Operating Profit Up 136%·Net Profit Up 163%
Improved Loss Ratios in Auto and Long-term Insurance
Impact of Samsung Electronics Special Dividend
Qualitative Growth Focused on Profitability Achievements
[Asia Economy Reporter Ki Ha-young] Despite the challenging business environment caused by COVID-19 and the prolonged ultra-low interest rates, Samsung Fire & Marine Insurance achieved the largest quarterly net profit in its history in the first quarter of this year. Excluding the special dividend from Samsung Electronics, the net profit more than doubled compared to the same period last year, marking the highest quarterly net profit excluding one-time gains. This is seen as evidence that the profitability-focused qualitative growth strategy pursued so far is yielding results.
According to Samsung Fire & Marine Insurance's 'Q1 2021 Business Performance' announced at the investor conference on the 12th, the preliminary operating profit for Q1 was 595.3 billion KRW, and net profit was 431.5 billion KRW, representing increases of 136% and 163% respectively compared to the same period last year. Sales were recorded at 4.8493 trillion KRW, a slight decrease of 0.2% from last year. Operating profit and net profit more than doubled compared to last year, surpassing market expectations with a surprise performance.
This strong performance is attributed to increased investment income from the special dividend of Samsung Electronics and stabilization of insurance profits due to improvements in loss ratios for automobile and long-term insurance. The prolonged COVID-19 pandemic led to reduced vehicle movement and fewer hospital visits, resulting in lower loss ratios for automobile and long-term insurance, thereby improving insurance profits. Additionally, Samsung Fire & Marine Insurance received a total special dividend of 140.1 billion KRW from Samsung Electronics, which holds 1.49% of its shares, at 1,578 KRW per share, significantly increasing investment operating profit.
The combined ratio (loss ratio + expense ratio), which measures insurance operational efficiency, recorded 102.1%, a decrease of 3.2 percentage points from last year. Looking at loss ratios by insurance category, long-term insurance saw a 0.1 percentage point decrease to 82.4% due to an increased proportion of guaranteed premiums. Automobile insurance showed a 6.5 percentage point decrease to 79.8%, thanks to a temporary reduction in accident rates due to COVID-19 and continuous efforts to reduce losses. However, general insurance increased by 6.2 percentage points to 87.3% due to a rise in high-cost claims.
The investment sector achieved an investment operating profit of 691.8 billion KRW, up 40.3% from the same period last year. The company explained that it is moving away from its previous conservative investment stance and securing both increased returns and asset stability through optimal portfolio rebalancing.
During the conference call, Samsung Fire & Marine Insurance announced that alongside strengthening profitability centered on its core business, it is also advancing digital business for future growth, collaborating with Canopyus, and proceeding with overseas projects such as the Tencent joint venture as planned.
Hong Sung-woo, Chief Financial Officer (CFO) of Samsung Fire & Marine Insurance, stated, "We will avoid reckless competition and continuously pursue profit differentiation through profitability-centered growth and efficiency improvements. We will do our best to maximize performance befitting the top company in the non-life insurance industry, surpassing last year's profit achievements."
Meanwhile, insurance companies are expected to post strong results in the first quarter despite the spread of COVID-19. Life insurers are likely to see increased net profits due to the reversal of variable guarantee reserves amid a stock market boom, while non-life insurers are expected to benefit from reduced traffic and medical usage due to COVID-19. According to financial information provider FnGuide, the combined net profit of three life insurers?Samsung Life Insurance, Hanwha Life Insurance, and Mirae Asset Life Insurance?and five non-life insurers?Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, Meritz Fire & Marine Insurance, and Hanwha General Insurance?is estimated to increase by 82.1% year-on-year to 1.646 trillion KRW in the first quarter.
Earlier, Dongyang Life Insurance and Lotte Non-Life Insurance also reported strong results. Dongyang Life Insurance recorded a 67.4% increase in net profit to 106.5 billion KRW in Q1, with operating profit rising 48.5% to 124.1 billion KRW. Lotte Non-Life Insurance turned profitable in Q1 with operating profit and net profit of 27.5 billion KRW and 62.8 billion KRW respectively, compared to losses in the previous quarter.
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