Strong Performance Expected in Q2... Changed Evaluations of Non-Life Insurance Companies

Expecting Car Insurance Loss Ratio to Turn Profitable
COVID-19 Resurgence... Long-term Reflective Benefits
Long-term Growth Outlook for the Non-life Insurance Market

On the first day of Level 4 social distancing in the Seoul metropolitan area on the 12th, the streets of Hongdae in Mapo-gu, Seoul, are quieter than usual. Under the Level 4 measures, gatherings of up to four people are allowed before 6 p.m., and only up to two people are allowed afterward. Photo by Moon Honam munonam@

[Asia Economy Reporter Oh Hyung-gil] Recently, the global asset management firm Fidelity Management has increased its stake in Hyundai Marine & Fire Insurance to 5.01% (4,476,454 shares) over the past month, according to a disclosure. In April, Fidelity also purchased shares of DB Insurance, raising its stake from 5.75% (4,070,477 shares) to 7.16% (5,070,506 shares).

The National Pension Service, which sold more than 1.7 million shares of Hyundai Marine & Fire Insurance in the first quarter, has recently repurchased the stock, increasing its stake from 8.21% (6,436,132 shares) in Q1 to 10.07% (9,002,889 shares) by the end of last month.

As expectations grow that non-life insurers will continue to post strong results in the second quarter following the first quarter, the insurance industry is receiving a changed evaluation both inside and outside the sector. The improvement in automobile insurance loss ratios due to the COVID-19 tailwind and the long-term growth outlook for the non-life insurance market support this perspective.

According to the insurance industry on the 13th, non-life insurers are expected to continue their 'earnings surprise' following record-breaking results in the first quarter into the second quarter.

The basis for these expectations is the recently stabilized automobile insurance loss ratio. In the first half of the year, the average automobile insurance loss ratio of 10 domestic non-life insurers (preliminary closing basis) was 82.4%, down 6.4 percentage points from 88.8% in the first half of the previous year.

In particular, the Big 4 non-life insurers (Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, DB Insurance, and KB Insurance), which hold an 85% market share in automobile insurance, recorded an average loss ratio of 78.9% on a provisional basis. Samsung Fire & Marine Insurance improved by 5.3 percentage points year-on-year to 78.9%, while Hyundai Marine & Fire Insurance decreased by 4.7 percentage points to 79.4%.

DB Insurance and KB Insurance also maintained loss ratios of 78.5% and 78.9%, down 5.6 and 4.4 percentage points, respectively. These figures fall within the generally estimated appropriate automobile insurance loss ratio range (77-80%), raising expectations for a turnaround to profitability in automobile insurance.

The loss ratio is expected to remain stable in the second half of the year. With new COVID-19 cases recently exceeding 1,000 and showing signs of resurgence, automobile usage is expected to continue for the time being.

Growth is also anticipated in long-term insurance and general non-life insurance. The Korea Insurance Research Institute forecasts that non-life insurers' premium income will increase by 4.8% compared to the previous year.

An industry insider said, "The prolonged impact of COVID-19 has led to continued improvement in loss ratios, which is having a positive effect," but added, "It is becoming increasingly important to maintain profit-centered management through improvements in operating expenses and investment asset yields."