Insurance Companies' Net Profit Doubled Last Year... But 'Risk Factors' Remain

Net Income of 60.806 Trillion Won... 14% Increase Year-on-Year

[Asia Economy Reporter Oh Hyung-gil] Last year, the net income of insurance companies improved compared to the previous year. Despite the COVID-19 situation, the loss ratios of major insurance lines decreased, leading to increased profitability in insurance operations.

However, concerns remain about slowing growth due to restrictions on face-to-face sales and reduced consumer spending power, and there are significant worries that loss ratios may rise again once the COVID-19 situation stabilizes.

According to the insurance company management performance report released by the Financial Supervisory Service on the 24th, the net income of domestic insurance companies last year was 6.0806 trillion KRW, an increase of 13.9%, or 742.8 billion KRW, compared to 5.3378 trillion KRW in the previous year.

Life insurers’ net profit rose 10.9% to 3.4544 trillion KRW. Although investment operating income decreased due to low interest rates, insurance operating profit improved by 2.0176 trillion KRW thanks to a reduction in guarantee reserve transfers and increased sales of savings-type insurance amid rising stock prices.

Non-life insurers’ net profit increased by 18.1% to 2.6262 trillion KRW. The loss ratios for automobile insurance and long-term insurance declined, improving insurance operating profit.

Premiums received from customers totaled 221.9044 trillion KRW, up 4.3% from the previous year. Life insurers recorded 119.5872 trillion KRW, and non-life insurers 102.3172 trillion KRW, increasing by 2.0% and 7.0%, respectively, compared to the previous year.

Total assets of insurance companies grew 6.6% from the end of the previous year to 1,321.1492 trillion KRW. Equity capital increased by 10.1% to 143.939 trillion KRW.

Return on assets (ROA) and return on equity (ROE) rose by 0.03 percentage points and 0.04 percentage points, respectively, to 0.48% and 4.45% compared to the previous year.

The financial authorities stated, "Although the net income of insurance companies improved due to temporary declines in loss ratios and the base effect of poor performance in the previous year, it remains below the recent three-year average of 6.8 trillion KRW. We will continuously analyze the impact of increased volatility in financial markets, such as interest rates and stock prices caused by COVID-19, on the financial soundness of insurance companies."

They added, "There is a possibility that expanding investments in high-risk assets such as alternative investments could lead to an increase in non-performing assets. Therefore, we will strengthen inspections on investment screening and soundness management, and closely monitor the appropriateness of business expense execution to prevent consumer harm and profitability deterioration caused by excessive sales competition."

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