Korean Re's Business Results for the First Nine Months of 2023

For the first three quarters of 2023, Korean Re reported KRW 292.9 billion in net income, with an insurance income of KRW 194.9 billion. Although we were hit by fire losses at Hankook Tire and losses from the Turkey earthquake, there was a significant improvement in the business performance of life and long-term insurance as well as some commercial lines of business.

We generated an investment income of KRW 183.7 billion. There was an increase in evaluation gains due to a new approach to the classification of financial assets under IFRS 9. 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.

*The above figures are based on the company's separate financial statements under IFRS 17.

Insurance revenue amounted to KRW 4,524.1 billion in the first nine months of 2023 compared to KRW 4,929.4 billion from a year earlier. 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. Non-distinct investment components are excluded from the insurance 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.

In 2023, Korean Re started to release its quarterly business results based on the new accounting standards, IFRS 17 and IFRS 9. Comparative figures from the previous year may not be fully comparable with the 2023 figures disclosed in accordance with both IFRS 17 and IFRS 9 because the 2022 figures for the insurance business are presented on the basis of IFRS 17 while the corresponding figures for the investment business are still based on IAS 39.

There were three options that a company could take regarding how it would transition to IFRS 17 - the full retrospective approach, modified retrospective approach, and fair value approach. We adopted the modified retrospective approach for general insurance and the fair value approach for life and long-term insurance. We also used the Premium Allocation Approach (PAA) for general insurance and the Building Block Approach (BBA) for life and long-term insurance.

Korean Re Obtained an ESG Rating of A from KCGS

Korean Re has achieved an ESG integrated rating of A (Outstanding) in the 2023 ESG evaluation conducted by the Korea Institute of Corporate Governance and Sustainability (KCGS). This marks an improvement from the previous year's B+ rating (Good). In this year's evaluation, Korean Re obtained A ratings in all three categories: environment, social, and governance (ESG).

The KCGS has disclosed the evaluation results and ratings for 987 listed companies. There are seven KCGS ESG ratings ranging from S to D. Scores are given based on absolute assessment, and ratings are assigned according to the score criteria. A rating of A is defined as having appropriately in place a sustainable management system in environment, social, and governance in line with best practices, with a lower risk of undermining shareholder value due to non-financial factors, according to the KCGS.

This year, Korean Re declared its commitment to environmental management and established specific guidelines. In this regard, we set targets to reduce greenhouse gas emissions and energy consumption by measuring our energy usage and carbon footprint. We also strengthened the oversight role of our board of management concerning ESG issues and commitments such as the Declaration on the Phase-out of Coal Financing, and solidified an organizational framework for ethics, legal compliance, and risk management to ensure transparent governance. Furthermore, we put in place a transparent disclosure system for sustainable management, including the publication of a sustainability report containing major ESG policies and initiatives.

Korean Re CEO Jong-Gyu Won stated, "We will continue to make sure that our ESG policies are implemented based on the belief that sound ESG practices contribute to building a healthy and sustainable business."

At Korean Re, we are committed to providing reinsurance services of the highest possible standards, with a focus on good ESG practices. Our commitment to ESG is based on the values of promoting transparency in corporate governance, protecting the environment, and being a socially responsible member of the communities we work and live in. Upholding these values is not just the right thing to do but helps us ensure sustainable business operations. Our success as a company will be driven not just by how well our business is operated commercially, but also by how well we care for the well-being of our employees and support the communities in which we operate.

Korean Re Signed a Coinsurance Agreement with Samsung Life

Korean Re has entered into a coinsurance deal with Samsung Life with respect to the life insurer's liabilities worth KRW 700 billion in October 2023. The agreement came after the two parties intensively discussed and analyzed the merits and effects of the deal for four months. Following a similar deal last year, we signed another large deal with the leading life insurer in Korea, demonstrating what we can do as a reinsurer that provides various solutions beyond traditional reinsurance arrangements in response to the needs of the cedant. The agreement went into force on November 1, 2023, and necessary reporting was made to the Financial Supervisory Service (FSS) at the end of the month.

Coinsurance is a type of financial reinsurance used commonly in the United States and Europe, which involves the ceding of not only risk premiums but also savings and other premiums by the primary insurer to the reinsurer. As opposed to traditional reinsurance where insurance risks involving large man-made and natural catastrophe losses are reinsured, coinsurance allows primary insurers to cede all risks including interest rate risk as well as insurance risk, helping to reduce their capital requirements and improve their financial solvency.

Korean Re has been setting the stage for developing the domestic coinsurance market since 2017 in light of supporting primary insurers with the adoption of the International Financial Reporting Standard 17 (IFRS 17) and the Korean Insurance Capital Standards (K-ICS). Based on this groundwork, we have successfully entered into coinsurance contracts with Samsung Life and Shinhan Life, offering new reinsurance solutions based on non-traditional methods.

Our dedicated team of experts has strived to explore and expand coinsurance business opportunities in Korea in ways that provide domestic life insurers with more reinsurance solutions in addition to traditional reinsurance arrangements. The use of coinsurance in the Korean market can offer various potential advantages for the insurance industry, including effective capital optimization, enhanced financial flexibility, and greater policyholder protection.

As the market is expected to see a rise in demand for coinsurance, Korean Re is poised to proactively address the evolving reinsurance needs of ceding insurers. Building on latest success in coinsurance deals, we will continue to offer differentiated services and coinsurance arrangements to meet varying demands of the insurance industry.