TONGYANG Life Insurance's record for the second consecutive year has made the acquisition of TONGYANG Life Insurance all the more urgent for Woori Financial, which needs to reduce its dependence on banks.
According to the insurance industry on the 21st, TONGYANG Life Insurance recorded a separate cumulative net profit of 310.2 billion won last year. This is a 17.1% increase from the same period the previous year, marking the highest level in history. The profit from insurance was driven by the popularity of health insurance products launched last year, such as cancer and dementia, which recorded a 17.2% increase to 274.4 billion won compared to the same period the previous year. The profit from investments was 109.7 billion won, up 26.6% from the previous year. The return on assets was 3.77%.
In the first half of last year, TONGYANG Life Insurance recorded disappointing results due to conservative provision accumulation and reduced investment profits compared to the previous year. However, starting from the third quarter, the company rebounded, achieving over 17% growth compared to the previous year. Both insurance operations and investment performance increased by double digits, resulting in a significant increase in net profit.
However, the adequacy ratio, an indicator of the insurance company's soundness (K-ICS), showed some deterioration. TONGYANG Life Insurance's K-ICS at the end of last year was expected to be 154.7%, down 5.6 percentage points from the previous quarter. Nevertheless, this level still exceeds the recommended ratio of 150% set by the Financial Supervisory Service.
Woori Financial signed a share purchase agreement with the major shareholders of Tongyang and ABL Life last August and is only awaiting approval from the Financial Services Commission. However, there is a need to be cautious of the management evaluation by the Financial Supervisory Service. Recently, it has been reported that Woori Financial received a grade of 3 in the management evaluation from the Financial Supervisory Service, which has worsened the atmosphere. If the grade is confirmed as 3, the acquisition of the life insurance company may fall through. However, even if the Financial Supervisory Service gives a grade of 3, the Financial Services Commission could still approve Woori Financial's acquisition of the insurance company with conditions such as increasing capital and the restructuring of non-performing assets.
Woori Financial, the only one among the four major financial groups, including KB, Shinhan, and Hana, without an insurance subsidiary, needs to reduce its high dependence on banks. Out of Woori Financial's net profit of 3.086 trillion won last year, 98% came from Woori Bank. Last year, KB Financial, which ranked first among financial groups in net profit, had a bank dependence of 60%, while Shinhan Financial (75%) and Hana Financial (84%) were also significantly weighted. If the final approval from financial authorities is granted, Woori Financial's bank dependence would decrease by over 10%.
An industry official noted, "Currently, the consensus in the industry is that the acquisition of Tongyang and ABL Life is indeed the best option as a so-called 'valuable' opportunity." He added, "However, considering the recent risks of Woori Financial, even if the acquisition goes through, it might take a while."