Profit Sources
Samsung Life Insurance President Kim Chang-soo has visited China twice in just three months since his appointment late last year. His deep interest in China is based on the belief that the Chinese market will be a prop for his company in the future.
At present, a total of 25 non-Chinese insurers are doing business in the Chinese insurance market, but their combined market share stands at just 5 percent. The potential of the market is limitless indeed, given that the premium income, which amounted to US$143 billion in as early as 2010, is continuing to rise. Still, Samsung Life Insurance’s track record is still relatively poor. The company recorded losses of 12.1 billion won (US$11.7 million) in China and 11.2 billion won (US$11.8 million) in Thailand last year. In particular, it has remained in the red in China for eight years in a row since day one in the region. The president’s recent visits have much to do with this situation.
The financial arms of the Samsung Group, which are led mainly by Samsung Life Insurance, are at a critical juncture now. All of the new CEOs of the subsidiaries who were appointed late last year put up profits, added value, and the like as the keywords of their business in this vein. “We will strive to improve our profitability in the domestic market while concentrating on business expansion abroad,” one of them explained at that time.
It is Samsung Fire Insurance that is showing the best business record among the subsidiaries. However, its annual net profits were only 17.9 billion won (US$17.2 million) last year, and overseas business accounted for just 2 percent or so of the total. The company is urged to open up overseas markets with the domestic one mired in regulations hindering further growth. “We will focus on the middle market of the United States, that is, small and mid-size enterprises, so as to raise the overseas business ratio to at least 10 percent by 2020,” Samsung Fire & Marine Insurance President Ahn Min-soo declared.
Samsung Life Insurance is expected to find new momentum this year as the Bank of China, one of the five state-owned banks of the country, decided on equity investment in its Chinese corporation Zhongheng Group late last year. It is going to launch a series of bancassurance products once the government approval is given in the first half.
Samsung Card, which has been engaged in no overseas business at all, is showing some signs of change in business direction under the leadership of the new president Won Ki-chan. The president is mulling over landing on the U.S. market in cooperation with Samsung Electronics as Hyundai Capital did with Hyundai Motor Company.
There are some voices of concern, too. “Foreign insurers make a strategic investment even though they incur losses for a couple of years during the early stage, but Samsung’s financial arms tend to be very sensitive to risk,” said a former high-ranking manager who worked for Samsung, adding, “If the tendency continues, Samsung’s efforts to turn itself into a global finance giant will bring less-than-expected results.”
In the meantime, Samsung Life Insurance has recently restructured its domestic branches with 20 to 30 life planners, getting rid of 90 out of the 1,000 or so branch offices and creating 70 new ones. “This move is based on our strategic decision to lead the market after the start of the financial market restructuring around the corner,” a high-ranking official at Samsung explained.