By Kang Seung-woo
Three local life insurers made their debut on the equity market under a big spotlight over the past year but they are struggling as their stock prices remain below the initial public offering (IPO) prices despite the recent market rally.
Tongyang Life Insurance launched its IPO on Oct. 8 for the first time among local insurers but failed to enjoy the first mover premium. Its IPO price was 17,000 won per share, but since then, it has dropped about 30 percent to 11,900 won as of Tuesday’s close of the Korea Exchange (KRX).
Korea Life Insurance and Samsung Life Insurance, which followed Tongyang, are also in the same situation.
Korea Life initially listed at 8,200 won per share in March, but has remained below 8,000 won, sitting at 7,850 won.
Samsung, which made its KRX debut to much fanfare in May with its offering valued at 110,000 won, has dropped to 105,500 won.
Market analysts think that the low interest rate is the key culprit behind the insurers’ sluggish performance on the stock market.
Insurers, which usually invest customers’ premium in interest-related products, such as bonds and loans, make profits by taking advantage of high interest.
However, interest rates have been on a steady decline this year.
The yield on treasury bonds, which are insurance companies’ favorite investment source, were at 4.9 percent earlier this year, but it has fallen to 3.6 percent.
The substandard exhibitions by the three listed companies have unnerved their executives and employees who purchased shares at the time of the IPOs.
The problem is that many of them borrowed money to purchase the stocks. They are suffering a double burden of investment losses and paying interest.
But market experts expect that shares of the life insurers will bounce back in line with a rise in interest rates.
“The stock prices of life insurance companies are not affected by short-term businesses,” an official in the industry said.
In addition, the industry believes that the stock prices will rally in the near future.
“Life insurers have struggled with low returns in asset management due to low interest rates, but if interest rates return to an upward trend and insurers continue to post solid operating profits, we expect stock prices to go up soon.”