Lotte Insurance Posts Q1 Net Loss Amid Middle East Risks... Insurance Operations Turn Profitable

Insurance Operating Profit Turns to Surplus at 27.2 Billion Won
CSM Reaches 2.509 Trillion Won
Investment Operations Post 55.7 Billion Won Loss
RBC Ratio Maintained at 164.4%

Although Lotte Insurance recorded a net loss in the first quarter of this year due to volatility in the financial markets caused by the Middle East war and rising oil prices, the company’s core insurance profitability improved.

Lotte Insurance announced on the 15th that it posted an operating loss of 28.5 billion won and a net loss of 19.8 billion won for the first quarter of this year. The company explained that the main factor was a decline in investment returns, driven by adverse market conditions such as the Middle East war and rising oil prices.

Key indicators such as insurance operating profit and insurance contract service margin (CSM) showed signs of recovery. Lotte Insurance’s insurance operating profit for the first quarter was 27.2 billion won, turning to a profit with an increase of 11.2 billion won compared to the same period last year.

At the end of the first quarter, Lotte Insurance’s CSM stood at 2.509 trillion won, up 250.9 billion won (11.1%) from the first quarter of last year, leading to an increase in insurance operating profit. The increase in CSM means that the insurer’s expected future earnings from insurance contracts have grown accordingly. The CSM amortization amount for the first quarter was 58.7 billion won, a rise of 6.4 billion won (12.3%) from 52.3 billion won in the first quarter of last year.

As sales of long-term protection-type insurance increased, premium income also rose. The direct written premiums for the company’s core product, long-term protection-type insurance, amounted to 641 billion won, continuing its steady growth trend. In addition, by cutting indirect costs related to long-term insurance, business expenses for auto insurance, and business expenses for general insurance, the company strengthened its core insurance business operations.

The investment operations for the first quarter recorded a loss of 55.7 billion won, primarily due to a sharp increase in interest rates caused by market conditions stemming from the Middle East war and rising oil prices.

Lotte Insurance explained that this mostly reflected valuation losses on interest-bearing assets, which are safe assets with principal guaranteed at maturity, and that these losses are expected to be reversed once market conditions stabilize. Temporary losses on some foreign currency assets are also expected to be mostly recovered, excluding hedge costs.

The company’s provisional risk-based capital (RBC) ratio at the end of the first quarter was 164.4%, maintaining a stable level. The RBC ratio is an indicator of an insurer’s ability to pay policyholders’ claims on time. Lotte Insurance plans to maintain capital soundness by leveraging the stable growth of insurance operating profit and improved asset structure.

A Lotte Insurance representative said, “Despite temporary valuation losses due to fluctuations in interest rates and foreign exchange rates, we are continuing the growth of key management indicators such as insurance profit and CSM,” adding, “We will continue to strengthen our business foundation with a focus on improving capital soundness.”

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