Life Insurers' Net Profit ↓ Due to COVID Impact... 'Beneficiary' Non-Life Insurers ↑

First Half-Year Management Performance of Life and Non-Life Insurance Companies

[Asia Economy Reporter Oh Hyung-gil] The net profit of life insurance companies and non-life insurance companies diverged in the first half of the year due to the impact of the novel coronavirus disease (COVID-19).

According to the first half management performance of life and non-life insurance companies released by the Financial Supervisory Service on the 24th, the net profit of life insurance companies in the first half was 2.0727 trillion KRW, a 2.6% decrease compared to the same period last year.

On the other hand, the net profit of non-life insurance companies increased by 15.5% year-on-year to 1.7156 trillion KRW, due to improvements in the profitability of automobile insurance.

The insurance underwriting loss of life insurance companies was 12.6586 trillion KRW, a 7.0% increase in loss size compared to the same period last year, while investment operating profit recorded 13.2019 trillion KRW, up 7.1%.

The insurance underwriting loss of non-life insurance companies was 2.0997 trillion KRW, improving by 158.8 billion KRW compared to the same period last year. Investment income also increased by 4.8% to 4.4972 trillion KRW.

Life insurance companies recorded earned premiums of 54.1619 trillion KRW, up 3.7% year-on-year, while non-life insurance companies recorded gross written premiums of 47.8135 trillion KRW, up 6.5% from last year.

In the case of life insurance companies, earned premiums from savings-type insurance (6.0%) and retirement pensions (12.2%) increased. Variable insurance saw a 31.9% increase in first-year premiums, but due to cancellations and other factors, continuous premiums decreased, resulting in a 6.9% decline in earned premiums.

Despite difficulties in face-to-face sales due to COVID-19, savings-type insurance performance centered on bancassurance channels increased, and favorable business performance was recorded due to the growth of the retirement pension market and the strong performance of retirement pensions.

Non-life insurance companies showed steady growth in long-term insurance (5.5%), automobile insurance (11.5%), and general insurance (11.6%).

Although the loss ratio temporarily declined due to reduced automobile operation and accidents caused by the spread of COVID-19, the loss ratio is expected to worsen again, mainly in automobile and general insurance, due to flooding damage to automobiles, houses, and farmland caused by heavy rains concentrated in July and August.

The total assets of life insurance companies increased by 5.2% compared to the same period last year to 936.8208 trillion KRW, and the return on assets (ROA) fell by 0.04 percentage points to 0.45% from 0.49% in the same period last year. Return on equity (ROE) also dropped by 0.71 percentage points to 4.68% year-on-year.

The total assets of non-life insurance companies increased by 6.5% year-on-year to 332.7722 trillion KRW. ROA was 1.05%, and ROE was 7.81%, rising by 0.08 percentage points and 0.41 percentage points, respectively, compared to the same period last year.

An official from the Financial Supervisory Service said, "Life insurance companies are facing deteriorating investment conditions due to the low interest rate environment, resulting in a decline in operating asset yields and increased burden of reserve accumulation, and concerns about impairment of overseas investment assets are increasing due to the spread of COVID-19. We plan to strengthen inspections of risk factors in asset management such as overseas assets and alternative investments, and focus supervisory and inspection capabilities to discourage short-term performance-oriented sales activities."

He added, "Non-life insurance companies need to promote sound management focused on profitability through loss ratio management, expense reduction, and strengthening asset management risk control," and "we will strengthen continuous monitoring of major risk factors such as loss ratios of key products and domestic and foreign interest and exchange rates."

[Image source=Yonhap News]

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