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This is the first of three-part series highlighting the financial status of Samsung Fire & Marine Insurance and the management of its CEO Ahn Min-soo at a time when insurance companies are struggling. ― ED.
By Nam Hyun-woo
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| Samsung Fire & Marine Insurance CEO Ahn Min-soo |
On March 20, 2014, Ahn held a press conference on his inauguration as the head of Korea's largest non-life insurance firm and said the company's total assets would double to 100 trillion won in 2021, adding that the firm would focus on asset management.
According to the firm's earnings report Friday, however, the pace of asset growth has significantly slowed, which poses questions over the viability of the 100 trillion won pledge.
In March 2014, the insurer's assets stood at 50.17 trillion won and quickly soared to 59.57 trillion won in March 2015. That was because its assets grew by 3.1 percent to 5.7 percent every quarter. Despite a following plummet in its growth rate, it managed to increase the amount to 67.9 trillion as of the end of last year.
But the quarterly growth rate was a mere 1.8 percent for the first three months of this year and the pace is feared to further slow. If the slump continues at a time when the whole insurance industry is faltering, Samsung Fire will not realize the 100 trillion won target by 2021.
Market watchers attributed Samsung Fire's recent struggle to its "overly conservative" approach in asset management.
On a yearly basis, Samsung Fire's investment income last year increased to 1.69 trillion won, up 0.7 percent from 1.68 trillion won in 2015. However, the increase was mostly from real estate ― it sold its offices in Seoul to earn 90 billion won.
Despite the one-off revenue boost, its investment yield declined to 3.1 percent in 2016, down from 3.3 percent in 2015, because of plunges in its investments in bonds, loans and overseas assets.
This is compared to other insurers, which are putting more emphasis on their asset management revenue, as insurance premium income is not strong because of the lingering economic downturn of Asia's No. 4 economy.
A majority of them are lowering dependency on conventional investment destinations, such as treasury and corporate bonds, and loans, while increasing the proportion of alternative investments.
Samsung Fire's rival Hyundai Marine & Fire Insurance recently made a 62 billion won investment into a buyout fund worth 9 trillion won raised by BC Partners. In contrast, Samsung Fire raised the portion of loans in its entire investment asset portfolio to 30.7 percent in 2016 from 27.3 percent in 2015, displaying its dependency on a conventional investment strategy.
It is understandable for insurers to have conservative investment strategies because they have to pay insurance to their customers over the long term. But observers point out that Samsung Fire is overly conservative, incurring huge opportunity costs.
Ahn would be by no means happy with the results as he is serving his third term after earning a reputation at Samsung Fire's asset management department.
Another broken promise is about the firm's global presence. In his inauguration speech, he said he would increase the number of Samsung Fire's overseas subsidiaries, branches and offices significantly.
Since then, the company has managed to expand the number of overseas outfits by just three to 22 in 11 countries, from 19 in as many nations.
In addition, he has yet to keep his promise announced at the end of 2014 that the company would acquire a foreign insurer in Southeast Asia.
When contacted, a Samsung Fire official said that employees are very cautious about discussing Ahn's 2014 promises and refused to comment further.
