Insurance firms’ performance in alternative investment under par

Although the insurance industry fared well overall last year in terms of profit amid the coronavirus pandemic, its performance in the foreign alternative investment segment was disappointing, according to data announced Wednesday.

Mirae Asset Life Insurance saw its operating profit drop 17.7 percent on-year to 115.8 billion won ($104.56 million) in 2020, although it secured a market share of more than 50 percent in the variable insurance segment. Its profit fell as the value of its alternative investments, including real estate funds targeting the Brazilian market, dropped significantly last year.

According to its recent filing with the state regulator, the Financial Supervisory Service, the company posted a loss of 47.97 billion won from January to September because of losses incurred from its investment in the Brazilian real estate funds.

KB Insurance saw its net profit decrease 30 percent year-on-year last year as it prepared reserves for losses from its investment in US hotel businesses.

Although Lotte Insurance was able to save 220 billion won last year by improving its loss ratio -- the ratio of losses to premiums earned -- and saving on operational costs, it lodged an operating loss of 20.8 billion won as its investment in the aircraft and hotel segments took a serious hit from the virus crisis.

“Insurance firms usually put money in alternative assets with relatively low risks, but the coronavirus pandemic dealt a blow to investments in hotel and aircraft businesses, which were considered safer than other types of assets,” said Lim Joon-whan, a researcher at the Korea Insurance Research Institute, an organization representing the domestic insurance industry.

By Kim Young-won (wone0102@heraldcorp.com)