Shinhan Life’s third-quarter profit fell as Korea’s volatile financial markets cut into investment income. At the same time, the stock of future profit on its books reached a record.
The life insurance arm of Shinhan Financial Group reported net income of 128.8 billion won for the third quarter, down 24.3% from 170.2 billion won a year earlier and 31.3% from 187.5 billion won in the second quarter. Net income for the first nine months was 419.4 billion won, down 18.5%.
Investments drove the decline. Financial profit for the nine months fell 25.7% to 132.9 billion won, as gains from bond valuations and disposals shrank amid increased market volatility. Across the group, Shinhan Financial said securities-related income fell in the quarter as market rates rose.
Insurance operations held up better. Third-quarter insurance profit rose 14.8% from the previous quarter. Cumulative insurance profit, which includes one-off factors, was 474.4 billion won, down 17.3% from a year earlier.
The longer-term picture is stronger. The contractual service margin (CSM) on in-force contracts, the main indicator of future profit under IFRS 17, reached a record 8.0423 trillion won at the end of September, up 5.7% from a year earlier. New business CSM for the first nine months reached 1.1379 trillion won, of which 421.8 billion won was written in the third quarter.
“The CSM surpassed 8 trillion won in the third quarter and hit a record high because we focused on solid growth and enhancing future value rather than short-term results,” a Shinhan Life official said, as reported by The Asia Business Daily.
Sales recovered in the quarter. Third-quarter annualised premium equivalent (APE) rose 16.3% from the previous quarter to 426.3 billion won, according to Shinhan Financial’s disclosure, with protection APE up 20.7% to 344.8 billion won. For the nine months, total APE fell 7.3% to 1.1492 trillion won. Protection APE fell 17.8% to 928.3 billion won, a decline Shinhan Life attributed to base effects from product portfolio adjustments, while savings and annuity APE nearly doubled to 220.9 billion won.
Shinhan Life’s provisional K-ICS solvency ratio was 204.6% at the end of September, down 5.8 percentage points from 210.4% a quarter earlier but still above 200%. The company said its K-ICS ratio remained “among the top tier in the industry”. Samsung Life, the market leader, reported a ratio of 208% at the end of June. Total assets fell 6% from a year earlier to 56.7 trillion won.
For general agencies and planners selling Shinhan Life products, the third quarter points to a renewed push on protection. Protection sales rose by a fifth on the previous quarter, and new business CSM grew by 421.8 billion won, a sign the insurer is chasing higher-margin cover going into year-end.
