South Korean life insurance companies are slashing jobs as part of streamlining efforts to offset their deteriorating profits in a protracted low interest rate environment.

According to insurance industry on Sunday, Metlife Insurance Co. of Korea, local branch of the U.S-based insurance giant, will receive applications for voluntary retirement from employees who have worked for 10 or more continuous years until November 8. It plans to pay retirement bonus worth up to 50-month salary.

Another major life insurer Mirae Asset Life Insurance Co. already received applications for voluntary retirement between October 13 and 24. Roughly 100 employees reportedly will leave the company in exchange for a three-year worth of salary per each. The workforce on the payroll would be reduced by 18 percent as the company also has been encouraging employees to move to Mirae Asset Securities.

The streamlining wave has become inevitable due to the deterioration in business conditions from the persisting low-interest environment. According to the Financial Supervisory Service, the total net profit of local life insurance companies in the first half of this year plunged 17.9 percent from the same period last year. Market experts said losses from the life insurance products that the firms had guaranteed high returns are piling up amid little investment options.

The new accounting rule under International Financial Reporting Standards (IFRS) 4 Phase II that will take effect in 2021 is adding another burden on local life insurance companies. Although the exact guideline is yet to be released, it would be inevitable for each life insurer to increase capital in their reserve in preparation for the new rule that evaluates insurers’ debt that needs to be paid back to policyholders based on market value.

By Park Joon-hyung

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]