South Korean life insurers booked a 24.3 percent on-year drop in their combined profit in the first nine months of this year due to mounting operating losses from waning insurance demand.

The net profit of the country’s life insurance firms totaled 3.06 trillion won ($2.58 billion) in the January-September period, down from 4.04 trillion won a year earlier, according to the Financial Supervisory Service (FSS) on Monday.

The nearly 25-percent plunge in profit was mainly due to losses from insurance sales that swelled 7 percent to 18 trillion won after insurance payouts climbed by 4.02 trillion won because of canceled or expired policies. Investment returns gained a mere 0.8 percent to 18.7 trillion won during the period.

Assets of insurance companies came to 905 trillion won as of late September, up 6.3 percent from late December 2018. Debt rose by 5 percent while equity jumped 20.7 percent thanks to increased gain on bond valuations from falling interest rates.

The big players suffered more than their smaller peers. The country’s three life insurer majors – Samsung, Hanwha and Kyobo – saw their combined profit shrivel 36.4 percent on year. The profit of nine foreign names, including AIA and Prudential, also dipped 16.3 percent. Meanwhile, the country’s seven banks, including Nonghyup and Shinhan, reported a 25.7 percent jump in net profit of their insurance business. Midsize players like Mirae Asset and Heungkuk also posted a 3.7 percent rise.

The FSS urged life insurers to break out of their insurance premium-focused business model if they wanted to seek growth in an increasingly saturated market. It advised them to develop new offerings that meet modern needs and streamline sales and risk management to achieve greater efficiency.

Industry outlook for next year remains grim. Korea Insurance Research Institute projected life insurers to report a 2.2 percent drop in their premium income next year. Demand for permanent life insurance and variable life insurance, the industry’s mainstay policies, is not what it used to be amid the rise of young single households and bearish stock markets, the institute said.

By Choi Seung-jin and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]