Insurers pursue overseas expansion, new business amid challenges
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Major insurance companies have been stepping up overseas expansion and pursuing mergers and acquisitions (M&As) to diversify into new businesses as a response to the challenges of a low-growth domestic market shaped by demographic shifts and regulatory changes, industry officials said Friday.
They noted that generating profits from core insurance operations has become increasingly difficult, while the ongoing possibility of interest rate cuts creates further difficulties in managing assets and liabilities.
Data from the Financial Supervisory Service showed that life insurers’ cumulative net profit for the first three quarters of this year stood at 4.8 trillion won ($3.3 billion), down 8.3 percent from the same period last year. During the same period, non-life insurers’ net profit dropped 19.6 percent to 6.5 trillion won.
This decline comes as underwriting profits have worsened for both life and non-life insurers, causing issues in their core business operations.
In response, insurers have sought to diversify their business portfolios by expanding into overseas markets and exploring new investment opportunities.
Hanwha Life has taken the most aggressive steps, accelerating its global push to diversify income sources and strengthen asset management capabilities.
On June 30, the insurer acquired a 40 percent stake in Nobu Bank from Indonesia’s Lippo Group, securing a significant ownership position and management rights. A month later, the firm finalized its acquisition of a 75 percent stake in U.S. brokerage firm Velocity Clearing, signaling its intent to expand beyond its traditional insurance portfolio and into North American capital markets.
Samsung Fire & Marine Insurance signed an additional equity investment worth $570 million with London-based global insurer Canopius in June, reinforcing its position as the second-largest shareholder.
DB Insurance acquired the U.S. specialty insurer Potegra in full for $1.65 billion.
Domestically, Kyobo Life Insurance expanded by taking over SBI Savings Bank in the first half of this year.
Amid the growing push to expand into new business areas, insurers’ primary concern remains maintaining financial soundness, as large-scale mergers and acquisitions require substantial capital and companies must uphold a certain level of capital adequacy under the Korean Insurance Capital Standard (K-ICS).
DB Insurance’s K-ICS ratio is expected to decline by about 15 percentage points following its acquisition of Potegra. This has led to calls for a cautious, medium- to long-term approach to business expansion.
“Generating new profits from the core insurance business alone is challenging and competition is becoming increasingly fierce, making overseas expansion and the pursuit of new business lines essential,” an official from a major life insurance firm said.
“However, the significant capital required means that such initiatives are mostly limited to large insurers, while smaller firms are unable to participate. Even for major companies, achieving short-term returns is difficult, so the overall approach remains cautious.”