South Korean insurance companies suffer a double whammy as their earnings from investment activities from insurance premiums plunge on top of deteriorating revenue from primary insurance policies.

According to Korea Life Insurance Association on Sunday, the investment income ratio - or rate of return on investment activities other than insurance operations - of 25 local life insurance firms recorded 4 percent on average. It is the lowest record since 1991 when the statistics on investment income ratio became first public.

The life insurers maintained a return rate of 11 to 12 percent on invested assets in 1990s but the figure started to head down to 8.9 percent in 2000 then to 4.5 percent in 2013. The investment income ratio made a brief rebound to 5.9 percent in 2014 but again stooped to 4 percent last year. The average investment income ratio for 30 non-life insurers and reinsurance firms was even lower at 3.79 percent on average last year.

The insurers are hardly earning anything from premium investments as they must keep loss reserves at the mid 4-percent range. In short, they are earning less than what they are required to pay back to their customers.

Allianz Life Insurance Co., PCA Life Insurance Co., and Dongbu Life Insurance Co. marked comparably higher investment income ratio among smaller life insurers with 4.58 percent, 4.56 percent, and 4.52 percent, respectively. Within large sized firms, Kyobo Life Insurance Co. and Hanwha Life Insurance Co. maintained investment ratio above the average each at 4.5 percent and 4.49 percent. Market leaders Samsung Life Insurance Co., Mirae Asset Life Insurance Co., Heungguk Life Insurance Co. fared worse than the average, posting returns of 3.69 percent, 3.88 percent, and 3.97 percent, respectively.

In non-life insurance sector, Meritz Fire & Marine Insurance Co. and Lotte Non-life Insurance Co. managed their investment portfolio well with a return ratio at 5.14 percent and 4.44 percent, respectively, while large-sized Samsung Fire & Marine Insurance Co. and Hyundai Fire & Marine Insurance Co. performed poorly with 3.32 percent and 3.63 percent, each, on investment income ratio.

Moreover, performance from their primary insurance operation is worsening. The accumulated operating loss for life insurers expanded to 20.9 trillion won ($18.2 billion) last year from 18.8 trillion won in 2013, while that for non-life insurance companies widened to 6.3 trillion won last year from 4.9 trillion won in 2013.

By Park Joon-hyung

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