Korean Re's Business Results for 2023

Korean Re reported KRW 287.5 billion in net income for 2023, with an operating income of KRW 365.2 billion. Starting from January 2023, Korean Re is reporting its financial results on the basis of new accounting standards, IFRS 17 and IFRS 9.

Although we were hit by fire losses at Hankook Tire and losses from the Turkey earthquake, there was some improvement in the business performance of some commercial lines of business, such as property, marine, and motor. We continued to seek profit-oriented growth based on strengthened underwriting guidelines and stable asset management.

We saw our revenue decrease by 15.5% to KRW 6,856.1 billion in 2023 compared to KRW 8,111.3 billion in 2022. The decline arose partly from a reduction in gross written premiums from long-term insurance due to the clean-cut of some poorly performing contracts.

In terms of gross written premiums (IFRS 4), we recorded a smaller decline of 13.8%, with total premiums reaching KRW 8,383.1 billion in 2023. Premiums from domestic commercial lines of business decreased by 1.3% due to portfolio modification, which involved reducing underperforming businesses such as cellphones and personal accidents. Domestic personal lines of business declined by 29.8% mostly because of the clean-cut of low-margin long-term bulk treaties worth KRW 1.5 trillion. On the other hand, we reported a 7% increase in premiums from overseas business, supported by ongoing market hardening. This robust growth significantly increased the portion of our overseas business.

The decrease in revenue was attributable in part to the application of IFRS 17 and IFRS 9. One of the major changes in the income statement based on IFRS 17 is the recognition of revenue on an accrual basis not on a cash basis, which allows revenue to reflect the services provided and exclude deposits. This may result in a substantial decrease in revenue from long-term contracts as revenue is recognized over the coverage period.

Moreover, non-distinct investment components are excluded from the insurance P&L under IFRS 17. This may have a negative impact on the insurance contract revenue for certain lines of business.

Under IFRS 9, a new approach is applied to the classification of financial assets. It is also worth noting that under IFRS 17, foreign currency exchange gains and losses on insurance contract liabilities are reclassified from the insurance profit and loss (P&L) to insurance finance income & expenses, which is a sub-item of the investment P&L.

There are also changes in accounting for reinsurance commissions. Fixed reinsurance commissions whose amounts are determined regardless of whether or not an insured event occurs are deducted from insurance revenue, resulting in a reduced appearance of the revenue volume. Previously they were treated as a business expense for the current period under IFRS 4. Variable reinsurance commissions were also treated in the same way under IFRS 4, but they are now recognized as part of claims under IFRS 17. Both business expenses and claims are recognized in profit or loss, so there is only a classification impact with no effect on net income.

Meanwhile, Korean Re has remained committed to returning value to shareholders based on its consistent dividend policy to offer attractive and sustainable returns to shareholders. Its total dividend payout was KRW 79.5 billion in 2023, with the payout ratio slightly increasing to 30.4%. This translates into a dividend yield of 6.8% and a dividend per share of KRW 540, one of its highest levels in history.