Surplus Turned Compared to Previous Year... Growth in Long-Term Guaranteed Insurance
RP Repayment to be Completed by June... Improved Soundness Up
Lotte Insurance achieved its highest-ever quarterly performance since the introduction of the new accounting standard IFRS17.
On the 9th, Lotte Insurance announced a preliminary operating profit of 105 billion KRW for the first quarter of this year. It recorded an insurance operating profit of 47 billion KRW and an investment operating profit of 58 billion KRW, marking the highest quarterly profit since its founding. When IFRS17 was retrospectively applied to the same period last year, there was a loss of 95.1 billion KRW, but this quarter turned to a profit.
Long-term protection insurance posted solid results. The quarterly new monthly premium reached a record high of 10.8 billion KRW, growing 107.7% compared to 5.2 billion KRW in the same period last year. The quarterly gross written premium was 505 billion KRW, surpassing 500 billion KRW for the first time ever. This accounts for 84.8% of the total gross written premium of 595.4 billion KRW in the first quarter. Compared to the long-term protection insurance gross written premium of 349.6 billion KRW in the first quarter of 2020, right after being acquired by the private equity fund JKL Partners, the amount increased by 44.5% over three years, and its share of the gross written premium rose by 21.3 percentage points.
The contract service margin (CSM), a key indicator of IFRS17, was recorded at 1.8949 trillion KRW. This is an increase of 94.4 billion KRW compared to 1.8005 trillion KRW at the beginning of the year. A Lotte Insurance official explained, "Due to the nature of IFRS17, which amortizes the CSM at a certain rate at the beginning of each quarter and recognizes it as insurance operating profit, the additional growth of the CSM means that insurance operating profit continues to grow. The growth rate of new contract CSM compared to the held CSM is at the highest level in the industry, indicating that future insurance operating profit can continue to grow."
Net assets (capital), which were 1.3652 trillion KRW at the beginning of this year, increased by 52.8 billion KRW to 1.418 trillion KRW at the end of the first quarter. The retention rate for long-term protection insurance was 87.2% at the 13th installment (1 year retention) and 79.8% at the 25th installment (2 years retention). The company-wide loss ratio (the ratio of claims paid to premiums received) was 82.7%, up 2.2 percentage points compared to the first quarter of last year. The repurchase agreements (RP) worth 2.7 trillion KRW, borrowed at the end of last year to secure liquidity, have already been repaid by about 1.8 trillion KRW this year. Lotte Insurance plans to complete the repayment by June.
A Lotte Insurance official said, "The record-high quarterly performance is the result of proactively preparing for the introduction of IFRS17, including investing in sales expenses to expand long-term protection insurance without being obsessed with short-term profits and losses. Since the change of the major shareholder, value-based management to enhance the core competitiveness of the insurance business has begun to show results."
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