Foreign Insurance Companies Accelerate Korean Exodus... Shaking the World's 7th Largest Insurance Market

AXA Sonbo, Potentially Up for M&A Sale

An employee working at the AXA Insurance Jongno Call Center (Jongno 5-ga Station) tested positive for the novel coronavirus (hereinafter COVID-19), and it was found that a total of five people, including family members and contacts, were infected. The Seoul Metropolitan Government closed the 5th and 11th floors of the building housing the call center, and all contacts have entered self-quarantine. Among the five confirmed cases related to the AXA call center, it was confirmed that the symptoms of patient number 30 from Seodaemun-gu, who is a family member, appeared slightly earlier than those of the couple confirmed in Seocho-gu, leading to a wide-ranging epidemiological investigation. The photo shows the AXA Insurance Jongno Call Center, which was closed on June 3./Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Oh Hyung-gil] The exodus of foreign insurance companies from Korea is accelerating. Following ING (now Orange Life) and Prudential Life, AXA Insurance is also pushing forward with withdrawal from Korea. With the domestic insurance market facing low interest rates and low growth, and the introduction of new international accounting standards (IFRS17) on the horizon, concerns about the exodus of foreign insurers are growing. This is also seen as a signal that the growth of Korea's insurance market, ranked 7th in the world, is stagnating.

According to the insurance industry on the 22nd, the French AXA Group recently selected Samjong KPMG as the lead manager for the sale of its 100% stake in AXA Insurance and is preparing for the sale process.

AXA Insurance, which launched as Korea Direct in 2000, was acquired by Kyobo Life Insurance the following year and renamed Kyobo Auto Insurance. In 2007, the French AXA Group acquired a 74.7% stake from Kyobo Life. The company name was maintained as Kyobo AXA Auto Insurance before being changed to AXA Insurance in 2009.

The company mainly sells direct auto insurance, where most contracts are concluded via telephone. As of the first quarter of this year, the number of new contracts was about 900,000, with a cumulative total of approximately 2.78 million contracts to date. Due to rising auto insurance loss ratios, the net profit turned to a loss last year for the first time in four years, resulting in a slump.

In addition to AXA Insurance, the withdrawal of foreign insurance companies from the Korean market has recently accelerated. Last month, Lina Life, Korea's first foreign life insurance company, was caught up in sale rumors. The American Prudential Life was acquired by KB Financial Group, and Orange Life was also acquired by Shinhan Financial Group.

Foreign Companies' Withdrawal from Korea Intensifies... Direct Hit from Profitability Deterioration

With the spread of low interest rates and low growth in the domestic insurance market, combined with worsening performance, foreign insurance companies are leaving the Korean market. This reflects the rapidly deteriorating status of the Korean insurance market.

According to Swiss Re, the world's No.1 reinsurer, in its analysis of the '2019 Global Insurance Market Status,' Korea's insurance premiums amounted to $174.5 billion, maintaining 7th place for three consecutive years since 2017.

The United States ranked first with $2.4601 trillion, China second with $617.4 billion, followed by Japan with $459.4 billion. The UK ($366.2 billion), France ($262.3 billion), and Germany ($243.9 billion) held 4th to 6th places, respectively, unchanged from the previous year.

An insurance industry official said, "While global economic conditions and headquarters' growth strategies must be considered, it seems based on the view that the domestic insurance market can no longer grow as it used to. It also appears that they judged they could not survive amid fierce competition with domestic insurers."

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