Korean Re has reported a net income of KRW268.9 billion and underwriting income of KRW215.3 billion in the first half of 2023.
Despite challenges like fire losses at Hankook Tire and losses from the Turkey earthquake, the business saw notable improvements in the performance of life and long-term insurance, as well as certain commercial lines of business, according to a news release.
Investment income totalled KRW127.5 billion, with gains attributed to a new approach to financial asset classification under IFRS 9. Notably, IFRS 17 led to reclassifying foreign currency exchange gains and losses on insurance contract liabilities from insurance profit and loss (P&L) to insurance finance income & expenses under the investment P&L.
Insurance revenue for H1 2023 stood at KRW2.981 trillion, a decrease from KRW3.168 trillion in the previous year. The shift under IFRS 17 to recognize revenue on an accrual basis, not cash, impacted the income statement. Also, changes in accounting for reinsurance commissions, differentiating fixed and variable ones, altered how revenue volume appears.
As of June, the contractual service margin (CSM) was KRW1.02 trillion, expected to remain around KRW1 trillion. CSM, reflecting future profits, is a crucial metric in understanding insurance business performance, released into earnings as contracts are fulfilled as expected.
Korean Re initiated quarterly business result reporting in 2023, aligning with new accounting standards IFRS 17 and IFRS 9. However, comparability with the previous year's figures might be affected, given that 2022 insurance business figures were under IFRS 17, while investment business figures remained under IAS 39.
Regarding IFRS 17 transition, Korean Re also revealed that it adopted the modified retrospective approach for general insurance and the fair value approach for life and long-term insurance, utilizing the Premium Allocation Approach (PAA) and Building Block Approach (BBA), respectively.
Elsewhere in the country, South Korea’s health ministry has announced a freeze on state health insurance premiums for the upcoming year, marking a first in seven years.
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