Large-scale occurrence of one-time asset damage impacts on internalization strategies such as strengthening long-term guarantee insurance
Lotte Insurance recorded a net loss of 16.6 billion won in its first annual performance after the major shareholder change. After the change of major shareholders in October 2019, long-term guarantee insurance has increased significantly due to improved loss ratio and stabilization of operating expenses, but it did not succeed in turning to a profit.
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Lotte Insurance announced on the 15th that it recorded an operating deficit of 20.8 billion won last year. This is an improvement of 50.1 billion won from the same period last year (70.7 billion won deficit).
During this period, total sales fell 8.4% from the previous year to KRW 2,234.4 billion. The insurance operating deficit decreased from 2019 (434.7 billion won) to 2117 billion won.
Lotte Insurance reorganized its insurance portfolio last year to significantly expand long-term insurance, stop long-term savings insurance, and reduce auto insurance. This is because of JKL Partners’ management policy to increase embedded value without pursuing short-term profit or loss.
As a result, long-term guarantee insurance with high new contract value recorded KRW 1.5 trillion in sales, up 16.9% year-on-year. Sales of long-term savings-type insurance and auto insurance were actively reduced by 46.5% and 46.1%, respectively, compared to the previous year.
An official from Lotte Insurance said, “As a result of the efforts to expand long-term insurance coverage and find the optimal size of auto insurance to reinforce the inherent competitiveness of insurance, the company-wide loss ratio improved by 7.9 percentage points from 96.5% in 2019 to 88.6% last year.” At the same time, he said, “Operating profit turned into a deficit of 20.8 billion won by reflecting one-time asset damage of 159 billion won in aircraft, overseas real estate and SOC investment assets due to the worldwide spread of Corona 19 in the fourth quarter of last year.”
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