Lotte Insurance on track to normalize 2021 earnings

Lotte Insurance headquarters in Seoul / Yonhap

By Lee Min-hyung

Lotte Insurance CEO Lee Myung-jae

Lotte Insurance is on track to achieve an eye-catching earnings rebound this year on continued efforts to reduce its loss ratio, after having reported deficits for the past two consecutive years.

The mid-tier insurer reported a net profit of 76.8 billion won ($67 million) in the first half of 2021, up 21.2 percent from the previous year.

The non-life insurance arm of Lotte has been desperately seeking to normalize its profitability after JKL Partners took over the company back in October 2019. Amid widening fears that the company could fail to do so by 2021 due to pandemic uncertainties, Lotte Insurance appointed Lee Myung-jae as CEO in March this year.

Lee has placed the firm's focus on minimizing the loss ratio for its overall business as a top priority in its earnings normalization. And, after just five months in office, the company is set to bounce back in its earnings.

“We have increased our insurance sales on our continued efforts to normalize our product portfolio and have succeeded in reducing the loss ratio,” a company official said.

The total loss ratio of the company reached 91.6 percent as of the end of the first quarter in 2019, but it continued improving to 87.1 percent during the same period in 2021. The firm's losses are also declining at a gradual pace, reaching 868 billion won as of July 31 this year from 950 billion won two years ago.

Lee endeavored to enhance the company's risk management capability after taking the leadership post. Under the so-called management goal of “embedded value,” Lotte Insurance garnered efforts to take solid control of risk management in the insurance market, rather than pushing for any short-term sales growth.

“Lotte Insurance reported growth in sales and the risk-based capital ratio in the first half of the year, compared to the year before, due to our efforts to enhance core competitiveness in the insurance industry,” the company official said. “We will thoroughly continue responsible management with the focus on strengthening the embedded value.”

According to data from the non-life insurance industry here, Lotte Insurance was the only non-life insurer among the nation's 10 largest insurers that succeeded in reducing its car insurance loss ratio in July.

The company's car insurance loss ratio declined by 9.1 percentage points to reach 85.5 percent in July. This was an outstanding achievement at a time when most top-tier and mid-tier competitors failed to do so and ended up widening their ratios during the same period.