Non-life Insurers' Surprise Q1 Earnings... "Due to Reduced Vehicle Usage Amid COVID-19"

[Asia Economy Reporter Changhwan Lee] In the first quarter, as vehicle traffic decreased due to the massive spread of COVID-19, the performance of non-life insurance companies also improved significantly. However, from the second quarter, with the easing of social distancing measures, there is a possibility that the loss ratio may worsen again.

According to the insurance industry on the 14th, major non-life insurance companies such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, KB Insurance, and Meritz Fire & Marine Insurance announced results that exceeded expectations in the first quarter.

DB Insurance's net profit in the first quarter increased by 47.2% year-on-year to 280 billion KRW. Meritz Fire & Marine Insurance recorded 222.2 billion KRW, up 70.4%, Hyundai Marine & Fire Insurance 151.2 billion KRW, up 19.6%, and KB Insurance 143.1 billion KRW, up 108%. Samsung Fire & Marine Insurance posted 409.1 billion KRW, an increase of 28.5% excluding last year's special dividend from Samsung Electronics.

These figures surpassed the expectations of the financial investment sector. According to Hanwha Investment & Securities, the degree of outperformance compared to consensus was DB Insurance (+31%), Meritz Fire & Marine Insurance (+20%), Samsung Fire & Marine Insurance (+15%), and Hyundai Marine & Fire Insurance (+4%).

The improvement in non-life insurers' performance was due to the rapid spread of the COVID-19 Omicron variant in the first quarter, which significantly reduced vehicle traffic and accidents, thereby improving the loss ratio.

On March 17, the number of confirmed COVID-19 cases reached a record high of 621,328 in a single day. The surge in international oil prices in the first quarter, which led to higher fuel prices, was also identified as one of the reasons for the reduced vehicle traffic.

Accordingly, the average loss ratio for automobile insurance among 11 major domestic non-life insurers in the first quarter was 79.6%, down 3.7 percentage points (p) from 83.3% in the same period last year. The overall average loss ratio for automobile insurance last year was 85.4%, so this represents an improvement of 5.8 percentage points.

However, with the halt of COVID-19 spread and the easing of social distancing measures from the second quarter, automobile insurance loss ratios are estimated to have risen again, and there are forecasts that the improvement in performance will slow down.

Kim Doha, a researcher at Hanwha Investment & Securities, explained, "Considering the lifting of distancing measures and the decrease in the number of isolated individuals, despite seasonality, the automobile loss ratio in the second quarter is expected to rise compared to the previous quarter."

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