Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Non-life insurers report brisk earnings while life insurers suffer virus shock
Seen above is headquarters of Meritz Fire & Marine Insurance in Seoul. The company reported the biggest growth in the first-quarter earnings among non-life insurers here. Courtesy of Meritz Fire & Marine Insurance
By Lee Min-hyung
By Lee Min-hyung
The nation's non-life insurers reported brisker-than-expected earnings in the first quarter despite the global pandemic. But most life insurance firms ended up falling victim to the economic impact from the spread of the virus reporting a steep drop in net profits.
The first-quarter earnings of Meritz Fire & Marine Insurance was most noteworthy, with the company reporting a 107.6 billion won net profit, up 63.6 percent from the previous year. The earnings surprise surpassed the previous market consensus of 72.2 billion won by a huge margin.
Hyundai Marine & Fire Insurance also reported 89.6 billion won in the first-quarter net profit, up 16 percent from a year ago. The stock price of the Hyundai affiliate closed at 26,700 won, up 2.1 percent from the previous day Friday.
The earnings growth of major non-life insurers here comes as the pandemic spread improved profitability of their car insurance business, as the virus-induced social distancing campaign kept many people off the roads.
Brokerage houses remained optimistic for non-life insurers' near-term growth due to COVID-19.
“The spread of the coronavirus is speeding up a momentum to improve the firm's loss ratio,” Samsung Securities analyst Jeong Min-gi said.
Major non-life insurers here suffered earnings setbacks in 2019, as their core businesses ― such as auto insurance ― ended up increasing their loss ratios.
Their business outlook in 2020 was murky, as no outstanding breakthrough was expected due to the toughening market environment.
But with COVID-19 escalating into a global pandemic, they became unexpected beneficiaries of the virus-driven economic downturn here.
KB Insurance, one of the nation's top-five non-life insurers, also reported growth in its first-quarter net profit, reporting 77.2 billion won, a gain of 2.5 percent from the previous year. DB Insurance also reported whopping growth of 38.7 percent with a net profit of 137.6 billion won.
But Samsung Fire & Marine Insurance ended up reporting an earnings decline during the same period. The company posted 164 billion won in net profit, down 28.9 percent, due to one-off spending as a result of a large fire at a chemical factory.
Contrary to non-life insurers, most life insurers here were hit hard by the aftermath of the virus shock.
Samsung Life Insurance, the nation's largest, reported a 256.5 billion won first-quarter net profit, a steep decline of 45.4 percent.
This was attributable to widening losses in their variable insurance business, as the coronavirus shock resulted in the collapse of the local stock market.
Shinhan Life Insurance and Orange Life Insurance also released disappointing earnings reports during the first three months of 2020.
The Shinhan affiliate reported 39.7 billion won, down 26.3 percent. Things were similar for Orange Life whose net profit came in at 59.5 billion won, a drop of 25.9 percent. The scale of earnings decline was more serious for KB Life Insurance whose net profit only reached 5.9 billion won, down 35.2 percent from 2019.
But Hanwha Life Insurance and Mirae Asset Life Insurance defended well against virus-related shocks.
The life insurance arm of Hanwha Group reported a 47.8 billion won first-quarter net profit, a slight gain of 2.7 percent from the previous year. This was an outstanding turnaround from the firm's earnings shock in 2019 when its net profit declined by 68 percent year-on-year.
Mirae Asset Life Insurance also succeeded in generating decent a earnings report in the first quarter when the firm chalked up 30.3 billion won in net profit, up 25.3 percent. The company said.
The company's term insurance business ― which guarantees high returns ― offset operating loss from the coronavirus, the firm said.