Printer Friendly

Insurers suffer major setback in 2019 earnings.

By Lee Min-hyung

Both life and non-life insurance companies here suffered major setbacks in their 2019 earnings as falling interest rates and prolonged economic slowdown have combined to hurt their bottom lines.

Samsung Life Insurance, the nation's largest life insurer, maintained its leading position despite a great decline in net profit, while Hanwha Life Insurance, the country's second-largest life insurer, generated the lowest net profit among major life insurers here.

Market watchers said insurers will continue to struggle in 2020, as a prolonged period of low interest rates keeps affecting their businesses.

The insurance industry is among the area most affected by the interest rate and the economic growth.

Most life insurers here invest in government-issued bonds deemed as one of the safest assets after selling insurance products to customers.

But the outlook for insurers' near-term rebound looks murky, as the Bank of Korea hints at the possibility of cutting the key interest rate from the current record low of 125 percent down to 1 percent.

With the rate declining, chances are growing that insurers will suffer continuous setbacks, as the yield on the government bonds will also likely be on the decline in line with the base rate cut.

'Life insurers' earnings decline was already widely expected due to the fall in the interest rate, which drove down their investment profitability,' Kyobo Securities analyst Kim Ji-young said.

Coupled with the unfavorable business environment, most large life insurers here are facing a growing dilemma over how to offset deficits coming from sales of some 'high interest guaranteed' insurance products.

Major life insurers here used to sell the permanent health insurance and annuity insurance products by guaranteeing an interest rate of up to 10 percent during times of high interest rates in the 1990s.

'Insurers have to return the money to customers with high interest rate plans at this time of low interest rates and low economic growth,' a source from the life insurance industry said.

'We have to spend more, even if insurance sales are not on track for rapid growth amid the external uncertainties,' he said.

Amid the murky outlook for growth, Samsung Life reported 105 trillion won ($892 million) in net profit last year, down 39.3 percent from the previous year

Hanwha Life reported the worst growth rate reporting only 57.

1 billion won in 2019 net profit, down 87.19 percent from a year ago.

Major non-life insurers also suffered huge setbacks in their earnings reports in 2019. Samsung Fire amp; Marine Insurance, the nation's biggest property insurer, posted 647.

8 billion won in net profit during the same period, down 39.5 percent from the previous year

Other non-life insurers, such as Hanwha General Insurance and Lotte Non-life Insurance, went into deficit in their yearly earnings.

They have raised discussions on the need to raise premiums for their car insurance products to tackle worsening profitability.

Most players in the industry failed to report growth in the business amid increasing cost burdens for auto repairs and excessive insurance claims from customers even in minor accidents.

Meritz Fire amp; Marine was the only firm which reported growth in its yearly earnings. The company generated 301.

3 billion won in net profit, up 28.9 percent year-on-year

.
COPYRIGHT 2020 Knowledge Bylanes
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2020 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:The Korea Times News (Seoul, Korea)
Date:Feb 13, 2020
Words:627
Previous Article:Hotel Lobby.
Next Article:KLM hit for 'racial discrimination' against Koreans.
Topics:

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters