Insurance Companies Moving to Financial Holding Companies... Earnings 'Smile'

Loss Ratio Improvement + Expansion of Sales Channels
Notable Growth in Non-Bank Sector... Synergy Plays a Role

[Asia Economy Reporter Oh Hyung-gil] The financial performance of insurance companies affiliated with financial holding companies continues to rise, leading the advancement of non-bank affiliates. The overall loss ratio in the insurance industry improved due to the impact of COVID-19, and synergies among affiliates such as asset management and expansion of sales channels contributed to the strong performance.

According to the insurance industry on the 28th, Prudential Life Insurance's cumulative net profit for the third quarter reached 255.6 billion KRW, surpassing last year's annual net profit of 227.8 billion KRW. Prudential Life Insurance, acquired by KB Financial Group in August last year, saw an improvement in insurance profit and loss as the proportion of savings-type products increased due to low interest rates, leading to a decrease in new contract expenses, and increased investment income through strategic trading of managed assets.

In particular, Prudential Life Insurance's asset yield rate stood at 4.86% through the second quarter, ranking first in the life insurance industry. They implemented a strategy to expand investment profits by strategically trading managed assets. A representative example is the large-scale sale of bonds from the US Prudential headquarters, which generated 149 billion KRW in investment operating profit. However, KB Life Insurance, another life insurer within the KB Group, recorded a net loss of 18.1 billion KRW in the third quarter, continuing its deficit.

Shinhan Life, which made a fresh start as an integrated corporation in July, also received passing marks for its first performance report. Its cumulative net profit for the third quarter was 401.9 billion KRW, a 4.5% increase compared to the same period last year. Before integration, Shinhan Life and Orange Life had net profits of 92.2 billion KRW and 216.8 billion KRW respectively in the first half of the year, meaning that after integration, they earned over 100 billion KRW in net profit in the third quarter alone.

Looking at the new contract annualized premium equivalent (APE), which gauges new contract growth, it decreased by 18.2% compared to the same period last year up to the third quarter, but on a standalone basis, it increased by 34.4% from 169.2 billion KRW in the second quarter to 227.4 billion KRW in the third quarter.

However, it is regrettable that earned premiums are decreasing and the loss ratio is showing signs of rising. The cumulative earned premiums for the third quarter were 5.5299 trillion KRW, down 13% from the same period last year. In the third quarter alone, it was 1.7577 trillion KRW, a 16.9% decrease compared to the same period last year. The loss ratio also slightly increased from 83.8% last year to 85.7%.

Hana General Insurance (formerly The-K Non-Life Insurance), which was incorporated into Hana Financial Group in April last year, also succeeded in turning a profit in just over a year since its launch. Hana General Insurance recorded a cumulative net profit of 5.9 billion KRW in the third quarter, an increase of 8.3 billion KRW compared to a net loss of 2.4 billion KRW in the same period last year. This growth was largely driven by improvements in automobile loss ratios. Hana General Insurance's automobile insurance loss ratio has maintained a stable level in the 80% range on average. Up to September, the loss ratio was 88.5%, improving by 3.9 percentage points compared to the previous year.

NH Nonghyup Life Insurance and NH Nonghyup General Insurance are also continuing their strong performance. The cumulative net profits for the third quarter of Nonghyup Life and Nonghyup General Insurance increased by 77.6% and 78.2% respectively compared to the previous year, reaching 114.2 billion KRW and 87.6 billion KRW.