Insurance Companies' Q1 Net Profit Increases 164%... "Significant Impact from External and One-Time Factors"

Provisional Net Profit of 3.872 Trillion Won

[Asia Economy Reporter Park Sun-mi] The net profit of insurance companies in the first quarter of this year reached 3.872 trillion KRW, marking a 164% increase, which is largely attributed to external and one-off factors.

On the 26th, the Financial Supervisory Service announced that the provisional net profit of insurance companies in the first quarter was 3.872 trillion KRW, an increase of 2.4058 trillion KRW (164.1%) compared to 1.4662 trillion KRW in the same period last year.

Life insurers' net profit was 2.5546 trillion KRW, up 1.7764 trillion KRW (228.3%) from the same period last year. Insurance operating profit improved by 3.189 trillion KRW due to a decrease in guarantee reserves following the rise in interest rates and stock prices, and dividend income increased due to Samsung Life Insurance's special dividend of 801.9 billion KRW from Samsung Electronics.

Non-life insurers' net profit also recorded 1.3174 trillion KRW, an increase of 629.4 billion KRW (91.5%) compared to the same period last year. The loss ratio declined due to the base effect of COVID-19 and last year's Lotte Chemical explosion accident, improving insurance operating profit by 789.8 billion KRW, and dividend income increased due to Samsung Fire & Marine Insurance's special dividend of 140.1 billion KRW from Samsung Electronics.

During the first quarter, earned premiums amounted to 52.4921 trillion KRW, up 1.8034 trillion KRW (3.6%) from 50.6887 trillion KRW in the same period last year. Life insurers recorded 27.9681 trillion KRW, an increase of 1.2056 trillion KRW (4.5%) year-on-year, while non-life insurers increased by 597.8 billion KRW (2.5%) to 24.524 trillion KRW.

Profitability also improved. In the first quarter, return on assets (ROA) and return on equity (ROE) were 1.18% and 11.19%, respectively, rising by 0.71 percentage points and 6.62 percentage points compared to the same period last year. However, despite the increase in premium income, the financial condition deteriorated as unrealized gains on available-for-sale securities decreased by 11 trillion KRW (-22.6%) due to rising interest rates, resulting in total assets and equity declining by 6.7 trillion KRW (-0.5%) and 960 billion KRW (-6.7%) to 1,314.6 trillion KRW and 133.7 trillion KRW, respectively, compared to the end of last year.

The first quarter net profit of 3.872 trillion KRW for insurance companies is largely influenced by the decrease in guarantee reserves (life insurers), Samsung Electronics special dividends (life and non-life insurers), and the decline in loss ratios due to COVID-19 (non-life insurers). However, the profit increase is more attributable to external factors (interest rate and stock price rises, COVID-19, etc.) and one-off gains (Samsung Electronics special dividends) rather than improvements in the revenue structure. There remains a possibility of long-term profitability deterioration due to decreased interest income in a low-interest-rate environment and contraction of face-to-face sales.

A Financial Supervisory Service official stated, "With the recent increase in volatility of interest rates and stock prices and the prolonged COVID-19 pandemic, uncertainty in the financial market is rising. Insurance companies need to pay more attention to enhancing financial soundness and risk management through internal retention of profits." He added, "We plan to strengthen continuous monitoring of insurance business practices and risk management, focusing on insurance companies with weak revenue structures or frequent unsound business practices."

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