Innovation Leads LIG Insurance to Success
By Yoon Ja-young
Staff Reporter
Though 2009 was a tough year for all financial businesses, some managed to fare well. LIG Insurance was one of the few winners, and it attributes its success to its continuous development of innovative products.
Despite the economic downturn, LIG increased its market share by 0.3 percentage points to 13.4 percent in 2009 by boosting sales by 17 percent to 4 trillion won.
This is the biggest growth in terms of sales and market share among the top players of the industry. LIG saw its market share rise in all categories of its business, including general insurances, long-term insurances and auto insurance.
The robust performance came as a result of the insurer's efforts to develop new products and markets. For example, it first introduced legal expense insurance in mid October last year, which covers lawyer's fees and other litigation and administrative fees. This niche market had been neglected by the local insurance industry.
LIG has expanded its customer base by selling auto insurance. The firm sees auto insurance policyholders as potential buyers of other long-term products. It expects the insurer's long-term insurance premium income to soar over time thanks to such efforts.
On top of the traditional sales force, LIG is also planning on expanding its market share in new sales channels such as bancassurance. The firm's ultimate goal is to become a comprehensive financial group by securing a leading position in multi sales channels and setting up an advanced risk management system.
Going Global
As the local insurance market becomes saturated, insurers are paying attention to markets overseas to secure a new growth engine for the longer term. LIG has been leading such efforts.
The insurer opened up a business in Nanjing, China, last October. "China has been marking an annual 10 percent economic growth, and the middle class is rapidly increasing along with growth in household income. The Chinese government is easing regulations on insurance after joining the WTO in 2001, and the main pillar of the social security system is moving toward individuals from the government," a spokesperson at LIG explained.
He added that demand for insurance, including corporate insurance, is continually growing upon the massive economic stimulus package of the Chinese government. As the government tries to boost the economy through investment and infrastructure construction, the potential of insurance market also grows.
LIG started business by focusing on selling corporate insurances to Korean businesses there. For the longer-term, it plans to expand its China business, selling insurance for individuals and advancing into the auto insurance market. It plans to set up branches in major cities to expand its sales channels.
LIG's branch in the United States, which marks its 20th anniversary this year, has achieved over 20 percent annual growth every year.
"LIG will seek localization in each of the overseas markets, and pursue both qualitative and quantitative growth," the LIG spokesperson said.
Long-term Insurance to Enhance Corporate Value
LIG is strong when it comes to long-term insurance products. This is expected to pull up the corporate value of the insurer, according to analysts in Seoul.
Foreign investors held a total 22.05 percent stake in LIG Insurance as of February. Foreign ownership has been increasing following the global financial crisis, and it is expected to rise further down the road.
LIG is considered a blue chip company in terms of business stability, profitability and growth potential. It maintained a 200 percent solvency margin ratio even during the global crisis. The ratio stood at 229.1 percent as of December.
LIG marked over 100 billion won in net profit for three consecutive years since 2007 by focusing on improving its underwriting capability and lowering the loss ratio. It also made efforts in cost management, and the efforts paid back with stable profits.
In particular, LIG concentrated on long-term insurance. It marked 37.7 percent growth in long-term insurance in 2008, and saw 42.3 percent growth in the third quarter of 2009.
The listing of major life insurance companies should also be an opportunity for global investors to reevaluate the corporate value of LIG. When evaluating life insurers, one pays attention to the embedded value of the policies they have. Since LIG's long-term insurances take up much of its business portfolio, investors are expected to notice that LIG is undervalued.
LIG's market cap stands at 1.2 trillion won, but its intrinsic value was estimated at 1.7 trillion won as of 2008. This means the market cap is some 30 percent lower than the corporate value. Since the corporate value is estimated to have increased upon continuous growth in long-term policies, LIG Insurance will be even more attractive in terms of valuation.