Korean Re Aims to become world-class reinsurance firm in 2020
Korean Re aims to become one of the world's top ten reinsurers by 2010 and jump toward ranks of world-class reinsurers by 2020. To achieve the ambitious goal, Korean Re will bolster international business and introduce advanced insurance services, a spokesman of the reinsurance company said.
Right after successfully overcoming the 1997-1998 Asian financial crisis, Korean Re established the "Vision 2020," a mid and long-term strategy to enter ranks of the top global reinsurers by that year, he said.
The strategy, among other things, calls for strengthening of the international business, expansion of capital volume, introduction of advanced insurance services and becoming more information and knowledge- oriented. As a result of pursuing corporate reform based on the strategy, Korean Re posted net profits of W80.7 billion (US$69 million) in 2008. The company plans to jack up the profit to W100 billion (US$85.5 million) in 2010 and further to W300 billion (US$256.5 million) in 2020. In terms of assumed reinsurance premium, Korean Re attained W4.0 trillion (US$3.42 billion) in 2008. It also projects to raise the premium to W5 trillion (US$4.27 billion) in 2010 and again to W15 trillion (US$12.82 billion) in 2020.
Korean Re also aims to expand the portion of assumed premium overseas from 22 percent in 2008 to 25 percent in 2010 and further to 50 percent in 2020. Along with this, it plans to expand its share of the world's reinsurance market from two percent in 2008 to five percent in 2020 in order to enter ranks of world-class reinsurers.
With the acquisition of high credit rating, "A-," from S&P, Korean Re plans to expand its overseas business arena from the present Asian market to the Middle East, East Europe and Latin America, and further to the U.S. and Canada, the spokesman said.
In particular, it will actively attack Asian life insurance markets, including China, India and Vietnam with high growth potential. It is moving to expand the portion of assumed life insurance premium from overseas markets to 10 percent in 2010 and 30 percent in 2020.
To build its global network, Korean Re, which already established an office in Dubai in 2008, will open offices in Latin America and East Europe in 2010, while pushing for upgrading the status of such offices to branches or locally incorporated firms on a gradual basis.
At the same time, it plans to make capital investment in insurance companies in China, Vietnam and India as part of its efforts to advance into the Asian insurance market with high growth potential, he said.
In the domestic market, Korean Re plans to expand its life insurance business by increasing the share of life insurance premium from 15 percent of the total assumed reinsurance premium in 2007 to 20 percent in 2010 and again to 30 percent in 2020.
In particular, it will actively push for development of long-term personal insurance covering disease, injury and health, the domestic market volume of which is estimated to reach 14 trillion won. By utilizing some 500 long-term insurance products in Japan, Korean Re projects to develop new products suitable for Koreans, the spokesman said.
Owing to introduction of policy insurances to manage such disasters as heavy rainfalls and typhoons, the demand for reinsurance is expected to rise sharply in 2010, he said. As part of its efforts to diversify business, Korean Re is also planning to build new growth models by making the best use of capital market.
Tiding over managerial crisis
During the 1963-1978 periods, Korean Re carried out easygoing management under the government's supervisory right. As a result, the company faced a crisis of bankruptcy during the 1997-1998 Asian financial crisis.
Since July 1998 when Park Jong-won was named CEO of Korean Re, the company has succeeded in tiding over the managerial crisis only through self-supporting efforts without receiving public funds or securing outside funds. For example, in September 1998, it slashed 30 percent of its manpower.
Through intensive self-rescue efforts, Korean Re posted W3.7 billion (US$3.16 million) in net profit in 1998, escaping from earlier expectation of W280 billion (US$239.4) in net loss, the spokesman said. Per capita productivity also soared 4.4 times from W3.7 billion (US$3.16 million) in 1998 to W16.1 billion (US$13.8 million) in 2008.
In 2009, Korean Re achieved brilliant development with an annual average growth of 13 percent, ranking No. 1 in the Asian reinsurance market and No. 13 in the world. Its ranking in the world's reinsurance market soared from 28th in 1997 to 18th in 2003, 13rd in 2006, 12th in 2007, 11th in 2008, and further to 13th in 2009. Based on its aggressive policy to expand business, high productivity, and scientific risk management, it also raked in W518.8 billion (US$443.57 million) in aggregated net profits for nine years since 1999.
Korean Re also secured stabilized financial status with its solvency margin ratio, called the BIS ratio of insurance companies, soaring to 196 percent at the end of September 2009, doubling the standard of 100 percent, he said.
Top-level credit rating
Korean Re acquired the high credit rating of "A-" from the world's famous credit rating agency S&P in December 2006, a significant improvement from "BBB+" in 2005, thanks to its favorable profitability and healthy capital balance.
Meanwhile, A.M. Best Company has granted "A-" rating to Korean Re for the seventh consecutive years in recognition of the reinsurer's persistent growth and favorable business results, the spokesman said. With the credit rating, Korean Re is expected to increase its premium revenue by some $100 million every year through expansion of good-quality contracts and advancement into new overseas markets in the Middle East and Europe, he said.
About W1.1 trillion (US$940.5 million) or 22 percent of its 2010 total sales of W5 trillion (US$4.27 billion) is expected to come from the reinsurance company's new projects in the Middle East and Europe by securing new contracts on such products as ship, aircraft and technology insurance that require state-of-the-art technology, he added. Through these projects, Korean Re will accelerate its entry into ranks of the world's top ten reinsurers and be reborn to global reinsurer from Asia's regional reinsurer.
Overseas business strategy
Korean Re has decided to focus its overseas business strategy on securing profitability-oriented contracts through risk management in preparation for natural disasters and scientific analysis system.
In particular, it will attack reinsurance markets in East Asia, the Middle East, North Africa, East Europe and Latin America with differentiated marketing strategies according to local situation, the spokesman said.
While providing its peculiar strong points such as speedy liquidation and voluntary mortgage offering service, Korean Re will make efforts to create close relationship with foreign corporate customers through direct marketing, he said.
Riding on the construction boom in the Middle East, Korean Re plans to secure technology insurance contracts from the region in the future. To do so, it established an office in Dubai in 2008 for the first time among Korean insurers. For business diversification to create stable profits, it also established its subsidiary, "Korean Re Investment Consulting Firm" in 2008.