Flu, bad weather hit insurers hard in Q4

By Lee Yeon-woo

Domestic insurers are expected to record disappointing results for the fourth quarter of 2024, driven by a surge in flu cases and weather phenomena such as heavy snowfall.

According to Daishin Securities, Monday, the combined net profits of five major insurance companies — Samsung Life Insurance, Samsung Fire & Marine Insurance, DB Insurance, Hyundai Marine & Fire Insurance and Meritz Financial Group — are projected to total 1.02 trillion won ($703 million) in the fourth quarter. This represents a 31.9 percent decline from the market consensus.

"This marks their worst quarterly performance since the implementation of new accounting standards (in 2023)," Daishin Securities analyst Park Hye-jin said.

Park referred to the adoption of International Financial Reporting Standards (IFRS) 17, which requires insurance contract liabilities to be calculated based on market value rather than book value. Since the adoption of this standard, the insurance industry has reported strong earnings growth.

The primary cause of the decline is an unprecedented rise in indemnity insurance claims, driven by a flu outbreak that began late last year.

The Korea Disease Control and Prevention Agency said the number of flu patients surged in December and January, hitting the highest level ever recorded by the respiratory sample surveillance system established in 2016.

Adding to the pressure, the rising frequency of bad weather continues to strain insurers' performance.

"The auto insurance loss ratio recently peaked due to heavy snowfall, which led to a significant deficit in the sector," Park said.

The massive wildfire raging in Los Angeles is also expected to have a significant impact on companies in the United States. Among them, DB Insurance faces substantial exposure, with 37 active contracts spread across seven regions of LA affected by the disaster. The company’s estimated losses from this event are projected to range between 60 billion won and 100 billion won.

The industry's poor financial performance has also weighed on stock prices. KRX Insurance, a domestic index calculated by the Korea Exchange for the insurance industry, dropped about 11 percent from the first day of December 2024 to Monday.

Individual stock prices also fell during the same period, with Samsung Life, Samsung Fire and DB declining by 17.3 percent, 9.9 percent and 14 percent, respectively.

"The surge in insurance claims stemming from the flu outbreak, combined with the worsening auto insurance loss ratio driven by a rise in accidents on icy roads, is anticipated to persist in the short term," Shinhan Securities analyst Lim Hee-yeon said.

"However, the implementation of future reforms targeting nonreimbursable and indemnity insurance could lead to improvements in insurance profitability over the medium to long term."

The government recently unveiled a reform plan for indemnity insurance aimed at curbing excessive medical treatments. The industry anticipates that the implementation of this reform could reduce insurance claims, narrowing the deficit for insurers.