CSM Nears 2 Trillion... 160 Billion Net Increase This Year
Lotte Insurance recorded a net profit of 33.6 billion KRW in the second quarter of this year, turning profitable compared to the same period last year. The contract service margin (CSM), a profitability indicator under the new accounting standards, also increased by approximately 110 billion KRW in the second quarter alone.
Lotte Insurance announced on the 14th that it posted an operating profit of 47.4 billion KRW and a net profit of 33.6 billion KRW in the second quarter of this year. Both operating profit and net profit turned positive compared to the same period last year.
As a result, it achieved an operating profit of 152.5 billion KRW and a net profit of 113 billion KRW in the first half of the year. Specifically, insurance operating profit in the second quarter was 55.9 billion KRW, a 19.0% increase compared to the first quarter. The total insurance operating profit for the first half was 102.9 billion KRW.
Investment operating profit was recorded at 49.6 billion KRW due to the base effect of bond valuation gains recognized in the first quarter. In the previous quarter, market interest rates fell, increasing valuation gains on interest-bearing assets, resulting in an investment operating profit of 58 billion KRW. It was explained that valuation gains slightly decreased in the second quarter due to a sharp rise in market interest rates. The assets affecting changes in investment operating profit were safe assets such as government bonds and structured bonds, which guarantee principal at maturity.
During the second quarter, new monthly premiums for long-term protection insurance reached 8.5 billion KRW, securing an additional new contract CSM of 109.9 billion KRW. Accordingly, Lotte Insurance's CSM as of the end of the first half stood at 1.9634 trillion KRW, an increase of 68.5 billion KRW from 1.8949 trillion KRW at the end of the first quarter. It increased by 162.9 billion KRW compared to the beginning of the year.
Lotte Insurance's long-term protection insurance gross written premiums for the first half of the year were 1.0277 trillion KRW, up 12.9% compared to the same period last year. The proportion of long-term protection insurance in the total gross written premiums for the first half was 84.9%.
Meanwhile, net assets at the end of the second quarter were 1.4511 trillion KRW, up 7.1% from 1.355 trillion KRW at the beginning of the year. The company's overall loss ratio (the ratio of claims paid to premiums received) for the first half was 81.5%, improving by 3.6 percentage points compared to the same period last year. The long-term insurance loss ratio was 82.2%, down 3.9 percentage points from 86.1% in the first half of last year. Other loss ratios recorded were 64.6% for general insurance and 79.1% for automobile insurance.
The expected versus actual difference ratio was identified as +3.9%. This difference represents the gap between expected insurance claims and expenses and the actual claims and expenses incurred, serving as an indicator of the accuracy of actuarial assumptions under the new IFRS 17 accounting standards. A Lotte Insurance representative explained, "Maintaining a stable level following the first quarter means that accurate CSM calculation was achieved under conservative actuarial assumptions."
A Lotte Insurance official stated, "Since the change of major shareholders, the results of value-based management aimed at enhancing the core competitiveness of the insurance business have become clear this year as well. We will continue to expand the profit base, including long-term protection insurance with excellent intrinsic value, and further improve profitability and soundness."
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