 |
By Kim Bo-eun
Foreign life insurers operating in Korea saw their earnings deteriorate sharply in 2018 due to worsening business conditions caused by an economic slowdown and the upcoming introduction of the new accounting standard International Financial Reporting Standard (IFRS) 17.
This is in stark contrast to Korean life insurers which are enjoying an average 20 percent growth in net profit.
Out of six major foreign life insurers here ― Lina, Prudential, ABL, MetLife, Tongyang and AIA ― only Lina Life Korea saw its net profit grow. AIA Korea and Tongyang Life Insurance's net profits fell by around 70 percent.
The combined net profit of the six firms dropped by 34 percent to 782.9 billion won last year from 1.19 trillion won in 2017.
The company that saw the largest drop in net profit was AIA Korea, whose profit plunged by 76.2 percent, from 287.6 billion won in 2017 to 68.56 billion won last year.
"This is due to the taxes paid last year after AIA Korea switched to become a subsidiary, from a branch," an AIA spokesperson said.
"The insurance business itself was not bad, as the value of new businesses, the key barometer for sustainability, has continued to improve."
Tongyang Life saw the second-greatest fall in profit. Its net profit shrank by 72.2 percent, from 184.4 billion won to 51.31 billion won.
A Tongyang Life official said this was due to an increase in protective insurance contracts, as the company seeks to reduce sales of savings-based insurance as insurers prepare for the introduction of the IFRS 17.
"The costs of new contracts were reflected," he said. "Profits also fell in investments."
The performance of equity-linked life insurance was poor due to the bearish market last year.
In contrast, Lina's net profit enjoyed a 15 percent growth, from 321.81 billion won to 370.1 billion won.
"The asset management division's profit increased, and insurance premium revenue has continued to accumulate," a Lina official said.
Life insurers are cutting the sales of savings-based insurance, which used to be a main product.
This is because the IFRS 17, a new set of global accounting standards, is scheduled to be introduced in 2022. Under the IFRS 17, savings insurance contracts will be counted as liabilities since insurers are required to pay back a stipulated amount when contracts expire.
The insurers are instead turning to more protective insurance contracts. Life insurers' premium income from this style of insurance grew 2.1 percent to 41.4 trillion won last year. This compares with the 13.5 percent fall in premium income from savings-based insurance, to 33.6 trillion won.
The premiums for protective insurance are lower than those of savings types, which is another factor behind falling profits.
Competition in the market for protective insurance is heating up as domestic players also seek to make the switch from the savings kind ahead of the IFRS 17's implementation.
![[ANALYSIS] Tesla, BYD's price cuts unnerve LGES, Samsung, SK](https://img.koreatimes.co.kr/upload/thumbnailV2/b1cf8ba68d474cb69352bfe7ea9d14f0.jpg/dims/resize/178/optimize)
![[INTERVIEW] How ATEEZ achieved worldwide success](https://img.koreatimes.co.kr/upload/thumbnailV2/c7723b56dde94eb4b260950d368fe8fb.jpg/dims/resize/178/optimize)
