Life and nonlife insurance companies in South Korea expect strong performance this year, on the back of higher interest rates, improved auto insurance business and the end of uncertainties over one-off costs related to suicide claims.
The country’s top nonlife insurer Samsung Fire & Marine Insurance’s net profit for this year would reach KRW1.05 trillion (US$916.6 million), a historic high. This would be a 25% jump from last year’s net profit of KRW840.9 billion and also far above the KRW930 billion that the firm had estimated at the beginning of this year, reported Pulse citing market data provider FnGuide.
Samsung Fire & Marine Insurance in a regulatory filing on 30 June said that its net profit for the first five months of this year amounted to KRW708.2 billion, nearly 70% of its annual target for this year.
One of the main drivers of the company’s bottomline growth is KRW200 billion from the sale of its building in central Seoul last year. Even without the one-off gain, the company’s earnings outlook still looks rosy on improvement in general business environment in the non-life insurance industry, according to market analysts.
Among positive factors that are expected to continue to boost nonlife insurers is improving margin from their auto insurance sales. According to Samsung Fire & Marine Insurance, its combined ratio of auto insurance product declined to 95% during the January-May period from 100% in the same period last year.
Boosted by the improvement in auto insurance sector, another leading nonlife insurer Dongbu Insurance also forecasts higher net profits for 2017. The company’s bottomline for this year will likely jump by 13% to KRW532.3 billion. It had chalked up 57% of its annual target net profit in the first five months of this year, according to market analysts.
The five-month accumulated net profit of other nonlife insurers including Hyundai Marine & Fire Insurance and Meritz Fire & Marine Insurance also surged between 40% and 50% compared to a year earlier.
Life insurance firms are also poised to rake in more this year as a higher interest rate environment would also lower the burden on reserves for future payouts on variable life insurance products. Concerns over suicide claims have also eased after several insurers completed paying out overdue suicide claims totalling KRW170 billion on a regulatory directive.