South Korea’s major life insurers finished the first half poorly due to prolonged low-interest environment and economic slowdown while non-life sector was better off at a time when insurance business is pressured to bolster capital to meet stronger accounting standards in compliance with the International Financial Reporting Standard 4 (IFRS4) phase Ⅱ by 2020.

According to the life insurance industry on Tuesday, the country’s leading life insurer Samsung Life Insurance Co. is estimated to have recorded a net profit of 640 billion won ($582 million) from insurance sales and investment returns in the January to June period this year, down by 25 percent compared to the same period last year. The estimation excluded profits made by acquisition of stakes in Samsung Card Co. early this year.

The second-largest life insurer Hanwha Life Co.’s net profit is also expected to have fallen 31 percent on year to 260 billion won over the cited period. The net profit of Kyobo Life Insurance Co. would also have shriveled 9 percent to around 380 billion won in the first half.

The big three all suffered drop in insurance sales due to weak economy. The volume of new policies at Samsung Life fell 19.7 percent on year in the first half while that of Hanwha Life dropped 12.1 percent. Instead policy cancellation rose by 6.9 percent for Samsung Life and 4.9 percent for Hanwha Life, suggesting they had to disburse more than they earned anew.

“The industry is under a triple whammy - the pressure of having to build up more loss reserves due to the adoption of the new accounting standard, poor investment returns on low interest rate and decreasing insurance sales,” said an industry source.

Non-life insurers fared better. The net profit of Hyundai Marine & Fire Insurance Co. increased 23.3 percent on-year in the first half, while that of KB Insurance Co. surged 88.3 percent and Meritz Fire & Marine Insurance Co.’s 72.9 percent over the same period. The industry observers attributed their good earnings results to the raise in their auto insurance premium, reduced car accidents and cost-saving from increased online marketing and sales.

By Park Joon-hyung

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