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According to the insurance industry on the 10th, last year’s consolidated net income of 8 major life and non-life insurers listed on KOSPI (Samsung, Hanwha, Mirae Asset, Dongyang Life, Samsung Fire & Marine, Hyundai Marine & Marine, DB Insurance, Meritz Fire & Marine) last year was 3,9040 trillion. It was up 33.24% year-on-year to KRW billion.
First of all, looking at the performance of life insurance companies, Samsung Life’s net income last year increased by 30.3% from the previous year to KRW 1.37 trillion. Hanwha Life Insurance, which was struggling in 2019, also posted a net profit of 242.7 billion won last year, an increase of 313.72% from the previous year. Tong Yang Life Insurance also posted a net profit of 128.5 billion won last year, up 14.5% from the previous year.
Life insurers cited the booming stock market and rising bond yields as reasons for earnings growth. As a result, the return on investment rose, and the variable guarantee reserves that had been accumulated so far were largely reversed.
The variable guarantee reserve is a resource for paying death insurance or pensions for variable damage. If the current rate of return on investment is lower than the estimated interest rate at the time the insurance company sold variable insurance (the rate that determines the premium), the insurance company must accumulate the difference as a guarantee reserve. In particular, insurance companies are sensitive to bond rates as they are based on the 5-year government bond rate when calculating the variable guarantee reserve.
In fact, Samsung Life Insurance and Hanwha Life Insurance are estimated to have reversed their variable guarantee reserves of 222 billion won and 92 billion won each in the third quarter of last year, and Samsung Life’s variable guarantee reserves of about 250 billion won are estimated to have been reversed in the fourth quarter.
In addition, expansion of sales of insurance-type insurance, which is less affected by interest rates, helped improve insurance operating profit. Samsung Life Insurance’s insurance premiums for new insurance contracts (APE) increased by 2.9% through 3Q, and Tong Yang Life Insurance also increased by 8.7%.
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Non-life insurers’ earnings growth was even steeper. Looking at the performance of each company, Samsung Fire & Marine Insurance’s net income increased by 17.33% to 7573 billion won last year, 23.3% to 3318 billion won for Hyundai Insurance, and 563.7 billion won for DB Insurance, a whopping 47.30%. In the case of Meritz Fire & Marine, the record-high performance was 4318 billion won, an increase of 43.3% from the previous year.
The increase in non-life insurers’ earnings was largely due to the remarkable improvement in the loss ratio of auto and indemnity medical insurance. The number of accidents decreased as the number of automobile movements decreased due to Corona 19, and insurance payments paid as hospital expenses decreased as the number of patients with nylons decreased.
In fact, from January to December of last year, the cumulative loss ratio of auto insurance for the four major non-life insurers (Samsung Fire & Marine Insurance, Hyundai Marine & Marine Insurance, DB Insurance, KB Insurance) was 84.5~85.6% (based on temporary closing). This is a 5-6 percentage point improvement over the previous year.
An official from the financial sector said, “Insurance companies are continuing to benefit from rising interest rates, and the loss ratio improved due to the corona, so we made profits.”