South Korean non-life insurance companies are expected to report better earnings in the July-September period thanks to an improvement in the auto insurance segment despite a prolonged low-interest-rate environment.
According to Korea’s market data provider FnGuide on Oct. 30, net profits of most listed insurers in the third quarter have risen from the same period over the previous year.
Samsung Fire & Marine Insurance Co., which ranks first in the non-life insurance industry, is estimated to have raked in 3,310 billion won in net profit in the third quarter, up 44.3 percent from the same period of last year. The sales revenue in the first nine months of this year amounted to 4.617,6 trillion won, up 2.2 percent YoY, which was mainly due to surprising a performance in September when net profit in the month came to 43.8 billion won, up 640 percent YoY.
The boost in auto insurance premiums played a big role in raising the net profits of non-life insurers in September, reports said, with not much damage done from typhoons in the summer. Samsung Fire charged higher premiums for auto insurance from April to raise net profit from auto insurance products, up around 17 percent YoY.
Other non-life insurers are also expected to report gains in net profit from last year, with Dongbu Insurance Co. up by 32.6 percent; Hyundai Marine & Fire Insurance Co. up 29.9 percent; Meritz Fire & Marine Insurance Co. up 12.4 percent; and Hanwha General Insurance Co. up 28.5 percent. Market analysts said such gains in non-life insurance are mainly attributed to decreased auto insurance loss ratio that had previously weighed on their performance.
According to Samsung Securities Co., the country’s top four non-life insurers - Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, Dongbu Insurance and KB Insurance Co. - are expected to see an improvement in full-year profit in their auto insurance segment by between 300 billion won and 400 billion won from the previous year. Auto insurance premiums are forecast have increased following the enforcement of a new auto insurance law aimed at preventing motor insurance scams at the end of last month, as well as other various reforms, including stricter rules on payments for minor damages and additional charges for vehicles with high repair costs.
Meanwhile, the country’s largest life insurer Samsung Life Insurance Co. would likely have benefited from a one-off gain of 277 billion won from the sale of its headquarters building in Taepyeongno, downtown Seoul. Net profit of the second largest life insurer, Hanwha Life Insurance Co., will likely have declined 7.3 percent on-year due to the record-low interest rate that has resulted in poor investment returns.
According to the security and insurance industries on Wednesday, the auto loss ratio of Samsung Fire was lowered from 85 percent last year to 76 percent, and Dongbu Insurance managed to make a greater cut from 92 percent to 77.3 percent over the same period. The loss ratio, an important performance identifier of insurance companies, is the ratio of total losses paid out to customers in insurance claims out of the total earned premiums. The lower the number, the better the earnings.
For auto insurance providers, the loss ratio should be kept below 78 to 79 percent just to break even. Last year’s high loss-ratio reached 88 percent on average and was the main culprit behind the poor earnings of the nation’s non-life insurers. Their combined cumulative deficit in motor insurance sector exceeded 10 trillion won ($8.7 billion) in the first quarter of this year.
Now things have turned around. With the rising popularity of auto insurance products that provide different insurance premiums according to analyses of driving habits and GPS-tracked records, the non-life insurance companies are seen improving their performance significantly.
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A view of the building in Seoul where Samsung Fire and Marine Insurance Co. is located.(Photos: Samsung Fire)
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