Insurers’ income declines

The net income of insurance companies fell more than 12 percent in the first half of their fiscal year as nonlife insurers saw higher loss rates for auto insurance, the Financial Supervisory Service said yesterday.

According to the financial regulator, the total amount of net income by 55 life and nonlife insurance companies reached 2.87 trillion won ($2.71 billion) from April to September, down 12.1 percent or 396.5 billion won from the previous year’s 3.27 trillion won. Of the total, earnings from 24 life insurers mounted to 1.76 trillion won, which is 0.7 percent less than the 1.77 trillion won they earned the previous year. As for 31 nonlife insurers, net income came in at 1.1 trillion won in the first half of the fiscal year, down 25.5 percent from 1.5 trillion won in 2012.

“For nonlife insurers, earnings dropped because their loss rate in auto insurance increased,” said an FSS official.

The official added that life insurers’ bottom line slipped slightly by 0.7 percent as bancassurance sales fell from 9.15 trillion won to 3.83 trillion won. Bancassurance refers to insurance policies sold at bank branches.

Meanwhile, with a drop in net income, local insurers’ return-on-asset and return-on-equity ratios fell. The two indexes are key measures of profitability. According to the FSS, the total amount of assets held by local insurers increased, but because of low interest rates, the return-on-asset ratio for life insurance companies fell 0.4 percentage point from 5.1 percent to 4.7 percent, and 0.6 percentage point for nonlife insurers from 4.5 percent to 3.9 percent. The lower the rate of return, the less profit companies make.

BY LEE EUN-JOO [angie@joongangco.kr]