected KB Life. KB Life’s premium income in the first half was 72.2 billion KRW, down 14.5% year-on-year. Poor sales of bancassurance savings insurance products had an impact.

Net profit also fell sharply by 28.5% to 11.8 billion KRW. Although there is a variable factor of the expected merger with Prudential Life in 2022, it is difficult to expect a rebound in KB Life’s performance in the near term.

On the other hand, KB Insurance’s net profit in the first half dropped 13.4% to 144 billion KRW as long-term and general insurance loss ratios increased despite improvements in automobile insurance loss ratios after the COVID-19 crisis. Investment operating profit sharply declined due to reduced dividend income and impairment losses on overseas alternative assets. However, gross written premiums increased by 6.4% from last year to 5.467 trillion KRW.

Hana Life, affiliated with Hana Financial Group, recorded a strong performance with a net profit of 23.3 billion KRW in the first half, an 81.6% surge from the same period last year. However, this was largely due to one-time factors. Premium income slightly increased from 193.1 billion KRW last year to 200.9 billion KRW this year, while financial asset investment income rose from 26.4 billion KRW to 52.2 billion KRW.

An industry insider said, "As insurance cancellations increase mainly in life insurance, the decline in life insurers’ performance is expected to continue for the time being," adding, "COVID-19 is affecting not only the business environment but also interest rates and stock prices overall, making it difficult to rebound performance."

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