Preliminary Business Results of Insurers in Korea for 2021

Insurance companies in Korea achieved strong business results for 2021 amid improving loss ratios and rising interest rates. Their collective net income jumped by 36.2% year on year to KRW 8,266.7 billion in 2021. Higher investment profit also helped improve their overall bottom-line results, with leading insurers receiving massive dividend payouts from top tech giant Samsung Electronics.

Life insurers saw their net income increase by 14.2% to KRW 3,940.3 billion in 2021 due mostly to investment gains. There was a 7.1% rise in investment profit, which was backed by interest and dividend income. However, their underwriting losses widened as premium income from savings insurance declined.

Non-life insurers delivered even better business results, with their collective net income soared by 65.2% to KRW 4,326.4 billion in 2021. This exceptional performance was driven by improvements in both underwriting and investment results. Their underwriting losses narrowed thanks to a drop in motor loss ratio and a reduction in expense ratio of long-term insurance. Fewer claims arising from a decrease in road traffic and non-urgent hospital visits during the pandemic helped non-life insurers improve their loss ratios. Their investment gains rose by 4.9%, and this favorable investment performance contributed to their overall net income results.

                      < Net Income >                                                              (Unit: KRW billion)

(Source: Financial Supervisory Service)  

In 2021, premium growth slowed to 1.4%, with total premiums reaching KRW 224.9 trillion. Life insurers reported KRW 120.5 trillion in premium income, up 0.8% from a year earlier. The growth was driven by premium income from variable and protection insurance as well as retirement annuities. Variable insurance premiums increased by 6.1%, and premiums from retirement annuities grew by 5.8% while protection insurance premiums expanded by 2.1%, with life insurers focusing their marketing efforts on selling protection policies.

< Premium Income >                                                        (Unit: KRW billion)

 (Source: Financial Supervisory Service)

Non-life insurers posted a higher premium growth of 2%, with their premium income amounting to over KRW 104 trillion. General P&C insurance premiums soared by 8.8%, while long-term and motor premiums rose by 5.2% and 3.7%, respectively. However, retirement annuity premiums declined by 15.7%.

Backed by strong net income growth, insurers saw their profitability ratios improve in 2021. The return on assets (ROA) ratio of the industry rose by 0.15%p to 0.62%, while the return on equity (ROE) ratio increased by 1.51%p to 5.95%. Non-life insurers reported higher ratios than life insurers as below:

< ROA and ROE >                                                          (Unit: %)

(Source: Financial Supervisory Service)

Insurance companies reported a moderate increase in assets on the back of premium growth. As of the end of 2021, their total assets grew by 2.8% year on year to KRW 1,358.7 trillion, which is broken down into KRW 992.4 trillion for life insurance and KRW 366.3 trillion for non-life insurance. Non-life insurers showed a higher asset growth rate compared to life insurers, but the latter continued to dominate insurance industry assets, accounting for 73% of the total.

           < Total Assets and Shareholders’ Equity >                               (Unit: KRW trillion)

 (Source: Financial Supervisory Service)

Despite strong net income growth, the insurance industry saw its total shareholders’ equity diminish by 6.1% to KRW 134.6 trillion as of late December 2021 because higher interest rates caused insurers to suffer a decline in unrealized gains on the value of securities they hold as investments. Indeed the yield on ten-year treasury shot up to 2.25% at the end of 2021 compared to 1.71% a year earlier. The upward movement of interest rates may help insurers improve their profitability in the long term, but it has a downside in the short term. When rates go up, the value of insurers’ bond portfolios goes down as existing bonds become less attractive than new bonds that offer relatively higher rates. Although this decrease in value does not affect net income because it is recognized as unrealized gains or losses, it reduces insurers’ book value or net worth.