Insurance Industry Polarization
The polarization of the life insurance industry is worsening. While the performance of large insurance companies such as Samsung and Hanwha Life Insurance are continuously getting better, small-and medium-sized insurance companies suffer from weaker growth potential.
According to the financial industry on Nov. 18, the performance gap between large and small insurance companies is expanding amid a series of announcements of performances in the third quarter.
The net profit of Samsung Life Insurance, the number one company in the industry, recorded nearly 300 billion won (US$269 million) in the third quarter, up 34 percent compared to last year. The operating profit and net profit of Hanwha Life Insurance in the third quarter increased by 16 percent and 17 percent, respectively, compared to last year. On the other hand, most small insurance companies recorded negative growth or suffered poor performance.
The accumulated net profit of Shinhan Life Insurance by the third quarter decreased by 8.2 billion won (US$7.4 million) to be 68.1 billion won (US$61.2 million) from a year earlier. The accumulated sales and operating profits of Hana Life for the first three quarters increased by 19.1 percent and 14.4 percent, respectively, but its net profit dropped by 55.8 percent. The operating profits and net profits of Heungkook Life were down to 24.9 billion won (US$22.4 million) and 17.8 billion won (US$16.0 million), respectively, in the first half of its 2014 fiscal year (April to September), which decreased by more than 50 percent compared to the same period last year, with 53.5 billion won (US$48.1 million) and 37.9 billion won (US$34.1 million).
The industry predicts that the gap between large and small insurance companies will widen. While small firms are undergoing threats to their potential growth, large companies, which have secured large profits, have been establishing self-sustaining practices by leading the market with bold reinvestments in the development of new products and services, including the ones in overseas office buildings.