Military Mutual Aid Association Posts Largest Surplus Since Global Financial Crisis

[Asia Economy Reporter Park So-yeon] The Military Mutual Aid Association announced on the 30th that despite the challenging domestic and international management environment, including the COVID-19 pandemic and prolonged low interest rates, it achieved the largest surplus since the global financial crisis.

According to the 2020 fiscal year settlement results, the Military Mutual Aid Association recorded a net profit of 150.3 billion KRW. It earned 410.5 billion KRW in business profits and paid out 260.2 billion KRW in member welfare expenses (such as member retirement benefit interest). This represents an increase of 51.6 billion KRW compared to the previous year, marking the highest net profit since the 2008 global financial crisis. This is the fifth consecutive year of surplus.

As of the end of last year, the Military Mutual Aid Association's assets amounted to 12.6958 trillion KRW, an increase of 1.1179 trillion KRW compared to the previous year. Capital surplus (retained earnings, other comprehensive income, etc.) increased by 274.6 billion KRW to 738.2 billion KRW. The reserve ratio also improved from 105.8% the previous year to 108.5%, up by 2.7 percentage points (p), enhancing financial soundness. Capital surplus refers to the surplus remaining after paying members their principal and interest in a lump sum. Based on these achievements, the Military Mutual Aid Association has maintained the highest corporate credit rating (e-1) from external credit rating agencies for 14 consecutive years.

Regarding last year's asset management performance, despite many difficulties such as economic recession caused by COVID-19 and reduced investment opportunities due to the low interest rate trend, balanced results were achieved across all sectors including stocks, bonds, alternatives, and real estate investments.

Over the past three years, by liquidating underperforming business sites, approximately 720 billion KRW of investment funds were recovered and reinvested, establishing a virtuous cycle of investment. Through this, a stable business portfolio is currently being built, and the sound management of invested assets is considered a key factor in maintaining continuous surpluses, according to the association.

Furthermore, new investments, which were previously allocated between 1 trillion and 1.5 trillion KRW, were significantly expanded to about 2.58 trillion KRW last year and approximately 2.1 trillion KRW this year.

The Military Mutual Aid Association plans to pursue more aggressive and proactive investments this year to generate returns exceeding the target rate of 4.5%. The investment scale, which was previously around 40 billion to 60 billion KRW, will now actively consider investment proposals around 100 billion KRW. In terms of investment methods, the association plans to expand beyond indirect investments such as blind funds through asset managers to include project funds and direct investment projects.

Additionally, the proportion of highly volatile stocks will be gradually reduced, while actively discovering real assets of high quality, new growth industries, the future 4th industrial revolution, and green new deal-related real estate and alternative investment projects to directly overcome uncertainties caused by the COVID-19 pandemic.

Kim Yu-geun, Chairman of the Military Mutual Aid Association, stated, "In the post-COVID era, timely change management is required in an uncertain economic environment. During my tenure, I will select initiatives to achieve assets of 15 trillion KRW, supply 10,000 member housing units, and strengthen ESG management, which has recently become a key management focus. We will develop detailed evaluation indicators to enhance the association's value and establish sustainable growth momentum."

Meanwhile, the Military Mutual Aid Association's total assets amount to 12.6958 trillion KRW, with investment proportions by asset class as follows: stocks 7.4%, bonds 10.5%, alternative investments 20.8%, real estate 24.7%, and businesses and others 36.6%.