[1mm Financial Talk] "Haven't Earned Money Yet"... Financial Supervisory Service's Bonus Investigation Dampens Morale at Life Insurance and Card Companies

Financial Supervisory Service Conducts Comprehensive Survey on Performance-Based Compensation Systems of Insurance and Card Companies
Life Insurance and Card Companies Dissatisfied with Last Year's Poor Results
"Banking Sector Caught in the Crossfire... Blanket Criticism"

[Asia Economy Reporter Minwoo Lee] Following banks, financial authorities have launched a full-scale investigation into the performance bonuses of insurance companies and card companies. This appears to be a response to the growing public criticism of the financial sector's 'money party.' Unlike banks and non-life insurance companies, life insurance companies and card companies, which generally experienced poor performance last year, are expressing dissatisfaction.

According to the financial sector on the 20th, the Financial Supervisory Service (FSS) recently requested insurance companies and card companies to submit information on executive performance bonus systems and payment status through the financial company data submission system (CPC). Although it was initially reported that the investigation would target some insurance companies and card companies that posted strong results last year, the FSS has decided to assess the entire industry. The criticism of the 'money party' in the banking sector seems to be spreading across the entire financial sector. An FSS official explained, "We are reviewing performance bonuses as part of understanding the general status in line with the closing of performance."

The industry is responding with dissatisfaction. While criticism of the banking sector, which earned record-high interest income, is understandable, companies that did not achieve decent results are also being lumped together as targets of the 'money party' criticism. Although some insurance companies and card companies paid large-scale performance bonuses like banks, this was limited to certain financial firms such as non-life insurers and Samsung Card. Life insurance companies and most card companies experienced or are expected to experience poor performance last year. During the high-interest rate period, as various funds flowed into bank deposits, aggressively increasing savings-type insurance to prevent liquidity depletion became a burden.

In fact, Hanwha Life, considered one of the 'Big 3' life insurers, reported operating profit of 714.3 billion KRW and net profit of 797.2 billion KRW on a consolidated basis last year, down 47.2% and 36.2% respectively from the previous year. Kyobo Life, also part of the Big 3, is expected to face deteriorating results last year. Mirae Asset Life's net profit decreased by 33.9% year-on-year, and Dongyang Life's net profit shrank by more than 70% compared to the previous year.

The situation is similarly bleak for card companies. The combined net profit of Shinhan, Samsung, KB Kookmin, Hana, and Woori Card last year was 2.0393 trillion KRW, down 2.7% from the previous year. The net profit of four card companies under financial holding companies was 1.417 trillion KRW, down 8.3% year-on-year. This is attributed to a significant increase in funding costs due to the tightening of the bond market last year. Samsung Card, which secured funds in advance through long-term bonds of three years or more before card bond interest rates rose, performed well. It posted a net profit of 622.3 billion KRW last year, growing 12.9% year-on-year and setting its highest record since 2014.

For this reason, employees of life insurance companies and card companies with poor performance are expressing frustration. A life insurance company official said, "The salary increase rate is low, and under these circumstances, it seems even the promised performance bonuses will not be paid," adding, "Many insurance companies have poor performance, but it is regrettable that the atmosphere is to criticize them all simply under the 'money party' frame."