Samsung Life Insurance said Thursday its net profit for the first half of this year reached 1.89 trillion won ($1.23 billion), up 35.8% from 1.39 trillion won in the same period last year, driven by a more than 80% surge in investment gains on higher dividend income and improved subsidiary earnings. The company also said it chose not to participate in the bidding for KDB Life Insurance because it concluded meaningful synergies would be difficult to achieve.
Net profit for the second quarter came in at 689.9 billion won, down 9.1% from the same period a year earlier.
Investment gains led the earnings growth. First-half investment profit reached 1.86 trillion won, up 82% from a year ago. Dividend income from Samsung Card and Samsung Securities rose 4% to 338 billion won, while consolidated and equity-method gains expanded 35.7% to 1.41 trillion won. However, 425.7 billion won of that figure reflected a one-time reversal of provisions; stripping that out, investment profit stood at 1.43 trillion won. The return on invested assets fell 1.71 percentage points to 1.19%, or 2.12% excluding derivatives gains and losses related to variable annuity hedging.
Insurance service profit totaled 533.1 billion won. Contractual service margin (CSM) amortization held steady at 734 billion won, in line with the prior year, but the variance between actual and expected results swung from a 39.5 billion won gain to a 112.9 billion won loss. Excluding one-time items — including a 52.6 billion won retirement reserve charge and a 30 billion won increase in personnel costs — insurance service profit would have been 615.7 billion won. The loss ratio, excluding indirect insurance payments, rose 3.7 percentage points to 85.3%. The 13th-month retention rate for protection policies edged down 1 percentage point to 88.9%.
New contract CSM reached 1.72 trillion won, up 20.4% from a year earlier. By product category, death benefit coverage surged 108.6% to 536.2 billion won, while health coverage slipped 3% to 1.11 trillion won. Even as the annualized premium equivalent for death benefit coverage dipped 0.6% to 643.7 billion won, CSM more than doubled, pushing the CSM multiple relative to first-month premiums from 5.0 times to 9.6 times. The company said the result reflected rising demand for refund-type whole life products amid higher interest rates. The CSM balance at end-June stood at 13.7 trillion won, up 500 billion won from the start of the year.
Consolidated equity at end-June reached 147 trillion won, 2.3 times the 64.8 trillion won recorded at end of last year. Fair-value gains on financial assets rose 70 trillion won in the first half, of which 77.2 trillion won came from unrealized gains on Samsung Electronics shares. The key solvency indicator, the Korea Insurance Capital Standard ratio — known as K-ICS — rose 10.2 percentage points from end of last year to 208%, though it edged down slightly from 210% at end-March as market risk exposure climbed from 34.6 trillion won to 74.3 trillion won due to the expanded equity valuation.
Lee Wan-sam, Samsung Life Insurance's chief financial officer, said on a conference call Thursday that the company had initially expected strategic synergies in channel operations, products and asset management from acquiring KDB Life Insurance, but ultimately concluded those synergies would be difficult to realize.
Samsung Life Insurance had been widely regarded as a leading candidate to acquire KDB Life Insurance, a subsidiary of Korea Development Bank, but did not submit a final bid on Friday, Aug. 7. On the question of a special dividend from Samsung Electronics, the company said the timing was hard to predict and the size difficult to specify given market volatility.
psj@heraldcorp.com
