New Industry High
Amid the controversy surrounding economic slowdown and the newly implemented IFRS 17 accounting standards starting this year, insurance companies have managed to achieve first-half profits comparable to the “top 5 banks” in the financial sector.
According to the insurance industry on Aug. 16, the consolidated net profits of major property and casualty insurance companies and life insurance companies for the first half of this year reached around 8 trillion won (US$5.97 billion), marking a record performance. Among these, property and casualty insurance firms recorded a net profit of 4.6 trillion won, while life insurance companies achieved a net profit of 3.4 trillion won. This level of profitability surpasses the first-half net profits of the top five banks, including KB Kookmin Bank, which stood at 8.969 trillion won.
The backdrop behind the insurance companies’ earnings surpassing those of the top five banks lies in the advantageous high-interest-rate environment for insurance firms and the newly implemented IFRS 17 accounting standards starting this year.
Insurance companies are treading cautiously as the substantial effects of the financial regulators’ revised guidelines on the actuarial assumptions under the new accounting standards will truly reflect in the third quarter results. This approach is influenced by concerns raised in the past regarding potential earnings exaggeration, given that insurance companies achieved remarkable results in the first quarter.
However, with insurance companies achieving exceptional results in the first half of this year, it is anticipated that the pressure from financial authorities for collaborative financial efforts will increase. This comes as insurance companies are known to have maintained a favorable auto insurance loss ratio even amid this year's typhoons and heavy rains. This could suggest that insurance providers have the potential to lower auto insurance premiums. Generally, in the property and casualty insurance industry, the break-even point for auto insurance is considered to be a loss ratio in the range of 76 percent to 80 percent, factoring in operational expenses.