Foreign insurers have upped foray into Korea as local players are weighed down by the burden to meet capital requirements ahead of new accounting standards IFRS 4 Phase II coming to effect in 2021.
According to disclosure data by the Financial Supervisory Service, Korea’s three largest insurers - Samsung Life Insurance Co., Hanwha Life Insurance Co. and Kyobo Life Insurance Co. - saw their combined market share in terms of premium income decline from 49 percent in 2014 to 45.8 percent at the end of July this year. In contrast, the combined market share of 10 foreign insurers including Tongyang Life Insurance Co. acquired by China`s Anbang Life Insurance Inc. grew from 20.2 percent to 21.3 percent the same period.
Foreign insurers stood out in expansion over the last eight months. Tongyang Life led the pack, registering 15.3 percent growth in assets, followed by Lina Life (10.7 percent), Chubb Insurance (10.4 percent) and Prudential (9.7 percent), data by the Korea Life Insurance showed. Premium income and asset are two major dimensions to measure the market share of insurers.
Tongyang Life sold saving insurance plans worth 1.5 trillion won ($1.28 billion) in the first six months alone this year. The company’s net profit reached at 218.1 billion won at the end of September, a 43.7 percent surge from a year ago.
Tongyang Life’s parent company Anbang Insurance Group acquired Allianz Life Korea in April and recently became one of the oligopolistic shareholders of Woori Bank. AXA General Insurance Co. decided to expand car insurance-focused business into general and long-term non-life insurance plans from next year. To back its business expansion, the insurer is scheduled to receive 25 billion won investment from its French headquarters. Its goal is to jack up revenue from general and long-term non-life insurance business from 12 percent of the total to 30 percent by 2020.
AIA Group’s Korean unit is going to change its position into a legal entity to strengthen the structure of its insurance sales representatives. AIA Life Insurance that joined the local market in 1987 has maintained its position as a local branch, which makes it difficult to expand its sales network. An industry official said, “After transformation into a legal entity, the company will begin aggressive marketing based on organizational stability.”
Prudential Life Insurance will focus on selling pension plans as its new personal pension insurance plans hit 100 billion won in accumulated sales in just eight months. Marketing through niche channels like home shopping and telephone is also benefiting the performance of foreign insurers. Lina Life, which grew as the largest insurer based on telephone marketing in Korea, posted a 9 percent increase in net profits in the first half of this year.
In contrast, local insurers are expected to show slow business overall. A life insurance company official said, "Top-ranking insurers need to stake up billions of dollars worth of capital expansion to meet IFRS4 requirements, forcing them to focus more on financial health and less on business expansion.”
By Park Joon-hyung
Copyrights Pulse by Maeil Business News Korea. All Rights Reserved.
Source: Pulse by Maeil Business News Korea (Nov. 17, 2016)