Insurance Industry
As major indemnity insurance companies see huge losses in auto insurance, net profits halved over last year.
According to the Financial Supervisory Service on October 4th, fiscal year 1Q 2013 (April to June) net profits for indemnity insurance companies were at 438.7 billion won (US$403.2 million), 46.1% lower than 814.1 billion won (US$748.2 million) in the same period last year.
Net losses, which were at 16.1 billion won (US$14.7 million) in fiscal year 1Q 2012 shot up to 533 billion won (US$489 million) in 1Q 2013. But investment income increased by a small amount, from 1.11 trillion won (US$1.02 billion) to 1.2 trillion won (US$1.10 billion).
This loss was caused by weak sales in auto insurance, which turned from 26.3 billion won (US$24.2 million) net gain to 176.9 billion won(US$162.6 million) net loss.
Profitability fell as discount products such as mileage special rates, black box special rates, and direct insurance poured out. The number of accidents was also higher than the same period last year, according to the analysis by the Financial Supervisory Service.
Also, a default in Yongsan metropolitan business led to 240 billion won (US$221 million) of insurance payments, which also caused the net profits to fall.
“Losses in auto insurance and default in Yongsan metropolitan business led to lowered net profits. Profitability in auto insurance continues to fall, leading to poor prospects in the remaining year,” said Financial Supervisory service official.