Are foreign life insurers pulling out of Korea?

06-Dec-2019 Intellasia | KoreaTimes | 6:02 AM Print This Post

Prudential Financial’s move to sell its life insurance unit here has drawn attention as it may affect other foreign life insurers in Korea which are suffering worsening profitability due to the saturation of the local market.

Over the past few years, a number of global players have left Korea ? ING Group sold its life insurance unit in 2013, while Allianz sold its in 2016, followed by PCA Life Insurance being sold in 2018.

Although other foreign players here are denying any exit from Korea, market observers speculate that Prudential’s move could trigger a foreign exodus, given that the local market will likely stay in the doldrums amid low interest rates.

According to industry sources and media reports, Prudential recently selected Goldman Sachs as lead manager for the sale of its Korean unit. The US-based insurance giant established the Korean subsidiary in 1989.

Prudential Life Insurance Company of Korea ranked 11th in terms of assets and fifth in net profits in the first half of the year.

Its risk-based capital ratio, considered a barometer for financial soundness, stood at 505.1 percent in June, which places it at the top of the list of life insurers.

Questions have arisen as to why Prudential, which has been performing well and appears to be in good financial health, is pulling out of Korea.

Some market watchers and experts believe that the move comes on expectations that the domestic market will become less profitable down the road due to the low interest rate.

According to data from the Financial Supervisory Service, 24 life insurers here made a combined 3.06 trillion won in net profit in the first three quarters of 2019, down 24.3 percent from a year earlier.

Among them, nine foreign life insurers posted a combined 766.5 billion won in net profit during the period, a 16.3 percent fall year-on-year.

There is also speculation that ABL Life and Tongyang Life under the ownership of China’s Dajia Insurance Group will be put up for sale soon as the Chinese financial group has sought to sell off the overseas assets of its subsidiaries.

Tongyang said it would accept early retirement applications from employees, which is seen as a means to pressure older workers to leave the company ahead of a possible sale.

However, other foreign life insurers here denied that they were also leaving.

“One cannot say all foreign insurers are in the same situation,” an official of one firm said.

“Prudential is known to have focused on whole life insurance. The policies mostly had high, fixed yields amounting to 6 percent to 7 percent, but now the interest rate has fallen below 2 percent. We, on the other hand, have been focusing on variable insurance policies.”

An official of another insurer said “We recently switched to a subsidiary, as a means to stay long-term.”


Category: Korea

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