[Financial Overseas Expansion Series]③ Korea is Saturated... Insurance Companies "Going Abroad"

Insurance Companies Target Overseas Markets... Aggressively Pursuing Southeast Asia
Recent Regulatory Easing... Expansion into Non-Insurance Areas Expected

Insurance companies are also focusing on overseas expansion. They consider the domestic market to have reached a saturation point in insurance subscriptions, leading to stagnant growth, and are actively targeting overseas markets, especially Southeast Asia, where growth potential still remains.

Both Life and Non-life Insurance Target Southeast Asia

According to the insurance industry on the 4th, DB Insurance recently signed a contract to acquire a 75% stake in BSH Insurance, the 9th largest non-life insurer in Vietnam, and is proceeding with follow-up procedures. This is the third time DB Insurance has acquired a Vietnamese non-life insurer. Previously, in 2015, it acquired a 37.32% stake in PTI Insurance, ranked 5th in the Vietnamese market, and has since raised its market share to 3rd place. In February, it signed a contract to acquire a 75% stake in VNI Insurance, a company ranked within the top 10.

DB Insurance has been knocking on the door of overseas markets since the 1980s. Having mainly targeted the Hawaii and Guam regions in the United States, DB Insurance is now focusing on the Southeast Asian market. Unlike the domestic market, where the population is declining and the insurance industry has reached saturation, Southeast Asia, especially Vietnam with its young population structure, is experiencing rapid economic growth, and DB Insurance is concentrating its efforts there.

KB Insurance is also expanding its presence in the Southeast Asian region. The country targeted by KB Insurance is Indonesia. It is evaluated that KB Insurance is securing stable profits by creating synergy effects with KB Financial Group affiliates such as KB Kookmin Bank and KB Kookmin Card, which have entered the local market. KB Insurance's Indonesian subsidiary recorded a net loss of 3.5 billion won in 2020 but turned profitable in 2021, posting a net profit of 1.165 billion won last year. The premium income, which is equivalent to sales, also increased by about 46.7%, from 196.523 billion rupiah (approximately 16.8 billion won) in 2020 to 288.258 billion rupiah (approximately 24.6 billion won) in 2021.

Life insurers, who have faced even more severe stagnation than non-life insurers in the domestic market, are also actively targeting the Southeast Asian market. Hanwha Life was the first domestic life insurer to enter the Vietnamese market in 2009. The premium income of its Vietnamese subsidiary, which was only 1.6 billion won in 2009, increased more than 100 times to 241 billion won last year. It is ranked within the top 10 life insurers locally. Recently, Hanwha Life has been focusing on Indonesia. In March, it acquired a 62.6% stake in Lippo Insurance, a financial subsidiary of Lippo Group, ranked 6th in Indonesia's business circles. Lippo Insurance ranks 14th among 77 Indonesian non-life insurers and holds the 2nd largest market share in health and accident insurance sales.

KB Life Insurance, launched after the merger of KB Life and Prudential at the beginning of the year, also formed a global business division in its organizational restructuring at the end of last year. Although specific details have not yet been announced, it is expected to focus on the Southeast Asian market. Samsung Life also entered the online market with pension insurance products through its Thai subsidiary earlier this year. Shinhan Life established its first overseas subsidiary in Vietnam early last year.

Performance Already Growing... "Need to Overcome Limits of Insurance Industry"

The net profit earned overseas by domestic insurance companies exceeded 100 million dollars last year. According to the '2022 Overseas Branch Performance of Insurance Companies' recently announced by the Financial Supervisory Service, 11 overseas insurance companies (4 life insurers, 7 non-life insurers) earned a net profit of 122.5 million dollars (approximately 157.5 billion won) in 11 countries last year, a 34.9% increase from the previous year. Of this, insurance business profits were 112 million dollars, and financial investment profits were 10.7 million dollars. The Financial Supervisory Service explained, "Life insurers' business conditions improved with the easing of COVID-19, and the profits from real estate leasing by local subsidiaries increased, leading to performance growth. Non-life insurers saw increased sales to domestic companies operating locally, and the scale of overseas insurance operations expanded with new entries into emerging markets such as Vietnam."

However, there are also opinions that insurance companies need to expand beyond the insurance business into various fields. Until now, insurance companies had to obtain approval from the Financial Services Commission for new businesses unrelated to insurance. To compete with various overseas financial companies, they need more flexibility. Japan, for example, amended its Insurance Business Act in 2014 to reduce the burden on insurance companies' overseas expansion, resulting in Japanese insurers conducting broader business activities overseas.

With financial authorities also moving to improve regulations, there is analysis that efforts should be accelerated. On the 17th of last month, the Financial Services Commission held the '8th Financial Regulatory Innovation Meeting' and decided to significantly ease restrictions on insurance companies' investments in and financial support for overseas subsidiaries. As a result, domestic insurance companies are expected to be able to own overseas banks. A representative from an insurance company said, "Insurance, a representative regulated industry, has found overseas expansion somewhat more difficult compared to other industries. Taking this regulatory easing as an opportunity, many insurance companies will actively venture into overseas markets."