Insurance Companies Approach Net Profit of Nearly 10 T Won

In the first half of this year, insurance companies achieved a net profit of nearly 10 trillion won (US$7.56 billion), driven by increased sales of guaranteed insurance policies and the positive effects of implementing new accounting standards, specifically IFRS9 and IFRS17.

According to the preliminary financial results for the first half of 2023 released by the Financial Supervisory Service (FSS) on Aug. 30, the net profit of all insurance companies amounted to 9.144 trillion won. This represents an increase of 3.54 trillion won, or 63.2 percent, compared to the same period last year.

In terms of net profit by sector, 22 life insurance companies reported 3.82 trillion won in profits, while 31 non-life insurance companies recorded 5.33 trillion won. This represents year-on-year growth rates of 75.0 percent, or 1.64 trillion won, for life insurance companies and 55.6 percent, or 1.9 trillion won, for non-life insurance companies.

Such impressive results are attributed to the adoption of the new accounting standards, IFRS9 and IFRS17. The implementation of IFRS9 led to an increase in the valuation profit and loss attributable to securities that are recognized in the current profit and loss, along with a concurrent rise in financial product valuation gains. Additionally, under IFRS17, interest expenses related to insurance contracts were transferred from insurance profit and loss to investment profit and loss, further contributing to the significant growth in insurance profit and loss.

Gross insurance premiums amounted to 111.34 trillion won, marking a whopping increase of 7.92 trillion won, or 7.7 percent, compared to the same period last year. In terms of the growth of premiums, non-life insurers outperformed life insurers. Non-life insurers achieved total premiums of 58.71 trillion won, up by 11.2 percent from the previous year, driven by strong sales in long-term insurance, auto insurance, and general insurance. Particularly noteworthy was the twofold increase in retirement pension premiums compared to the same period last year.

Life insurers reported total gross insurance premiums of 52.63 trillion won, which showed an increase of 2.13 trillion won, or 4.0 percent, compared to the same period a year earlier. Although life insurers saw growth in key products such as guaranteed insurance and savings insurance, sluggish sales of variable insurance products hindered their overall expansion.

The return on assets (ROA) and return on equity (ROE) stood at 1.56 percent and 10.95 percent, respectively, which represents an increase of 0.72 percentage points and 1.14 percentage points compared to the same period last year. By sector, the ROA for life insurers was 0.90 percent, while for non-life insurers, it was 3.30 percent. The ROE for life insurers was 7.25 percent, while non-life insurers recorded 17.24 percent.

The total assets amounted to 1,169 trillion won, which is a decrease of 141.1 trillion won compared to the end of last year. In contrast, equity increased by 78.1 trillion won during the same period, reaching 167 trillion won. The decrease in assets due to accounting changes was offset by a greater reduction in liabilities resulting from the fair valuation of insurance liabilities, leading to an increase in equity.