With the total premium of immediate annuities expected to surpass 2 trillion won by the end of this year, a local insurance company Korealife Insurance acquired the highest credit rating.
Single premium immediate annuities are now the talk of the town. According to industry sources, so far this July, the total premium of immediate annuities topped 1 trillion won, with the savings bank scandal and recent dip in stock market weighing on investors. This has drawn part of the floating money to annuity insurance. The increased need for preparation for old age has also contributed to the rise. If the trend continues, total premium is expected to surpass 2 trillion won by the end of this year.
Major life insurance companies have seen a sharp increase in annuity insurance sales. Samsung Life Insurance sold 407 billion won worth of annuity insurance in the three month period from June to August, up 35.6% from a year earlier. Over the same period, KYOBO Life Insurance gained 169.1 billion won, an increase of 28.5% compared with the previous year. Korealife Insurance sales totaled 80 billion won, up from 69 billion won in June.
With single premium immediate annuity, the annuitant pays for the annuity with a single lump sum and receives a monthly benefit as an old-age pension. Unlike protection type insurance products, its initiation is also possible on the first of the next month after purchase. Despite such advantages, there are important factors to consider when choosing immediate annuity. It is a long-term product, maintained for at least ten years. Therefore, people establish a long-term plan and fully review the insurance company’s financial health before signing. According to an analyst, canceling annuity before the date of expiration causes a loss to the insured because the lump sum, such as retirement grants, used to purchase an immediate annuity is forfeited, and income payments will continue until your benefits have been exhausted based on the contract provision, or until death.
Furthermore, the benefit can be changed quarterly according to whether crediting rates reflect market rates, possibly leading to lower payments than expected. Nevertheless, experts are recommending them, saying that a single premium immediate annuity is so far the best safety net to supplement funds for old age.
Korealife Insurance Winning Highest Credit Rating, AAA
In the meantime, Korealife Insurance acquired the highest rating, AAA, by Korea’s three major credit rating agencies; NICE Information Service, Korea Ratings and Korea Investors Service, for its capability to pay premiums. It has kept the status for four consecutive years since Korea Ratings and KIS raised its rating to AAA on December 2007. A company official said, “This is because the company has a stable insurance portfolio, expanding the proportion of protection types and dividend paying types,” adding that its large sales network also contributed, as did its capital buffer, which was enhanced through an IPO last March. The company also expects to maintain a high level of capital adequacy because of an accumulated surplus.
Based on its marketing power and brand awareness, the first insurance company in Korea has gained a strong brand power and secured its presence in the market as the No. 2 issuer.
It was highly rated because of its asset quality and capital adequacy. The three credit rating companies viewed its rating outlook as stable, in recognition of its solid customer base and stable asset management strategy. As of June, the company’s total assets amounted to 65. 19 trillion won, while its risk-based capital (RBC) ratio was 231%.