Fierce Top 2 Competition in the Insurance Industry... "Need to Strengthen Core Business Competitiveness" [Financial Paradigm Shift]③

Samsung Life and Samsung Fire Maintain Firm Grip on Top Spot
Hanwha vs Kyobo, DB Insurance vs Meritz Fire: Neck-and-Neck Performance Race
Strengthening Core Business Competitiveness and Enhancing Responsiveness to Accounting Standard Changes are Key

Editor's NoteAs 1% low growth becomes entrenched, the survival competition among domestic financial companies that have grown mainly in the domestic market is intensifying. To survive the severe domestic slump, innovation is being triggered across the entire financial sector including banks, insurance, and cards, with fierce ranking competition emerging amid this. Asia Economy is focusing on companies causing tectonic shifts through innovation in major financial sectors and running a series to consider what strategies financial companies should set in the era of low growth.

The competition for the top 2 positions in the insurance sector is fierce. Leading with Samsung Life and Samsung Fire & Marine Insurance, in the life insurance sector Hanwha Life and Kyobo Life, and in the non-life insurance sector DB Insurance and Meritz Fire & Marine Insurance are engaged in intense battles for position. For them to solidify the second place and leap to first place, strengthening core business competitiveness along with enhancing responsiveness to changes in interest rates and accounting standards will be key.

Hanwha Life vs Kyobo Life... Fierce Tug-of-War Over Separation of Manufacturing and Sales vs Exclusive Agents

According to the Financial Supervisory Service on the 4th, Samsung Life's net profit last year was KRW 2.1068 trillion (based on separate financial statements), an 11.2% increase from the previous year. This is Samsung Life's best-ever performance and the highest in the insurance sector. Insurance profit decreased by 62.6% (KRW 907 billion) to KRW 542 billion, but investment profit increased by 104.6% (KRW 1.1161 trillion), boosting overall results. A Samsung Life official explained, "Investment profit improved significantly due to increased dividend income and reduced debt burden interest from falling interest rates."

Kyobo Life is likely to have taken second place in life insurance performance last year. As an unlisted company, Kyobo Life has not yet announced its final results, but as of the third quarter of last year, it posted a net profit of KRW 939.9 billion. This significantly exceeds Hanwha Life's net profit of KRW 720.6 billion last year. In 2023, Hanwha Life led with a net profit of KRW 616.3 billion over Kyobo Life's KRW 489.1 billion, but this time it appears Kyobo Life will take second place.

Hanwha Life and Kyobo Life have very different strategies for managing insurance agents. In April 2021, Hanwha Life became the first major life insurer to implement separation of manufacturing and sales by operating through subsidiary-type corporate insurance agencies (GA). The number of insurance agents affiliated with subsidiary-type GAs (Hanwha Life Financial Services, Hanwha Life Lab, People Life) was 31,005 as of the end of last year. These agents sell not only Hanwha Life products but also products from other insurers, generating revenue.

Kyobo Life centers on exclusive agents directly affiliated with the head office. As of the end of last year, Kyobo Life had 15,141 agents. Unlike GA agents, these agents can only sell Kyobo Life products. However, they possess expertise in their own products and have advantages in customer management. Despite the recent spread of separation of manufacturing and sales in the insurance industry led by Hanwha Life, Kyobo Life is strengthening its strategy focused on exclusive channels. This strategic difference is expected to be the most important variable enabling a future challenge for first place.

IFRS17 Changes... Enhancing Responsiveness is Key

The undisputed number one in the non-life insurance sector is Samsung Fire & Marine Insurance. Samsung Fire's net profit last year was KRW 2.0478 trillion, making it the first non-life insurer to join the '2 trillion club.' It posted profits across general, long-term, and automobile insurance businesses. Buoyed by confidence in its performance, Samsung Fire announced a value-up (corporate value enhancement) plan on January 31, becoming the first listed insurance company to do so.

DB Insurance took second place among non-life insurers last year with a record net profit of KRW 1.7722 trillion. The previously loss-making general insurance segment turned a profit of KRW 103 billion, and investment profit increased by 59.4% to KRW 743.6 billion, resulting in a well-balanced overall performance. Meritz Fire & Marine Insurance, which was second in 2023, slipped to third with a net profit of KRW 1.7105 trillion last year by a narrow margin. However, Meritz Fire also posted its best-ever performance, with insurance profit up 2.4% and investment profit up 25% year-on-year.

Who will take second place between DB Insurance and Meritz Fire this year is expected to be determined by their adaptability to changes in International Financial Reporting Standards (IFRS17). Meritz Fire successfully defended against the no- and low-surrender insurance lapse rate guidelines prepared by financial authorities in November last year. Despite applying the principle-based model, Meritz Fire was the only major non-life insurer whose Contractual Service Margin (CSM) increased compared to the previous quarter at the end of last year. Meritz Fire has made conservative assumptions in line with the 'principle-based model' suggested by authorities, so the impact of regulatory changes was minimal. This year, significant insurance accounting changes such as solvency ratio (K-ICS), surrender reserve expansion, and final observation maturity extension are expected, so thorough preparation is necessary.

DB Insurance has about a 22% market share in automobile insurance, much higher than Meritz Fire's 3%. Despite worsening loss ratios, DB Insurance posted a profit of KRW 170.9 billion in the automobile insurance segment last year. Recently, the government announced improvements banning future treatment cost (settlement money) payments for minor injury patients, a major cause of automobile insurance leakage, which is expected to lead to mid- to long-term performance improvements.